In the post In Praise of Effort, Priya talks about the effectiveness of being consistent with your efforts as a habit. She shows how an overnight success is often glorified and untrue, when in truth those success stories ran several days, months or years in the making. In fact, more than your talent, it is your ability to show up and put in the work everyday that defines your success or failure. Martial arts expert and actor Bruce Lee summed it up as, “I fear not the man who has practised 10,000 kicks once, but the one who has practised one kick 10,000 times.” Continue reading Let’s fall in love with routine
We have seen finance experts like Dave Ramsay tell us to cut up our credit cards. We have seen how delinquent home loans not only caused people to lose their homes but also a systemic crisis that spread across several financial institution and countries during 2008. Repossessed cars and two wheeler are common in many low income households. To add to this trouble student loan defaults have become high all over the world as the income opportunities often don’t match up with the cost of some of these courses.
So is debt a bad thing? Should we indeed cut up credit cards? Save for 15+ years to buy a home. Never take a loan in our life?
From Shylock of ‘Merchant of Venice’ to today’s bank that offer Personal loans and credit cards with dubious terms the bankers have been portrayed as Vultures. It is often joked ‘Banks will only lend money to those that don’t need them.’. Are these Financial institutions just vultures that serve no real need?
- ISBN-10: 0743200403
- ISBN-13: 978-0743200400
Peter Lynch, one of the greatest investors of our time has given ample time tested techniques in this book.
How retail investors can win in the stock market
-> Take advantage of what you already know. i.e invest in familiar sectors.
-> Invest in a house before you invest in a stock market
-> Ignore short term fluctations
-> Predicting economy or stock market direction is futile
-> 6/10 wins is a stellar record
Types of Stocks
- Slow Growers – 4 – 6% growth. Stable Business like Power and other Utilities. Buy when you can’t find anything else.
- Stalwarts – Medium Growth. 10- 12% growth. Established companies like HUL, CocaCola, P&G etc that grow year on year and make standard profit. Take profits at 30 – 50% and repeat with other stalwarts.
- Fast Growers – Medium to small size companies that grow at 20 – 25%. Assess growth phase and sustainability.
- Cyclical – Expands and contracts over time. Eg: Auto, Airlines, Tyres, steel, Chemicals.
- Turnarounds – Stay with bad news for a possible good turnaround. But stay away from tragedies where outcome is unmeasurable. Lynch considers companies moving into unrelated fields as ‘diworsification‘
- Asset Plays – Properties i.e land and other assets held by a company is more valuable than the quoted price.
Categorise the stocks you purchase into the above buckets and arrive at target price based on the category it falls.
What is a Perfect Stock?
- Dull or simple business with a boring name
- It does something dull Eg: Packaged Foods like biscuits, soap etc
- It does something disagreeable Eg: Harpic
- It’s a spinoff from a well known holding company Eg: Bajaj Finance
- Institutions don’t own and analysts don’t follow.
- Rumours abound like toxicity, mafia Eg: Casino
- There’s something depressing about the business Eg: Funeral homes
- It’s a no growth industry. Steady business, reliable customer base.
- It’s got a niche
- People have to keep buying it. Eg: Razor blades, cigarrets
- It’s a user of technology which results in massive cost savings.
- The insiders are buying
- Company is buying back shares
Which stocks to Avoid ?
-> Hottest stock in the hottest sector
-> The next something
-> Avoid ‘Diworsification’ i.e companies that expand into unrelated business
-> Avoid acquisitions that lack synergy
-> Avoid whisper stocks i.e great stories with no substance and no earnings
-> Too dependent on a handful of clients
-> Beware of stock with an exciting name
When to Buy ?
Buy when Price line is below Earnings line and Sell when Price line goes way above the earnings line.
P/ E guideline – check historic P/E levels to know average.
Utility/slow growers – 7 – 9
Stalwart – 10 – 14
Fast growth 14-20
Check if companies have a plan on how to increase future earnings – reduce costs, raise prices, expand into new markets, sell more to same market, close down loss making operations etc.
