Views on Life & on Equity Investing

Wonder, Wealth & Abundance

DHFL

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IMO not a single large real eatate developer in India has gone without some sort of palm greasing.

Extent of profit extraction and greed has been different but equating every such lapse of corporate governance with fraud presents good opportunities.

As we spreak DHFL is now being priced for bankruptcy or closer at 3800 Crores market cap valued at less than 0.4 times book value. However WGC and DHFL sold a subsidiary, Aadhar Housing yesterday, at 3 times book.

https://m.economictimes.com/industry/banking/finance/banking/blackstone-pips-baring-hero-fincorp-to-buy-aadhar-housing-finance-for-rs-2700-crore/articleshow/67804563.cms

Unless we are talking about cherry picking loan book, which is not the case, it will be interesting to see in hindsight how two companies of the same group can be priced seven times apart in valuations (3 times book vs 0.4 times book).

Written by amitdipsite

February 2, 2019 at 7:13 pm

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What is your excuse for not working hard – 2 ?

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Blind person working on a construction site, uses rope to carry bricks on his head.

 

 

Written by amitdipsite

December 31, 2018 at 4:53 am

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What is your excuse for not working hard?

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Written by amitdipsite

December 31, 2018 at 4:45 am

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Which version is correct?

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Few months back in a book that I forget the name of, I read that it took equity investors of 1929, using S&P yardstick, 25 years to break even, i.e until 1954 to make the money back they lost.

Today, I saw a PPT forwarded from someone a slide in which sort of contradicted the above assertion, that was presented by Samir, that S&P returns were ~4x during this period. The context of the presentation was equity as an asset class in comparison with other asset classes, that point was made appropriately. However, its another proof on how statistics can be deceptive.

Non-Inflation

Source: https://iaip.files.wordpress.com/2018/12/Presentation-by-Samir-Arora.pptx

In my previous post, Fooled By Charts, https://lifeandequities.wordpress.com/2018/12/25/fooled-by-charts-before-after/ I mentioned how unwise it is to assume that S&P delivered 300X in the previous century whereas, it actually returned ~17X only, and that, long term (multi-decade charts) should be

A) Inflation adjusted

B) Log scale adjusted

Here is that chart post adjustment.

Inflation-Adjusted

When you invest in frontier markets, you should not be impressed with the stocks that have been 10X in the previous decade, the reason being, there could have been an incidence of hyper or excess inflation in those economies, masking the real return.

Over the previous 148 years (1870 to 2018) S&P has returned 4% CAGR, adjusted for inflation or 25x, but if you do NOT adjust for inflation, the return vaults to 500X, a twenty fold multiple.

148 years s&p.JPG

 

 

http://www.elevendimension-funds.com/

http://www.equityadviser.in/

Please do your own due diligence and consult your investment adviser.

Written by amitdipsite

December 28, 2018 at 5:40 pm

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Fooled by charts: BEFORE / AFTER

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When you date a girl (BEFORE) and then get married (AFTER), the experience varies, its all good because you get exposed to your own shortcomings 🙂 necessary for your growth.

I have been deluded by the charts on two counts:

A) I thought that bear markets typically last 1/3rd of bull markets in duration.

B) I have also been convinced that stock market index returns 100 x over the life time of an individual.

Both the above statements are broadly correct but not if you try to probe further into them.

When you scrape a little deeper and try to find the adorable pancreas (or kidneys for that matter) under that pretty face, you can’t find, they aren’t adorable, beauty is skin deep 🙂

Once adjusted for:

A) Inflation

B) Use Log scale

The picture doesn’t look pretty as they show in BEFORE / AFTER advertisements. In fact, it has the reverse effect.

before_after

BEFORE Simple Dow Chart show 295x returns.

Dow was trading circa 71 in 1915 to 21000 today, WOW! 295X.

Who doesn’t want to make 295X or even more by ‘better than index’ stock picking. Punjabi might say SADKE JAWAN meaning I am in awe or breathtaking.

BEFORE_DOW

AFTER, let us look beneath the surface and gradually take the first layer off, lets adjust the chart log scale on Y axis, after all, earning 50$ on 500$ is not the same as earning 50$ on 50,000$.

DOW_LOG

AFTER, now adjust for inflation. Buying 1 Liter of milk in 1980 at 0.25 INR is not the same as buying it in 2018 for 70 INR. Returns from DOW are now a humble 11X over a 100 year period from 1915 (1700) to 2018 (21000). Looking this the enraged punjabi might say  KANJAR MARJAANEYA, FITTEMUH CHAPPED MAARAN? , meaning “you jerk (and other expressions that do not have an equivalent english counterpart) shall I slap you for deluding me with the first chart”.

DOW_Inflation

Inflation and Log adjusted Bear Market chart shows bear markets last a decade or longer every 10-20 years.

bear market

http://www.elevendimension-funds.com/

http://www.equityadviser.in/

Please do your own due diligence and consult your investment adviser.

Written by amitdipsite

December 25, 2018 at 3:38 am

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Quotes

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You know you’re winning when you’re happy for no reason. When you don’t attach your happiness to anything or anyone, you become free.

I hate to cancel. I know we made plans to get together tonight but that was 2 hours ago. I was younger then, full of hope. But now I’m tired.

Sometimes you simply need to talk to a 5 year old and an 85 year old to put your life back into perspective.

It’s ironic how you feel most alive when your heart skips a few beats.

Money can’t buy happiness but poverty can’t buy anything.

You cannot be lonely if you like the person you’re alone with.

We are all a little weird and crazy and life’s a little weird, and when we find someone whose weirdness and craziness is compatible with ours, we join up with them and fall in mutual weirdness and call it love.

Do your own thinking independently. Be the chess player, not the chess piece.

Whoever best describes a problem is the one most likely to solve it. To be able to ask a question clearly is two-thirds of the way to getting it answered.

To handle yourself, use your head; To handle others, use your heart.

Good girls are found on every corner of the earth but unfortunately the earth is round.

If at first you don’t succeed, destroy all evidence that you tried.

The risk I took was calculated but man, am I bad at math.

If you like me, then raise your hand, If not then raise your standard.

Well, enough about me. Let’s talk about you. What do you think about me?

Most men die at 27, we just bury them at 72.

Written by amitdipsite

December 24, 2018 at 1:53 am

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10x in 10 years

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A number of investors including myself (and Ramdeo Agarwal  mentioned in a couple of interviews) aim for a 10X in 10 years.

This is quite a tall order in any market. Passive investing reached maniacal proportions, with ETF market aggregating nearly 10 Trillion USD in 2018. 2018 has been negative for most asset classes.

There will have to be a reset of funds flow because the previous 10 years were aided by PE expansion.

Sensex India was trading at 1000 Levels in 1990, going by the 10X in 10 years, Sensex will have to be 1000,000 by 2020. (10,000 in 2000, 100,000 in 2010, 1000,000 in 2020).

No index is able to deliver such returns over the long term period. Few lucky companies, whose management also are not aware, deliver such outsized returns. Bill Gates thought that definition of success will be, having a company with 30-50 employees in one of the interviews.

Sensex India delivered 9% CAGR in the recent 4 years, starting 1 Jan 2015 from 27K to 35K today. Asking for 10X every decade requires more than hard work.

sensex

The best industries that are likely to generate maximum wealth, in my opinion, will be software, robotics, medicine and financial. That, however does not imply the best performing stocks will necessarily be from the above sectors.

I have tried to acquire equities and held stocks (and still holding) with an expectation that they could be 100X in 25 years, but its much worse growth rate (20%  CAGR)  in comparison to equities that could double in 3 years (26% CAGR). Which of the two groups is more appealing to me in any particular year depends on an equation comprising temperature in Timbuktu, wind speed in Sahara desert and humidity in Malaysia.

 

http://www.elevendimension-funds.com/

http://www.equityadviser.in/

Please do your own due diligence and consult your investment adviser.

Written by amitdipsite

December 23, 2018 at 5:25 am

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