Tiger ,Tiger Everywhere

reminds me of "there is never just one cockroach in the kitchen" though i think this is becoming cliched. Well the tiger in question is a very well covered company in recent days (though most funds have discontinued research). and the 80% market fall does it warrant buying on account of over reaction. Well a company where the top man admits the books are wrong, not sure how the stock can be valued.

probably a wiser thing will be to buy one of the business devlopment managers which will help some tigers eat other tigers, and not the people riding them, or riding with them.

Warren Buffett advices to buy American :D

WEB wrote this piece for New York Times on Oct 16.

THE financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.

So ... I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

A little history here: During the Depression, the Dow hit its low, 41, on July 8, 1932. Economic conditions, though, kept deteriorating until Franklin D. Roosevelt took office in March 1933. By that time, the market had already advanced 30 percent. Or think back to the early days of World War II, when things were going badly for the United States in Europe and the Pacific. The market hit bottom in April 1942, well before Allied fortunes turned. Again, in the early 1980s, the time to buy stocks was when inflation raged and the economy was in the tank. In short, bad news is an investor’s best friend. It lets you buy a slice of America’s future at a marked-down price.

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

You might think it would have been impossible for an investor to lose money during a century marked by such an extraordinary gain. But some investors did. The hapless ones bought stocks only when they felt comfort in doing so and then proceeded to sell when the headlines made them queasy.

Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.

Equities will almost certainly outperform cash over the next decade, probably by a substantial degree. Those investors who cling now to cash are betting they can efficiently time their move away from it later. In waiting for the comfort of good news, they are ignoring Wayne Gretzky’s advice: “I skate to where the puck is going to be, not to where it has been.”

I don’t like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I’ll follow the lead of a restaurant that opened in an empty bank building and then advertised: “Put your mouth where your money was.” Today my money and my mouth both say equities.

Key takeaway, put your money where your mouth is !!

When everyone is scared ...

When markets are choppy and everyone is scared, I think its the best time to identify some interesting opportunities. In fact WEB has this very famous quote "Be greedy when others are scared and be scared when others are greedy" that echoes the same thing.

Everyone from an individual investor to a Mutual Fund to an Institutional Investor is very very scared of Indian stock markets right now. Does this translate into oppurtunity? And if it does, how do we find companies that are worth investigating?

I am listing few things that I have used to identify stocks.

• Look for companies where management (or insiders) have hiked their stake since this turbulence began in markets. Rationale: Management are the first people to know about the shape of the company and if they are covertly buying, that means that they are confident about the performance, and since Mr. Market is offering them a good price, they are buying.
• Create a list of stocks where prices (after adjusting splits, bonuses, amalgamations etc.) are at the same levels as they were two, three years ago. Check if there has been a noticeable growth in terms of revenues, margins, return on capital employed etc. If there is, then these are being priced irrationally by Mr. Market and can be further investigated.
  
• Look out for all the BSE and NSE notifications and updates. Since a lot of companies are being priced irrationally quite a few takeovers, buyouts, mergers would be on card. These notices might throw few very interesting ideas.
  

Please note that I am not trying to teach anyone anything here. I am just sharing my understanding of Mr. Market. Obviously a lot of it would be flawed and I hope someone will help me correct it.

How are you screening stocks? Is there another way to identify companies?

Long Term Investment

Awesome ad for Allan Gray Investments.

"Always look for potential .. and
Have the patience to wait for it."

Isnt this true for investing also?

What kind of companies to put money in?

I have been thinking what kind of companies should I put my money in. Here is a small checklist...

1. Should have a product that caters to a large chunk of population. (Why not niche markets? Afterall, a brand can command a premium in niche markets?)

2. The market should be growing. (For obvious reasons)

3. The market should not be crowded with competition. At max three players in the market.

4. Barriers to entry should be high. The company should not be susceptible to competition from fly-by-night operators.

5. It should have a huge brand name. I dont know how to quantify brand names but it should be easily recognizable and trusted by its customers.

Obviously price is still the most important factor in the buy decision.

