Invest in Incredible India

Tuesday, January 31, 2006

Banking Stock I recommand for now

Stay invested in * Federal bank and Centurion bank of punjab *

Federal Bank is about to takeover a North Indian bank " Ganesh Bank", which will give the bank a strong North presence,the bank already have a strong southern operation particularly in Tourist centered Kerala,The takeover will give the bank a large business in North particularly in SME and agricultural sectors. Taking over a sick bank will also give a tax break to the bank.Bank is also considering rising it's foreign holding limits (FII and NRI).Bank at Rs.180 is a sure bet.

Centurion bank of punjab have a strong presence in both part particularly after it's merger with Bank of punjab. I have a great faith in it's management team as it was lead by Mr. Rana Talwar.
It's about raise it's capital either through a domestic issue or a foreign issur, it had also made a private placement to some FIIs so at Rs.24 it is also a sure bet.

Book to read

Book: You can choose to be Rich ( A Rich Dad Series)

Some extract from the book

* The times are rapidly changing and if you want to be rich,your approch to money and investing have to change too.

* There is a bit of magic hidden in every mistake. The mistake is called learning.

* Investing isn't risky;not investing is risky.

* The primary difference between rich people and poor people is how they handle fear.

* Cynics criticize and winner analyse.

* Prepare your self for disappoinment and you'll turn disappoinment into an assert.

* The poor and middle class work for money. The rich have money work for them.

* When you are young work to learn, not earn.

* If you want to be rich,don't work for a business - own a business.

* One of the reasons the rich get richer is that they make money as investor not worker.

* There is gold everywhere ,most people aren't trained to see it.

* Borrowing is easier in the short term but harder in long term. Don't buy luxuries until you've built the assert to afford them.

* The poor and the middle class turn cash in to trash or liability. Meanwhile the upperclass buy things like stocks,real estates, and businesses turning cash into assets.

* When interest rate are high, yields on bonds go up and investors buy more bonds.when interest rates are low,it's cheap for business to borrow money for growth,and when business are growing , investors flock to stocks.

* There will always be market booms and bust.The trick is a buy in a bust instead of sell.Don't panic profit.

* Assets put money in your pocket. Liabilities take money from your pocket.

* Every time you owe someone money, you become an employee of their money. If you take a thirty year loan, you've become a thirty year employee.

* Thing of every dollar in your asset column as an employee who works hard for you so you don't have to work so hard.

* Make your money on the buy not the sell.

* Keep in mind that your objective is to earn a good return on your investment, not to pay a lower commission or tax.

My opinion on Selling

Selling is like a divorce. consider that you have 2 wife,a good one and a bad, whom do you want to get rid of? is it a good girl who understand you or a girl who hates you. Normaly in life we choose the later option but in stock we all chose the former option i.e selling a good stock,and keeping bad stock in hand waiting for time to come, it is wrong. Always sell your worst stock first and keep good one with you forever.

How to make money in stocks

* Buy shares having low debt-equit ratio.

* Buy a company that has only smaller amount of shares outstanding.

* Always sell your worst stock first.

* Buy shares having low price-earning ratio.

* Don't follow the crowd be a contrarian

* Invest in wonderful companies run by people you admire.

* Buy to hold and buy and hold.

Golden Rules

* A Business to be, one that we understand, operated by honest and competent people, with favourite long term prospects, available at a attractive price.

* Rather buy 10% of wonderful business T at X per Share than 100% of T at 2X per share.

* Remember a market pendulum may swing on both direction.

* Broker: Don't ask a barber whether you need a hair cut.

* Diversification: If you have a harem of forty women, you never get to know any of them well.

* Fools rush in when angels fear to trade.

* Too much of good thing is wonderful.

* Investment is most intelligent when it is most business like.

* It's difficult for an empty sack to stand upright.

* Hope for the best and prepare for the worst

Wednesday, January 25, 2006

My Stock Ideas

1. Buy more number of Indian Companies rather buying MNCs because an Indian company may expand it's operations in other countries but MNC won't expand it's operation to other country since it parent company will do that.

2. Buy a company which has only limited shares available to the investers(i.e limited shares outstanding) consider P&G, Gillette, Bharti etc

3. Buy on investor focussed companies,i.e the company should not go on issuing fresh equity like ICICI Bank, which go on issue fresh shares which make no value to existing shareholders.

