Just out of the topic that is being discussed, listened to Prof. Aswath Damodran video on Numbers and Narratives, it was indeed a very fascinating session and was totally Intriguing, brings out a different perspective on how investing should be approached and seen, thanks for the link.
- Change in PP&E and other Fixed Assets is CapEx
- You can find it in the Balance Sheet as Cash or Bank. You may want to consider liquid investments such as Mutual Funds as well.
Can anyone throw some light on how to use stoploss and averaging in fundamental investing
No serious investor uses a Stop-loss, as far as I know. At least not in the traditional sense. They make sell decisions based on availability of better opportunities or risk of a huge capital loss. Both of these are linked to a company’s fundamentals and the story they think will play out from those fundamentals.
Same thing applies here. You average if you think the company’s fundamentals and story demand a value higher than the price.
If you go through this thread from this point onwards, it might help:
Hello all my friends.many great investors talk about investment with best quality managements.what are few characterisics of a best quality management?it will be very helpful
I personally use Jack Welch’s 4E model (A modified version of the original 4E):
Some ways to identify these qualities could be:
- Energy/Passion: Listen to interviews by the management. Do they seem passionate about what they do? Are they excited when the discuss plans about the company?
- Energize: Look at employment websites like GlassDoor or Indeed. You can easily understand how the management treats its employees.
- Edge: Very difficult to identify unless you are an insider or an insider. This relates the speed at which managerial decisions are taken. If there are news articles online or if you could get something from the company’s AR, that would be great.
- Execution: Listen to company con calls and read the MD&A of the AR. How does the management respond to problems? Are the motivated to tackle it or do they sort of ignore it until it goes away? Do they provide generic statements as solutions? Execution is the hallmark of a great management.
Some additional things that can be looked at to confirm the quality of the management:
- Higher dividend payouts when there are no capex/acquisition plans in the immediate future (Subjective – Microsoft, Google or Berkshire Hathaway may be some counter examples)
- All the returns ratios (RoE, RoCE, RoA) substantially higher than the industry average
- Independence of the Board (Family members/friends of the CEO part of the board, unqualified members part of the board could be some red flags)
- The presence of a brand or a higher number of patents
- “Skin in the game” or the manager’s own stake in the company and whether it is increasing or decreasing
- Measures taken to counteract difficult scenarios in the industry or the company in specific (For ex: The management of Goodyear India specifically state that they’re more concerned about maintaining Margins, rather than promote Sales and it shows. When Rubber prices fluctuate, Goodyear’s Margins still remain within a closed boundary)
That’s almost everything I consider regularly. Of course, an easier addition to this could be to just read loads and loads of articles and watch videos involving the management team. Once when I held a stake in MCX, I even went as far as to add the CEO in LinkedIn. Since management quality has a lot of human element involved, try to read a lot of books on leadership and management in general.
I hope this helped.
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Thank you very much sir