What to look for before you buy
(1) Does this new trending product have an impact on co’s prospect. If yes consider, else no.
(2) PE Ratio & Growth = long term growth rate + dividend yield / P/E Ratio – ratio < 1 poor, 1.5 – 2 – Ok , 3 and above – Excellent. This is not same as PEG ratio.
(3) Cash Position – Cash, Cash equivalents and marketable securities over long term debt. Revised P/E = Market Price (less) Cash Per Share/ Earnings
(4) Debt Factor esp for companies in trouble. Can they survive the crisis?
(5) Dividends – Regualr dividends payouts acts as floor for drop in price.
(6) Book Value (BV) – Before buying for Book Value examine the assets that form part of BV and ensure it is worthy. BV could also be Asset plays due to nderstaed value of real estate,land, securities, tax write offs etc
(7) Cash flow – Free cash flow to be checked for heavy capex industries
Signs to look out for – Piling up of (obsolete) inventory , pension plans and future obligations including contingencies. Eg: litigations.
A 20 PE at 20% growth rate will make more than 10 PE stock at 10% growth rate
Recheck your story every few months to see if they are still relevant.
How to avoid the ‘dotcom’ crash scenarios yet participate in the upside of new technology
Pick and Shovels Strategy : Investing in Denims rather than the gold rush. More money is to be made by the suppliers or direct beneficiaries of a much hyped industry Eg: Microsoft Vs Dell
Through Holding Company: When a holding company has a subsidiary in the much hyped sector which might later be spun off. Holding co. business is a downside protection.
Through ‘Brick and Mortars’ that benefit from the efficiency by use of this new technology.
Personal preferences can be a reason to add companies to list of stocks to research . But never invest without doing the homework i.e knowing
(1) Company’s earning Prospects
(2) Financial Condition
(3) Competitive Position
(4) Plans for Expansion
(5) At what stage of Expansion phase is the company currently in
Invest for the the long term so that you will not be forced to liquidate for need of cash in a bear market. Only Invest what you can afford to lose without the loss having any effect in your foreseeable future.
The Final Checklist:
- P/E ratio – High or Low – Compare with similar co’s in same industry.
- % of institutional ownership – Lower the better
- Are insiders (Promoters/Directors) buying ? Company buyback?
- Are earnings growing consistently
- Strong or Weak Balance sheets i.e Debt/Equity Ratio
- Cash Position
- For Slow growers – Dividend consistency and Dividend/Earnings ratio
- For Stalwarts – Check P/E, for possible ‘diworsificcations’, growth rate, momentum and for long holding periods chk performance over prev. recessions and downturns.
- Cyclicals – Watch out for new entrants. Anticipate shrinking P/E. auto up and down cycles last for 4-5 years each. Deeper down cause higher ups.
- Fast Growers – Is PE almost equal to growth rate in earnings. Is Expansion speeding up or slowing down? Does it have room to grow ? Proven ability to expand ?
- Turnaround – Will business survive ? Liquidation Value of company. How will turnaround happen? Is Business coming back or costs being cut ?
- Asset Plays – Is there any hidden value in the assets? Is company taking on new debts ? Beware of Provisions and contingencies.
Points to note:
(1) Understand the nature of the company and specific reason for holding the stock.
(2) Categorise your stocks for right expectations
(3) Big companies small moves in prices, small companies make big moves.
(4) If consideration is based on specific product, consider impact on company
(5) Consider small proven and profitable companies
(6) Avoid hot stocks in hot industries
(7) Be suspicious of 50% growth rates
(8) Moderately fast growers in non growth industries is an ideal investment
(9) Insiders buying the stock
(10) Don’t buy only on stated Book Value. Consider Real Value.
Realistic Expectations – six of 10 ideas and 12- 15% return.
