tag:blogger.com,1999:blog-7004453.post4687463760032446557..comments2023-09-02T19:53:06.144+05:30Comments on Understanding and applying value investing principles: The value of ‘overvalued’ stocksRohit Chauhanhttp://www.blogger.com/profile/00356455735241398199noreply@blogger.comBlogger18125tag:blogger.com,1999:blog-7004453.post-18379626778920893762016-02-02T18:04:35.846+05:302016-02-02T18:04:35.846+05:30Hi Rohit,
this is a well written and insightful p...Hi Rohit,<br /><br />this is a well written and insightful post. Thanks for sharing.<br /><br />My five cents on the subect. Finding such great companies that deserve being expensive is a really tricky task. I mean just imagine going back in time when such a company was just getting by and ask yourself if the outcome of its decisions were in any way predictable. If not, you are probably seeing patterns in hindsight where there was only chaos in the moment.<br /><br />"I have never quite understood the point of these debates. There is obviously no single way of making money in the stock market. There are short term traders, buy and hold guys, debt specialists and all kinds of people in-between. Each approach has its strengths and weaknesses and no one can claim that a specific approach is inherently superior to the other, unless they are equally proficient in both."<br /><br />That is a good point, and I totally agree. The only problem is that most investors haven't got a clue who they are as an investor. To what category they belong.<br /><br />I really think that most people would be better off, first sitting in a room alone, doing nothing and figuring out who they really are as an investor, i.e. getting to know themselve. And than start in the endavor of value investing.<br /><br />I recently have written a post on that subject on my blog, which could be of interest to you.<br /><br />http://undervaluedjapan.blogspot.de/2016/01/self-awareness-value-investing.html<br /><br />Regards<br /><br />Otto<br /><br />O-tonehttps://www.blogger.com/profile/14922301157900495819noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-84376934641732584172015-12-07T01:43:50.987+05:302015-12-07T01:43:50.987+05:30hi neerav
agree on eicher motors ..its worth study...hi neerav<br />agree on eicher motors ..its worth studying. investing at current valuations is a different matter. personally I don't own it<br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-78357222546032935032015-12-07T01:42:44.209+05:302015-12-07T01:42:44.209+05:30Hi satya prakash
true ..however in cases like me i...Hi satya prakash<br />true ..however in cases like me it has taken much longer<br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-10109357347334103822015-12-07T01:41:00.766+05:302015-12-07T01:41:00.766+05:30hi dhwanil
thanks for the comment. agree , being r...hi dhwanil<br />thanks for the comment. agree , being rigid limits ones learning and a lot of times the opportunities too. people like me have learnt this after a long time ..but better late than never :)<br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-7731498433106632062015-11-30T15:01:14.107+05:302015-11-30T15:01:14.107+05:30Really interesting point. One company that I feel ...Really interesting point. One company that I feel really fits in this example is Eicher motors. The brand has a phenomenal equity and I feel it will retain this competitive advantage for some time till some of the indian players develop products in its segment or a foreign player enters in a really big way. Currently the stock seems to be way overpriced but something I am definitely interested in. Few points working in its favor<br /><br />1. The motorcycle business is growing faster than CV business and is more profitable. This has been driving constant margin expansion<br /><br />2. With its waiting period due to high brand pull the business runs on negative working capital cycle. <br /><br />3. ROCE numbers kind of indicate presence of a MOAT (brand has near monopoly in 150K + bike segment) which is likely to last for sometime atleast. <br /><br />4. CV business though slowing down is still profitable and indications are of cycle turning. <br /><br />Definitely one to watch out in my list Neeravhttps://www.blogger.com/profile/00280469577343297261noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-68514078139374925282015-10-29T08:39:55.397+05:302015-10-29T08:39:55.397+05:30I have come to realize that the most important fac...I have come to realize that the most important factor to long term success is to understand which approach suits your temperament.