We should know if they are weeds or flowers, only then we can take an appropriate decision. Did the company trade at such high multiples before or is this the first time? If it had happened in the past, perhaps the company is back on track and the market believes it. If this is the first time for such valuations, something could have changed for better, competition disappearing, some structural change happening in the industry, some regulatory help, or visible growth for a few years because of some tailwinds for that company or for the entire industry, or the company might have caught the fancy of investors and may fizzle out soon. Check the price and volume action. Check the charts. Each case could be different.
When Lynch or Buffett give such quotes, it is because they find flowers before the flowers blossom, before anybody can smell the scent. For investors like me, it takes time to find the reasons why so and so stock has gone up so fast, surprised and overjoyed on one hand and wondering on the other. And if indeed they are flowers, you should water them, average up, because they will grow for some more time.
I think here concentrated PF has an advantage. As the number of stocks are few, one can spend time and understand the nuances of the business which answer why the price to go up, and can monitor the price movement closely.
The very reason why everyone says, selling is tough.
It all depends on the runway. If you expect these companies to grow their sales in the future, while maintaining margins, watering the flowers aka averaging up may be the way to go.
But if you believe that growth in sales is temporary or their margins may not sustain, or both, then the best course of action would be to try to find the next Amines/Nitrite.
Coming to holding high valuation stocks, due to scarcity of high quality high growth stocks in India, the market often takes prices of overvalued stocks to the moon and beyond, and selling in a staggered manner is the way to go. That way, we let the market give us feedback whether or not our initial selling was right. Something like a systematic withdrawal plan might work best.
where i can find the company past data like last ten years book value, ROE etc.
what is the proper way to calculate the intrensic value of the company ( i have read in a book buffetology says epsĆ·government long term bond yield, benjamin graham has one formula, dcf is other way)
please recomand book for business and management analysis.
Hi, I have a some questions on formation of LLP, not related to investing directly. Please share your feedback.
We group of friends would like to invest in stocks, derivatives, mostly trading. Not everyone has same level of expertise. So we plan to form a LLP (or other structure) with intention of trading and 1-2 of us would be responsible to trade and share profit/loss charging minor fee on focused efforts put in.
Is LLP structure good for above activity?
Does this require SEBI approval?
Are there any other structure better with respect to taxation?
Depends upon the nature of the business, had I posted the same data for Divis Labs one wonāt be able to differnetiate given in Cdmo/B2B businessess some amount of money often gets stuck in working capital (know they are a cash machine, but the Business mentioned here travelled this journey in 15 years from 8lakh revenues to 4800 crores+)
Things exist in a context and not in isolation but at the end outcome will speak in next 3-4 years.
Just a random thought from my side: things always exist in shades of grey. Nothing is a certain yes or no when it comes to some things related to business or world in general. Certainty seeking investors are in for dissapointment in the real world when business itself is an uncertain activity. For instance: thereās a steel tubes company which not so long ago was capitalizing itās A&P expenses, thereās a agchem company which doesnāt disclose anything, yet has created wealth. Then thereās a technical textile business which has constantly reinstated its annual reports and has grown the other income through various ways (OP Cagr is much less than Pat Cagr). Then thereās a footwear business which is lauded as a consistent compounder, yet in early 2000s if one reads the annual reports interesting things come to forth. Management evolves, business evolves and the industry evolves. Understanding can only be derived through context and not plain financial numbers in my view. Reason why I respect @Sanjay_Bakshi 's approach of starting reasoning by saying āPart of the reasonā. Always keeps one open and mutlidimensional.
Disclosure: invested in the business mentioned in the table. Open to disconfirming evidence yet maintaining the necessary arrogance to ride it out
Profit making business whose sales have increased YoY.
Lots of follow-up questions, listed below- 1. What made the sales to increase 70+ % in FY21? 2. How sales grew so much without much addition to the Gross Block? 3. What made the inventory to go up so much if sales have increased 70+ % in FY21? 4. Whatās the trend of the Cash flow from operations for all these years? Very Important as Borrowings have increased YoY except one time. A business can keep making profit and can go bankrupt if it does not make Cash flow from operations, which shall be in sync with the profit trend.
To answer your question, more information is needed on the above noted points.
Intrinsic value is a blurry concept. Different people have different ways of valuing companies.
