Investing Basics - Feel free to ask the most basic questions


(Mahendra243) #799

FII/FPI 28-Jan-2019 6678.52 6455.08 +223.44
DII 28-Jan-2019 3717.26 3624.94 +92.32

If both the FLL and DLL bought today…how come the nifty sensex and midcaps corrected that much today…I dont think retailers can bring market down…any clues?


(rupaniamit) #800

@jamit05 - I am not a big fan of financial jargons myself. Will try my best to keep things very simple.

I will assume that company business economics demands investment in Working Capital to generate incremental growth. As you rightly said, if debtor days are increasing, it will put pressure on the company’s WC. Either company has to fund WC from internal accruals or outside debt. Let’s assume that company takes additional debt for investment in WC and then see impact on each item that you have mentioned independently:

Inventory Turnover: Company should be able to have right inventory levels (because of debt) to support growth in sales. So no big impact at a high level.

Operating Profits: No impact to EBIT or EBITDA. Increase in interest cost should reduce net profit margin.

FCF: Lower net profit means lower FCF as some cash was given away for principal and interest payment.

ROE: Lower NP but higher leverage should balance ROE and there should be minimal impact depending on the weightage of NP to leverage.

As I mentioned above - one needs to check what impacts ROE more. Decrease in net margin or increase in leverage and to what magnitude.

Hope this helps.

Thanks,
Amit


(sarthak kumar) #801

Hello,

Can someone please point me to a resource where upcoming de-mergers can be tracked.

Thanks


(raghav sharma) #802

(rishabhkaul123) #803

Since there is a lot of uncertainty in the market (and its still very expensive), I am thinking of parking my excess cash (viz about 10% of my total networth) in a liquid fund. Right now it’s in my savings account.

I am thinking of putting it in a liquid fund for the next 2 months and will look to invest as we near closer to elections or maybe even post the elections.

  1. Is this a good strategy?
  2. Where are you folks parking your excess capital as you wait and watch (And if it’s in liquid funds, what are some of the better ones?)

(Harsh04) #804

i have a home loan OD account with SBI and i always park my excess funds there.
So, effectively, interest is only charged on the remaining balance of the homeloan.
Money saved = Money earned :wink:
i feel so far this is the best method to use my liquidity and save EMI outgo.

You can also look at liquid ETF, although i am not sure of its returns lately.


(Sujay Ghosh) #805

For 2 months, why not let it remain in the savings fund instead? In that way you can quickly transfer it to your Trading account.

Anyway, for that short period, I feel overnight funds are best suited. You can choose HDFC, ICICI, Kotak or SBI’s (with high AUMs).


#806

If it is just for 2 months, how much more would you gain in 2 months with liquid funds than with a savings account? If the difference to you substantial, then you can go with it. Also, credit risk always exists even for liquid funds, the NAV will fall, although it will regain fast compared to other debt funds, liquid fund of Taurus fell and investors lost money. Then there is redemption, there a few funds which offer instant redemption, but I think it is up to a certain amount and there could be redemption pressure if many redeem at a time. Then there is STCG.

If you want to invest, then check for the highest AUM funds, so that they don’t invest much in 1 bond, and also the redemption will be fast, check if you can redeem as much as you want instantly. Invest in AAA rated bond funds.


(skg) #807

Hi, can anyone point me how to calculate intrinsic value of a company with an example? I tried to find it online. But it seems complicated. So any help or pointer will be appreciated. If it has already been discussed in any other thread, please point me to that.


(Dinesh Sairam) #808

These are a few Valuation related threads in VP:

If you’d like a complete learning solution, I suggest you take a look at the following:

http://people.stern.nyu.edu/adamodar/New_Home_Page/webcasteqspr19.htm?utm_source=quora&utm_medium=referral

(Prof. Aswath Damodaran’s Spring 2019 Valuation classes at NYU Stern, put up online for everyone to see and use–for FREE)


(skg) #809

Thanks Dinesh. I will go through prof Aswath video first to understand the concept as I am not from finance background. So I might not be able to use excel directly without knowing the concept.


(IcyHot) #810

If an individual or a fund owns <1‰ of the company say .46‰, will it show up on the BSE shareholding data( public)? I ask because I have seen such shareholders with values less than 1‰… if thats true then why do I hear that a fund shows up on bse only when it holds =>1‰?


(Chandragupta) #811

Show an example where it is less than 1 %, then it will be easier to understand your question. Normally the limit for mandatory disclosure is 1 %.


(IcyHot) #812

Refer above attached screenshot for wonderla Dec 2018 shareholding report as a sample… now my question is…would the mutual funds and foriegn portfolio still show up on this report if their respective holdings were less than 1%?
I can see that the NRI non repatriable is .29‰

This question is important because lets say you are tracking foreign funds buying your stock but they will not appear on shareholding data untill they are 1% of the company… so you will have to rely on other mechanisms like block deals bulk deals etc to understand who is buying your company


(Chandragupta) #813

My answer is No, they wont show up. If you see, 10 MFs hold is 5.71 % but only 2 are listed specifically. So the others hold less than 1 %.

This is a category and not individual holding. There are 288 investors who jointly hold this much.

1 % disclosure is for an single investor and not category.

Hope this answers the question.


(IcyHot) #814

Brilliant explanation. Thank you. Finally all my doubts are clarified.


(sonal minhas) #815

Sharing my investment framework here…feel free to discuss.

Sonal


(SOHAN) #816

Hello all how does comparing debtor days of companies from same sector help?does it shows any thing about quality of company product or management?


(Dinesh Sairam) #817

It shows the pricing power with suppliers. A better metric to look at would be the broader Cash Conversion Cycle, which looks at the whole chain (Suppliers, Distributors and/or Customers).

Great companies often have a negative or extremely low Cash Conversion Cycle. But like most things, it is all relative. If the industry average CCC is 12 weeks and a company can do it in 4 weeks, then its way better in terms on converting Revenues to Cash for the Stakeholders.

http://www.ratestar.in/ shows Receivable Days, Inventory Days, Payable Days and CCC all in one place.


(SOHAN) #818

How does credit ratings report helps investors in knowing quality of management business and longevity of growth