Great articles to read on the web

Books & Tutorials
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By dominating retail and digital business services, both of which touch almost every other industry, Bezos is now positioned to move adjacently into just about any business where he finds added value. He’s playing in the multibillions in at least four markets—healthcare, entertainment, consumer electronics and advertising—that constitute many of the companies not already terrified of Amazon.

This is a superb article touching most of the facets of Amazon and Bezos. A must-read.

There is a feeling in Silicon Valley that you can say anything you want to investors as long as you think you’re changing the world.

A great article on a legendary short seller - Jim Chanos.

https://www.institutionalinvestor.com/article/b1b00ynrgtn05r/How-Jim-Chanos-Uses-Cynicism-Chutzpah-and-a-Secret-Twitter-Account-to-Take-on-Markets-and-Elon-Musk

The next crisis might not come from a financial shock at all. The more likely culprit: a cyber-attack that causes disruptions to financial services capabilities, especially payments systems, around the world.

The onset of stress entices the brain into growing new cells responsible for improved memory. However, this effect is only seen when stress is intermittent. As soon as the stress continues beyond a few moments into a prolonged state, it suppresses the brain’s ability to develop new cells.

I love lists. This one has some wonderful quotes and plain simple advice.

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“Why US dollar has to be the only world’s reserve currency?”

China and Russia are pushing hard to make an alternate payment system.

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https://www.bloomberg.com/news/articles/2018-10-03/the-tyranny-of-the-u-s-dollar

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Why one shouldn’t blindly clone…

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The US-China trade war may not be what it looks. Interesting views by a respected economist Dr. Ed Yardeni.

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Excellent interview of Bharat Shah and good discussion on how to value financial business
Thanks
Ashit

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would suggest forum members to try out this website which is a paid subscription curating new longform articles everyday from India.
you can check out some free articles too
i feel good journalism has become a rarity these days & i quite liked this portal so sharing
Here it is :The Ken

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Extraordinary comparison between the Amazon of today and Sears of a century ago to show how uncannily similar they were.

From the start, Sears’s genius was to market itself to consumers as an everything store, with an unrivaled range of products, often sold for minuscule profits. The company’s feel for consumer demand was so uncanny, and its operations so efficient, that it became, for many of its diehard customers, not just the best retail option, but the only one worth considering.

In the decade between 1895 and 1905, Sears’s revenue grew by a factor of 50, from about $750,000 to about $38 million, according to Alfred D. Chandler Jr.’s 1977 book The Visible Hand: The Managerial Revolution in American Business. (By comparison, in the last decade, Amazon’s revenue has grown by a factor of 10.)

Sears was not content to be a one-stop-shop for durable goods. Like Amazon today, the company used its position to enter adjacent businesses. To supplement its huge auto-parts business, Sears started selling car insurance under the Allstate brand.

Read the full article here: https://www.theatlantic.com/business/archive/2017/09/sears-predicts-amazon/540888/

A good profile of how Oberoi Realty is bucking the trend in the crowded real estate market.

To be honest, I had never heard of Robert Vinall before this week. He is the owner and fund manager at RV Capital based out of Frankfurt Germany. His fund completed 10 years and he has written a wonderful letter. It encapsulates a lot of learnings that most of us go through. Definitely worth a read.

From a financial perspective, my sell decisions demonstrate that whilst it is correct to sell when a flaw in the investment case becomes apparent, it is often not when the valuation appears rich. In all but the broadest strokes, the future is unknown and unknowable. Where I know the company and its people well and, crucially, trust them, the surprises have normally been positive. What appeared at the time to be a high valuation, was not.

If you are starting today, my advice is to be fully invested, but only to hold the companies you would own if you knew the economy was on the brink of collapse. Incidentally, this is the correct way to invest all the time.

Read the full article here https://1q89e4mw1b12ns91b3jfdebu-wpengine.netdna-ssl.com/wp-content/uploads/2018/10/Memo-10-Year-Anniversary.pdf

EU is planning to impose tax on big Tech (google, facebook etc) based on digital presence rather than physical presence. If implemented, it will open up a new frontier of taxation and my guess is most if not all countries will then follow suit.

Read the full article here: https://www.bbc.com/news/business-45813754

Paul Allen, the cofounder of Microsoft, passed away earlier this week. Here is an obituary written by Bill Gates.

Paul foresaw that computers would change the world. Even in high school, before any of us knew what a personal computer was, he was predicting that computer chips would get super-powerful and would eventually give rise to a whole new industry. That insight of his was the cornerstone of everything we did together.
In fact, Microsoft would never have happened without Paul. In December 1974, he and I were both living in the Boston area—he was working, and I was going to college. One day he came and got me, insisting that I rush over to a nearby newsstand with him. When we arrived, he showed me the cover of the January issue of Popular Electronics. It featured a new computer called the Altair 8800, which ran on a powerful new chip. Paul looked at me and said: “This is happening without us!” That moment marked the end of my college career and the beginning of our new company, Microsoft. It happened because of Paul.

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388

old Study worth reading by credit suisse

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389

Boom, Bust, Rinse & Repeat: Predicting The Global Economy by Raoul Pal

Great video on correlation of business cycles with equity, debt, credit, commodities etc.

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https://outlookbusiness.com/the-big-story/lead-story/between-the-devil-and-the-deep-blue-sea-4759

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394

I see that the link hasn’t before in this thread. Pardon me if it has been posted in some other format.

In 1984, Warren Buffet wrote an article titled ‘The Superinvestors of Graham-and-Doddsville’ on Hermes, a magazine published by the Colombia Business School. In it, he promoted ‘Value Investing’. To provide proof, he talked several of his peers, including the likes of Walter J. Schloss and Charlie Munger.

The article is still available in Columbia University’s website:

I highly recommend that you make the 13-page article a light, weekend read.

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Mauboussin interview : excellent discussion on Base rate , expectation, EV/Evebitda and all link provided are also worth it
All his research work is conceptually easy to understand for me and I like to read repeatedly

Thanks
Ashit

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A very interesting Presentation on valuation by Raamdeo Agarwal

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Wonderful article on the search for investment edge. Has some wonderful anecdotes.

In 1834, however, the signal from a similar optical telegraph system in France lost its edge when the data became corrupted.

In the world’s first cyber-attack, two bankers bribed a telegraph operator to transmit false information about the bond market to unsuspecting investors in Bordeaux, which would benefit the banker’s positions.

We are not just using plastic, we are eating them too!

If the pieces of plastic were in these people’s digestive tracts, nobody is sure yet how they got there. Some might be coming up the food chain — ingested when we eat creatures that ate plastics, or when we eat creatures that ate creatures that ate plastic, etc. Some may be coming from water bottles and food containers. Other studies have shown that both tap water and bottled water are contaminated with microplastics. A story in National Geographic points out that carpeting and other household items can shed plastic fibers, and that fibers from synthetic clothing are floating around our homes.

Also unknown are the health ramifications, if there are any. In studies of sea birds, ingesting plastic had exposed them to chemicals called phthalates, which are known hormone disrupters.

https://www.bloomberg.com/opinion/articles/2018-11-02/people-apparently-eat-and-drink-microplastics-effects-unknown

A very interesting new research on how the potato, brought back by the Spanish from South America in the 16th century to Europe, ushered in an era of high farm productivity, which in turn reduced armed conflict significantly in the following 200 years.

The difference on being humble and being humble :slight_smile:

A wonderful compilation of corporate misdemeanors in India by Rudra Chowdhury.

And now, bottled air!!

https://thehustle.co/the-dystopian-business-of-bottled-air/

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Primer on Working Capital for New Investors from Non Accounting background

Why a company’s working capital matters for investors

Efficient management of working capital by a company is vital for maintaining its solvency and liquidity.

by Sameer Bhardwaj

Working capital is an impotant metric to evaluate a company’s health. This is because even profitable companies can turn bankrupt if they fail to manage their working capital properly. Working capital determines the resources that are needed for running day to day operations of a business. It is an accounting term that shows the short term liquidity position of a company at a point in time.

