For Whom Wealth Matters
June 12, 2011 Leave a comment
Coca-Cola made an IPO in 1919 when it issued shares at $ 40 each. A year later, the share was quoting at $19. You might think that’s a disaster because the share had lost 50% of its value in just one year. After that there was sugar rationing and the farmers were rebellious. Years later, the Great Depression and World War II happened, there were thermonuclear weapons and what not. You could always find a reason for why that was not the right time to buy shares of Coca Cola. But if you had gone ahead and bought that one share for $40 and reinvested the dividends, your investment in Coca-Cola would be worth $5 Million today.
June 11, 2011
Mr. Rakesh Jhunjhunwala, combines diverse skills as a equity trader, visionary investor and incubator of new businesses through private equity.He is the first dollar billionaire from India to have made all his money by investing–primarily in stocks.Converting Rs 5000 to a billion dollars is no mean feat.Moreover since he deals exclusively in Indian stocks and often in publicly traded companies, whose shares we all have access to,it’s well worth spending time learning how to invest one’s way to wealth from him.
Firstly,Rakesh believes that the choice of asset class is important . As he says”If you bought gold in 1970 and sold it in 1980, you bought the Nikkei Index in 1980 and sold it in 1989 and then bought the NASDAQ [till before the dot-com bust], you would have made 33% compounded returns in three decades.”Personally, under the guidance of Mr Radhakrishna Damani, he made a lot of money shorting stocks at the time of the Harshad Mehta scam post 1992.As he says,”My decision to aggressively invest in the asset class of Indian equities at the right time was a very important determinant of my success.”As Rakesh believes that the mother of all bull runs is still to happen in India ,for people like us,sticking to Indian securities as an asset class might not be such a bad idea! Read more of this post
March 6, 2011 4 Comments
This book is pretty small – just a little over 200 pages.And I love it.I am naturally a bargain hunter and love shopping in sales.I also love getting high quality goods at bargain-basement prices.So It’s small wonder that I am attracted to value investing.The danger of shopping in sales is that a person picks up things they don’t have any use for or items that are not a perfect fit just because they are cheap.Then there is a danger of buying poor quality stuff just because it seems to cost so little.The same applies to buying stocks cheap.Sometimes the whole market is beaten down and all stocks seem cheap, but if I buy stocks of companies I would not normally buy because of their poor returns to investors,just because they are cheap,I am left with the problem of selling them when the market and the stock recovers.This is a problem for me personally as I have a tendency to get married to my stocks.At other times a stock sells for low P/E multiples simply because there is something fundamentally wrong with the company. Stocking up on the shares and hoping for a turn-around is pretty foolish.But I am an optimistic type and I need to force myself to turn away from such situations.Over a period of time I have found ways to control my habits.When the markets are down,I first establish a budget and then try to make a list of likely stocks and arrange them in order of attractiveness depending on Buffett-style criteria and tell myself that I’m to invest over 80% of the budget on only the top 5 of my list.I find this stops me from stocking up on not so great businesses that I might find hard to sell later.Then I have accepted the fact that I am a speculator at heart.I no longer try to fight the urge but try to use the Dhandho Principles that come pretty naturally to me to gain out of my speculative tendencies.This is a book I recommend for all investors like me who like value investing but can’t overcome the urge to speculate.
Here is a round up chapter-wise of what is found in the book:-
Chapter 1
Pabrai starts the book by discussing the term “dhandho“which is a Gujarati word meaning “business”. Gujarat is a western coastal state in India that has served as a hotbed for trade with Asia and Africa. The Patels are a community of particularly entrepreunerial Gujaratis whose entrepreneurial ventures led to them forming a dominant part of the East African economy by the early 1970s. When Asians were thrown out of Uganda in 1972 on the basis of their race, a flurry of Patel immigrants landed in Canada, England and the United States. Read more of this post
March 4, 2011 Leave a comment
Here is an extract from the article ‘ Investors will miss out if they confuse uncertainity with risk ‘ by Whitney Tilson published in the Financial Times on 16 Feb 2008.I think confusing uncertainity with risk is precisely what happened pre-budget in India this year. And this confusion is something that happens to a greater or lesser extent every year before the budget.The same thing happens before the final decision is taken on any government policy. So if a stock investor remembers that there is a difference between uncertainity and risk he/she can sometimes buy shares cheap.Risk means the chance of a loss of capital. Uncertainty is the range of different outcomes. So a stock may have high uncertainty but may not be risky, if no one knows what will happen but the worst case scenario would not results in a huge loss.
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