A load of crap from an idle brain

Somewhere in 2003, fed up of perennially running out of cash at the end of every month and just before the salary for the next month was to come in, i realised i had to do something drastic. Also the thought of not wanting to work till 55 or 60 years old (like everyone else) was always in the back of my mind.

I decided to not only save a small part of my salary but also start investing. Real estate was out of question as it required a bigger monetary commitment and i was loathe investing in land that could some day be encroached and i would need to run around the authorities and people in power to get them evicted.

The next best option was the stock market.  It didn’t require a huge upfront money and also because of Systematic Investment Plan (SIP), i could invest a small amount every month in the mutual funds.  Also because of demat, it was easy for me to buy small number of shares of the companies that i liked.  Since my knowledge of economics, finance and the stock market in general was a big zero, i had to educate myself.  I attended a few seminars, but at the end realised that they were nothing but big money making scams.

This is when i truly realized the power of the internet.  With some great help from Google uncle, i jumped headlong into an intense 12 month study of the stock markets. I searched for information like crazy on equities and mutual funds. By then i had more or less realised that i was going to concentrate primarily in the Indian stock markets.  A developing economy which
was consistently clocking above 7% growth every year and a huge market, i realised that if i could get in early, i could probably ride a 20-30 year long boom.

India was then just starting off.  The BSE Sensex was then around 4500 (it has since climbed to 21,000, then fell to 9000 odd and is now back to 19000). I remember reading an Indian business magazine that pointed to a target 8000 for BSE Sensex in a few months time.  I chuckled to myself at the audacity of that heading.  But still deep down in my heart somewhere I had the belief that we were looking at something spectacular that was about to happen.

Imagine a country of a billion people and with the economy clocking 7-8% annual growth in GDP, it was sure to hit a trillion dollars soon and if the rate of growth could be kept up, then the next trillion could come in 8-9 years.  Yes, there were and are lots of things that could derail the growth. Terrorism emanating from Pakistan being just one such issue. Poverty, rampant corruption (that has become a norm these days), a closed economy, religious and regional violence…many issues could be an impediment to India’s growth and thus hit my investments in the market.

But honestly, when you realise that you are in the pits, the only way to go is up.  I took the risk and opened a demat account.  Tata Consultancy Services (TCS) was getting listed on the Indian stock markets for the first time ever in 2004.  I applied for the IPO and was allotted a measly 7 shares at 850 rupees each.  I was disappointed at not having been allotted more. Nervethless,  i held on.  A few months later the stock hit 1400 rupees.  I sold off at almost 550 rupees profit per share.  I made more than 3800 rupees (not accounting for taxes) in a few months by investing in TCS.

I had tasted blood.

Target 2015 continues….

Above target picture courtesy: David Hawkins

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Sold off some of the laggards like Suzlon, Reliance Communications (not sure how the 2G scam will hit this stock) and Punj Lloyd (holding on to a bit of the stock).

Bought 3I Infotech & Noida Toll Bridge for the first time. Increased my holdings in Graphite India & MIC Electronics.

With the 1:1 bonus shares issued by Dabur & TVS motors, the portfolio looks good

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Finally, managed to finish the book.  The biggest audio book i have ever listened to or read.  It took more than a month to finish listening to this audio book.  It was like a never ending read and just like the 80 odd year old Warren Buffett, the audio book went on and on and on.

Most surprisingly, it was engaging and i was never bored.  Considering the short attention span that i have and the trouble i have listening to a 5 minute talk without my mind wandering off;  I managed to hold my concentration well to listen to the whole book.

For starters, the book is not exclusively about the investments of Warren Buffett, its just a part of that.  The book is all about Buffett, the man, his family, friends, investors, rivals (if any), his fears, his interests, his integrity, his failings, his winnings.

If you are someone who idolises Warren Buffett, then stay away from this book.  It does present him in a not-so flattering way.  There are constant references to how Buffett shies away from confrontation with people, his little quirks, his almost complete dedication to his work that he almost ignores his wife who loves him unconditionally.  The ignorance leads to separation of Buffett and his wife (but they never divorce).

Its said that when the book released and Warren realised the not too flattering account of him in the book, he distanced himself from the author of this book, Alice Schroeder.

The book starts with a detailed background description of Warren’s parents, Warren’s growing up days. His almost obsessive pursuance of money from a young age.  At a age when youngsters of his age are busy playing, Warren distributes papers, chewing gums, pepsi, works as a caddy etc to earn his pocket money, file income taxes for the first time at the age of 14.  Warren’s interaction and working with his guru, Benjamin Graham is also mentioned in the book and also Graham’s influence on Buffett.