Need to put a lot of thought before I can finalize the checklist. Can anyone point out flaws?

Superinvestors of Grahamsville and Doddsville

This is one of the most famous piece of work from Warren Buffet. Prof. Bakshi talked about this back in 2005. Finally found it on one of the old harddrives and uploading it.

Here is a link to Superinvestors of Grahamsville and Doddsville.

2007 Berkshire Hathaway Annual Report

The 2007 annual report is out. Get it here.

I will update the highlights and my thoughts soon.

Recent Investment Positions

In last week, I took active position in two securities.

1. Cheviot Company Ltd.
2. Mid Day Multimedia Ltd.

One is a deep value play and another is an unfolding growth story.

Me and Sandy have spoken about Cheviot earlier too. This is the link to the previous post. Nothing has changed since then. Mr. Market is still pricing Cheviot for bankruptcy. Cheviot still holds all those assets that make it a value play. I am still trying to figure out what can be the trigger.

Mid Day is another company that has been on our radar for a long time. Here is our earlier post on the same. It just happened that Mr. Market has been really kind and is pricing the company at really attractive valuations. When we started tracking Mid Day almost an year back, its price is what it is trading at right now.

Any thoughts from any readers on either company?

Investments history and lessons

Been long time since I updated the blog. Here is a post out of compulsion rather than necessity. SA is out of the country for some time and hence its me who will have to post things here now.

Investments history.

When I started investing in 2006, I started with Rs. 10000. My investing philosophy was what it is right now. Pick 5-8 stocks and divide the capital equally amongst these 8. Obviously it is difficult to get 8 value picks at the same time. I thus decided to put 2500 in every opportunity.

Over a period of time, I got a job and started saving. Now suddenly I had more money to invest. 10000 looked like a paltry sum. I reached a point where I had invested 50000 in market. I did not hike my stake in earlier investments and merely added new securities. My portfolio now had investments of less than 5000 in 5 or 6 companies and about 10000 in 3 companies.

Moment my savings reached a lakh, I did a review again and realized that I still haven’t sold a single company and the portfolio had less than 5000 in 6 companies, about 10000 in 3 companies and 25000 in 2 companies.

And by the way the portfolio was doing really well. The ones I had put money in 2006 were at-least two-baggers (one stock was up 5 times too). The ones I put Rs, 10000 in had almost doubled and the ones where I put 25000 were up some 30 odd percent. Overall the portfolio was about 40 percent up. And I owned about 12 companies.

Today I did yet another analysis. I realized that I have put in 2 lakhs in all. Since I haven’t sold any stock since I started investing, I own about 16 companies now. 5 are multi-baggers, 5 are two-baggers, 1 is making a loss of about 10% and rest are up by 30 odd percent. Portfolio on the whole is up by 30%. Even thought I have 7 multi-baggers, my portfolio as a whole is up only 30%. One side, I am happy that I have not lost money in the market. On the other hand, I am disappointed that I did not beat the index.

Lessons and feedback

1. I need to start thinking about investments again. I was under the assumption that I don’t have time and if I let the portfolio hang on forever, it would only increase. I have now realized the hard way that selling is as important as identifying and buying is.

2. I need to know when to sell. Few of my stocks are down 50 percent from their highs. I have never sold a stock. Ok, I sold one stock when I needed money but I recently bought it again when market fell 10% on a single day.

3. Since I never thought I would sell, I would need to formulate a selling strategy also. I can sell my stocks when they have reached their fair value (what I think/calculate as the fair value). Or I can sell them moment they are up by 50% or some other such number. Or I can sell them when I see a better opportunity. I will have to sit down and think.

And if you dint notice, I just made it public. I have a 2.5 lakh portfolio. And this is all the saving I have. Lets see how many ransom calls do I get now and how many new friends spring up cos of that.

P.S.: If anyone has any feedback, please revert.

Pseudo Demand and Pseudo Supply

Post removed by Blog Admin.

