Author: Vivek Bothra

Learn top down Investing

Top down investing is one of the methods used by investors to identify opportunities. What is top down analysis – read this investopedia link to familiarize yourselves with this approach , In short the diagram below depicts the approach

Top Down investing

Putting top down analysis in practice –  Download this excel , it has all active securities that currently trade on BSE. Now lets see how to use this sheet to do top down analysis

Step 1 – Identify the economy which is growing fast – In this case we stick to India as we intend to invest in Indian stock markets

Step 2 – Identify sectors that are growing fast in economy, now this is little tricky, We have to be aware what is happening around us,  you need to read articles like this and reports like this to know what sectors / industries are doing well

Step 3 – Once you have identified sectors, pick sector whose business is easy for you understand and one which you can explain to a school boy.

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How to select stocks like Peter Lynch ?

Peter Lynch  deserves a place in the hall of fame with his average returns of 25+% per year during his 13 years tenure at Fidelity Magellan Fund.  In one phrase his investment style can be summed as “buy what you know” Although it is very difficult to quantify his philosophy as a rule of thumb, however after reading his classic best selling book ” One up on wall street”  reader do get an insight into his stock selection method. Putting together 5 key tenets below

1. High growth – Earnings drive prices, companies growing fast have to be bought to make inflation beating long term returns on invested capital. Lynch always liked high growth companies however he was wary of very high growth companies as their could be earnings manipulation, he avoided companies growing at 40%+

2.  Price earnings growth – The price/earnings to growth (PEG) ratio is used to determine a stock’s value while taking the company’s earnings growth into account, and is considered to provide a more complete picture than the P/E ratio. Lynch considered stocks quoting at PEG < 1 as attractive, they fitted well in his theory of growth available at reasonable prices (GARP)

3. Low … Read the rest

5 things I like about moneycontrol portfolio manager

Moneycontrol is one of my favorite personal finance website, it has greats tools to analyze stocks, however in this post I want to discuss one of the most important features of website – moneycontrol portfolio manager.

Here are five things that I use moneycontrol portfolio manager for

1. First and foremost ability to create a watch list – As an investor you will keep getting ideas here and here, the best way to store them is to add it to your watch list.

MC-1

2.  Keeping a tab on the Management view of my investments – As a practice, I like to read what management of the company has to say about it’s present or future. Portfolio manager is a great place to read about all your investments at one place.

MC-2

3. Brokerage recommendations – Although broker recommendations have to be taken with a pinch of salt, I like this section as many a times you will find one brokerage recommending to buy while other recommending to sell, you get diversity of opinion and kicks in tangential thought process. This also helps you to cross check your hypothesis on investments

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Trend Investing

NaMO

 

Even though there are still few hours remaining for coronation of Narendra Modi as India’s next prime minister, the stocks markets have behaved as if India is already transformed. This is the idiosyncrasy of markets they run so high on sentiments. The ground realities haven’t changed much since Manmohan Singh left office, so the exuberance on stock markets for an outsider is very tempting.

Am I the one who has missed the boat ?

Can I still enter markets at this level ?

Where should I put my money – on the stock that has risen 50% in last one month or Something which is still to be played out ?

If these are the questions haunting you – Read on

 First getting the facts right – Stock market is on song and every Suresh, Naresh and Pranesh is making money in stocks in 2014. The benchmark indices have risen almost 8% in last one month with some stocks like BHEL up astonishingly 45% in this period . These are maniac times and it is very exciting to be a stock trader these days. But what about an outsider has he really missed boat ?

My answer is NO, … Read the rest

How much would you allocate to bonds ?

This is my third and final post on debt series, to read previous ones click here and here

In this last post on Debt investments, I would cover allocation or in Simple words – How much of the portfolio should be in invested in debt instruments

Situation 1 – I know I need to double my portfolio in 6 years after paying taxes so that I can meet my personal needs

Here you know the target return on investment, i.e. 12% pre-tax on a compounded basis to double your portfolios in 6 years. Now first one has to understand on an average historical basis  how much debt and equity has returned. In India if look at last ten years data

Debt has given approximately 9% pre-tax return that equates to post tax return of 7.2% ( Assuming you pay 20% income tax)

Equity has given approximately 14% post tax return

Based on above one has to invest 70% in equity and 30% in debt to achieve their goal of attaining 12% pre-tax compounding return

But should you get obsessed with past performance? Understand past is not a guarantee of future performance, however one has to start somewhere and the best … Read the rest

