holdyourthoughts

"You have a choice. You are either too busy dying, or you are too busy living." -- Shawshank Redemption He who fights and runs away, lives to fight another day. -- Old saying It is the ability to foretell what is going to happen tomorrow, next week, next month, and next year. And to have the ability afterwards to explain why it didn't happen. -- Winston Churchill on the qualifications for becoming a politician We have to do what we have to do, so that we can do what we want to do. When you are content to be simply yourself and don’t compare or compete, everybody will respect you. - Lao Tzu

Is there a market bubble going on now? Is the markets going higher or lower? Should I put my money in the markets now? Will the markets crash? These are some of the questions I keep getting from people I know. Manias, panics, excesses, whatever you may decide to term them as, rarely come gift-wrapped announcing itself beforehand. Just the fact that everyone around is so cautious negates the herd mentality and makes it more difficult for the market to crash. So, does it mean, you should put all your money in the markets now? My answer to that is, "It depends...". Like in everything in life, investment is a very individual process and it is not possible to comment on personal investment decisions without having a good understanding of your aspirations, risk appetite, personality and other such traits. The best way to invest is to always look for undervalued stocks and periodically buying into them. Does it mean that there is no bubble in the markets? Where is so much liquidity ...

Here are the details of Indag Rubber:- The company is the the tyre retreading business. RoE is approx 32% and RoCE is 28.5% FY10 Sales is 111 cr and profit is 11.5 cr Market Cap is currently around 55 cr. i.e, Market Cap is lesser than prev year sales Dividend Yield of 3.8% Last 3 year PAT CAGR is 40% and Sales CAGR is 22% Current PE is around 4.7 Notes from Annual Report 2010 Increase in raw materials has exerted pressure on operating margins Expanded manufacturing capacity at its Nalgarh plant in Himachal Precured tread rubber production is now at 1200 tons per month and 1800 tons of uncured rubber gum Due to a increased demand of precured tread rubber, product accessories such as URSG and vulcanizing cement (both are basically the adhesive for pasting the tyres to the pretreads by the cold-bonding process) are also seeing increased demand Manufacturing is at 100% capacity for these additives, but demand is much greater. The increase in capacity will cater ...

Here is what I came yup with by crystal-ball gazing (the crystal ball is now pretty cloudy and filled with dust, but what-the-heck...it sure is some fun to look at it once in a while... Sensex/Nifty will make a dash for the all-time high sometime soon (maybe as early as October end) Either breach it or turn back just short of it. A bout of profit booking follows. Indices go down 10%-15% (back to around 18K-18.5K) Main indices remain sideways for the next couple of quarters. Mid caps move up from now as the last few weeks the valuation gap has widened. Sometime after 2-3 quarters, the next up move starts for the main indices. By that time, PE is down to about 22 (which is still high but certainly not hitting the roof). One point to consider is that the 2008 debacle is still fresh in the minds of most people, and as long as it remains, the sentiment of fear will be there. That will prevent the markets from having a runaway rally or a breakneck fall. I sure hope I am right!!! ...

For people who invest in the stock markets for the long term, perhaps the most critical point to note is to have a default strategy for action. This is a very overlooked part of investment and forces many otherwise brilliant investors to do foolish things. Most people tend to like action and that is why they buy or sell stocks to get into “action”. This results quite often in either selling good business too early (booking profits to satisfy the “action” bug) or to buy into questionable companies following a “tip” heard on TV(or from a friend). I have the same problem. So, here is what I do to keep myself safe from the “action” bug. I have a default investment strategy. That is whenever I have money and do not have a company that I really want to buy, I buy into either a liquid fund (typically LiquidBees on NSE) or buy into an index fund (again typically NiftyBees on NSE). I chose a liquid fund when I don't have a good company identified and I feel the markets are overvalued. I c...

I am in the process of studying Balaji Amines in greater details. Here are some of my thoughts. From the AR - " Some of your company's new products are 100% import substitutes and other products are commanding 100% market share in India and are being exported to major customers worldwide" .... could not ascertain which specific products they are talking about. Some of company's new products are 100% import substitutes and other products are commanding 100% market share in India and are being exported to major customers worldwide. Di-methyl amino ethanol (DMAE) plant with a capacity of 10 MT/day was commissioned during the year. This process was developed through in house R & D Team of the company. This is a forward integration project for methyl amines plant and the product has good demand in the domestic and international markets. To meet the increasing domestic and international demand, new plant for manufacture of GBL and NMP with a capacity of 50 M...