4. Buy good companies when it losses in a legal Suite at that time you can see a larger value like Ranbaxy

5. In a uncertain mad Bull run if the stock you bought at Rs.100 jumped to Rs.200 then sell half of your holding to make the buy price as 0 , and now you don't worry about this mad bull.

6. Concentrate in only 20 to 30 companies.

7. Buy good IPO's like proposed SUN TV before it reaches Secondary Market.

8. Buy companies which has higher operating margin greater than 30% like General Insurance,Retail etc. eg. Reliance Capital, Shopper's Stop.

9. Buy potential Mid-caps and Small caps.

10. Hold all shares you have for a long term more than 10 years,so you can be blessed by power of compounding.

11. Don't buy Government Companies(PSU),though it is essential for a balanced portfolio it won't trade any higher. It will trade very near to it's book value. You may suffer from facters like Labour Union Strike, Corruption, Lazy Staffs, Unsatisfied Customers,No merger or acquisition of any company,President will hold 51% stack so no buy-out of the company, No FII or FDI interest.

12. Read atleast 3 year annual report of the company you are going to buy, and read the Red hearing prospectous before investing in IPOs.

13. Don't buy companies that produce a product for which the price was fixed by government.
example: For Now: Oil Companies & Fertilizer manufacturers.

14. Don't even turn your head towards Indian aviation industry as it was more competitive.Consider this, airline passengers were growing 5% per annum but seats(flights) were growing at 50% per annum.High Oil Price (ATF) have minimized the margin of the company, Airline Stocks were trading near or down to it's IPO price.

15. Don't buy a stock just for the reason as it was recommanded in any of Stock Market Daily or weekly.

16. Buy a stock considering at what price the stock is going to be traded after 5 years not after 5 days or months

17. Don't just buy a stock as the stock is going to give a bonus share, or don't look at it's one time greater earning.

18. Learn to be a contrarian, i.e buy when others are selling and sell when other are buying.

19. Diversify your portfolio,don't just lock yourself in only Tech sectors,it is dangerous when the sector take a down turn.

20. Avoid Speculative Stocks and useless Penny Stocks.

Indian Bluechips

1. Procter & Gamble Health and Hygiene
2. HDFC Bank
3. Federal Bank
4. Centurion Bank of Punjab
5. Yes Bank
6. Suzlon Energy
7. Asian Paints
8. ITC
9. Gillette
10. Tata Tea
11. Pfizer
12. NDTV
13. Liberty Shoes
14. Reliance Capital
15. Pidilite
16. Nestle
17. Ranbaxy
18. Crompton Greeves
19. Glaxo SmithKline Pharma
20. Glaxo SmithKline Consumer
21. Apollo Tyres
22. Biocon
23. Novartis
24. Siemens
25. TV18

Books To Read

1. Intelligent investor by Benjamin Graham
2. Warren Buffett Wealth by Robert P.Miles
3. Beating the Street by Peter Lynch
4. Rich Dad, Poor Dad by Robert T. Kiyosaki
5. Rich Dad’s CASHFLOW Quadrant by Robert T. Kiyosaki with Sharon L. Lechter, C.P.A.
6. Money Mastery - 10 Principles That Will Change Your Financial Life Forever by

Fidelity’s Top 10 Tips to Successful investing

1. Start early
- the sooner you invest, the more time your money will
have to grow. If you delay, you will almost certainly have to
invest much more to achieve a similar result.

2. Keep some cash aside
– it is always a good idea to have some money set aside in case
of emergencies. Enough to cover three months’ living expenses
is often a rough guide to how much you need. And make sure
you can withdraw it when you need to, without penalties.

3. Ask yourself how much risk you can take
– there is no point having a stock market investment if you are
going to lose sleep every time share prices go through a rough
patch. It’s vital that you are realistic about your appetite for risk –
an Investment Adviser may be able to help you decide how much
risk you can tolerate.

4. Bear in mind that inflation will eat into your savings
– returns on risk-free cash investments may sound respectable, but
when you subtract the current rate of inflation you may not be so
impressed. For significant long-term growth you need to make
your money work harder.

5. Think carefully about how long you will be investing for
– only look at the stock market if you are prepared to put your
money away for five or ten years, or perhaps even longer. If you
are likely to need your money any sooner, keep it in a lower-risk
investment so there is less chance of a fall in value just before
you make a withdrawal.

