Views on Life & on Equity Investing

Wonder, Wealth & Abundance

A Random Walk Down Wall Street – Burton Malkiel

with 40 comments

Highly recommended reading of first three chapters, Firm Foundations and Castles in the air, Madness of the Crowds, Stock Valuations from Sixties through Nineties. Can save you a lot of money in life.

While a value investor may never subscribe to dart throwing monkey business or indexing approach in latter half of the book, above chapters are, in my opinion, well packed.

While you may have come across mania and fixation of crowds such as Tulip Mania in Holland, Florida real estate craze wherein 1/3rd of population turned to real estate profession, South sea bubble, Conglomerate boom, Nifty Fifty madness, Biotech, Internet, Real Estate, you’d hope that at least similar mania would no rerun. Real estate is a recurring theme. You’d believe that a decade long depression after Tulip idée fixe that caused severe damage to Dutch economy, fact that people would exchange their house, factory, farm in exchange for a single flower and subsequent aftermath would not erase from the memory of world. Not quite so. Our memories are really short lived more so as a crowd. As Gustave Le Bon noted that in crowds it stupidity and not mother wit that is accumulated. China fell for the same trap with Lycoris Plant as recent as 1980s.Value of a small plant went as high as 300 years annual salary, of course there had to be a wake up when half the city grew Lycoris. They seem to be drunk on a cocktail made from Lethe. (http://en.wikipedia.org/wiki/Lethe)

You’ll be amazed to know of a fact in next statement. Given that United States economy has always been bigger than Japanese, at least in 20th century. In terms of acreage USA is 26 times the size of Japan. Population wise its been twice the size. In 1990 value of real estate in Tokyo alone exceeded that of whole United States or about 20% of global wealth. Japan could have sold Tokyo in exchange of all United States. 27 year Nikkie graph below illustrates that every market including dalal-street can lay an egg and financial laws of gravity know no boundaries of race or region.

Japanese have been paying for over two decades

Written by amitdipsite

June 11, 2011 at 2:17 am

Posted in Uncategorized

40 Responses

Subscribe to comments with RSS.

  1. A Random Walk Down Wall Street – Burton Malkiel. Friends, free download available on the net. Enrich your knowledge to enjoy the riches

    Amar

    June 12, 2011 at 7:55 pm

  2. While you are right that a value investor/active investor may not subscribe to index investing which is a passive form of investing, studies show that majority of active strategies/fund managers cannot beat the market over a long period of time and the average investor is much better off investing in a low cost index fund to create long term equity wealth.

    Anish

    June 13, 2011 at 4:33 am

  3. While the active stock investor/fund manager will not subscribe to passive low cost indexing strategy, it is one of the best ways for the average investor to create long term equity wealth.The best fund managers will have a few years of winning streaks and if you are lucky then you will take the ride along with him but over a longer period of 15 years and beyond the odds of beating the market are very very low.

    Anish

    June 13, 2011 at 4:37 am

  4. Hi Amit,
    What is your gut feeling in MMFSL – smart money pouring in or pool managers playing a trick?

    Regards,

    Amar

    June 13, 2011 at 5:17 am

  5. Hi Amar,

    Can't say but promoter buying has attracted value investors too off late. It was overdone selling as well. In momentum play now…5% up or 5% down

    Regards

    Amit Arora

    June 14, 2011 at 5:23 am

  6. Hi Anish,

    I agree that its hard to beat index over long periods but not impossible. I find that its rather easy to beat index with small sums. If you look at some other fund managers like Prashant Jain / Jhunjhunwala / or Graham investors like Chetan Parekh managing 1000s of crores they are beating index hands and pants down for decades

    http://jeetay.com/index.htm

    Regards

    Amit Arora

    June 14, 2011 at 5:03 pm

  7. Hello amit,
    any gud company under the ready to eat segment, as this sector is look promising to me.

    Thanks

    AKKI

    June 15, 2011 at 3:50 pm

  8. Hello amit,

    Your relaxo post in TED is doing good. But you are off to that post. wht is your latest view on rural consumer goods pick “relaxo”

    sudhir

    June 16, 2011 at 5:36 pm

  9. Hey Sudhir,

    Rubber price up Relaxo down

    Rubber price down Relaxo up, that is how short term market is.

    But we can play rubber through Gurajat Reclaim and Rubber and Puneet Resins also.

