Also take your own advice to jstocks, & go through various threads on valuepickr (under categories like Investment Learning, Investing Strategies, Accelerated Learning) where people have shared their knowledge on analyzing & valuing businesses, and portfolio building.
Regarding my question, for individual stocks I know I can easily find the returns. But what I would like to know is that, are the seniors here able to achieve a higher return on their overall portfolio than those achieved by top mutual funds?
The reason for asking this question is that, is it worth spending your time analyzing stocks and keeping yourself updated with every new piece of information, rather than just investing in a good quality mutual fund which has given good 5 year returns? Is there a benefit spending your time reading about investing when the same returns can be achieved by a mutual fund?
Some senior investors generate multiple times the returns of what a mutual fund does. Personally, I benchmark my performance with HDFC Equity Fund. My logic is if I am not able to do better than a large diversified equity fund, with all its institutional constraints, then it would be better for me to invest in funds and spend my time doing something else.
But, I really enjoy reading and learning about businesses. So, that’s an advantage. And as for performance, let’s say that I don’t invest in mutual funds
But, I think it is useful to do that check for oneself. If one doesn’t like spending time on reading or studying businesses, then it might be a better idea to invest through funds. At the end of it, its one life, and one should try to follow one’s passion.
I completely agree with your logic. If you can’t get a return higher than a good quality mutual fund then there is no point in wasting one’s time and effort analyzing stocks as one could simply invest in that particular fund and save himself from all the hassle.
You said that you benchmark your performance against hdfc equity fund. I have checked that this fund has given a 17% return over a 5 year period. So if I may ask, would you be kind enough to give me a rough estimate of the returns earned by you for a 5 year period?
I have seen some mutual funds such as canara robeco mid cap funds giving a 30% return over a 5 year period. And I also read somewhere that Warren buffet had earned a return of 20% on his investments during his lifetime. What are your thoughts on that?
i am new to the investing. Please help me how to find the stocks. is there any way to find or only screeners or equitymaster are the tools to find. and as VP member i m learning many things. So pls help me in this matter. Thank you.
You need to follow your passion. If you do not like investing or studying for it, then put your money in mutual funds. Knowing how much others have earned will not help you in any way. If you love the process, only then do it.
Hi, Need your guidance to make sense of the details in the below snapshot. I do understand that company has some some tax losses carried forward on it’s balance sheet, but i feel that there is more information in it and I am not competent enough to make sense of it. Please do guide…Snapshot is taken from AR of ABFRL (FY16-17):
I am trying to understand the importance of free cash flow and browsing through few companies in ratestar. In some of the companies, under the heading “Cash from Investing Activity”, there is a column as “Others”. Where can we find this Other Investment details in Balance sheet. I was looking at Pricol ltd.(because I am living near Coimbatore and familiar with the company) for FCF understanding, in the year ending March 2015, they have mentioned -75 cr as others. For my learning with the accounting, I am curious to know where can we find this piece of data in balance sheet?
I see holding companies as promoters of many companies. These holding companies are own by other promoters. What is the purpose forming a holding company?
What is significance of inventory ,work in process, stock in trade as negative number in results and how it affects the profit and loss?
Please help. I tried to find it on net but could not find the affect it can play to profit and loss.
In the “notes to accounts” section of the 2016 annual report of sun pharma there is an item #28 mentioned for research and development. It is mentioned that this item #28 is included in the consolidated P&L statement. But when I check the consolidated P&L statement I can’t find it. Why so?
Also, does technical analysis indicate patterns which arise due to insider trading?
In Airlines industry or the industries where Fuel cost is significant, how they buy fuel. Do they buy at Indian market price or they buy at international prices.
For ex. In India petrol is around 70-80 rs from last 3-4 years but in international markets the prices has gone down from 100+ levels to 40-50 levels.
Research & Development expenses appears in multiple places.
First is Director’s report: See page no 27 plus few more pages, statutory requirement under Companies Act. But please note director’s report are informatory not accounting in nature. Hence the level of information will differ from company to company.
Second is on Accounting Policy (notes to accounts)- this is part of accounting policy disclosures. You can interpret how company is treating this particular expenses or receipts.
Third, again within notes to account you would have a break up of R&D if significant. Reason is it could have grouped under other expenses within PL.
Your second question- technical analysis to indicate insider trading.
First foremost insider trading is illegal as you know which is based on confidential information. Hence all accumulation done by management can come under insider trading unless proven other wise. Look for intimation to stock exchange when management or associate acquire shares or sell shares. You would find all of them under listing rules and obligation.
Secondly if management is giving information to someone who is not obliged to disclose would only be caught through forensic investigation like Mr Rajat Gupta.
Lastly, whether insider or not you can read footprint of traders and investors in a pictorial representation or chart. If the stock behaves unnaturally you should triangulate why it’s happening. For example a large price drop with massive volume.
Negative number will increase the cost of goods sold and hence reduces income for period reporting period.
Here is rationale:
Inventory change is the difference of value between last reported financials and current financials (quarterly or yearly). If the current period inventory is lower than last period inventory we have a negative change and number accordingly.
I spoke about cost of goods sold in this post. Please see the link
This is the cost of goods that has been sold by company/entity. Meaning against revenue number what was the cost required to produce the goods or services. Otherwise known as matching principle in accounting. In short mandatory requirement for Profit & Loss account.
One of the way calculating Cost of goods sold is adjust the cost of goods purchased or manufactured with changes in inventory. If the change in inventory is positive it means there is unsold item lying and reduced from cost of goods sold. For negative change in inventory it will be reverse that means sold more than previous period and hence added to cost of goods sold.
If Purchase is 100 and change in inventory is say positive 10 then cost of goods sold is 90.
if purchase is 100 and change in inventory is say negative 10 then cost of goods sold is 110.
Logic is all purchases should not be matched because there may oversold or undersold in comparison during the reporting period,
I use this way: opening stock of inventory+purchase of goods IS EQUAL TO cost of goods produced+ closing stock of inventory
Imagine Tata family which holds hundreds of companies accross the spectrum, be it telecom, IT or manufacturing. Would it be practical for them to manage day to day affairs even if they are capable? At the same time they are the torchbearer of strategic direction, major stakeholder of risks and rewards. How would they do it then, via a holding company,
Easier to create legal entities and hold control over them financially. Please note holding companies do not involved in producing goods or services.
The legal entities become focused group rather diversified business units under one umbrella. This facilitates easier operations.
Easy owner’s accounting as holding companies only record financial gains or losses.
But this is more important: RISK AVERSION
When one of company goes bankrupt holding company lose financially but liquidation can not be called upon holding company as it does not have a responsibility towards debtors/creditors of individual company.
Patents can be protected from operations, with operational disaster holding company does not give patent rights if its molded to another legal entity.
Of course this means avoiding law suit, bad press etc.
Free cash flow is Cash flow from operations minus (growth) capital expenditure.
I can create an economic value only by investing capital and generating
return. The capital can go to operating expenditure or capital expenditure,
balance left out is free cash flow. Basically FCF/Capital is the cash I can
take out from company without materially impacting operations. Management
has to decide how to allocate this capital or FCF?
by paying dividend (financing activities)
by buying back shares (financing activities)
by acquisitions (investing activities)
by reinvesting in business ( a new line of business or invest to existing
business as expansion- Growth capex)
by retiring debts (financing activities)
Note- some people separate growth and maintenance capital expenditure
because one is to maintain asset, second is to create growth or considered
as investment. In this case FCF is cash flow from operations minus
maintenance capital expenditure.
I would suggest you calculate once and reconcile to the website you are examining. It will increase your comfort on what to rely and what not to.
