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Words of Wisdom
 The Equity Desk Forum :Market Strategies :Words of Wisdom
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basant
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Quote basant Replybullet Posted: 23/Jul/2006 at 10:02pm
Great thoughts I feel this is one of the secret sensors to differentiate between an honest management and a bad management. But you know with Foesco, Infy and the other ones you named they are absolutely great companies where investors will make a decent alpha from the market but these stories are already discovered to a very large extent. Any way why don't you put your stock ideas in the Fundamental section under stock ideas. 
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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Vivek Sukhani
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Quote Vivek Sukhani Replybullet Posted: 23/Jul/2006 at 10:35pm
Although I agree with whatever Mamta has said, yet I the very dynamics of estimating EPS is very fluid. Ultimately, subjectivity comes into the scene and this explains why a particular stock appeals to me and why it doesnt appeal to you.P/E relects the investors' expectations, and as members of community we need to agree to disagree.Ultimately, i dont think a day or two of analysis can prompt you to buy stocks... its a process of continuous observation.Fundamental Analysts keep their eyes open and ears closed which most of the so-called analysts never do. they have their ears open and eyes closed.
 
regards, vivek
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The Lord
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Quote The Lord Replybullet Posted: 23/Jul/2006 at 10:47pm
so what the details that you observe about a company before getting into that company what i'm trying to ask here is what prompt's you to buy a stock of a particular company
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Vivek Sukhani
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Quote Vivek Sukhani Replybullet Posted: 23/Jul/2006 at 10:54pm
I beleive newspaper reports are the most vital piece of information you require, before embarking on a aparticular company. Its about the vibes which a company sends.Take some examples. Look at companies like Havell's and Pidilite. the way they are carrying on their expansion plans. After having observed that, you get down to Balance Sheets, cash flows and Profit and Loss Account. I am a great devotee of mathematical school of Stock Investing yet I agree with Mr. Basant that first observe and then analyse.
 
regards,
 
Vivek
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kulman
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Quote kulman Replybullet Posted: 04/Sep/2006 at 1:20am
On Sharad18's view about Sesa Goa, I would like to add that by paying Rs. 940 odd for Sesa today, our initial rate of return itself is nearly 20%. Its like buying @Rs. 940, a fixed income bond with future value of approx. Rs. 1,600 @ initial rate of return of Rs.200.
 
I request you all to visit this link
http://www.moneychimp.com/articles/valuation/buffett_calc.htm which is a calculator. I need your views (especially Basantjee's) on this method of determining approximate intrinsic value.
 
Thanks
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basant
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Quote basant Replybullet Posted: 04/Sep/2006 at 1:52am
I visisted this link but I do not think that this model would work for all any company in India.
 
Reasons:
 
1) It does not assume a growth rate of more then 8% In India the long term GDP grows is at 5% - 8%. Add inflation 5% that makes it 13% corporate India should grow by at least this figure
 
2) There is no mention of RoE/ Dividend yield/Book value. EPS  is just one section of the model.
 
3) The model is the same for Infosys and Geometric - no place to quote whether it is the sector leader or not. Leaders get higher valuations.
 
4) I think that the model uses the basic corporate finance dividend discount model -- value of a share is Dividend/(K-g). That arithmetic rarely works in equities.
 
5) Sesa Goa and HLL will give you same values inspite of having very different business models.
 
In a nut shell it does not appear reliable.
 
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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Quote kulman Replybullet Posted: 04/Sep/2006 at 2:19am
Very good instant reaction, Basantjee. Thanks for your comments.
 
I always remember your "footnote": If you could tell the future from a Balance Sheet (or for that matter CALCULATOR) then accountants and mathematicians would be the richest people in the world!
 
Thanks again and look forward to your reaction to SHIPYARD sector forum. Could you please comment on thaem, especially Bharati Shipyard and ABG Shipyard?
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Vivek Sukhani
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Quote Vivek Sukhani Replybullet Posted: 24/Sep/2006 at 2:13pm
Actually, I got the inspiration for this topic as I was reading one of the posts by Mr. Basant that he gets worried more by falling EPSand rising prices rather than rising EPS and falling prices. Although, I agree with you Basant, yet sometimes I feel supply side is also very important if you want the stock price appreciation. Very often you will come across companies, which have ecellent credentials yet there is no movement in them. I will give you a very simple example, there is a company by the name of walchandnagar Industries Limited. This company has excellent financials and is also active in Nuclear technology yet this company rarely gets its due importance.Its dividendyoeld is very low, but otherwise has excellent financials.Ot compares very well woth other engineering companies. But, its stock market price is on a downwardspiral.
 
Another company which is into Process equipments and advanced engineering solutions is Alfa Laval. But its price is hovering around current levels for so many days. I readits in-house magazine Here very regularly and am quite amazed to see such a pathetic price this company is commanding. I had also sent you the scanned pages of annual report of Porritts and spencer Asia Limited. Another case in point, is Foseco india Limited.
 
But then, I also get convinced by the way Lanxess India has displayed what good numbers can do. Areva T&D is also a case in point. Infact, I wanted to study this maze of supply side effects in greater detail, but was unable to get the thread.
 
Infact, one of the best lines I remember from Peter Lynch is when he mentions that ease of getting a divorce is not a good logic for marrying a person and similarly ease of making an exit is also not a compulsive reason to make an entry in a company's stock.You will find many people saying that isme to volumes hi nahi hai, or yeh kharid liya to baichega kisko?Thats the manifestation of the malaise of supply-side effect.
 
Basant and other forum members, will be glad if you can throw some light on this....
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