September 19, 2009

So why no new ideas?

I recently got asked – whats up rohit ? why no new ideas on the blog ? on a vacation ?

Short reply – not on vacation and still searching.

During the Oct – April 2009 period it was
easy. One could throw darts and pick stock which were cheap. Ofcourse, what was needed was courage at that point. A lot of people wanted to wait till the fog of uncertainity cleared up. Well, the fog supposedly has cleared up and the valuations reflect that and more. We have moved from a 10 ft visibility in March 2009 to 100 Km visibility in a short span of 6 months !! amazing change in sentiment.

Not much value
I have been looking for new ideas, but most are not attractive enough or are fairly valued. I personally don’t do top down, sector based or any other mumbo jumbo type investing. I have a brute force method of looking for stocks – run various filters based on PE, debt equity and other factors manually on a list of stock. This would give me a list 5-10 stocks which I analyse in further details (read annual report) and come up with 2-3 stocks. In the end I may pull the trigger on 1-2 stocks. So it is all sweat and labor. For more details see
here.

I am able to find 2-3 ideas a year and that works for me. I am quite amazed at some people who are able to post an idea a week.

In a minority
I have been talking to some friends and most are now planning to get into the market. Most of them feel left out and want to enter now and ride the upswing as much as they can.

I may be wrong here and we may at the cusp of major bull market where the index will go from 16K to 25K in the next 6 months, but this is a game I have not yet learnt. I would prefer to do nothing if I cannot find something smart to do.

In a nutshell, I am not finding too much value out there. Ofcourse my opinion is in the minority, where you have others
recommending stock such as maruti suzuki when I am exiting this position.

22 comments:

Siraj said...

Warren Buffett has often said, "I could improve your ultimate financial welfare by giving you a ticket with only twenty slots in it so that you had twenty punches - representing all the investments that you got to make in a lifetime. And once you'd punched through the card, you couldn't make any more investments at all. Under those rules, you'd really think carefully about what you did, and you'd be forced to load up on what you'd really thought about. So you'd do so much better."

Maybe Mr Chauhan is following this rule.. The mark of a value investor

Anonymous said...

Hi Dear,

You may be right in your part as per the stock selection work you do after all the work is good if u are convinced wat u doing. But when the crowd starts running its understood that few who never ran will try to run with them after all who knows WAT I GET OR MISS is a big question...which proves more tempting than greed. The love of money makes 95% run and the love of money makes rest 5% think before running so you see I agree with you. Still I form the other part of the crowd ...cause Wat a jobber or a daytrader like me want to do is look for bargain in the smallest amount of time. So you see Value invester is like an eagle who flies around its prey and it can go on and on without loosing its patience eyes opened and always thinking about the best approach it can make. A daytrader jobber is like a swan who will hit at only those fish which swims near the surface So all said and done..Till market is there a crowd will always be there and inthat crowd you will find an eagle and a swan doing there work and rest of the crowd will always reamin a crowd. After all Market must go on The bell will ring @9.55The game will start till the bell rings at 3.30 time to go home cause next day again the crowd has to come back again to the play ground it has made for itself. Swans and eagles will also come cause they know what they want.

Wish u the very best..
rzen

Sunil said...

Hi Rohit
Your blogs have been an eye opener for me! I have started a blog at investologic.wordpress.com and would like your comments !!
I will aslo be posting the top 50 companies with some data as per Joel Greenblats Magic formula.
Sunil

rehan said...

Try to look at ICSA ..i like the B/S, the growth so far , the quality of shareholders . I am presently looking deeper in terms of scalability and exactlty what it does ...why it is so cheap ? rihan

Manish Chauhan said...

Rohit .. what do you think about this article of mine on Warren Buffer Two rules

http://www.barelkarsan.com/2009/09/never-lose-money.html

I have tried to digg his two rule and apply it mainly for Traders .. Let me know your views .

Manish

Anonymous said...

Hi Rohit,

In your earlier blogs you mentioned that you find some other blogs on value investing useful and there are some current/Indian value investors you admire. Would you mind giving pointers to those blogs or names so that we can benefit from them?

Thanks,
Amogh

Rohit Chauhan said...

Hi siraj
I do not follow the 20 punches approach by buffett strictly. i focus more on valuations when buying and selling

hi sunil
look forward to your list

Rohit Chauhan said...

Hi rehan
i have looked at ICSA in the past and was not comfortable with the fundamentals in terms of cash flow, hence gave it a pass

rgds
rohit

Rohit Chauhan said...

Hi manish
it is an important rule ..it basically boils down to managing risk prudently and looking at the downside. that ofcourse is easier said than done
rgds
rohit

Rohit Chauhan said...

Hi amogh
there are many good indian value investors ..though most dont have a blog ..some are sanjay bakshi, chandrakant sampat, chetan parikh etc

some of the good blogs you can find on my side bar

rgds
rohit

Siraj ( Dr Khan ) said...

Dear Rohit

Im new to your blog.. I enjoy reading it and I fell it is a good Indian component of Buffett disciples worldwide..

Even Mr Buffet does not follow the 20 punch rule exactly.. He gives it as a guideline to make investments very selectively and carefully and to condemn the trading mentality..

Vic said...

Thanks Rohit for the update.

it is always a Joy reading and learning from your posts.

Vikas

Anonymous said...

