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Avoid Stocks Of Holding Companies

August 1, 2013 Leave a comment

Historical data shows that holding company shares might not be good for minority shareholders as the market traditionally values holding companies — an entity that controls a clutch of businesses — at a discount to their book value.

ET looked at valuations of nine holding companies listed on Indian stock exchanges. Specifically, they looked at one metric: the price-to-book value ratio. Book value is the total value of a company’s assets less intangible assets (like trademark or intellectual property) and liabilities. For seven of these nine holding companies, this ratio was less than 1, indicating under-valuation. The average discount-to-book value was 40%, and ranged from 4% (EID Parry) to 93% (UB Holdings). Aditya Birla Nuvo and Tata Investment Corporation were the two exceptions (See table). Read more of this post

Filed under Paper Assets Tagged with ACC, acquisition of cash flow, Aditya Birla Nuvo, Ambuja Cements, Bajaj Holdings, Book Value, discount to book value, dividend distribution tax, double incidence of dividend tax, EID Parry, Holcim India, Holcim-Ambuja Cements deal, holding company stocks, JSW Holdings, McDowell Holdings, mergers and demergers, mezzanine structure, minority shareholder interests, minority shareholders, postaday, price to book value P/BV, Rane Holdings, selective acquisition of cash flow, share investing, shift profits, stock investing, Sundaram Clayton, Tata invest Corp, UB Holdings, valuations

Gone Fishing With Buffett

July 5, 2013 2 Comments

Warren Buffet follows his own investment method and has stuck to it through thick and thin to made a lot of money. The key principles of this investment method, as described by Sean Seah in his book Gone Fishing with Buffett are as follows:

1. Investment Rule Number 1: Never Lose Money
Investment Rule Number 2: Never Forget Rule Number 1.

2. Risk comes from ignorance.

3. Buy businesses with good and exceptional economics and buy them at a sensible price. Repeat until wealthy.

4. The stock market is the only place where people who drive BMWs take advice from people who take the train.

5. If you need complicated maths for investing, Buffett would probably be distributing newspapers today. Read more of this post

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Rakesh Jhunjhunwala’s Stock Picking Mantra

March 11, 2013 Leave a comment

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Rajiv Gandhi Equity Savings Scheme, 2012 (RGESS)

January 27, 2013 2 Comments

To encourage the flow of savings of small investors into the domestic capital market, the Government of India announced a scheme named Rajiv Gandhi Equity Savings Scheme, 2012 (RGESS) in the last budget.Also a new section 80 CCG under the Income Tax Act, 1961 on ‘Deduction in respect of investment under an equity savings scheme’ was introduced to give tax benefits to “New Retail Investors”who invest up to `50,000 in ‘Eligible Securities’ and have a gross total annual income less than or equal to Rs.10 Lakhs.

A ‘New Retail Investor’ for the purposes of this scheme is defined as is any Resident Individual

who has not opened a demat account and has not made any transactions in the equity or derivative segment as on the date of notification of the scheme i.e., November 23, 2012. OR
who has opened a demat account as a first holder, but has not transacted in the equity or derivate segment till November 23, 2012.OR
who has a demat account as a joint holder.

“I Buy When Other People Are Selling.”

January 12, 2013 Leave a comment

wealthymatters J.Paul Getty is one of the world’s greatest success stories. The wealth he amassed in his lifetime was stupendous-estimated at roughly 1/900th of the entire U.S. economy. Today that would equate to $160 billion.

Getty got his start in the windswept oil fields of Oklahoma. In 1914, at the age of 21, he became a wildcatter, searching for oil in some of the most unforgiving land in the country.By the time he was 23, Getty had earned his first million (although $1 million in 1916 would be worth about $20 million today). But J. Paul Getty was not just an oilman. While he did make a fortune drilling for oil, he also made a fortune in a completely different place — Wall Street.As he put it.“In the Depression I did what the experts said one should not do. I was a very big buyer of oil company stocks.”

Consider the the story of Tide Water Associated Oil Co. Getty first bought the shares in 1932, in the middle of The Great Depression. The Dow had dropped from a high of 380 in 1929… all the way down to 40 — a fall of nearly 90% in three years. Investors had dumped everything. No one was buying stocks.Getty first bought shares of Tide Water at just $2.12 per share. Five years later, they traded above $20. And this is just one example of his success. Some stocks he owned grew to 100 times the value he originally bought them for. Read more of this post