tag:blogger.com,1999:blog-7004453.post1013998859438306341..comments2023-09-02T19:53:06.144+05:30Comments on Understanding and applying value investing principles: Is investing all about numbers?Rohit Chauhanhttp://www.blogger.com/profile/00356455735241398199noreply@blogger.comBlogger15125tag:blogger.com,1999:blog-7004453.post-13786079770549038772011-01-28T06:38:39.640+05:302011-01-28T06:38:39.640+05:30Own businesses you understand, said the Oracle.
D...Own businesses you understand, said the Oracle. <br />Dont just look at the figures, look at the the soul, sez me. To investors and bachelors alike!Unknownhttps://www.blogger.com/profile/17771508716928275535noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-60313892342501545832011-01-26T06:52:57.822+05:302011-01-26T06:52:57.822+05:30Hi ramanad
free cash is same as earnings in a lot...Hi ramanad<br /><br />free cash is same as earnings in a lot of companies..however the strict formulae is <br /><br />earnings+ depreciation - maintenance capex. i have covered this point in an earlier post.<br /><br />think of a cement company ..it has to keep adding capital to its business to keep costs low. so its free cash flow is lower than earnings<br /><br />on the high pe high growth issues ...i prefer low pe stocks. problem with high PE stocks is the risk is high. if the expected growth does not happen, you can lose a lot of money. in a lot of cases there is no margin of safetyRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-50118365463241813782011-01-26T06:49:54.603+05:302011-01-26T06:49:54.603+05:30hi ranajit
i have greenwald's book. it is a go...hi ranajit<br />i have greenwald's book. it is a good book. i have co-opted some models from his book into the template<br /><br />my template is a bhelpuri of all my learnings :)<br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-82377933078997191012011-01-26T06:47:40.325+05:302011-01-26T06:47:40.325+05:30hi dhiraj
the past numbers provide a starting poin...hi dhiraj<br />the past numbers provide a starting point for the analysis. the investor has to think whether these numbers are representative of the future. <br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-3861531512391946302011-01-26T06:46:36.989+05:302011-01-26T06:46:36.989+05:30Hi gaurav
thanks for the comment. glad to know tha...Hi gaurav<br />thanks for the comment. glad to know that you find scenario analysis useful ...as with the other things on the blog it is not entirely original. i have seen a lot of other good investors do it<br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-23809635206612417952011-01-26T06:45:35.179+05:302011-01-26T06:45:35.179+05:30hi brian
thanks for the comment
Hi aneel
a moat m...hi brian<br />thanks for the comment<br /><br />Hi aneel<br />a moat makes all the difference. think of a sugar company v/s a crisil or ITC. if you look at last 5 years, sugar companies which have almost no moat have not made money for investors. a crisil or ITC has made quite a bit of money for the owners<br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-10136529484840073542011-01-26T06:43:38.957+05:302011-01-26T06:43:38.957+05:30Hi lucky
if there was a shortcut ..we would all be...Hi lucky<br />if there was a shortcut ..we would all be rich :) ..just joking<br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-4219731127427520152011-01-25T16:02:16.450+05:302011-01-25T16:02:16.450+05:30Excellent post Rohit. I've had hard time, tryi...Excellent post Rohit. I've had hard time, trying to convince people that buying individual stock needs a thorough and diligent analysis. But still have many friends who end up buying on 'tips'.<br /><br />By the way, I had the pleasure of attending Prof Aswath Damodaran in person at this year's CFA conference. His presentation on 10 common mistakes in valuation was a hit. I'm posting the link here, if you don't mind.<br /><br />http://www.cfainstitute.org/learning/products/events/Pages/india_presentations.aspx<br /><br />I would encourage everyone to first attempt the problems in the handout. It would give you a great perspective into the presentation.Smart Singhhttp://www.smartsingh.comnoreply@blogger.comtag:blogger.com,1999:blog-7004453.post-58224764302760851692011-01-23T11:02:28.701+05:302011-01-23T11:02:28.701+05:30Hi Rohit,