A small portfolio of 3 – 10 stocks would be a managable size. The composition of the portfolio should be
Growth – 30 – 40% – Slow -Low Risk low gain /Fast – High risk high gain
Stalwarts – 10 – 20% – low risk moderate gains
Cyclicals – 10 – 20% – low risk high gains or high risk low gains based on entry level
Turnarounds – Rest – high Risk High Gain
Consider risk portfolio and age factor while allocation.
When to Sell
If company has gone up well to factor in all good news, it may be sold. But if original story is intact stay invested.
Slow Growth – On 30 – 50% appreciation or when fundamentals have deteriorated.
Stalwarts – Price strays too far from earnings, and/or industry P/E. Slowing growth or vulnerability of a major division.
Cyclical – 100% of capacity is used, Inventory build up, product slowdown, union demands, high capital requirement for expansion.
Fast Growers – too much media attention, no where to expand business, high P/E of 30 + when growth is below 20, high institutional holding, exit of key executives to join rival.
Turnaround – After the turnaround, High dependency on one customer, growing debt , rising inventory , High P/E.
Asset Plays– Once hidden value is unlocked and is fairly priced. Increased institutional ownership, lower sales, increase in debt , dilution of share value.
Do not buy a mediocre company because it is cheap.
Happy Investing. Stay Profitable 🙂
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Though raised in Mumbai, I am Tamil. People from Tamil Nadu have a huge affinity for their top actor of all time, Rajinikanth. Internet memes have been created in his honour. At every movie theatre in Tamil Nadu, be in Chennai or Kanyakumari, when a Rajini movie is aired, fanatic Tamils stand up and cheer his every punch dialogue. It can be comical, entertaining, bewildering or exasperating, depending on whether you like him or not. I am not a big Rajini fan, nor do I call him a superstar, nor think he is a particularly good actor. But even I cannot deny that his so-called ‘punch dialogues‘ are packed with lessons for life, especially in the virtues of productivity, discipline and humility. Add to that the music scores that accompany his every punch line and the words seem profound and immortal!
In an acting career spanning more than 40 years, the total count of Rajini punch dialogues goes well into three figures, perhaps even four. But I have picked my favourite 8, especially those that I think have the most valuable lessons. All the dialogues are in Tamil. For the benefit of my non-Tamil friends, who are in fact the majority, I am translating the movie names and the meaning of each dialogue into English. So, get ready for the best lessons in life…. Rajini style….. Mind it, I say!!!
Movie: Padhinaru Vayadhinile (At the age of sixteen)
Dialogue: Idhu eppidi irukku?! (How about that?!)
Scene after scene, villain Rajinikanth picks on a hapless and lame Kamal Hassan, teasing him, insulting him or playing pranks that lead to injury. More insinuating is the fact that Rajnikanth turns to his other bully buddies and asks them the titled question. To which, they guffaw and whistle, leaving a hurt Kamal Hassan very humiliated.
Although used antagonistically and sarcastically in the movie, it shows the idea of constant feedback. Feedback is necessary to improve yourself and make changes. It makes you grow as a person. When you build something you care about, when you want to be better for someone you care about, it may be worthwhile to pause a while and ask, “idhu eppidi irukku?”.
Movie: Padayappa (name of the lead character in the movie)
Dialogue: En vazhi… thani vazhi! (My way …. is a different way!)
FMCG in India is a potpourri of copy cat products. Stride into the familiar aisles of a shopping mall and you see those familiar names…. Surf, Ariel, Tide and so on. I have now forgotten which one is made by Unilever, which one by P&G and so on. Because they all look and feel the same. Ditto for cold drinks from Pepsi and Coca Cola. Drink either and you don’t see the difference. Biscuits from Britannia aren’t different from those of Parle. You can pick any product from the shelf and you’ll probably forget the brand five seconds later as the product goes deep into your shopping cart.