    Nothing wrong with Relaxo at all. If you read Philip Fisher, he urges to lump couple of years earnings together to get a true picture of company's earnings not a single years earnings in isolation. Here, we have people who will dump a stock 70% down if it shows losses in two quarters, therefore we have to defend ourselves against short term stupid market.

    Regards

    Amit Arora

    June 16, 2011 at 6:00 pm

  10. Nice article Amit. Lots of example we can get from past about bubbles, euphoria and lunatic behavior of masses.
    Some where I will it is social pressure always. Its peer pressure, when one is also bound to make the same mistake like When I was out of College, every where it was Software programming job boom, I found it very weird and decided not to go in that direction, but finally when everybody run, and in absence of other good options, I choose that and then DOT-COM got bust. I was like “I knew this :-(”

    Same way I feel now in real estate, I am in Pune since 5 years and except for 2-3 months in recession, real estate prices are so unrealistic (In My View) that I never thought to buy my first Flat here. But for that I have to face people “Why you are not buying?”. And most of the people are at opposite side of me. Yes, Very few people also thinks like me. Though I am not sure if prices are going to correct. But I do not want to BUY 40-60 lacs costing flat (that too of choice of Builder) and then working for banks for life time.

    Daring and patience to behave contrary with consciousness, not just for the sack of being contrarian, is the key for everything which a Human should get in Life.

    Regards
    Rahul

    Rahul Kumar Paliwal

    June 17, 2011 at 11:20 am

  11. AK Capital finally making positive news:

    Cholamandalam Investment & Fin to raise Rs 1.5 bn via bonds – The Economic Times http://bit.ly/mdY1zs

    Regards
    Rahul

    Rahul Kumar Paliwal

    June 17, 2011 at 11:24 am

  12. Thanks for the update Rahul,

    We are brought up like that. A wise man said, “Environment is more powerful than will power”. The kind of country, planet, century, family we are born in shapes us more than we realize. Therefore being contrarian not just for the sake/heck of it but because of some deep felt justified reason implies we are able to think independently.

    AK Capital should do well I feel.

    Regards

    Amit Arora

    June 18, 2011 at 7:11 pm

  13. Whats your view about Blackrose Industries?

    Rahul

    June 24, 2011 at 5:50 pm

  14. Hi Amit & Rahul

    1 more news where AK Capital may be participating. http://articles.economictimes.indiatimes.com/2011-06-15/news/29660459_1_ncds-type-of-debt-instrument-treasuries-and-provident-fund

    Regards
    Manjunatha

    Manjunatha

    June 25, 2011 at 6:45 am

  15. Thanks Manjunatha

    Rahul, Not following Black Rose, I feel its decent for a small cap as company is playing all antics to shore up the stock price, bonus and 10 paisa dividend along with OK results. May not become a multibagger.

    Regards

    Amit Arora

    June 25, 2011 at 5:32 pm

  16. News on cravatex.
    “Cravatex Ltd will be permitted to manufacture and sell Fila products in the Middle East”.
    http://www.just-style.com/news/global-news-roundup_id111423.aspx

    selvan

    June 25, 2011 at 8:04 pm

  17. Hi Amit,
    Regarding MMFSL, you said you talked to comp & comp has no liability. Can you plz share whom you talked to & how? Asking coz I called CS & he is not ready to disclose any info citing insider reasons & is asking to wait for AR & AGM.
    Thanks.

    JK

    June 29, 2011 at 8:20 am

  18. Hi Amit..

    I want you to have a look on Elpro International as well. It has got significant stake in MAx newyork Life insurance. Since insurance companies are soon to get norms to get listed on Bourses …i see alot of potential in this script. Being a very low equity share.. i feel can be 3 bagger atleast in the next 2yrs…Only thing that is needed is the Recognition… i.e Big Investors has to recognise it. Please share your views on this.

    sandeep maddali

    June 29, 2011 at 12:49 pm

  19. Hi JK,

    I am traveling and don't have my notes. Spoke with some lady.

    This however does not require any insider knowledge because by definition a Corporation / Company is a separate legal entity distinct from its members with its own privileges and obligations. A company can discharge its officers, Chairman from duties and recruit new ones for mis demeanour.

    Regards

    Disclosure: I am invested and want to bet heavily

    Amit Arora

    June 29, 2011 at 2:50 pm

  20. Sandeep

    Elpro has a stake in Metlife India Insurance and not Max New York Life Insurance. Metlife is not exactly setting any scorching pace in India. Maybe Amit can shed some light on this stock.