Working capital is defined as the difference between current assets and current liabilities and includes the receipts and payments that have a tenure of less than one year. Current assets includes the company’s unsold goods (inventory), amount due from customers who have purchased goods on credit (accounts receivable or debtors) and the amount of cash available with the company. On the other hand, current liabilities include short-term debt, amount of goods purchased by a company on credit (accounts payable or creditors), bank overdrafts and other short-term obligations.

The working capital of a company should be positive. Companies with negative working capital (current liabilities more than current assets) are prone to financial risk and should be thoroughly evaluated. Nature and size of business, seasonal variations in sales, change in input or raw material prices and length of production cycle are a few factors that influence the working capital requirements of a company.

Financial ratios like working capital turnover, current ratio and quick ratio prove very effective in judging the liquidity position of a company.

Working capital turnover is calculated by dividing sales by the working capital. Generally, higher the ratio, the better it is. It shows how much sales a company has made for every rupee of working capital employed. On the other hand, current ratio is simply the ratio between the current assets and current liabilities. Current ratio greater than one is desirable because it implies that the company has more current assets than its current liabilities.

Another modified version of current ratio is the quick ratio.

Also known as acid test ratio, it includes most liquid assets in the numerator. Such assets are cash, marketable securities and accounts receivables. Basically, quick ratio excludes inventory from the current assets as it is considered illiquid.

We tried to identify companies that have displayed working capital efficiency by considering consolidated data for the past five financial years, starting from the year 2013-14. Over 890 companies with market cap greater than ₹500 crore were picked. We filtered out companies that have the highest working capital turnover, current ratio and quick ratio in 2017-18 compared to the previous four financial years. Also, an additional filter is applied to identify companies with current ratio greater than one in the year 2017-18. Only 19 companies passed these comprehensive filters.

Let us look at the five companies out of the 19 shortlisted companies that have decent buy recommendations and highest one-year upside potential as per the Bloomberg consensus estimates:

Amber Enterprises

A solution provider for air-conditioner original equipment manufacturer and design industry, engaged in room air-conditioners (RAC) and related components. According to a latest report by Sbicap Securities, low penetration in the RAC segment, higher wallet share for original design manufacturers and market share gain indicate strong growth prospects for the company in the medium term.

Colgate-Palmolive (India)

The company is engaged in personal and oral care business and offers products like soaps and cosmetics. JP Morgan is bullish on the stock due to expectations of volume growth revival, improving market share, healthy margin profile, free cash flow generation and improved dividend payout.

Graphite India

It is a manufacturer of graphite electrodes and carbon and graphite specialty products. Analysts believe that high prices for graphite electrodes and healthy operating environment will prove beneficial for the company. Moreover, growing demand for environment friendly electric arc furnace (EAF) due to stringent environmental norms in China are likely to create strong demand for electrodes.

The India Cements

A cement manufacturing company with market leadership in South India. Analysts expect demand revival in South India, cost rationalisation, improving plant efficiency and up-tick in realisation, which will all be significant growth drivers going forward. Moreover, cement demand is likely to grow on account of the government spending on low cost housing projects.

VRL Logistics

The company is engaged in goods and passenger transportation. Being one of the largest organised players in the industry, it has been a key beneficiary of GST. Analysts are closely monitoring the stock due to fuel related challenges that the company is witnessing. Revival in profitability will depend on the future fuel price trends and VRL’s ability to pass on the rising costs to consumers.

Please send your feedback to

etwealth@timesgroup.com

Picture!

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I think this point needs a rethink and should be seen in the right perspective. Many dominant companies such as Maruti Suzuki, ITC, VST Industries, Bajaj Auto, Hero Moto Corp etc have negative working capital precisely coz these have a substantial business dominant position. Hence negative working capital in isolation can’t be judged upon.

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