TCS

August 26, 2014 Leave a comment


wealthymattersYesterday, TCS, India’s largest software exporter, celebrated 10 years of listing on the stock exchange. It was on August 25, 2004, when TCS made its trading debut on Dalal Street at a 27% premium to its issue price. And, there has been no looking back for the stock, churning a compounded annual return of 27% for a decade.

The market capitalisation of the company has risen from Rs47,232 crore to a mammoth Rs4.94 lakh crore in 10 years of listing -the highest among all Indian listed companies.

Investors who stayed put in the stock in the period would have made over three times the average annual compounded returns from fixed deposits. For instance, an investor, who would have put Rs1 lakh in the TCS initial public offer (IPO) at Rs850 a piece, would be sitting on Rs12.52 lakh on Monday . TCS is currently trading at Rs2,521 after two bonus issues -one in July 2006 and other in June 2009. The company has also paid handsome dividends.

In contrast, if the investor had put Rs1 lakh in a fixed deposit with 9% interest in 2004, he would have made Rs2.37 lakh by now without considering taxes. Read more of this post

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Good Ole Debt!

August 25, 2014 Leave a comment


wealthymattersThese days,equity investors are laughing their way to the bank because Sensex has generated 44% returns during the past one year. While the benchmark index has generated this return, there are several stocks that have risen by more than 100% during the same period.So, it’s natural for investors to get carried away when Dalal Street is on a roll, and the Sensex is making a habit of hitting record highs almost every other day. Suddenly, retail investors are flocking back to the market if inflows into equity schemes and the number of demat accounts opened recently are any indication.But here lies the catch: retail investors who are entering the ring now may not get the kind of returns from equities as seen in the recent past.

In some instances, it also doesn’t make much sense being a long-term investor in equities. A look at the Sensex returns chart in the past 20 years could be a bit disappointing even for a hard-core investor. The Sensex closed at 4,588 in August 1994 and despite being at a lifetime high of 26,420 now, it has only generated a mediocre annualised return of 9.15% during this 20-year holding period. Several debt products, like the Public Provident Fund (PPF), have generated better annualised returns of 10.46% in this period. Read more of this post

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The Home Loan Deposit

August 21, 2014 1 Comment


wealthymattersThe Reserve Bank of India (RBI) has decided to encourage banks and individuals to be actively involved in home loan deposits, a savings product that will help showcase the repaying ability of customers seeking to borrow money to buy a house.

The RBI feels that there is a felt need for financial innovation with respect to loan products and one such product could be savings-induced home loan or a home loan deposit.

The willing customer will be induced to generate a savings balance by way of monthly or periodic deposits. This will enable the creation of a track record for repayment of future home loan products. Once a customer reaches a threshold balance, financial institutions will consider sanctioning a housing loan. The balance in the product would act as a collateral or margin. The amount deposited every month would act as the basis of assessing repayment capacity of customers for calculating their monthly repayments.

Such a product will aid the Indian government’s efforts to promote affordable housing. The government has already laid out a plan to create 100 smart cities with the aim of “housing for all by 2020“ while reducing interest rates on home loans. This product may help lower interest rates as well, with better appraisal of potential borrowers.

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The Ten Baggers Of Dalal Street

August 19, 2014 Leave a comment


10 Baggers of Dalal StreetEven the subdued markets of the last five years have produced multibaggers.

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The Superinvestors of Graham-and-Doddsville

August 19, 2014 Leave a comment


wealthymattersThe Superinvestors of Graham-and-Doddsville is a seminal essay by Warren Buffett.

Buffett begins this essay by imagining a nationwide coin-flipping contest. Everyone in the US participates and calls the flip of a coin. Call correctly and move on to the next round, guess wrong and you’re out.After 20 days, about 215 lucky flippers will have correctly called 20 consecutive flips. They gloat about their success, yet the nature of coin-flipping tells us they’re just lucky. It’s a game of random chance.

But what if all 215 flippers lived in the same town? What if they all hailed from the same school? The same fraternity? Then we’d get excited. The laws of probability suggest 215 winners after 20 days. But those same laws tell us that if all 215 belonged to an associated group, that almost certainly wouldn’t be the product of random chance. These 215 flippers clearly would know something we don’t.

The real flippers in Buffett speech are nine “superinvestors” — himself included. All nine crushed the market averages over multiyear periods by between 8% and 22% per year.In a world with millions of investors, such returns can occur by sheer luck — just like the 215 coin-flippers appeared at first glance. But all nine superinvestors hailed from the investment school of Benjamin Graham and David Dodd — Columbia professors now known as the fathers of value investing. That meant something big. It meant that their success wasn’t the product of luck. It almost had to be attributable to the only common link they shared: the investing philosophy learned from Graham and Dodd. The “intellectual origin,” as Buffett put it. Read more of this post

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