    Had researched on the same but dropped the idea of investing in it.

    Ansh

    June 29, 2011 at 3:01 pm

  21. Hi Ansh..

    Yes u r absolutely correct.Dont know how i got it wrongly over there.However,thanks for correcting.

    Even though Metlife is not performing at the best of the industry,it is an undervalued share in any means and it deserves better valuations. Waiting for Amit's comments on this.

    sandeep maddali

    June 29, 2011 at 4:35 pm

  22. Hi Guys,

    I have not applied my mind enough on Insurance space due to bigger numbers. My calculator has only 8 digits🙂

    It appears that Metlife India could be worth 4000 Crores so a roughly 10 – 12 % holding could be worth 350-600 Crores, so there is undervaluation. I could not find what is overall holding of Elpro though either Metlife US Annual Report or Jammu and Kashmir Annual report.

    I am very bad at waiting patiently for a big part of portfolio so it has to be a tiny bet for me.

    Regards

    Amit Arora

    June 29, 2011 at 6:37 pm

  23. Fila Korea announces licensing structure in EMEA region:

    Cravatex scores Middle East also.

    http://www.fibre2fashion.com/news/company-news/fila/newsdetails.aspx?news_id=100618

    Amit Arora

    July 3, 2011 at 2:45 am

  24. Hi Amit

    As per the news cravatex has got licences to sell fila products in Middle east as well as africa. If true, this means good opportunities for cravatex. How come this important business developments are not reported by cravatex to Stock Exchanges? May be something is not finalised/materialised or may be these licences are awarded to cravatex promoters and not to cravatex itself.

    selvan

    July 3, 2011 at 12:30 pm

  25. Following is the view of 'thehindubusinessline' on cravatex in the short term:

    Cravatex (Rs 788): Cravatex has been trending higher from its August 2010 trough of Rs 164. Medium-term trend is up for the stock from its March low of Rs 450. However, after marking an all-time high at Rs 892 on May 27, the stock started to weaken and is oscillating between Rs 700 and Rs 850. Moreover, we notice that weekly and monthly indicators are displaying negative divergence signalling that trend reversal is on the cards. Currently, two-week average volume traded is 339 shares. We advise at this juncture to exit from the stock.

    Strong close below Rs 700 will pull the stock down to Rs 580 and then to Rs 450 in the medium-term. Further, decisive fall below Rs 450 can lead to sharp decline to Rs 300 or even to Rs 200 in the long-term. Key resistances ahead for the stock are at Rs 850 and Rs 900.

    selvan

    July 3, 2011 at 3:30 pm

  26. What should I say to that Selvan, the ass Yoganand D. replying on behalf of The Hindu Business Line knows the price of everything and value of nothing🙂 Its not even funny ! 200 – 900 Range, yeah thats a good answer. I give a range of 1000 – 10,000 for HDFC Bank for next 5 years.

    Amit Arora

    July 4, 2011 at 3:13 am

  27. While predicting future is hard, don't these three people look fools !

    http://www.livemint.com/2009/11/10215056/Cookware-concerns.html

    Thats exactly the word I used for them. I used the work Jackass for all three, that was polite in hindsight

    http://www.theequitydesk.com/forum/forum_posts.asp?TID=2186&PN=12

    and

    http://www.theequitydesk.com/forum/forum_posts.asp?TID=2186&PN=13

    Amit Arora

    July 4, 2011 at 3:48 am

  28. Hi Amit

    Time will tell who had the last laugh.

    Anyway, AGM of cravatex is on 8th July. Hopefully, the management will shed some light on the future of cravatex.

    selvan

    July 4, 2011 at 4:59 am

  29. I have been surveying sports shops in New York and New Jersey area and Footjoy and Titleist dominate the scene in Golf section in their categories. These are Acushnet brands now under Fila Korea. Any Indian company getting rights for Acushnet business would make a killing and goof part is that there isn't a national franchisee in India as yet for Acushnet brands. Fingers crossed. Golf on the other hand may or may not become that big a game in the sub continent.