Rohit,

The names you have taken, do you have evidence regarding their long term risk adjusted return profiles

Everybody on Dalal Street can talk the talk, not many can walk the talk

One's philosophy is completely outdated, the other can talk and the third one is good but not on Dalal Street

I wonder when people refer to certain someone someone as a good value investor, do they even realize the assumptions they make

Here is a Tip - The best Value Investors in the country, you will not find on blogs, they will be phantoms, out of the limelight, not trumpeting their drums, just minding their own business and counting sweet sweet coin

Does Radha Kishen Damani ring a bell?

Cynically Yours

Anon - Alpha

Rohit Chauhan said...

hi anon alpha
i am aware of RK damani, though i dont follow him much.
i personally have read and followed sanjay bakshi, CK sampath, chetan parikh and in addition rakesh Jhunjhunwala too.

i am not sure which of the three investors has an outdated philosophy or can just talk.

prof bakshi has a superior record and so does CK sampath which spans over multiple decades.

it is true that there are some great value investors out there whom we do not know, but it does not serve my or amogh purpose of being able to follow and learn from them.

what do i do with unknown great investors ..i cant learn anything from them

when i mentioned the above value investors, i am not giving some ranking or listing of superior value investors in india. these are some great investors who write or blog publicly and one can learn from them and i personally follow them.


rgds
rohit

Anonymous said...

Rohit,

CK Sampat's track record over multiple decades - You need to check this? This is not true, his track record started faltering very badly 10-15 years back

His is still living in the world of MNC companies which while are good businesses but not necessarily good investments

And there is nothing new these guys can teach, although Bakshi makes a very good effort

Just explain to me what a great value investor according to you is?
You have used the phrase quite liberally, I want to understand what you imply

Anon - Aplha

Amogh said...

Hi Rohit and A Alpha,
Thank you for your views.

I agree with Rohit that my innocent intention was to know few names from whom I can learn over internet. It need not be the best names with top ranking, in fact, with due respect to the individual, it is of no use to me to know number one name if his knowledge/experiences are not accessible over internet. Sure he/she can be a topic of discussion in other context, sorry not here.

Rohit, you are doing a noble job through your blogs and please continue without being discouraged by comment from our friend A Alpha. I am sure there are many others like me who are grateful to you for sharing your experiences.

And yes, till your response I completely overlooked the other blog links on your side bar. It has great stuff and serves helpful to me. So your answer was bang on target for me. Thank you once again.

Pl keep it up!

~Amogh

Rohit Chauhan said...

Hi anon alpha
amogh's question was - who are the value investors you admire and follow and i have given him a list of those good investors.

key point - it is a list based on my personal view.

is it a list based on long term risk adjusted returns and based on multi factor analysis ? absolutely not ..the list is top of mind recall and my personal viewpoint.

i am not talking of investing money with these investor ..i am talking to learning from what they have to say

you and others are bound to differ on who you consider as a good or great value investor.

you seem to feel that none of these investors have anything to teach ..interesting ..maybe you should share names of 'indian' value investors who are worth following ..unless you think there are none worth following

on the other points you have raised -

you may be right. i dont have CK sampath's latest numbers.

my definition of great value investors are those having superior performance compared to the index over the long term (10 yrs or more)

Rohit Chauhan said...

Hi amogh

anon alpha has asked a valid point.


i am waiting for his list of superior investors and we could also benefit from his list

now these could be people who dont speak publicly and hence although he may have access to their wisdom ..we dont. too bad for us

what amazes me is his comment that ..there is nothing these guys have to teach which includes rakesh jhunjhunwala ..even prof bakshi makes a very good effort.

Rohit Chauhan said...

anon - alpha
do you post regularly on TED - theequitydesk.com ?

rgds
rohit

Anonymous said...

If you have to learn, then learn from the businessmen who run companies

Even though there is so much literature on the net regarding clunkers that management made, management on an average is still a better capital allocator than the average "great" value investor

And everything that you read from the guys you mentioned is a rehash of Buffett or Graham, over and over again, why not stick to the primary sources

Understand how businesses work, that is it, if you understand how a business works, there is not much number crunching or inflow of "spurious" gyaan from self proclaimed (most of them)experts needed

And btw, the Magic Formula has beaten almost all the great names you took, with the exception of Mr Jhunjhunwala, but he was very heavily leveraged

Anon Alpha - Rana

Ninad Kunder said...

Hi Anon Alpha Rana

The exercise of looking at what other value investors have done is not to replicate the investing style but to pick up learnings which could be assimilated in one's own investing framework. This of course would differ for each individual. The learnings need not neccesarily be only on the positive side. It could also be in terms of not repeating the mistakes that other investors have done like u r point about chandrakant sampat's HLL, gillette kind of bets.

Similarly one could learn from " Value traps" that other investors have got into and hopefully steer clear of it.

I am not in sync with u r arguement of going to the source Ben Graham only. Of course it is the starting point for the framework but clearly knowledge is not a static concept in any stream and it would be futile to reinvent the wheel all over again. I am sure value investors along the way based on that framework have added to the body of knowledge.

It goes without saying that understanding a business is a neccessary condition but not neccessarily a sufficent condition.

Cheers

Ninad

Srinivasan said...

Hi

How de we find the specific stocks recommended by Sanjay Bakshi and others. Appreciate, if you can lt me know

my mail id is ::: sksrini9@yahoo.co.in