IFCI Ltd. - How NOT to Invest In Indian Stock Markets

IFCI Ltd. - Company Details

SA and SG write Pseudosocial. This is an conversation they had today in the afternoon.

Please read. A very good example on how are people moved by greed and are blinded by lure of quick gains.

**** refers to names that we dint want to disclose.

SG: market 18k ho gayi?
SA: kya lena hai?
SG: IFCI
SA: :) woh to leh hi raha hoon. uske alawa aur kya lena hai. IFCI ki bid kitne par hai?
SG: maloom nahin. lekin log bol rahe hai 200 ho jaaega.
SA: :) yeh log kaun hai?
SG: pata nahi. main soch raha hoon ki 100 ho to bech doon :D
SA: who is log? :)
SG: random people yaar
SA: abe mein soch raha hoon 15-20% return mile to bech doo. Kher aur kya lena hai?
SG: maloom nahin. IGL dekh raha tha main. maza nahin aaya
SA: IGL kaun hai? indraprastha gas?
SG: haan
SA: Ok. IFCI aur kitna girega? Mujhe lowest pe lena hia :)
SG: mera lowest **** hai !
SG: Abhi kitna hai? Mera nse nahin khul raha.
SA: 77
SG: 77 fuk .. ?
SA: :). Aur kitna girega?
SG: maloom nahin. Lekin itna to nahin girna chahiye yaar
SA: mujhe lowest pe lena hai
SG: it should not go below 85. Ruk lemme see. Koi news aayi hai kya?
SA: haan thoda overreaction hai shayad
SG: 85 pay sab logon nay bid kiya hai
SA: (log bol rahe hai) minimum bid is for 120
SG: yaar mujhe 85 maloom hai kyonki it was documented in paper. Agar 77 hai to khareed sakte hain 500 share!
SA: 85 kisne document kiya tha? Or rather which document?
SG: 85 pay **** nay akhbaar main bola tha
SA: oh ok
SG: paper main tha ki they have given open offer to acquire at 85. Uskay baad hi IFCI wale so kay uthe aur bid ki naubat aayi
SA: **** ne hi bola hai minimum bid for 120
SG: ok ok. 77 pay hai to khareedna shuru kar sakte hain thoda thoda but don’t know the bottom. Lekin margin of safety nahin hai
SA: **** ke "untrustworthy" sources ne. But at 77 it is a buy for around 10 - 15 %
SG: abey FnO main we can go for killing
SA: it is banned in FnO
SG: aaj neeche hai, kal badega, tereko maloom hain FnO kaise khelte hain?
SA: jaise jua khelte hai waise hi fno khelte hai
SG: haan lekin mere ko fno nahin maloom. jua maloom hai.
SA: horse racing jaise khelte hia, koi ghoda acha laga to paise laga
SG: lekin yaar yeh news based hai
SA: jeeta to sahi nahi to bhi sahi. What is the news?
SG: matlab news aaegi to 10% upper and bad news aayi to 10% lower
SA: IFCI ka stake kiske pass hai? GOI? Who is selling stake?
SG: IFCI itself it selling stake
SA: ok. To who all? Pvt. Companies? Oh fuck it is 75 now
SG: http://www.IFCIltd.com/shholdpattern.pdf and IFCI kay liye moja sey pooch ki story ya hai
SA: I am not sure I have just put some money in IFCI. Fingers can be burnt here but lets see i have just bought 200 shares
SG: greed @ play!!
SA: :) :) a lesson can be learnt
SG: saale. Greed hai aur kuch nahin hai. Sun TFCI dekh. That can be bought for long term
SA: tourism finance corp
SG: ye IFCI type hai. I saw it at 10 bucks and now its 30
SA: haan
SG: may main 10 ka tha and I think I told you about it also
SA: ya I want it lower than 30. It has gone up very quickly. IFCI should be sold at at least 90. That’s what I think. So I will buy more
SG: abey! Irrational exuberance!
SA: :) mujh pe model lag raha hai. But I will stick my neck out and buy more
SG: saale. I will post this conversation on blog!! and on lollapalooza
SA: :)
SG: serious!
SA: ok no issues. but some parts should be removed. like references to some company names as done earlier
SG: hehe. I will remove things that I think should be removed and maine bhi 100 khareed liye :). ab meri IFCI holding *** shares ho gayi
SA: :)
SG: saale tune model laga diya. achha khasa chup chap kaam kar raha tha main
SA: maine kya kiya
SG: lekin ab khareed liya hai to lite. mera average price 75 ho gaya
SA: 75 average price kaise ho sakta hai, jab lowest price *** rs hai
SG: I meant abhi ki purchase
SA: oh ok
SG: till yesterday my average price was **** including taxes
SA: :) mujhe kaam nahi hota hia to bahut bira hota hia :)
SG: seriously! 100 share khareed liye maine bhi
SA: maine bhi 250 share khareed liye
SG: 250 ?
SA: haan
SG: ok
SA: 200 pehle 50 baad mein. But all after we started chatting
SG: this will make an interesting post on blog!
SA::) I know
SG: I will post this after correcting spellings and removing names of people and companies
SA: yes companies definitely
SG: IFCI is now 79 :D
SA: let's sell :) but on a more serious note it should have gone down more I wanted to buy another 50
SG: sell kar dooon ?
SA: mein bhi wohi soch raha hoon
SG: this will be my first experience with intra day trading!!
SA: :) abhi mujhe thoda kaam bhi hai
SG: ok
SA: thodi der kaam karna padega
SG: you carry on. I will post about it on the blog after editing some parts of the conversation
SA: ok