Notes from Annual Report 2010 * The company expects to achieve 20%+ volume growth per year in medium term * No significant change in product wise share of revenue * Crisil has upgraded the rating outlook from A+Stable to A+Positive * 1, 3 and 5 year sales growths are: 20%, 17.76% and 18.45% respectively * 1, 3 and 5 year PAT growths are: 48.6%, 42.39% and 43.66% respectively * Last 3 years average RoCE is 33% * Last 3 years average RoE is 34% * Long term Debt-Equity ratio has reduced from 1.02 to .49. This should reduce even more with the increased sale of the commercial building space. PLASTIC PIPING SYSTEMS * India's capacity for PVC resin is 67% of demand. Rest is imported. * Kanpur plant's capacity to be expanded from 8000 tons p.a to 15000 tons p.a. Plant is to be commissioned by Dec'10 * Newly launched Lifeline CPVC grew more than 120% * "Aqua Gold" plumbing system for cold water has grown by over 50%. It is successfully replacing GI pipes. * Expects the ren...

The Girl with the Dragon Tattoo by Steig Larsson is the first part of the three-part Millenium trilogy that has become a cult series in the last few years in the mystery thriller genre. Larsson is the first author to have sold more than one million copies on the kindle store in amazon (that is, he has sold a million copies in the ebook format). So, decidely I was very excited when I got hold of my copy (I also read an ebook on my Infibeam PI). The book has two main characters - Mikael Blomkvist, a financial investigative journalist and Lisbeth Salander, a young social misfit cum computer hacker cum investigator. Blomkvist rund a small magazine and tries to expose the misdeeds of a large businessman in Sweden. He also gets commissioned by an ageing patriarch of a large Swedish conglomerate to investigate the murder of his niece over forty years back. Blomkvist takes up the challenge when Vanger, the old patriarch, promises to give him evidence of some criminal activities by the person h...

After six months of starting to closely track my portfolio on an NAV basis, here are the results: Primal Value Fund (this is what I call my fund)=30.03% Sensex=12.48% Relative Outperformance=17.56%

The Polyester Prince is a banned book. I am not sure why it is banned and after reading it I can guess. McDonald's narrative points fingers at the Congress government and some very senior ministers and leaders of colluding to help Dhirubhai in his endeavours. It is a fascinating read and goes over the life and time of Dhirubhai Ambani. It details the famous Dhirubhai versus Nusli Wadia battles, Indian Express' taking up the cudgel against him and focusses mainly on the dark side of the man. The primary feeling that I had while reading was the author started with a negative bias against the man. In my opinion, no supremely successful business in a controlled economic regime can be either just black or white in character shade. He has to be some shade of grey. So, the book should have explored the various shades instead of focussing just on the darker side. Another major issue with the book is that it tells very little of Dhirubhai Ambani the man and more of Reliance and its oper...

This book delves with the idea that super successful people are not a result of their innate greatness but a result of two factors - opportunity and cultural background. It shares stories of extremely successful men like Bill Gates, Bill Joy, Robert Oppenheimer, The Beatles and others and digs deeper to show that all these people had had an extraordinary opportunity which was not available to others at that point in time. So, there success cannot be attributed to their greatness but to their circumstances. The book tries to debunk the "individualistic" model of success so popularized by the western media of the "self-made-man". Gladwell argues that there is no self-made-man and the success is a combination of the opportunities and culture (which includes the genes the person is born with). The idea is not to demean the achievements of the super-successful people. It is not that they did not do anything. Obviously, to be a superlative success in anything, it takes a...

After nearly ten years in the markets, I started tracking my portfolio as a fund this February. The idea was that if I was not making better returns than the index then it is better to invest in index funds and concentrate on other things in life. I started with a NAV of Rs. 10. The objective of the fund is to outperform the Sensex on a long (3 years plus) term with securities chosen primarily with a focus towards value and mid and small cap. The idea is to have a concentrated portfolio of between 5-12 stocks at any given point in time with a investment horizon of an average of 3 years. So far, as you can see from the chart, the Primal Value Fund has managed to outperform the Sensex. Sensex return has been 10.04% and the funds return has been 15.54%. So far so good. I will try and update the performance on a quarterly or half yearly basis. Also providing the current portfolio and percentage allocation.