6. Spread your money across a range of investments
– Don’t put all your eggs in one basket.
it’s rarely a good idea to have all your eggs in one basket.
Depending on your goals and attitude to risk, you will probably want
to spread your money across different types of investment – equities,
bonds and cash. You may also want to diversify within each of these
categories. An equity fund, for example, will invest your money in a
variety of companies but you may want to ensure you have a range of
industry sectors too.

7. Invest regularly
– investing regularly can be a great way to build up a significant lump
sum. You will also benefit from what is known as rupee cost averaging.
This means that, if you are investing in a mutual fund, over the years,
whether the market goes up or down, you will pay the average price
for units.Invest systematically, through the ups and downs.

8. Choose your funds carefully
– you should select investments based on your personal
circumstances and goals. If you are investing in a mutual fund, don’t
opt for the flavour of the month, unless you are sure it will be right for
you in the future. Don’t assume all funds investing in Indian equities
are the same – look at what a fund invests in and check if you are
comfortable with its investment style and objectives.

9. Remember that time not timing is the key to successful investing
– when planning an investment, it can be tempting to wait for the
market to drop. But you run the risk of missing out on the rises that
often occur in the early days of an upward trend. In Fidelity’s
experience, even the experts cannot “time the market” consistently
well. It is better to choose an investment that you feel confident about
and take a long-term view, so that you have time to ride out any ups
and downs.Think time in the market, not timing the market.

10. Review your investments
– a portfolio that is right for you at one point in your life may
not be quite so suitable a few years later. Your investments
need to adapt to changes in your circumstances, such as
getting married, having children or starting a business. It’s also
a good idea to check that each of the funds in your portfolio
is living up to your expectations. Talking to an Investment
Adviser could help you decide whether you need to switch
money between funds.

Investment Rules

“An investment operation is one which, upon thorough
analysis, promises safety of principal and a satisfactory return. Operations
not meeting these requirements are speculative.”

There are two rules of investing, said Graham. The first rule is don’t
lose. The second rule is don’t forget rule number one.

Hierarchy of Investments

YOur Own Business
Share Market
Real Estates
Small Savings(Postal)
Bank Deposits
Tax Saving Instruments


• They have a good return on capital, without “accounting gimmicks”
and lots of debt.
• They are easy to understand.
• Their profits are measured in cash.
• They have strong franchises and some freedom to raise prices.
• They don’t need a genius to run them.
• Their earnings are predictable because they’re consistent.
• They are not regulated or targets of regulation.
• They have low inventories and high turnover. They don’t need
large and regular infusions of capital.
• The managers think of shareholders first.
• There’s a high rate of return on inventories plus plant.
• The best businesses grow along with other businesses, with little
need of their own capital. (Example: advertising)
Final Thoughts on Buffett
• He is determined to invest in almost-sure things. No gambling.
• He concentrates on areas he knows.
• He does his homework.
• He insists on working with people he trusts and admires.
• He’s good at evaluating people.
• He ruthlessly studies his mistakes and tries to learn from
• He’s no Nervous Nellie, ready to trade his securities for little or
no reason at all.
• While he isn’t Simon Legree, he does put his shareholders’
interests before other people’s interests—employees, for
• He doesn’t make the foolish mistakes that ordinary investors
• He’s uncannily knowledgeable about a wide variety of American
• He has a splendid reputation, lots of charm, and lots of
• He is modest and humble, but also self-confident—at the appropriate


1. Concentrate your investments in outstanding companies run by strong management.
2. Limit yourself to the number of companies you can truly understand. Ten to twenty is good,more than twenty is asking for trouble.
3. Pick the very best of your good companies, and put the bulk of your investment there.
4. Think long-term: five to ten years, minimum.
5. Volatility happens. Carry on.


Business Tenets

1. Is the business simple and understandable?
2. Does the business have a consistent operating history?
3. Does the business have favorable long-term prospects?

Management Tenets

4. Is management rational?
5. Is management candid with its shareholders?
6. Does management resist the institutional imperative?

Financial Tenets

7. What is the return on equity?
8. What are the company’s “owner earnings”?
9. What are the profit margins?
10. Has the company created at least one dollar of market value for every dollar retained?

Value Tenets

11. What is the value of the company?
12. Can it be purchased at a significant discount to its value?

William's Word

Williams’s theory as: “The value of a business is determined by the net cash flows expected to occur over the life of the business discounted at an appropriate interest rate.” Williams described it this way: “A cow for her milk; a hen for her eggs; and a stock, by
heck, for her dividends.”

Williams wrote, “If earnings not paid out in dividends are all successfully reinvested, then these earnings should produce dividends later; if not, then they are money lost. In short, a stock is worth only what you can get out of it.”

Buffett's Words

The basic ideas of investing are to look at stocks as businesses,
use market fluctuations to your advantage, and seek a margin of safety. That’s what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing.

It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

All we want is to be in businesses that we understand, run by people whom we like, and priced attractively relative to their future prospects.

I buy businesses, not stocks, businesses I would be willing to own forever.
“Investing is most intelligent when it is most businesslike.

“I am a better investor because I am a businessman,” Buffett says, “and a better businessman because I am an investor.”

I want to be in businesses so good even a dummy can make money.

Look for the durability of the franchise. The most important thing to me is figuring out how big a moat there is around the business. What I love, of course, is a big castle and a big moat with piranhas and crocodiles.

When you have able managers of high character running businesses about which they are passionate, you can have a dozen or more reporting to you and still have time for an afternoon nap.

In evaluating people, you look for three qualities: integrity, intelligence, and energy. If you don’t have the first, the other two will kill you.

In the long run, of course, trouble awaits managements that paper over operating problems with accounting maneuvers.

I read annual reports of the company I’m looking at and I read the annual reports of the competitors. That’s the main source material.

It’s bad to go to bed at night thinking about the price of a stock. We think about the value and company results; The stock market is there to serve you, not instruct you.

To properly value a business, you should ideally take all the flows of money that will be distributed between now and judgment day and discount them at an appropriate discount rate. That’s what valuing businesses is all about. Part of the equation is how confident you can be about those cash f lows occurring. Some businesses are easier to predict than others. We try to look at businesses that are predictable.

Great investment opportunities come around when excellent companies are surrounded by unusual circumstances that cause the stock to be misappraised.

“We just focus on a few outstanding companies. We’re focus investors.”

I can’t be involved in 50 or 75 things. That’s a Noah’s Ark way of investing—you end up with a zoo. I like to put meaningful amounts of money in a few things.

Success in investing doesn’t correlate with IQ once you’re above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.

We don’t have to be smarter than the rest; we have to be more disciplined than the rest.

Stocks are simple. All you do is buy shares in a great business for less than the business is intrinsically worth, with management of the highest integrity and ability. Then you own those shares forever.

The market is there only as a reference point to see if anybody is offering to do anything foolish.

Investing is not that complicated. You need to know accounting, the language of business. You should read The Intelligent Investor. You need the right mind-set, the right temperament.

You should be interested in the process and be in your circle of competence. Read Ben Graham and Phil Fisher, read annual reports and trade reports, but don’t do equations with Greek letters in them.

Thinks to keep in mind while buying Stock

* Understand the business in which you are investing

* Look for sound fundamental economics

* Find competent leadership

* Buy at the right Price

* Always be a Value investor.Attempt to buy $1 worth of assert for 50 cents

* Know what you Own.

* Buy based on value not on price.

* Ignore the madness of the crowd.

* Don't go into debt to invest in he stock market.

* Live below your Means.

* Follow your passion and do want you enjoy doing, not what will pay you the
most among the money.

* Invest in what you Know.

* Don't increase the degree of risk by investing in something or somewhere
you don't understand.

* Only buy something you'd be perfectly happy to hold if the market
shut down for 10 years.

* Unless you can watch your stock holding decline by 50% without panic-sticken,
you should not be in the stock market.

- Extracted from rules followed by Warren E. Buffett,Chairman,Berkshire Hathaway.

* Know the story of the stock.Don't sell if the story is still good,whether the market is up or down

* Use common sence approach to Stock picking.

- Extracted from rules followed by Peter Lynch, Vice Chairman, Fidelity Management & Research Company and former Fund Manager of Fidelity Magellan Fund

If you have trouble imaging a 20% loss in the stock market, you shouldn't be in stocks.

- John Bogle (Founder Vanguard Group)

Monday, January 23, 2006


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