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Download an excel for debt investors

This is part 2 of debt investment series, to read part 1 click here

Today we give you  Bond Analysis  excel to play with and find out what suits you, Quickly understand what these columns mean

Category – Defines what kind of instrument – NCD , Zero Coupon bond , Infra bonds etc

Exc = Exchange they are listed on

Issuer Name , NCD Name  = Self Explanatory

Credit rating = As provided by rating agencies when the instrument was issued

Coupon rate = rate of interest

Coupon frequency = How often interest is paid

Maturity date = When they will return you principal

Face value = Self Explanatory

LTP = Last trading price as on 24.03.2014

YTM = is the internal rate of return (IRR, overall interest rate) earned by an investor who buys the bond today at the market price, assuming that the bond will be held until maturity

Maturity amount = How much you will receive at the end of maturity, often equal to face value

Next coupon due = When are you getting next interest payment

Now, this excel can be easily used to find whatever kind of investment you are looking for, lets look at … Read the rest

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Investing in bonds & debt instruments

One of my most popular post has been on parking short term cash from last year. I have always believed that any successful investor should invest a portion of his portfolio in debt.

I will be writing on debt in three parts to do justice to this asset class. Today’s post is part -1

When investing in debt securities you are effectively lending money to businesses or governments or banks. Returns typically comprise interest and changes in the market value of the security.

Today we are going to cover

a) What is the risk of investing in debt instruments

b) What feasible options are available to retail investors to invest in debt instruments

There are few risks which we should be aware of

1. Loss of entire capital – Also know as credit risk or default risk. In unfortunate circumstances if the businesses or governments or banks are unable to return what you have lent them. To guard against this most of the debt instruments are rated by independent agencies,an investor should carefully understand what each ratings account for.

2. Loss on account of reduction in price of security – IFprice of the debt instrument goes  down, you may face … Read the rest

What makes us happy

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Top blogs to follow

A very happy Easter to everyone.

If you  like to read more than what there on Google news, then you need to dig web a lot more and in a different way. Here is my view on some of the most exciting places on web to read cool and meaning full substance.

Blogs

Tiny Buddha

Here is how Lori describes her blog –Tiny Buddha is about reflecting on simple wisdom and learning new ways to apply it to our complex lives—complete with responsibilities, struggles, dreams, and relationships. Over 1.5 million members have found happiness with forum.

Zen Habits

Zen Habits is about finding simplicity in the daily chaos of our lives. It’s about clearing the clutter so we can focus on what’s important, create something amazing, find happiness. The blog claims to be one of the Top 25 blogs and Top 50 websites in the world, with more than a million monthly readers. I like Leo Babauta’s simple and affable writing style presenting simple things in simple ways

The Art of Non-Conformity

A home for unconventional people doing remarkable things, that’s how Chris Guillebeau defines his blog. He writes on variety of topics ranging from personal development, entrepreneurship … Read the rest

The wait list Investing – Example of Selan Exploration

We added Selan exploration to model portfolio recently here is my detailed analysis.

About

SELAN is engaged in oil exploration and production of crude oil and natural gas. The seismic data acquisition being undertaken for the Company’s oilfields has been completed. The Company’s oil fields are located in Bakrol, Indrora and Lohar oilfields in the State of Gujarat. The Company also has Ognaj oilfield and Karjisan gasfield situated in the State of Gujarat.

 

Now first of all if you don’t understand E&P business its better you avoid this one. This is a complex industry which requires detailed study.

Look at the production levels for company

Year Lohar Indora BAKROL  TOTAL
OIL GAS OIL GAS OIL GAS OIL GAS
(1000 Tones) mm3 (1000 Tones) mm3 (1000 Tones) mm3 (1000 Tones) mm3

2004

2.64

0.04

0.79

0.04

5.54

0.13

8.97

0.2

2005

2.82

0.04

0.86

0.04

6.16

0.14

9.84

0.22

2006

2.63

0.04

0.74

0.03

7.02

0.16

10.38

0.24

2007

3.87

0.06

0.81

0.04

9.58

0.22

14.27

0.32

2008

4.98

0.08

0.98

0.04

13.4

0.31

19.36

0.44

2009

6.07

0.1

0.69

0.03

33.85

2.31

40.61

2.44

2010

5.76

0.1

0.64

0.03

29.28

10.26

35.67

10.39

2011

5.83

0.1

0.56

0.03

21.16

… Read the rest

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