Timothy Ferris' The Four Hour Workweek is a book devoted to people who do not want to spend the rest of their lives working in their cubicles. It makes a case for automating your cashflow so that you are no longer dependent on your job. It introduces the concept of freedom as one where you are both free from money and time pressures. Just having a great deal of money is not enough to be really rich, according to Ferris. You also need to have a lot of time to do all the things your heart desires. Ferris makes a very compelling case for setting up some business major components of which can be outsourced to generate the free cash flow. He then goes into how to setup a "outsourced" business and life. The book in this stage becomes a bit "silly" at times. Ferris, when he wrote this book was a 30-something person without a family. So, going away to foreign countries and staying extended periods may be possible for him but is practically not possible for most people. ...

This is an excellent collection of quotes from mostly contemporary American personalities. What is good about the book is that most of the selected quotes are relatively fresh and are not overly quoted everywhere else!! There were only two complaints I had were that i) the quotes are all lumped together and not grouped into categories so looking up a specific quote at a later point in time would be very very challenging and ii) the quotes are not really for the "professional" only, they are equally applicable to life in general. In fact, that is why this book makes it such a good read.

I bought a new ebook reader. It is the Infibeam PI (www.infibeam.com/PI) . I have seen and used both the Amazon Kindle and Sony ebook reader. The main reason I selected the PI is because it was available in India. I did not have to wait for weeks to get my hands on it. I will not go into detailed comparisons between the three readers I have used. The reason I bought the ebook is to read books. Although that sounds rather a stupid thing to say, I found some features on Kindle quite superfluous to book reading. Like the space consuming keyboard. I dont know of any book which comes with a keyboard, so why should an ebook come with one. If I have to surf the net, I will use my laptop to do it. The whole buying process was easy and seamless. Delivery happened within 3 working days. The only regret I had was my father was not there to see this. He was pretty excited with the concept of an ebook reader and I had entrusted him with the duty of checking the condition of the parcel when it arriv...

The sense of loss has not yet gone. Others who have had similar experience insist it takes a while before it does. In one instant the feeling of having lost the roof over your head is not easy to get over. The last few days I was thinking of the lessons that Baba tried to impart to me, sometimes successfully and sometimes not so successfully. Take care of your health Save money. You never know when you will need it. Spend as much time as possible with your family. Very little else matters. Be a good father to your son. Always be there beside him when he needs you. Take life as it comes. With all its ups and downs. Perception matters. It is important to not only be good but also to look good. Work might take to some foreign land, but that is not your home. Home is where you were born. Be particular about your work. Always maintain a checklist of things. He used to maintain a small notebook with him where he noted down things that he had to do. Don't procrastinate. Do things as they ...

Even at our birth, death does but stand aside a little. And every day he looks towards us and muses somewhat to himself whether that day or the next he will draw nigh. Death is not extinguishing the light; it is putting out the lamp because dawn has come. - Rabindranath Tagore Death is the one thing that connects us all. It reminds us that what's really important is who we've touched, how much we've given. It makes us realize that we have to be good to one another. This Friday night baba (father) passed away. We watched TV and then had dinner together that evening. He went into the toilet and when he was not coming out after 10 minutes, ma (mother) knocked on the toilet door and when after a few knocks there was no response, I got a bit alarmed. I pried open the toilet door and there he was, lying down crouched on the floor. I lay him down very very quickly on the floor and tried his pulse. There was none. Ma by that time has called my Uncle (Jethumoni-my father's eld...

This book reads more like a novel than a piece of historical work. It captures the turn of the century and the political intricacies during the period of 1988 to 2008. During this period there were wars, changes in US presidency and great turmoil in the world. Bennet does a competent job of capturing them. The book would have beeb much better had the author tried to go behind the reasons of historical events rather than just being a chronicler of it. So, in effect the books reads more like a collection of newspaper articles pieced together in a very nice fashion.