Not with Patanjali. The company makes closer to nature products, using less preservatives and less processing. A really strong point has been their ultra-cheap pricing and their distribution network. Sometimes they book their own shelves at malls. And they even have their exclusive retail Patanjali outlets.
Leonardo da Vinci was different for his time. So was Pablo Picasso. Thomas Edison, Henry Ford, Warren Buffet, Jeff Bezos. All of them challenged the status quo and found their unique way that seperated them from the crowd. Maybe they seem eccentric to the contemporaries. Maybe they are geniuses. But surely they can say, “En vazhi…. thani vazhi”!
Movie: Baba (as in a spiritual leader, this word means the same in several Indian languages)
Dialogue: Naan yosikkaama pesamaatten. Pesina piragu yosikkamaaten
(I don’t talk without thinking. And I don’t think after having talked).
Whenever he takes a tough decision, a spiritually active Baba character played by Rajinikanth is asked several times by his peers whether he has thought it through. And every time, Baba unleashes this punch dialogue to the accompaniment of a rock music number (B to the A rap by Blaze) in the background.
This rhyme-laced dialogue is one of the two dialogues in this post that endorses the power of commitment. Before you commit to anything, you need to think it through. If you do not feel like committing, back out. If after much thinking, you realise that the commitment is for you, then go ahead. After committing, you are not encouraged to have second thoughts. You should have thought it through in the first place.
Movie: Annamalai (name of the lead character in the movie)
Dialogue: Naan sollarathayum seiven, sollaadhadhayum seiven (I do what I promise… and I do what I don’t promise)
A famous customer care mantra says, “Underpromise and overdeliver” or “Promise less and do more”. This lowers customer expectations and surprises them when you give them more.
Saying NO to your customer for something you can’t meet shows your honesty and understanding customers will adjust. On the other hand, if your promise them and then can’t keep it later, it reflects badly and the customer feels cheated. However, if you feel that a certain promise falls in the grey area and you are unsure about whether to commit it, then it is better not to do so. But in the end, if you are able to deliver it, then you should do so. The customer will be very happy.
We have seen car service companies, bakeries and electronics companies who throw in a few free goodies every time we go there. A crooked car door fixed for free, a set of free candles when the baker knows that you are buying a cake for a birthday or a complementary talk-time recharge from your mobile phone vendor make you want to do business with them again and again.
Movie: Baashha (the call-sign of the kingpin in the movie)
Dialogue: Naan oru tharava sonna, nooru dharava sonna maadhiri
(If I have said it once, it’s like I have said it a hundred times)
In this movie, while initially shown as an auto driver, the main character is revealed to be a dangerous kingpin with several connections to murder. However, like Robinhood, his bloodshed is limited to keeping other malicious kingpins in check.
This dialogue endorses commitment. The character says that he is ready to say the same thing hundred times without any change to his words. The commitment is long-standing.
Dialogue: Kadham, Kadham! Mudinjadhu mudinju pochchu
(It’s over, it’s over! Let bygones be bygones)
‘Kadham’ is a Tamil adjustment of the Hindi word, “Khatm”, due to inadequacy of letters and other grammatical rules. The word means over or finished. Several times in the movie, Baba cuts his ties with the past with a sweep of hand and this dialogue. The sweep of hand is accompanied by a blade-like sound in the background, signifying the character’s severance with his past.
Indeed, there are times in your life where your past shouldn’t be a baggage for today. If you wrecked your car in an accident in the past, it doesn’t mean that you cannot drive thousands of kilometres around your country today. At the same time, the glory of your ancestors shouldn’t get to you. Just because your ancestors were good artists doesn’t mean that you are genetically predisposed to be good with oil paint and canvas. You need to learn that yourself.
