August 14, 2015

The madness for growth


Let me share some actual data, without sharing the name of the company initially

One year return = 69%
5 year return = 75% CAGR

I don’t know about others, but in my universe this kind of performance is something to kill for. At the same time, one has to be insane to expect this kind of growth forever. If one my positions were to deliver this kind of performance, I will consider myself lucky (not smart). 

However I would not run around looking for such companies prospectively as they are like shooting stars – be glad you saw one (or hold one), but do not sit on your terrace forever waiting for one.

If an investor has an investing lifetime of 30+ years, even a 20% return will make him or her insansely rich. A 75% per annum return for 30 years ? look at the numbers below for comparison
1 lac becomes 2.37 Crs after compounding at 20% for 30 years
1 lac becomes 1,95,497 Crs after compounding at 75% for 30 years

However investors keep chasing these shooting stars


And what happens, when they are disappointed, even temporarily?


So what is the name of this mystery company? Its symphony limited

Below is the chart of the company for 5 years


The madness of growth
Is the name even important? This is not a one off case. Look for any company – good, bad or ugly. If the company shows a couple of quarter of growth, the stock price shoots up with no link to valuation, quality or sanity.
On the other hand if the music stops, even for 1-2 quarters, the response is brutal. The herd which rushed in blindly, now heads for the exit.

I don’t think this can be called investing – it’s a mad hunt for growth.

For the slowpokes like me, it is better to just sit and watch. The risk here is that the retail investor will again repeat the same lessons of the past – Buy high and sell low.
Added note: I have taken symphony limited as an example. I am not discussing the merit of this company as an investment. I may or may not hold this stock in my portfolio. The warning holds – if I discuss about gold, real estate or goat, I may or may not be buying or selling it. So please do your homework if you plan to buy anything discussed here, including the goat!
 

---------------- 
Stocks discussed in this post are for educational purpose only and not recommendations to buy or sell. Please contact a certified investment adviser for your investment decisions. Please read disclaimer towards the end of blog.

July 20, 2015

The same rules apply




The best way to analyse any asset class is to look at the long term return for it

For example
Fixed income : inflation +/- 1%
Gold : Inflation + 1.5%
Real estate : Inflation + 3-4% (or more ?)
Equities : inflation + 6-7%

Now based on timing and in some cases, asset specific skills can help you beat these returns, but over the long run no matter how much you love the asset class, these returns do hold.

In 2011-2012, even my mother who only wishes the best for her son, was encouraging me to look at Gold and real estate. When people who truly love you start recommending an asset class , for your good, that’s a good sign of a bubble.

In this case, I bought a little gold for my mother and wife and they were quite happy about it. Now that was a decent investment – one cannot measure happiness :)
 


---------------- 
Stocks discussed in this post are for educational purpose only and not recommendations to buy or sell. Please contact a certified investment adviser for your investment decisions. Please read disclaimer towards the end of blog.

May 31, 2015

A picture worth a thousand words ?

It is said that a picture is worth a thousand word. Hopefully ,some of the crudely drawn ones below, by yours truly are worth atleast a few words.

The Matrix

Time, Value and price


 



----------------
Stocks discussed in this post are for educational purpose only and not recommendations to buy or sell. Please contact a certified investment adviser for your investment decisions. Please read disclaimer towards the end of blog.