<br /><br />I got it after 1 yr to 1 and half years of investing. Following that is also important like following value investing when one invest in value stocks. Satya Prakashhttps://www.blogger.com/profile/03077927985184741600noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-38161267005435690902015-10-28T17:11:48.693+05:302015-10-28T17:11:48.693+05:30Hi Rohit,
Excellent post. As an investor who star...Hi Rohit,<br /><br />Excellent post. As an investor who started very staunch value guy, I realized over time that such "rigidity" does not help at all. One should be flexible in at least understanding various models that works and why the work. The expands your horizon and will help you decipher some excellent insight that you can apply in future. Many a time, when you experiment, it also yields you good results and hence your opportunity set expands over time. You have very clearly outlined "why" it is worth undertaking such exercise. <br /><br />Thanks again for this wonderful write up!<br />Dhwanilhttps://www.blogger.com/profile/02537043667425952923noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-65008953055918684992015-10-27T15:00:30.617+05:302015-10-27T15:00:30.617+05:30Hi Rohit,
Can we apply the same logic to Mumbai r...Hi Rohit,<br /><br />Can we apply the same logic to Mumbai real estate price? It has been almost 8-10 years and the market is expensive. Many believe that there will be a price correction in real estate prices; however it just doesn’t come up.<br /><br />In that case, it is quite possible, that the expensive price is actually the right price and the market is discounting the future growth in infra in Mumbai correctly.<br /><br />I thought that there should be a price correction about 5 years back but it has almost tripled since then.<br /><br />Regards,<br />SwapnilSwapnilnoreply@blogger.comtag:blogger.com,1999:blog-7004453.post-36882283830734805492015-10-26T21:46:57.168+05:302015-10-26T21:46:57.168+05:30hi lucky/ chandramouli - thanks for the comment
H...hi lucky/ chandramouli - thanks for the comment<br /><br />Hi sarvdeep - will watch the video ..thanks for sharing<br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-90712671289555032422015-10-26T21:45:23.979+05:302015-10-26T21:45:23.979+05:30hi anon
you are missing the point. a high PE in an...hi anon<br />you are missing the point. a high PE in an of itself does not mean overvaluation ...it could be but not always and that the point of my post.<br /><br />undervaluation in all aspects is a wonderful thing and we had that in 2013, but not now..atleast its not pervasive. so if you can be patient and wait for that kind of situation to come back, then its fine.<br /><br />also graham type of investing does not work as well in india. if you run graham filters most of the time one get horrible biz with bad managements. also overall returns are lower. finally what was a deal breaker for me was that i felt sick in my stomach when i held such lousy companies. so i have realised my temprament does not work for really cheap companiesRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-85555698713310452232015-10-26T21:41:56.226+05:302015-10-26T21:41:56.226+05:30hi madhu
its comes down if you can play both the a...hi madhu<br />its comes down if you can play both the approaches well. if you can jump in and out of undervalued positions, all the better. i dont find that easy for me and too much of a headache. buy and hold has worked better for me.<br /><br />does it mean a few % less returns ..sure , but i am happy with what i make :) adding a few extra % and being miserable does not work for me. i feel sick in my stomach literally when i hold crappy companies even if they eventually make money for me. that does not mean it will not work for othersRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-85514222634060201372015-10-26T21:38:56.784+05:302015-10-26T21:38:56.784+05:30Hi mkd
thanks for the comment.