Last week during our lunch break at work, we got into a discussion on why company executives are so hung up about short term performances instead of focusing on the long term improvement of the company. We see this everyday. Companies lay off people during bad times and then hire back with a gusto when business is booming, often at multiple times the compensation that was paid to the person who occupied the position before. This is so true in the IT industry in India. My friend, Amit, concluded that all this 'evil' was due to the "short-termism" created by being intently focused on the short-term stock value - the proverbial quarter end numbers. Amit attributes all that is wrong in the corporate system to this short=term view of life and the force that the stock markets exert on individuals as the incentive to outperform earnings is extraordinary. I thought about this theory while driving back from work. I have a couple of objections to this line of thought (that the ...

Last few weeks, two important pieces of legislation were taken up by the Indian Parliament. The first was the reservation of one-third of the electoral seats for women and the second was the passage of the bill to guarantee education to children. I am skeptical of both these. Let me tell you why. A lot has been said and written about the women's reservation bill. Any form of reservation is, to my mid, a step backwards. Instead of empowering people to excel it creates a coterie of "entitlers" (if I may be permitted to call them that). We have seen this so many time is the past through the SC/ST and other similar reservations. It does very little to impact and uplift the poorest of the poor and is mostly cornered by the people who are at the top of such groups (the so-called "creamy layer"). Since, it is a difficult political setup, no one has the courage to challenge the status quo. It will be no different for the women's reservation. The seats will be corner...

The IT sector stocks have been on a sweet spot for some time now. The US markets were improving (or rather showing signs of not going into a depression) and some semblance of business sense were returning. This was getting reflected in the valuations of the IT stocks. I think the party may be over for the time being. The currency printing frenzy in the US is more than likely to produce high inflation in the US and a weakening of the dollar. This is likely to impact the dollar arbitrage business fairly negatively for these companies. I have no idea where the dollar-rupee exchange rate will go, but even a 10% weakening of the dollar (around Rs. 40 for a greenback) would mar the prospects of remarkably. Now, let us think what what these companies can do to fend off the currency challenge. It can hedge it's currency position (net zero hedge position) Reduce it's onshore employee strength Look to increase geographic diversification (spread off into countries like Vietnam, Philippine...

I strongly believe that moat as a concept is somewhat illusory. All businesses tend to become commodity after a point, when more and more competition sets in. Look at the business history over a 100 year period and you will find it very difficult to find companies which have sustainable business advantage. A case in point is newspapers. Even the great and venerable Warren Buffet used to think that his holding in Washington Post to be a bullet proof investment because in his own words "You can't beat a good newspaper business franchise". However, 50 years down the line Washington Post is struggling to make money. Times change, consumers change, preferences change. As in life, there is nothing permanent about business, other the promise of change.

I saw a great post from Michael Hyatt today. It was about why we cannot complete our work. It's has some great tips. In fact, I can vouch for nearly all the 10 points as I practice them personally and have been greatly benefited. Read the post here .

I just finished reading Liar's Poker by Lewis, an account of the early career of a Saloman brothers bond salesman. The book captures the culture and work ethos of a famous Wall Street investment bank and exposes the motives of people who run the business. The fact that the whole business was managed with only short term goals in mind and the customer's interest came last (after personal, followed by Saloman's) is etched into the reader's mind. Also, the hypocrisy perpetuated regularly by the management exposes the emotions of how fear and greed works in the market. Liar's Poker raises fundamental questions in the mind of the discerning reader. Are the interests of the customer ever foremost in the mind of the the broker or is the broker out to make a killing for himself and his firm? Are the tie-dangling MBAs hired by these brokers who walk and talk like financial wizards have any knowledge of the markets or are they just parroting what they have picked up second-h...

Education is something we are supposed to get in school (and college). However, the more "educated" investors meet, the more I come to suspect this. It's like what 'Rancho' in the film 3 idiots says, circus tigers are called well-trained, not well educated. I guess, the education system, the world over focuses on producing a plethora of well-trained people. The genesis for that, I suppose, dates back to creating workers for industrial factories. What is really needed in life and in investing is multi-disciplinary learning. Learning and correlating various subjects and finding their real-life uses. Subjects that really help an investor is basic mathematics, algebra, probability, logic, philosophy, history and very importantly psychology. Unfortunatley, colleges that turn out MBAs teach very little of this. Arcane academic theories are as useful to an investor as a wooden stick to a tiger hunter in a dense forest - it's just not useful enough. As Charlie Munger ...