Movie: Muthu (name of the character in the movie)
Dialogue: Naan eppo varuven, eppidi varuven nu yarukkum theriyaadhu. Aana varavendiya nerathula correct-a varuven
(Doesn’t matter how I come, but I will show up on time where I need to be)
Punctuality is one of my favourite traits. I am reasonably good at it, though not 100%. No wonder then that this dialogue gets my soft corner. Muthu, the horse chariot rider, has a habit of being nowhere to be seen, but popping up at places right on time, whether it is for his master’s temple prayers or to rescue someone from an evil antagonist. This dialogue is repeated twice or thrice in the movie, everytime when Muthu unexpectedly crawls out of the woodwork to save the day.
Two things to learn from this dialogue are:
1. Be on time
2. Always show up. Don’t be absent when you are needed there.
Both actions exude reliability. It makes everyone trust you and depend safely on you. First, they’ll know that you won’t miss and that you will show up. And then, that you will show up on time.
There is just one thing about Muthu that I don’t agree with. For theatrical effect, he pops up at the last minute. I like to be where I need to be with plenty of time to spare. Reaching the airport 90 minutes before the flight when the rules call for 45. Waking up at 4:15 am and getting my laptop, phone and charger ready and plugged and booted up so that I start typing on my keyboard at 4:30 am. Last-gasp punctuality will eventually run out of luck. A wonderful article about ‘doing something’ and ‘managing to just do something’ was written by Priya, my wife, a few months ago.
Dialogue: Kashta padaama edhuvum kadaikathu. Kashta padaama kidaichchadhu ennikkume nelaikkadhu
(Nothing is attained without struggle. That which is attained without struggle doesn’t last)
Famous performers like Elvis Presley and Michael Jackson succumbed to the temptation of drugs to enhance their performance on stage. Later, the abuse got to them and they lost their lives. Taking drugs to enhance performance is a short-cut. The body is made to burn harder and extract more performance from the muscles. Such performance is not sustainable and the body eventually responds with a seizure or a heart attack. We have seen these during high-stakes sports events like Tour de France and the Olympics. The glory is often short-lived before the athletes are found out and shamed.
And then there are people like Usain Bolt, who worked their way to the top with sheer struggle and practice. It’s the same case for Michael Jordan.
We see these shortcuts in every field. Falsification of reports, fudging of account books and flouting taxes to show a higher profit to shareholders as against working on the sales pitch and the quality of products to sustainably and honestly find more customers to book real profits. Slipping towards the easy way. But the easy way is often an unethical, illegal and unhealthy way.
Rajinikanth’s Padayappa character reminds us not to fall into the trap of the easy way out. That which is attained through a lifetime of struggle stays with us. And that which is attained via shortcuts slips away.
Rajnikanth still acts in movies and continues to unleash punch dialogues. But with this article, I urge you to analyse those dialogues as lessons for life rather than as one-line entertainers. You will be surprised at what you learn.
Recently, Maharashtra banned the use of plastic bags. Shops stopped handing out polythene bags overnight and people found themselves carrying things in their hands or going back home to set out with a cloth bag. It caused some confusion and friction for a week. Then everything felt okay. Carrying a cloth bag seems like second nature as Maharashtra has accepted and fully integrated the ‘no plastic’ rule.
Why wouldn’t people bring their bags before the ban? Why did it take a ban to spur them into action? And how could people change so quickly?
People already knew that use of plastic is questionable and that cloth bags are environment friendly. There were thousands of awareness programs about the ‘evils’ of plastic. But the systems were in favour of plastic. With polythene bags costing a fraction of a Rupee, shops would give you polythene bags free of cost. People didn’t need to carry bags with them and would set out empty-handed. Not anymore. With cloth bags being costlier, vendors stock up only paper bags. But paper is unsuitable for wet (curd) or really heavy (watermelon) grocery. People had to take stock of their behaviour and alter it. They needed a nudge.