Thanks for the viewpoints. Can you clari...Hi Rohit,<br />Thanks for the viewpoints. Can you clarify your below example?<br />"a company growing a 10-12% with an ROE of 15-20% would come to a PE of around 17-20 times current year’s free cash flow"<br />Here, by PE, do you mean the simple PE of Market Cap/Net Profit for the financial year? The words free cash flow at the end sound a bit confusing...do you mean cash flow rather than the stated net profit?<br />As an aside, do you think that high growth, high PE companies earn a better return for investors vs stable business, low PE, undervalued companies? Of course, assuming other things such as competitive advantages (moats), shareholder friendly management etc. being comparable in both cases.<br />Thanks & Regards<br />RamanandRamanandhttps://www.blogger.com/profile/07385723230133705375noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-76320231272123566432011-01-22T21:01:47.464+05:302011-01-22T21:01:47.464+05:30Nice post Rohit. Good insight and advice and I agr...Nice post Rohit. Good insight and advice and I agree with you completely. It also helps to know one's blind spots which all of us have in different measures.<br /><br />Btw, I do use DCF and other simple/complex valuation metrics to value a company ( and I agree that no valuation technique is perfect). <br /><br />Have you had a chance to read Bruce Greenwald's book on value investing where he talks about another valuation metric - Earnings Power Value or EPV? Even though it is another quantitative valuation technique, it also requires a very close knowledge of the industry. I will be curious to know what you think of it?<br /><br />-RanajitRanajitnoreply@blogger.comtag:blogger.com,1999:blog-7004453.post-5812421930401669252011-01-21T20:04:56.511+05:302011-01-21T20:04:56.511+05:30dear rohit as usual an illuminating post,however l...dear rohit as usual an illuminating post,however life and business are seldom linear events ,even a 3 year cycle is capable of throwing a sine wave curve, and to top that add positive and negative black swan events and that makes all lessons and analysis based on past numbers history! anyways we still need some framework to work on.dhirajnoreply@blogger.comtag:blogger.com,1999:blog-7004453.post-62978073010148663232011-01-21T13:51:31.469+05:302011-01-21T13:51:31.469+05:30Hi,
Your post makes a lot of sense. Though i am n...Hi,<br /><br />Your post makes a lot of sense. Though i am new into the world of investing personally, i am working in finance domain. I Learn a lot from you. Guidelines on scenario analysis are very good & highly appreciated. Keep up the good work.<br /><br />- GauravGauravhttps://www.blogger.com/profile/14603291526305391374noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-53276646014898413282011-01-21T12:52:58.275+05:302011-01-21T12:52:58.275+05:30"One of the key negatives for the company was..."One of the key negatives for the company was that it was a small company in an industry which is dominated by the likes of CISCO and LUCENT who have R&D budgets which are a 100 times the annual revenue for this company"<br /><br />This is very interesting point on MRO-TEK which I feel ppl generally ignore when past numbers looks good. Based on your experience, we can derive that moat is definitely very important. Good point.<br /><br />Thx<br />AneelAneelhttps://www.blogger.com/profile/15509571234402783484noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-12707247705461323782011-01-20T13:02:52.906+05:302011-01-20T13:02:52.906+05:30I just discovered your blog and love how you'r...I just discovered your blog and love how you're applying value investing techniques to stocks in India.<br /><br />When screening stocks, I do exactly what you do and run a quick DCF calculation to see if it's worthwhile to investigate further. I've done this so much that I've created a <a href="http://stockzoa.com/dcf" rel="nofollow">DCF calculator</a> that automatically pulls FCF numbers from Yahoo.<br /><br />Keep up the awesome work!Unknownhttps://www.blogger.com/profile/03874063541065125291noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-66149058299393392332011-01-20T09:53:42.047+05:302011-01-20T09:53:42.047+05:30There is no shortcut in becoming a decent investor...There is no shortcut in becoming a decent investor. Cannot agree more.<br /><br />One of the reasons one has to come back to this blog over and over again is that there is more than just stock analysis.<br /><br />Keep educating. Thanks.Luckynoreply@blogger.com