Method 1 - For companies which have very low or no volatility in their earnings, based on historical earnings growth rates, you may try to project what the earnings could look like a 3-5-10 years from now, assign a conservative P/E multiple to those estimated earnings and try to calculate the expected returns based on current price. You may want to check out the framework that Prof. Bakshi explained here beautifully.
These letters are the best education in finance one can get and it takes time to absorb concepts that Buffet talks about. Maybe print them out and enjoy reading them in an undistracted manner, because unlike electronic gadgets, there are no notifications demanding your attention while reading on paper and undistracted attention is a must have to read and understand these letters.
I would also create 3-4 different word files and label each one in the below format.
Business analysis.doc
Management analysis.doc
Valuation analysis.doc
Other concepts.doc
Unless one is a maverick, it takes time to digest these concepts and maybe reading and thinking about them a couple of times, at least, would be the way to go.
Personally, I read a few letters, got distracted with other things in between and eventually figured out that practical experience is a better teacher than theory.
You may want to start reading them and see where it takes you because what worked for somebody else may not necessarily work for you and vice versa.
This is because companies in early phase of lifecycle need to invest for growth, so you will mostly find negative free cash flow, and
Free cash flow is affected by working capital changes also, so you will find free cash flows very volatile Year to year.
Free cash flows are essentially funds that a business is unable to reinvest. In most cases, this indicates that there arenāt enough opportunities available for reinvestment.
I would also equate a business generating FCF to a fixed deposit. Although the business could be earning a high interest rate for its owners (in the form of return on capital), it is still not able reinvest surplus funds and is hence not compounding funds for its owners.
Conversely, a business that is earning a high return on capital plus is able to reinvest its earnings is a true compounder and abides by the spirit of the idea mentioned by Warren Buffett in his 1992 letter " Leaving the question of price aside, the best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return"
So even Buffett prefers businesses to reinvest their earnings at high rates of return and not generate free cash flows and eventually pay out dividends, which are tax inefficient. Profits are taxed and then dividends are taxed again, resulting in double taxation.
Investor Tom Russo articulated this beautifully too, in this article
" Famed investor Thomas Russo says the goal of investing is not to find companies that generate free cash flows, but to find those that have the ācapacity to reinvestā that free cash flow to expand the value of the enterprise in the future.
āIt is really the reinvestment of cash flow that in fact is free when it relates to the existing business, but which, if properly deployed, can expand the enterprise enormously. That is the skill you want to have attached to a cash-flow engine,"
This might be be a noob question but how can i download my latest CDSL statement?
I followed the steps here: Steps To Download E-CAS Through CDSL
For CDSL I went to this website: :: Central Depository Services (India) Limited ::
but it only has statement for March 2021. Is there any way I can download the latest statement which is for say the last trading day, or last trading week?
A fund manager has access to screener, valuepickr and more tools such as Bloomberg, capIQ, etc. They also have access to top management of company, industry consultants, access to larger block/bulk/QIP deals. In terms of access they will beat an average retail investor hands-down.
At the same time, a fund manager has quite a bit of restrictions on concentration (at least āxā number of stocks), has to have certain sectors diversification, cannot invest in low float stocks, ESG compliant companies, etc. They also have to beat their target index on a quarterly/annual basis. All of this reasons makes most of the fund-manager to take safe bets (Most fund-managers who love their jobs have very similar stock selection to their target index - you will find the same HDFC, ICICI, TCS in their portfolio albeit with different weight-ages). This leads to very similar returns as the index (and lower return when you take into account the fund managerās fees, AMC fees, etc)
A retail investor does not have the above restriction. He can participate in low market cap stocks, sit on cash as per his comfort, diversify as per his own comfort and have an holding period which is suitable for his own temperament. And also no fees.
TLDR:
If an investor has limited time, interest, understanding of financial statements, develop sector/investment thesis ā Index funds is the way to go
If an investor has time to develop all of the above ā Direct investing is an option that will be intellectually rewarding (Cannot guarantee the financial reward )
They are asking me to fix it manually but i am skeptical to do so because none of my actions caused this discrepancy. Does anyone have experience with receiving bonus shares in zerodha/kite? Does this also get fixed with time automatically or do i really have to manually edit and tell zerodha that i received bonus shares?
(know they are a cash machine, but the Business mentioned here travelled this journey in 15 years from 8lakh revenues to 4800 crores+)