Disclaimer: Both of us now have a stake in IFCI. Please be advised.

And this is a very good example of how NOT to invest.

Aftek Ltd.: Am I Missing Something

Aftek Ltd.

Company Website: Aftek Ltd.
Company Details: Google Finance on Aftek Ltd., Kotak Securities on Aftek Ltd
Annual Report: Aftek Ltd. Annual Report 2006, Aftek Ltd. Annual Report 2005

I am not comfortable with the kind of business they are in. Also I am not very sure of the products they make. They sound complex and it is a business that keeps changing. Also the company has an uncharged amount around 17 crores against foreign exchange that is essentially a reduction of 17 crores.

Consider the market cap (857 lac shares * 73rs = 625 crores), cash flows the company is generating (they claim in excess of 300 crores as cash and cash equivalent) and reported profit after tax around 100 crores. The company is not very heavily loaded as far as debt is concerned (aroud 50 odd crores).

Is this some kind of a scam or is all this true. Add to this a subsidiary (25% holding I think) which is currently valued at 600 crores (25% stake was purchased in lieu of knowledge transfer). The company exists for sure as I had once appeared for an interview for a job oppurtunity with the company (don't ask what was the result).

And the chairman starts his speech with a line from "Sound of Music"

Lets start from the very begining
a very good place to start

ANY COMMENTS, whoever has read this far ...?

Few Videos on Worldy Wisdom

With Youtube, sharing and viewing videos is easy and fun. Here are a few very highly recommended video - for investors, speculators, traders, students, random people alike!

1. Steve Jobs at Stanford Graduation Commencement - June 12, 2005

Video on YouTube | Full Text

"Your time is limited, so don't waste it living someone else's life. Don't be trapped by dogma — which is living with the results of other people's thinking. Don't let the noise of others' opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary."

2. Warren E. Buffett at University of Florida MBA - 1998

Video on YouTube | Video on Google Videos | Full Text

3. Guy Kawasaki at TIEcon - May 13, 2006

Video Link | Full Text

4. Randy Pausch at Carnegie Mellon

Video on Google Videos | Video on Youtube | Full Text

Credits: Ravi, Value Investing

Please recommend more videos and help make this a comprehensive list.
Last updated: 1.Oct.2007

Linguistics - Finance

We have a new section. We will post articles on Finance, Valuation and Investing written by friends and guests.

To kick off, Prasad contributed this very interesting article about Linguistics and Finance on Lollapalooza. With his permission, it is being reproduced here.