Knockout Entrepreneur by George Foreman and Ken Abraham was a decent read. It tries to relate Foreman's experiences as a heavyweight boxing champion and as an entrepreneur after his boxing career was over. It is always interesting to read about someone who is a high achiever in his chosen field (like Foreman in boxing) and then goes out to achieve success in another unrelated field. It proves that success is based on certain attributes like hard work, perseverance and the ability to think and act for oneself. This is as true in the boxing ring as in real or business life. The book is simplistic in it's approach and readers who are looking for some guides on how to star a business will be disappointed. This is more of a story of how Foreman made it big in business rather than a how-to guide. The book contains mostly common-sense approaches to starting a business which is available in nearly all this type of books. People who know George Foreman and have some liking of boxing wo...

There are some very important questions that you can (and definitely should) ask yourself on a regular frequency. This aids in introspection. When people are in school or college they have term exams which help them judge if their progress on their education journey is reasonable. One of the problems of growing up is we stop asking ourselves that question. One probable cause is because we are not conditioned to ask questions of our progress ourselves. So, here is a ritual that I suggest everyone follow atleast once a year. It's best to choose significant days to do this like our birthdays, New Year or any such day. What you need is a pen and a blank sheet of paper and a quiet place to sit and contemplate. With paper and pen in hand ask yourself the first question, "What would I do for the rest of my life if I won the lottery for xxx amount today?" The amount can be anything that you think is more than enough for you. Think about this. Write what you would do if you did ...

Last week I completed Bill Bryson's Short History of Nearly Everything. It is a good book that tries to cover in one sweep the evolution of natural sciences. It starts of from the creation of the universe and goes on to explain the universe, planetary systems and other celestial phenomenon. It then moves on and covers diverse topics like Physics, Chemistry, Biology and Geology. It takes the user through a journey of how each of these subjects of study evolved over a period of time and also it's more illustrious practitioners. The book has very nice glimpses, in the form of anecdotes, into the lives of great scientists. It is a very good read and is sure to engage readers who are scientifically inclined.

I just completed Parag Parikh's new book titled "Value Investing and Behavioral Finance". It is a very nice book with examples of equity mis-pricing by the markets based on fear/greed. It explores various mental models of behavioral finance. It makes nice reading because the examples are from the Indian markets so familiarity is high. It has some interesting insights on index investing. Something that I had not known/thought about earlier. Parikh has put data from Sensex from 1979 to 2005 of stocks that were taken out of the index. The data suggests that companies that are taken out from the index have actually performed better over long term than the index! It is a good book to read for long term investors, specially if you are interested in investing in the Indian stock markets.

This weekend was great. Saturday we went to the Alumni Association of our school (AGCS). I met a lot of old friends after over 14 years. I met Irshad, Tabish, Hemant, Debarshi Ganguly, Durjoy Sengupta, Rajni and Kavita after 1995. It felt really nice to see these people. Sandip (Das) is now in Calcutta for a vacation. So, today we met at Tung Fong, Park Street. Sandip and his wife, Sudipta and his wife, Biswajit and me. Sanjoy and Chotu came late, nearly the time when it was time for Bishu and me to leave. It's nice and cold in Calcutta now, so it was good to go to Park Street in the evening. The good thing was I managed to come out without eating a lot, so the new year resolution is on track.

It is customary to make new year resolutions. So, here is my list. 1. Lose 5 kgs (or more) of weight - I have lost over 10 kgs in the last year. Down from 85kgs to around 75kgs now. Resolving to get it down to 70 kgs or less. 2. Exercise everyday (except Sundays - even God rested on Sunday!!) - Resolve to walk/exercise for 15-45 mins everyday. 3. Spend more time with family and friends - Add family time to the calendar!! 4. Read atleast 2 books per month - Make and maintain a list of books to be read. 5. Start practising meditation - Start working on meditating for atleast 5 mins everyday. Plan These are my resolutions for 2010. Not too many. The trick would be to stick to them and make them work.