At the age of 11, he buys 3 shares of Cities Service Preferred for himself, and 3 for his sister Doris.  He sells the shares at a small profit and then looks on as the stock price goes up 10 times.  That’s when he learns his first lesson. And that is “If you really believe in the company, then the holding period for the stock is almost forever”

His investments in Coca cola, Geico Insurance, General Re, Borsehims Jewelry, Net Jets, Star Furniture etc is legendary. Not to mention the down to earth and modest nature of the man who stil stays in the same house he bought in 1957 for about $31,500.

Inspite of being the world’s richest person he doesnt indulge in the usual rich people’s intersts like yachts, jewellery, mansions, ranches etc.

For someone who was known as being tight fisted when it came to donating money to his own children, he decided to donate a significant amount of his assets to The Bill & Melinda Gates foundation.  The following saying by him highlights his thoughts about wealth

I don’t have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society. It’s like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GDP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don’t do that though. I don’t use very many of those claim checks. There’s nothing material I want very much. And I’m going to give virtually all of those claim checks to charity when my wife and I die.

Some more quotes by the man which i have found interesting over the years i have read about him.

• It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently

• Only when the tide goes out do you discover who’s been swimming naked

• You only have to do a very few things right in your life so long as you don’t do too many things wrong

• I always knew I was going to be rich. I don’t think I ever doubted it for a minute.

• I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.

• I buy expensive suits. They just look cheap on me.

• If past history was all there was to the game, the richest people would be librarians.

• Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.

• Price is what you pay. Value is what you get.

• Risk comes from not knowing what you’re doing.

and my most favourite one….

• Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.

The Snowball: Warren Buffett and the Business of Life
Author – Alice Schroeder
Pages – 832
Publisher – Bantam

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The BSE Sensex was around 18000 when Reliance Power came out with its IPO in February 2008.  The crash that followed the listing brought the markets down to around 8000.  It was the bloodiest bloodbath i ever experienced as an investor in the market.  I took that opportunity to buy a lot of good companies at ridiculous prices; and raked in good profits when the markets bounced back a year later.

More than 2 years later, we are staring at a similar situation.  The markets are hovering close to 20500.  The Public Sector Unit, Coal India is set to come with its mega 15,000 crore IPO.  The markets are at their all time highs. The pundits have been predicting a cooling down for some time now.

Will we see a correction again post the Coal India IPO launch?  Am watching from the sidelines to pick up some good bargain.

Above images courtesy: Topnews

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Happened to lay my hands on the audio file of this book and managed to finish the audio / book in 2 days flat. Its obviously an advantage getting the audio of books so that i can just transfer the files to my mp3 player and listen to them on my travels to work. Holding a book in hand; trying to read them during rush hour is a chore and these audio books are indeed coming handy for me.

Philip Arthur Fisher was an American stock investor who wrote this book Common Stocks and Uncommon Profits way back in 1958.  Just like Benjamin Graham’s bible of investing, The Intelligent Investor, this book is also considered to be a must read for anyone planning to invest in the stock markets.

Philip Fisher is considered a pioneer in the field of growth investing. Morningstar has called him “one of the great investors of all time”. In Common Stocks and Uncommon Profits, Fisher said that the best time to sell a stock was “almost never”. His most famous investment was his purchase of Motorola, a company he bought in 1955 when it was a radio manufacturer and held until his death in 2004.

Perhaps the best-known of Fisher’s followers is Warren Buffett who has said on some occasions that “he is 85% Graham and 15% Fisher”.  (source: Wikipedia)

Fisher goes on to give a lot of Do’s and Don’ts for investors.  A few of the Do’nts include

• Dont buy into promotional companies

• Dont ignore a good stock just because its traded over the counter

• Dont buy a stock just because you like the tone of its annual report

• Dont overstress diversification

• Dont be afraid to buying on a war scare

• Dont fail to consider time as well as price in buying a true growth stock

• Dont follow the crowd

Fisher also goes about sharing his ideas of how he goes about finding a growth stock.  Fisher talks about using the Scuttlebutt method to investing.  This means that the relative points of strength and weakness of each company in an industry can be obtained from a representative cross-section of the opinions of those who in one way or another are concerned with any particular company.  Also he talks about talking to the vendors, customers etc to find the correct information needed for your investment in that particular company.

Common Stocks and Uncommon Profits
Author – Philip Arthur Fisher
Pages – 271
Publisher – John Wiley & Sons

Above picture courtesy: Nickgogerty

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