Hi,

Some thoughts to share about, on the application of linguistics in finance. These are in no way any conclusions, but only thoughts to reflect upon. Please share your comments/ideas on the same.

Human "line of thought"(LOT) is divided into natural sciences, applied sciences, arts and humanity etc and many a times one "line of thought" (LOT) is enriched by findings from other "lines of thought". Such a division itself is difficult because of overlapping nature. Sometimes findings in one are found to be erroneous before taking into consideration the findings from other. Example: study of history is enriched by anthropology, evolution, biology etc; Even in the area of finance, we are applying insights from various fields like evolution, biology, chemistry, psychology etc. And there are many other such examples of inter-disciplinary dependancies. I have some thoughts to ponder upon regarding linguists and finance.

1. In Linguistics, one question posed often is "can we think with out language"? Isn't the existing knowledge bounded by the limitations of "language"? We may not always express correctly what we felt/thought. Actions resulted from thinking that we do with out associated words(language), are difficult to analyze further. We try to find situations where various mental models or their combinations have relevance in area of finance and life at large. People's awareness/understanding/susceptibility/application of mental models differ. In such cases, does't it get more dificult to find the right mental model/combination of models, compounded by the problem of actions resulted from thinking with out language, and analysis limited by language?

2. Many disciplines/sciences add new jargons, being limited by existing words. Does the innovation in the discipline (even finance) becomes limited by language constraint? Is it that "I cant express myself in words" a question to be limited to disciplines of arts, metaphysics etc?

3. Is the application of mental models/finding the right model limited by language as in case of study of history, with out inputs from paleontology/archealogy etc.Any such situations one noticed? Are such situations so rare that they don't demand further analysis with regard to applications in behavioural finance? Even if they are not rare, the fact that everyone is bounded by such limitations makes this discussion irrelevant?

I doubt even the above sentences are, limited by langauge as well as my ability to use language effectively. Please share your comments/ideas on the same.

Regards
Prasad.

P.S.: Wiki on Linguistics

Delhi Autorickshaw Drivers - A Fare Deal ... ?

Autorickshaw (aka autos) drivers in Delhi have always been notorious for fleecing customers and demanding exorbitant fares from passengers. Autos are supposed to charge by a fare meter (installed on the auto). A fare meter is an essential part of any public transport system. All the autos had a meter but no driver ever used them. Even people in Delhi got used to haggling with the drivers before they took an auto. I have spent good part of 25 years in Delhi and have never travelled in an auto that runs on fare meter. Even Lonely Planet Guide and other Delhi travel advisories told people to fix rate before they get into the auto.

I moved to Mumbai three months back and on a recent visit to Delhi, I was surprised to see that somehow all autos were going by meter. All means all autos on the road. I took autos at 2 AM, 8 PM, 6 AM and all the time I paid by meter. This was something new to me. How can this radical a change happen in less than 3 months? What changed? This is equal to a social epidemic. The very basic behaviour of people (in this case autodrivers) changed in less than three months. What brought about the change?

It took almost a day to figure out and this is what I could find.

In last three months, few things changed.

1. The per kilometre tariff for auto was hiked (from Rs. 4.5 per KM to Rs. 5.5 per KM).

2. The fine on not going by a fare meter was hiked. From Rs. 100 to Rs. 2000. In case of second default, the autos could be impounded.

3. Policemen were given incentives for catching defaulters. I asked a cop, he did not share the exact numbers but he said that if they catch even 5 defaulters a day, they make same money as they would make in bribes in a week.(This is what a cop told me when I acted as an innocent college kid :))

Now these three changes had following effects

1. Auto Drivers: Most of these auto drivers do not actually own the autos they drive. These are rented (Rs. 250 per day). It was easy for most of the drivers to cough up 100 bucks if at all they were caught. They could either pay Rs. 100 or bribe a cop Rs. 50. To compensate, all they needed to do was over charge 2 other customers. Now with fine at 2000, if they are caught even once, they are in a soup (large fine and possibility of not getting the auto for next day). And with super-incentives to cops, chances of getting caught and fined became higher. It also became difficult to bribe cops as they make more money if they issue challans (traffic violation ticket).