And nudge, we too did. The featured image of this post shows our home’s front door, with a cloth shopping bag attached to the hook. It is nearly impossible for us to forget our bag behind. In this post, I want to emphasise the importance of nudges and triggers. I want to say why mere awareness is not enough and why you should have a system of triggers to make you really do something you plan. Continue reading Grow awareness, but nudge yourself
Last week, we successfully published our 100th blog post in ‘We Are The Living’. The journey has been very transformative to say the least. To start this blog was a random whacky idea we picked from some online expert. The blog has been helpful in surprising ways. In this 101st post in ‘We Are The Living’, I would like to state these reasons and hope that they can persuade you to start your own blog too.
Encounter my devils
The lenses that in which we view our world as children often become some of the hardest filters to get out of in our life. Mine had been about my height. Even now when I write this sentence it gives me a little uncomfortable feeling. The first time I really caught this bull by its horn was in the post ‘The Joy of Acceptance.’ I can confidently say I felt infinitely better after I wrote and published that article. It was also reassuring to know that it helped many others with the same struggle.
Another of my devil was my stinginess which I faced in ‘Why we should celebrate.’ Putting my fears, inhibitions and guilt in black and white made me take a step back, accept and handle them much better.
We have all had struggles with bottled up emotions, frustrations, unhappiness, embarrassment, guilt etc. But how about flipping it up bottling up your happiness, joy, love and so on. I do not mean bottling up in the conventional way of not expressing it to the outside world, but quite literally bottling it up. i.e writing it up and putting it inside a bottle.
This was an idea that was made famous by Elizabeth Gilbert of the novel ‘Eat,Pay,Love’. We heard it though from Tim Ferris who was coerced by a friend to use it to stop and celebrate, enjoy his success and happiness before moving onto the next thing.
Let’s rewind to your morning today. Did you wake up with purpose, knowing exactly what to do for the next six hours? Or did you open your eyes with your brain all clouded, knowing that you have zillions of things to do, but with no idea about where and how to start? In this confused state, it is very easy to pick activities that need very little effort. For instance, snooze the alarm & stay back in bed. It is very easy to cling to activities that make your brain feel busy, but you aren’t doing anything productive. For instance, reading the newspaper all morning, browsing your email or watching TV. Continue reading The magic of planning for the next day
Quitting our jobs and giving up our house, to travel around India for one year is one of the most radical things we had ever done. Now that we are back from the epic journey it is time to look back and reflect how the year has been for us and what we had learnt in the journey.
(1) Start before you are ready
Before every trip most people plan judiciously. A packing lists that covers all possible scenarios, like rain coat if it rains, 5 kinds of accessories, 3 colours of lipsticks etc to match the dress that we carry and might buy. Things to do before the trip like cancel the newspaper, inform the maid, close the water taps, get a new cylinder etc. Even a short trip of one week can be overwhelming if we keep such exacting demands on ourselves to be prepared for everything and to look perfect in every part of the trip.
In reality, we can never be fully prepared and ready for all the demands of travel or life.
As Tim Ferris says ” The stars will never align and the traffic lights of life will never all be green at the same time. If it’s important to you and you want to do it ‘eventually,’ just do it and correct course along the way.”
So like Nike says ‘Just do it.’ Atleast get started.
Reading is an activity fraught with choices and distractions. You know how it is when you walk to a book shelf at a library or a book store. Too many books call out to you and you are paralysed. Reading online is more difficult. Apart from millions of articles on a single topic, articles often have a rabbit-hole of hyperlinks leading to other articles or even other topics. In the post, Get more out of your reading, we explained how to avoid distractions and focus on what you are reading. We even suggested that you discard all content that isn’t relevant to your life. We gave you some good habits to follow to keep your reading fun.
What if you can fine-tune your reading even more, so that you get the best results from your sessions? What if you walk into a library and know exactly where to start and how to proceed in your next few visits? What if you set reading goals for your upcoming year? What if you set seasonal topics that you will stick to? What if you are more proactive with your reading, using techniques like note-taking and deliberately practising the skills introduced by your books. This post takes your reading experience to a new level where you will start mastering a few skills that you have always wanted to learn. Continue reading Why have a reading plan