Investing Basics - Feel free to ask the most basic questions

(jstocks) #565

Why isn’t buyback of shares permitted more than 25% of paid up?

(SNL.Balaji) #566

Hi guys, How do I protect my portfolio against a stock market crash? Or in other words what are the different strategies I can use to protect my investment against a stock market crash?

(Dinesh Sairam) #567

There are only two ways, if I’m not wrong:

  1. Sell your portfolio completely and wait for a crash. But this is market timing and often useless in the long term perspective.
  2. Buy insurance i.e. Buy Out of the Money puts on the broad market indices (NIFTY, SENSEX). Use Delta Hedging to determine how much you should buy.

(Yogesh Sane) #568

Take a look at these threads

(SOHAN) #569

Helo all.can we use market cap to cash flow(i.ecash from operations)as a tool to value a company

(simplyraghav) #570

I usually add more if any of my high conviction stocks fall by more than 5%. My question to all is, how do you consider averaging down or averaging up- do you follow any fixed drawdown parameter like 5-10% or look for any technical pattern like base formation ? I am asking this as I am salaried and usually invest like SIPs in the same stocks that I own.
PS: I am novice and learning a lot from you guys, thanks.

(Deepen Thakkar) #571

I prefer averaging up , the way I approach it is like I take a reasonable position in which company I am interested than as the results start pouring it helps to build more conviction so I buy more in smaller lots on every upside of 10\20 % . For example I took initial entry of 100 shares in bajaj finance at 750 during demonetisation ,than bought 50 more at 1100,50 more at 1500,50 more at 1700, 50 more at 2100 which makes total investment of 300 shares at 4lacs whereby my AVG cost being 1350 rs . If I would have waited to AVG it down i couldn’t have been able to buy any besides the first lot at cost of 75000 rs . My notional gain today would be 220000. But by 2nd approach on investment of 4lacs is fetching me near to 9 Lacs rupees

(simplyraghav) #572

Thanks @Deepen_Thakkar, can you also provide your mental model for an investment that do not perform as per expectations, only price wise and wherein you feel to average down and buy more.

(Deepen Thakkar) #573

Whenever I have done so it personally has led me too losses ,maybe the stocks were of inferior quality . My best profits have come from averaging stocks up rather than on downs .

Maybe some other guy who practises the downward averaging approach can share

(Dinesh Sairam) #574

It’s just a proxy for the simpler P/E Ratio. It’s significance can range from significant (For a company that mostly sells through Credit) to none (For a company that’s in aggressive expansion mode). In the end, just like any other ratio, it has no use by itself. Using it along with several other ratios to made an informed decision would be the way to go. If you’d like to get to the bottom of Ratio Analysis, I’d suggest reading this (And practicing intently):

I invest more money into a stock I hold whenever it trades below my calculated Value. The method of calculation differs from person to person and that’s not the contention here. However, I don’t think it’s well-advised to invest in a stock you own just because it fell 5% or 10%.

Say, you think a stock is worth Rs. 500. It is currently trading at Rs. 600. Tomorrow, the stock drops to Rs. 540 - a 10% drop in a single day. But should this warrant a purchase from your side? Of course not, since your expected price is still nothing short of Rs. 500.

There can be several variants to this approach, but I believe that this is broadly how further investments should be made in a stock you already own. Any additional money you accumulate until such time can be parked in a safe debt fund.

This ability is famously termed ‘Assiduity’.

“Assiduity is the ability to sit on your ass and do nothing until a great opportunities presents itself.”

Charlie Munger.

(Dinesh Sairam) #575

Probably a weird thing to post here, since this is not related to investing, but ValuePickr in specific.

Does someone have data related to how many people use the site regularly, how many 'Regular’s, 'Top Contributor’s and 'Moderator’s?

Just curious. @ayushmit @hitesh2710 @manish962


Have a look here:

Top users:

(Manish Vachhani) #577

You can find it here.

(Dinesh Sairam) #578

Thanks a lot @drgrudge @manish962

However the link doesn’t seem to work.

(draveshia) #579

How does one account for reserves n surplus of company in DCF model for valuation of company

(Kuldeep2017) #580

How can i get following information-

  1. Major customerwise revenue contribution in perecetage
  2. Productwise contribution in total revenue in percentage
    3.Major raw materials used in production as percentage to total cost.
    Above information is necessary to ensure that company is not dependent on a single/few customers , how diversified compamy is in its offerings and effect of changes in raw material cost structure on its bottom line.
    Thanks n regards.

(Manojlion) #581

Hi ppl

A question to ponder over the weekend

This is about the quality of auditing done in India

My wife is pursuing her CA and she had finished the mandatory 3 year ‘Article Assistant’ at a leading Auditing office in Chennai (not wish to reveal the name)

As am from a non finance background, I keep bugging her with my doubts about Balance sheet ,P&L statement ,Cash flow statement and related parties disclosure in annual report.Eventhough she answers all my queries patiently,she consistently insists me not to believe the audit companies

According to her, the main job of the audit companies is to cook the books of the clients ,who approach them ,so that their Clients pay very low taxes to the government

Apart from the regular fees paid to the auditors,it seems the auditors also receive various kinds of gifts from their Clients.

Most of her company clients are super markets,wholesale shops,retail cloth shop whose revenue will be in the range of 10 lakh to 1cr.Offcourse none of the clients are listed

She is confident that most of the audit companies ,she knew operates in the same way

My only point of argument against my wife is big auditors like Deloitte Haskins ,KPMG would not work in that manner.

Can anyone throw light on this please

(Dinesh Sairam) #582

Reserves and Surplus forms part of the Equity Capital of the company. You use it while calculating the Debt-Equity Ratio and while calculating Re-investments. If you’re asking whether one should consider the absolute value of Reserves, then it’s a no.

Some of this information may be found in the Annual Reports. The website has information regarding Raw Materials and Finished Products for each company.

(simplyraghav) #583

Had read this last year, thank you for refreshing it-need to practise it as well. But my dilemma is not having enough cash to invest in one go, and hence, I have to buy in a staggered manner.

(Dinesh Sairam) #584

As I’d already mentioned, park whatever money you accumulate in a safe debt fund or a government security until a reasonable enough opportunity comes along. Just look at what Warren Buffet is doing right now. He’s sitting on almost $110 Billion in cash.