I have not looked ...Hi mkd<br />thanks for the comment.<br /><br />I have not looked at the probabilites of each model, as my aim is to first look at some common patterns. also its not easy to find the base rate in each case.<br />i look at each of these models more like a point of view or tool to see where the company is going. for example, a platform company is a type of company with google and facebook being pure example. but we can have companies where they may not be a pure platform business but still have those characteristics.<br /><br />in such cases, even if i dont have the exact probabilities, thinking of the company in that sense will show me that the growth possiblities are much higher and hence a seemingly high valuation is not too high and the business is more fairly priced.<br /><br />so most of these models are more different lens to view a company and not really a precise approach to value it<br /><br />rgds<br />rohitRohit Chauhanhttps://www.blogger.com/profile/00356455735241398199noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-21862739973712951722015-10-26T11:14:44.648+05:302015-10-26T11:14:44.648+05:30Hi Rohit,
Just loved your post. Thought you might...Hi Rohit,<br /><br />Just loved your post. Thought you might want to see this on google analysis<br />https://www.youtube.com/watch?v=VBVEaifDx_A&list=PLGGpadyh0wS53HdovgrEgRwEqHcWrJwgP&index=7 <br /><br />Regards,<br /><br />Sarvdeepsarvdeep malhanhttps://www.blogger.com/profile/12924281381466315654noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-26796704621940589402015-10-26T10:24:56.059+05:302015-10-26T10:24:56.059+05:30Thorough analysis. As WEB says, it's simple bu...Thorough analysis. As WEB says, it's simple but not easy. Happy investing!Luckyhttp://www.indiapersonalfinance.blogspot.innoreply@blogger.comtag:blogger.com,1999:blog-7004453.post-16788230658097481542015-10-26T09:46:21.892+05:302015-10-26T09:46:21.892+05:30Brilliant oneBrilliant oneAnonymoushttps://www.blogger.com/profile/10127397928993835082noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-88889810301096230322015-10-26T07:22:04.088+05:302015-10-26T07:22:04.088+05:30dear rohit,
high PE investing is all about the ri...dear rohit, <br />high PE investing is all about the risk you want to take to prove your hypothesis. if your knowledge advantage mitigates the risk, you are safe. but, as graham pointed out , you are safest when all the three components of an investment indicate safety- industry/ company, your gut, and the market. and high PE fails there.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7004453.post-20294083671615380712015-10-26T07:15:33.322+05:302015-10-26T07:15:33.322+05:30dear rohit,
wonderfully expressed all my views in ...dear rohit,<br />wonderfully expressed all my views in your words. firstly, debate is because when you hold a stock which is overvalued , the price correction is sometims very sharp. then, we look back to see if we did not take advantage of a transient market ineffeciency eg cer correcting by 50%<br />secondly , more painful is how undercvalued is a undervalued comapany and for how long--- eg ricoh, fdc, mayur, . here we lose big time.<br />thirdly, do we let go transient but massive mispricing eg textile stocks, mid cap pharma where value was very very obvious.<br />although , a disciple of yours i want to make money always and also be rich. so, i look for all multiples to a 100x( 10x10, 5x20 etc).phelps with multiplication and market cycle churning always helps since it is naturalAnonymoushttps://www.blogger.com/profile/11343562017207149162noreply@blogger.comtag:blogger.com,1999:blog-7004453.post-31532937250543888272015-10-26T07:14:34.635+05:302015-10-26T07:14:34.635+05:30Rohit,
Let me be the first to comment - Fantastic...Rohit,<br /><br />Let me be the first to comment - Fantastic post!!<br /><br />Distilled gyaan from multiple models, all woven together neatly in a simple and easy to understand post. This is the reason it is always a pleasure to read your blog and I wish you would blog more often.<br /><br />Coming back to topic, I wonder if you have come across any study which talks about probabilities of capital loss for these various models. I assume it would be different across all these situations and if one understands them well she could apply it for payoff calculations and position sizing as well.<br /><br />e.g. In a platform kind of business with winner takes all, assuming only 1 out of 10 companies succeeding, an investor could expect to lose 70-100% of investment capital in 9 out of 10 cases. This would probably dictate the percentage of portfolio which can be realistically allocated to such ideas while controlling the risk of capital loss. If its a small percentage, even after earning high rate of return it may not matter much at portfolio level compared to a business following a boring model, promising a lower rate of return but with possibilities of much higher allocation possibilities due to higher chances of success (and lower chances of capital loss).<br /><br />mkdmkdnoreply@blogger.com