2. Cops: Earlier, cops were happy catching autos for petty things (no driving license, improper uniform etc) and getting Rs. 50 as bribe. With high incentives, they cracked down on autos like anything. They stop autos at random and instead of asking the driver, they ask the passenger about the fare and if the meter is being used or not. Suddenly cops were making quick and easy money and above all, this money came in form of awards. This probably became the tipping point and suddenly every auto driver wanted to go by meter.

So basically it took two simple step to solve an age old problem of over-charging. An awesome application of what Robert Cialdini, Seth Godin, Malcolm Gladwell and a lot of other unknown social scientists have been doing (I am taking the liberty of categorizing all of them as social scientists).

Moral of the story is that next time you take an auto in Delhi, make it a point to go by meter (spread the Ideavirus - become a sneezer).

Post BFBV, everything is reduced to application of Mental Models.There are quite a few evident Mental Models in the entire episode. The ones I could spot immediately are

1. Reciprocation – we have increased the fares, now you start using the meters and stop fleecing the commuters.

2. Incentives – catch defaulters and make fast money.

3. Punishments – large (comparatively) and enforced strictly.

4. Positive Feedback Loop – Initially cops made money, they got stricter, autos started going by meter to avoid getting caught, cops getting even stricter with lesser autos defaulting.

If there is a different opinion, please share. Please point out flaws in arguments.

I have also made following two assumptions

1. No one paid fines earlier and most cops were happy to take bribes than issue challans (aka traffic violation tickets)

2. Assumed that this exercise is success. However the effectiveness is yet to be proved. Until commuters start demanding to travel by meter and use of meters becomes a norm, the effects would start fading in some time.

Three A's (AAA)

First the three A's are for Adhunik Metallics, Alps Industries, and Abhishek Industries. Moja introduced us to the first 2 A's and the third one is just another company from the textile sector.

2 of the three are from the textile sector which is a "sitting duck" as someone may like to quote. Actually Arvind Mills could also have been covered here but will save that for some other time. Moving on we came across Abhishek Industries while trying to look for something new. The company has been posting a PAT for around 40 crores for the last 4 years and at the present market cap of 340 crores is not an expensive buy. But none the less as Sudhir says he does not like the managment and the share price though not high will be better still if it goes somewhere below 15. Again why the textile sector is in such a shape currently we do not know and will love pointers on the same. Is it the capacity utilisation of some of these textile firms or ...

The other 2 were stories given by Moja and though moja gave the adhunik story at 36 - 37 the price has risen since and oscillated as well. Both these stocks are discussed here on behalf of Moja who on repeated requests has not produced an article for the same. Adhunik looks to be in a promising industry where the tailwinds seem to be with the company for sometime to come. The company is definitely on a growth track but we will not like to take the discounted value for the growth into the valuation for the stock. With the kind of results posted for FY 2006 -07 the company was worth a dekho at 36 but at current level (well, price changes everything) ... :-)

As for Alps industries this is the fav of the three, something which is trading at a huge discount to the book value of Rs. 147. Does this book value really represents the liquidation value, we have not done the calculations. But surely as per the numbers go this one looks the most comfortable but again is a company in the market cap of 100 - 200 crores and we are already saturated with companies with similar market values. Though one of the important criteria in picking a stock should be the marketability of the scrip, and this scrip satisfies those criteria unlike some of the others in similar M Cap range.

All in all not too much numbers presented here for the three companies but this is more for getting some views on the same especially for the ones belonging to the textile industry.

We have interest in one of these scripts, moja and freinds have interest in another and the third one is Just for ...

Neembu Mirchi

I sent this to my alumni group ...

I was standing on this traffic light when I saw a small kid tying Neembu-Mirchi to a bike. I had seen auto drivers and taxi drivers using Neembu Mirchi to drive away the bad spirits but a biker using Neembu Mirchi was something I hadnt even imagined!

Got curious, got down from the auto and stood there for some time. Realized that the Neembu Mirchi was done with all the bikers even though none of the bikers had originally asked for the thing to be put on the bike.

Classic Cialdini at play. The Neembu Mirchi is traditionally used to prevent something from "Buri Nazar". Everyone has seen it, everyone knows it and most of the people believe in it (for the record - I dont).

Since these were small kids, giving away Neembu Mirchi for free and helping you save yourself from "Buri Nazar". He is doing you a favour. You have this strong urgent of returning the favour. How do you do it ... ? Give Money! Saves you from the guilt of taking services from a kind hearted kid who is there to help you. Further, since the Neembu is tied up, you dont want to drive away with something from a starving kid without paying for the cost. PUSH selling .. :D

Wiping of windscreens on traffic lights, giving you a photograph of some god, now Neembu Mirchi - Reciprocation ! AND RELIGION (in last two cases) !
Regards,
SG

Prof. Bakshi replied

Yah Saurabh, I think you're right abt Cialdini's models at work here.

Actually, the road is a wonderful place to see psychology at work.

On Saturday's in Delhi, its common for beggars to put oil in containers with coins inside and approach you - you NEVER find a container without coins in them - social proof - others have given, so should you.

The eye-to-eye contact which the beggars are so eager to establish and ppl are most reluctant to have enforced on them is contrast effect as in "you're so rich, look at me, look at the contrast between us!"

When people accelerate their vehicles instead of slowing down when approaching a crossing and when the light has just turned from green to yellow - its deprival super reaction - most of us do this - we lose control of ourselves and our perception of risk goes for a toss when we see our chances of sailing through a crossing diminish by the second - total impairment of cognition... When ppl lose something or are almost about to lose something, they becoming willing to take huge gambles to avoid losing it - what you see on the road happens all the time in the casino and of course in the stock market...

Road rage is a function of reciprocation (retaliation is a form of reciprocation), and envy (sometimes).

Even clustering of "similar others" (social proof) takes place. If you hit a cyclist and he falls down and you stop, you can be sure that most pedestrians and cyclists who gather there will take his side - regardless of who was at fault, and most motorists who stop by will take your side - again regardless of who was at fault.

And when one sees someone obviously hurt lying on the street in pain and agony, one is reluctant to stop and help because no one is helping (social proof means we not just copy actions of others, but also their inactions), and our own personal calculations (let someone else do it).



==SB

Kenny Loggins - Playing with the Boys - Current Fav Song

Kenny Loggins - Playing with the Boys - Current Fav Song

Featured in the Motion Picture Top Gun ! (OST)

I'd say it was the right time
To walk away
When dreaming takes you nowhere
It's time to play
Bodies working overtime
Your money don't matter
The clock keeps ticking
When someone's on your mind
I'm moving in slow motion
Feels so good
It's a strange anticipation
Knock, knock, knocking on wood
Bodies working overtime
Man against man
And all that ever matters
Is baby who's ahead in the game
Funny but it's always the same

After chasing sunsets
One of life's simple joys
Is playing with the boys
Said it was the wrong thing
For me to do
I said it's just a boys' game
Girls play too
My heart is working overtime
In this kind of game
Someone gets hurt
I'm afraid that someone is me
If you want to find me,
I'll bePlaying with the boys

I don't want to be the moth around your fire
I don't want to be obsessed by your desire
I'm ready, I'm leavingI've seen enough
I've got to goYou play too rough

Cheviot Company Ltd

Company Website: Cheviot Company Ltd
Company Details: Kotak Securities
Annual Report: Cheviot Company Annual Report 2006

I read about Cheviot on Rohit Chauhan's blog first. Then Prem Sagar talked about it. And since it was on their radar, I had to look at it.

Cheviot is a West Bengal based company into Jute products. It has 100+ years history. 100 years don't guarantee anything. Recently a 1400 year old business succumbed to excess debt.

Company is into two businesses - Jute goods and Captive power generation. Annual Report 2006 says that power generation contributes less than 10% of revenues and hence is not covered in the annual report. Jute goods include Jute Yarn, Sacking Bag and Canvas Bags.

Its products are used extensively in packaging. In India, GOI has made it mandatory to pack sugar and some other food items to be packed in jute bags. However more than 70% of revenues come from exports and even if these regulations are taken away by GOI, there would not be a major impact on earnings.

Since the entire jute industry has been facing losses, small competitors and most of the players in the unorganized sector have been forced to shut shops. Cheviot remains the lowest cost producer and one of the few companies left making money in the industry.

+ives

1.Company deploys excess cash in mutual funds and other companies. Subsequently company is sitting on Rs 212 cash per share (and this is at cost of investments – with market giving 46% return last year, the market value could be much much higher).

2.Current trading price is about 238. With 212 per share in cash, Cheviot can be effectively bought at Rs. 26 per share.

3.Promoter group holds about 73% of outstaying shares – may be a reason for their love of giving out generous dividends! It would have been interesting to know the dividend payout if promotes had only 27% holding in the company.

-ves

1.Jute industry has been given sops by GOI and in absence of these sops, profitability might come down. Most of the revenues come from exports and in case sops for packaging are taken away, Cheviot would still be unaffected.

2.There is no catalyst that might initiate the value unlock process. In case of Venkys, people just had to start eating chicken again. Here there is no such natural catalyst.

3.Labour issues in West Bengal are very sensitive. Strikes happen on whims and fancies of the union and might have some effect on operations of the company.

Inputs

1. Jute – prices and availability of raw jute.
2. Annual report mentions about petroleum prices being an input.

Dividend History
2007 - 80% interim
2006 - 100% final

Numbers as on April 27, 2007

Market Cap: 108 Crores
Current Market Price: 238
Face Value per share: 10

Numbers of shares outstanding: 3007500

52 week low: 214 on 02 April 2007
52 week high: 492 on 04 May 2006

All time low: 10 on 06 Dec 1996
All time high: 492 on 04 May 2006

EPS: 78 (as per 2006 annual report)
PE Ratio: 3 (as Rohit and Prem say ... market is pricing Cheviot for bankruptcy!!)

To be read more

1. Mention of bonus shares in 2006 report. What happened to it?

2. Read about Jute industry, mandatory packaging of food grains in Jute bags in India, products from Bangladesh and China etc.

3. Use of petroleum in manufacturing jute bags.

4. Operational cost margins to be considered. With 58 crores in bank, the real figures of ROE and ROI have to be better.

Please point out mistakes and errors ... !

Investing Checklist - Set of questions to be asked before investing

I am trying to come with a string of questions that I would ask before I am comfortable investing in a company.

Following are the questions ...

1.What is the quality of management? Are they shareholder friendly? Is the company paying taxes? Do the promoters attend shareholder meetings?

2.Why is stock a pick? How did it become a value stock? Is it a special situation? Does it have huge growth potential in future? Does it have hidden value in terms of cash or cash equivalents?

3.What is the potential downside?

4.If it’s a special situation, is there a catalyst that would unlock the value? How much time would it take for the catalyst to unlock value? what happens in absence of the catalyst? Is there a sign of emerging catalyst?

5.If it’s a growth story, has Mr. Market factored in the growth potential already (by reflecting the optimism for future years in the current prices)? In other words does the stock has high PE multiple?

6.What can change the value proposition? Environmental changes? Regulatory changes? Competitive scenario?

7.If the equation might change, how can the company cope with it? What will be the new downside? Will the company still be a value play?

8.How long will the money be kept blocked? Can the money be freed in case of emergency before the stock appreciates to expected levels?

9.What is the expected return?

Right now I don’t have anything that considers competition, prevalent mood of Mr. Market, Interest rates, return from other avenues. I know there are other things also that I have missed.

Also the list is very big. I ideally want to have not more than 5 questions.

I will keep updating this list as and when I learn more. If someone reads this, please point flaws and omissions.