    Amit Arora

    July 4, 2011 at 3:01 pm

  30. Hi Amit,

    so you mean that…….. CRAVATEX will be the authorised manfacturer of Acushnet brands in INDIA and other Middle East countries as Acushnet has become a Core part of FILA Korea.

    sandeep maddali

    July 4, 2011 at 6:01 pm

  31. Good Morning (Good Evening) Amit,

    How positive would be the impact of Speedo Brand inclusion in Page Ind kitty?

    http://www.thehindubusinessline.com/companies/article2158565.ece

    COIMBATORE, JULY 4:
    Page Industries Ltd has entered into an exclusive licensing agreement with Speedo International Ltd for the manufacture and distribution of Speedo brand swim wear, water shorts, apparel, equipment and footwear with effect from July 1.

    Amar

    July 5, 2011 at 3:43 am

  32. G'Day Amar,

    Speedo is privately held by a UK group but does somewhere around 2000 Crore INR in revenues. Has a very good recall in swim wear. Technology and research is important to make latest lightest equipment, also marketing. Should help Page considerably. I am almost on the verge of saying goodbye to TTK Prestige and Page though they will be 3+ baggers from hereon within next 4 years.

    Amit Arora

    July 5, 2011 at 4:22 am

  33. In that case our revised buy list at opportune time and price would be: AK Capital, Cravatex, Globus spirit, Photoquip, Intec Sec, LIC Housing, Money Matters, Panama Petro, Puneet Resins, SBT and TTK Health. Am I missing anything?

    Regards,

    Amar

    July 5, 2011 at 4:39 am

  34. Hi Amit,

    Today while purchasing Proline T-Shirt and Fila Shoes in Hyderabad, I asked a person at the cash counter that “who is marketing Proline and Fila brand in India” ?

    He said it is Bombay dyeing..I was completely shocked on his reply.

    Is it that Fila and Proline stores are looked not by Cravatex? Who is getting the revenues from the sales of the apparels..Cravatex or Bomnay Dyeing.

    Let me know your comments.

    Amit

    July 9, 2011 at 6:24 pm

  35. Hi Amit,

    Proline T shirt is not part of Cravatex Ltd.

    You may get some answers here

    http://multibaggersindia.blogspot.com/2010/11/discuss-cravatex.html

    Cash counter employee was an ignoramus

    Regards

    Amit Arora

    July 9, 2011 at 7:25 pm

  36. Hi Amit,

    Thanks for the link. It is clear to me now.

    I want to bring your attention towards VA Tech Wabag. Its a only MNC from Water Sector listed on exchange. Management has the vision to make 6000cr company in next 5-6 years.

    Whats your view on this company?

    Amit

    July 9, 2011 at 8:31 pm

  37. From the AGM of cravatex:

    1.UK subsidiary M/s. BB (UK) Ltd will do a business of around 40 crore this year.
    2. Middle east & north africa sublicense for fila is with cravatex. Mr. Batra didn't explain the prospects in these regions.
    3.There will be a uptick in borrwing this year as working capital is around 30% of topline.
    4.Didn't give any figure regarding growth in sales.
    5.Plans to open 5 nos company operated stores this year at a cost of 4.5 crores.
    6.One shareholder complained vehemently that Mr. Batra's salary is very low.
    7.Another old lady, who had nothing better to do, sang a poem in praise of Mr. Batra.

    selvan

    July 12, 2011 at 5:35 pm

  38. AK Capital

    Mr. Damani has reduced stake in akcapital during the april-june qtr

    selvan

    July 12, 2011 at 5:36 pm

  39. Thanks Selvan,

    Very dramatic AGM culminated by a song🙂

    I have been noticing FILA's presence in United States in almost all major stores. Though they are smaller than Nike, Adidas.

    Another brand Under Armour has become very big in US.

    http://www.underarmour.com

    Even in a small country like NZ with 40 Lac population, people do wear FILA, therefore I am pretty certain that at 100 Cr market cap, potential exists. I am saying this because people feel that shoes industry is commoditised hence FILA is commodity. But I see not more than 5-10 brands in US even in biggest of sports stores for heat and cold gear. Sports apparels are not commoditised even if shoe industry is, FILA is more than shoes.

    Regards

    Amit Arora

    July 12, 2011 at 6:52 pm

  40. An Observation:

    Somedays back I purchased proline Tshirt and fila shoes from proline store in Inorbit Hyderabad through my credit card.
    In the credit card statement I found that the amount was actually credited to Cravatex ltd.
    This means revenues from these stores are accounted to Cravatex.

    Correct me If my assumption is correct or not.

    Amit

    July 15, 2011 at 5:44 pm


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: