A load of crap from an idle brain

Been a while since i updated my equity portfolio.  Some of the stocks were already at their highs; and i felt it was appropriate time for me to liquidate them and invest in others.

Bought the following

Sold the following

Hoping for the markets to correct sharply once the much expected double dip recession hits the US economy.  There would be lots of great bargains out there then.

Above stock price history courtesy:  Yahoo Finance

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3 years of hard work…all for this.  Got my MBA convocation certificate. Yay.

Next whole week i will be on course.  After that, a few more certifications…maybe.

Few additions to the blog including my portfolio on the right.  Also the latest BSE / NSE and stock prices updated in real time.  Was sick of logging on to different websites to check for the stock prices.  So, put up all of them here on this blog.

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The author has perfected a formula that he has used to beat the market consistently and earn more returns than what the index has provided. He calls it the Magic Formula Investing.  The formula is explained in the book in relatively easy language.  According to Greenblatt what you need to be concerned is just 2 things about a company:

• A company’s earnings yield

• Return on capital

The rationale is straightforward: buy shares in good businesses, measured by returns on capital, only when they’re available at bargain prices, defined as a high earnings yield.

The magic formula looks for companies that have the best combination of earnings yield and return on capital, with each input weighed equally. An outstanding company with an expensive stock ranked, say, first for return on capital but 1,999th on earnings yield, would have the same combined ranking of 2,000 as a low return on capital company within expensively priced shares, ranking 1,999th in return on capital but first on earnings yield.

Using this approach to create a regularly updated portfolio of about 30 stocks with the highest combined rankings, Mr Greenblatt tested his formula between 1988 and 2004. The results were remarkable: with only one down year, the magic portfolio would have returned 30.8 per cent a year, against a 12.4 percent annual return for the S&P 500. Rather than using the latest 12 months’ earnings to calculate earnings yield and return on capital, Mr Greenblatt and his analysts try to improve on the rote application of this formula by using earnings estimates in a “normal” year, one in which nothing unusual is happening within the  company, its industry or the overall economy.

source: Amazon

The Little Book That Beats The Market
Author – Joel Greenblatt
Pages – 176
Publisher – Wiley

Its been a year since i moved this blog to my own domain.  Didnt realise till the other day when i was searching something about my domain and found that it was to expire in a few days.  That’s when i remembered about a mail i got from Justhost explaining that since i have hosted my blog with them, they will continue to renew my domain name for free.

The past year of hosting has been really wonderful and the guys at Justhost have been a great help. Havent had any downtime of this website.  Touchwood.  On the 24th of this month, i would have completed 6 years of blogging.  When i started, i never realised that i would last so long.  Moving to my own domain has taught me a lot of things about hosting and stuff.  Hope to blog till there are news which will prompt me to comment. And i hope such news never stops.

Meanwhile will start writing more about finance and investing as these are the interests that i plan to pursue further. I started investing in the Indian stock markets in 2005 for fun.  TCS was coming out with its maiden IPO and i applied for it.  That was my first ever investment in equity.  I had been investing in mutual funds before that through Systematic Investment Plan (SIP).  I was allotted 7 shares of TCS for around Rs 850 each.  I sold them off a few months later around Rs 1250. I tasted blood and havent looked back ever since

After reading Equitymaster for a few years, I signed up for their service and till now they have given me superb advice on stocks to pick up.  I have seen few people complaining about the advise provided by Equitymaster, but for me their advice has mostly been positive.  On an average, 8 out of 10 of their recommendations have worked for me.  And i would advise anyone to subscribe to them.  Its surely not cheap, but they have lots of small options that you can subscribe for.  Their reports are comprehensive and constantly updated.

Sometime in future, i plan to write the NCFM exams of the National Stock Exhchange and also get certified as a Certified Financial Planner (CFP).  Those are my long term plans.

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The stock markets have been on a free fall for some time now ever since the Greek debt crisis blew up.  The Euro has been going down vis-a-vis the US dollar.  The dollar has been gaining in strength even against gold. Does that mean all is hunky dory and that all the problems are over with the US dollar and the American economy?  No.  Whenever there is a crisis in the world economy, the money takes a flight to the US dollar.  And that’s what we are seeing now.  It doesnt mean that all the weaknesses inherent to the dollar have vanished

The situation now is mirroring the famous words said by some great soul “In the land of the blind, the one-eyed is the king“.

So, what does this crisis mean to people who want to invest for the long term?  Its the ripe time to buy.  Dont pump in all your money at once.  Buy good companies in small quantities.  The market might go down further from here. Buy some now and some more when the markets go down further.  Never try to time to market.  The markets might not go down further from here, and if you buy now, you would have still got some great stocks for cheap.

Am a big follower of Warren Buffett when he says “Buy when there is blood on the streets“.  It might not be complete mayhem now, but there are some great companies available for cheap.

I have bought a few more shares of the following companies

Alok Industries

Bharti Airtel

MIC Electronics

Punj Lloyd

I really hope that the markets fall further so that i can pick up some more good stocks at some great prices.

Important Note: Please dont follow my buy/sell advise blindly.  Do your own research or follow the advise of a certified financial planner before investing.  Iam not responsible for any profits or losses you make by following my investment strategy.

Above price charts courtesy:  Yahoo Finance

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What a recovery it has been for the markets.  Just a year ago, the Sensex crashed to 8160 points.  Now its trading above 17000 points.  More than 100% growth in just a year.  No other sector (gold, PPF, debt, realty) would give you that kind of growth.  When the markets were down last year and i was talking about the opportunity to buy into some good companies, many of my friends dissuaded me from doing that.

“Buy when everyone sells and sell when everyone buys” is probably the only way to make money in the market.  Following the heard mentality is sure to give a lot of heart pain in the long run.

The exhilarating bounce from the lows that the Indian equity market touched on 9 March 2009 is now a year old—and what a year it has been. These 12 months have been a wildly profitable time for those brave souls who held their nerve and bought stocks, while it has been a missed opportunity for those who thought it was a short-lived bear market rally and thus preferred to sit on cash.

The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, closed on Tuesday at 17,052.54, up 109% over a year ago, though just about nobody believes the next 12 months will be as good.

Read the full article here

Above picture courtesy: Livemint

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Bill Bonner of the Daily Reckoning has for long had a bone to pick with Thomas Friedman of the New York Times. It all first started with legendary short seller James Chanos calling China “Dubai times 1,000 – or worse.” To which Thomas Friedman wrote that James Chanos should be careful about trying to “short a country that has $2 trillion in cash” in this article titled “Is China the next Enron?”

Thomas Friedman & Bill Bonner

In his article, The Long and Short of China, Bonner goes hammer and tongs at Thomas Friedman saying…

Oh happy days are here again. Obama is going to get our money back from the banks. Jeffrey Sachs is telling Haiti how it can get its economy back in order (with other people’s money, naturally). And Thomas Friedman is offering investment advice.

This should be fun. We’re all on the bus…and it’s driven by the blind, the deaf and the very dumb. Oh, sorry, we meant the visually impaired…the hearing impaired…and the mentally deficient.

Friedman is, as we all know, full of advice on just about everything. He advises finance ministers on how to soup-up their economies. He advises the Arab world on how to update its religious institutions. He advises whole nations on how to improve the future before it happens.

And here he is now counseling Mr. James Chanos, noted short seller, on how to make money

Big egos are at play here.  But its not to discount the value of the words being spoken here.  Bill Bonner, Thomas Friedman and James Chanos are all good at what they do.  They have built up a career full of backing their claims with the work they have done.

Last word on whether China is a bubble or not is yet to be spoken.  Meanwhile, Thomas Friedman finds another supporter in Keith Fitz-Gerald of Money Morning.

Above pictures courtesy: Theteemingbrain, Cityfile & Stockopedia

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We are already 6 days into the new year.  I dont see much changes happening around and wonder why people blew up so much money boozing, eating, partying away and on firecrackers to bring in the new year.  The first day of the new year was the same.  The sun rose in the east, it felt like just another day. Anyway, if you ask an economist, they will say that its all these foolish spending that fuels the economy.

Generally, when asked for resolutions, i always maintain that “my resolution for this year is to have no resolutions“.  But then i make my secret list every year and work on them.  At the end of the year, i do an analysis to see if things went according to plan or not.  I hardly manage to accomplish around 20-30% of my targets every year and i realise that its a pathetic performance.

This year’s targets are also ambitious (as always).  Not sure if i can make any significant dent in it, but lets see.

Reading a lot is one of the priority this year and am simultaneously reading 2 books, not to mention magazines and other work relate books that i read.

Hope to be much more regular in blogging this year.  Hope the stock markets remain depressed all through the year and give me option to buy lots of good stock at cheaper prices.  Since my investments are for the longer term, i dont mind a few more years of depression / recession.

Its only when there is blood on the streets that you manage to find the best companies to buy.

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