Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Chasing Bubbles

with 5 comments

I read about Louis Navellier and a book by him few months back called “Little Book that makes you Rich”

http://en.wikipedia.org/wiki/Louis_Navellier

Most of his picks are 2-3 baggers or less. Only a few would be 5 baggers. Guy is quite well read, wise or not another story. He quotes that one of fallacies is to sell too soon. Hes Writing financial newsletters since 1980. Many of them paid, thats how he made money.Chap is self made and manages over 5 billion $

According to independent source his newsletter turned money 48 times in 22 years, one of the top percentile long term record esp. if you included those 10 dud years in dow jones, where msft, ge, xom lost 50% market cap and dow stayed flat.

What we need to learn from him is, lack of emotions and no love for stock. Eg. he sold out from Ebay in 2005, after 2-3 bagger ride between 2003-2005 and it collapsed by 60% in 2006 based on numbers. He sold out from Enron before collapse, he exited Cisco and Sun Microsystems in Dec 2000, he enjoyed several years of ride in Apple Computers. He write that, people fall in love with stocks that make them big money. Analyzing things from a subjective piont of view allows us to color situations with our own opinions, views, hopes and dreams and to be influenced by others. There is way too much info floating around of subjective nature.

He quotes interesting examples of quant coache Billy Beane, in NBA /basketball that forever changed game and other teams like Red Sox and Yankees had to hire a quant, that make mocker of those who believe “that you have to have an eye for talent”.

Similar story comes up in operation theatre where doctor had too many variables to worry about so a formula was needed during cardiac arrest.

There are about eight parameters which are on which he measures companies. Earning Revision by Wall St Analysts is first amon. A wall st analyst wants to be an All-Star analyst put out annually by Institutional Investor magazine. Analysts does not want being fired like anyone else, so estimate is close but slightly lower to avoid stock from falling. They err on lower side to be conservative in self-preservation. Since 2001 burst analysts estimates are far less accurate now due to less information in possession, thanks to SEC’s FD regulation. So they are reluctant to raise estimates. SOX also had impact. Analyst has to be wildly enthusiastic to raise estimate of next earnings. guess high, stock drops and you lose job, guess low and stock goes up or you get it wrong but who cares, there lies the rub ! another reason is once things begin to catch fire and sales and earning move at a fast clip, they tend to do so for a while. usually more earnings revision are on the way after the first one.

Other parameters are positive earnings surprises, increased sales growth, expanding operating margins, strong cash flow, earnings growth, positive earnings momentum – and last high ROE. Hes made 100s of million for himsif not billions of $, I believe someone worth learning a lesson or two from.

For example: Here is his ratings on Apple Computers

http://navelliergrowth.investorplace.com/portfolio-grader/stock-report.html?t=AAPL

He is a pure Quants guy.

Those you want to chase will-o-wisp of Microfinance bewitching beauties in India need to be hard calculating not emotional.

Written by amitdipsite

August 27, 2010 at 2:38 am

Posted in Uncategorized

5 Responses

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  1. Hi Amit,

    Good post.

    Wht is your take on Poly Medicure?
    A niche from Healthcare sector….and into medical devices.
    Let me know your thoughts on this….

    Regards,
    Vikas

    Vikas

    August 27, 2010 at 11:11 am

  2. hi i am amit sangwan.i own 2000 shares of polymedicure @ 115.it is a nice company.visited their site at ballabgarh faridabad.nice set up.u can blindly buy.the scale of oppurtunity in this sector is extrmely high.they have expansion plans.their product quality is good.they us clearences also.another company which will do well is span diagonostics.also amit arora request your views on om metal infra

    amit sangwan

    August 27, 2010 at 12:00 pm

  3. Hi Amit Sangwan and Vikas,

    Poly Medicure is good ! I had it on my radar for the past 4-5 months but could not board the train.

    Although its not undervalued in the sense that it will perform based on results. Looks like has all right ingredients for growth. Thanks for letting us know that you visited their site at Faridabad.

    Its an accumulate over the next 6 months.

    Cheers

    Amit

    Multibagger

    August 27, 2010 at 10:09 pm

  4. Here is what I read from Vimal Oil website.

    “The Manufacturing facility comprises an integrated, continuous plant, set up by Alfa Laval. All the packaging is done in-house. In fact the Company has gone in for backward integration, by manufacturing its own packs. Be it Tins, HDPE jars, PET bottles or corrugated boxes. This works out to be very cost-effective, and also retains the quality of the product. The products are lab-tested at every stage, staring with the raw material, and ending with final packaging.”

    This goes against Manjushree type of companies. While Manjushree can double from here in a year but I'd still go with certain 40% than uncertain 100%. They can't expand exponentially and law of economics is against them.

    Vimal Oil will become attractive if they reduce loans or expand market share. Waiting to know how much additional equity they will issue to promoters after CRISIL de rating.

    Sorry, no idea about Om Metal Infra.

    Cheers

    Multibagger

    August 27, 2010 at 10:32 pm

  5. Thanks both Amit Sangwan and Amit Arora for your valuable inputs on PolyMedicure.

    Regards,
    Vikas

    Vikas

    August 28, 2010 at 1:25 am


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