Reblog: Shelby Cullom Davis & The Wisdom of Great Investors


One of the best papers ever written on investing is The Wisdom of Great Investors, provided by Davis Advisors.

Davis Advisors was founded by legendary investor Shelby Cullom Davis, a leading financial advisor to governors and presidents, who parlayed an initial investment of $100,000 in the late 1940s into more than $800 million by the end of his career in the early 1990s. In 1969, Shelby Cullom Davis’s son, Shelby M.C. Davis, founded Davis Advisors after serving as the head of equity research at The Bank of New York.

Shelby Cullom Davis famously said:

“You make most of your money in a bear market, you just don’t realize it at the time.”

This timeless paper is a great reminder that wherever we are in the history of investing it is crucial that we don’t forget the painful lessons from investors of the past. Here are the most important takeaways from the paper:

Overview

It is important to understand that periods of market uncertainty can create wealth-building opportunities for the patient, diligent, long-term investor. Taking advantage of these opportunities, however, requires the willingness to embrace and incorporate the wisdom and insight offered in these pages. History has taught us that investors who have adopted this mindset have met with great success.

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Reblog: Rites Ltd IPO review


Rites Limited (Rites) (erstwhile known as Rail India Technical & Economic Services Ltd.) is a wholly owned Government Company, a Miniratna (Category – I) Schedule ‘A’ Public Sector Enterprise and a leading player in the transport consultancy and engineering sector in India and the only company having diversified services and geographical reach in this field under one roof. It has an experience spanning 43 years and undertaken projects in over 55 countries including Asia, Africa, Latin America, South America and Middle East regions. Rites is the only export arm of Indian Railways for providing rolling stock overseas (other than Thailand, Malaysia and Indonesia). The company is a multidisciplinary engineering and consultancy organization providing a diversified and comprehensive array of services from concept to commissioning in all facets of transport infrastructure and related technologies.

Rites was incorporated by the Ministry of Railways, Government of India (“MoR”) and have the benefit of being associated with the Indian Railways, which is the fourth longest rail network in the world. It has developed expertise in (1) Design, engineering and consultancy services in transport infrastructure sector with focus on railways, urban transport, roads and highways, ports, inland waterways, airports and ropeways; (2) Leasing, export, maintenance and rehabilitation of locomotives and rolling stock, (3) Undertaking turnkey projects on engineering, procurement and construction basis for railway line, track doubling, 3rd line, railway electrification, up gradation works for railway transport systems and workshops, railway stations, and construction of institutional/ residential/ commercial buildings, both with or without equity participation; and (4) Wagon manufacturing, renewable energy generation and power procurement for Indian Railways through our collaborations by way of joint venture arrangements, subsidiaries or consortium arrangements.

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Reblog: Fine Organic IPO review


Fine Organic Industries Ltd. (FOIL) is the largest manufacturer of oleochemical-based additives in India and a strong player globally in this industry. It produces a wide range of specialty plant derived oleochemical-based additives used in food, plastic, cosmetics, paint, ink, coatings and other specialty application in various industries. As at March 31, 2018, FIL had a range of 387 different products sold under the ‘Fine Organics’ brand. It is the first company to introduce slip additives in India and is the largest producer of slip additives in the world. As on 31.03.18 it has 631 direct customers (i.e., end-users of products) and 127 distributors from 69 countries. Its customer list comprises of multinational, regional and local players manufacturing consumer products and petrochemical companies and polymer producers globally. FOIL’s plastics additives and specialty additives are also used in the packaging of foods and other fast moving consumer goods.

The company manufactures additives from base oleochemicals is a highly specialised and fully atomized process. Hence, many of these additives are specialty products, and this industry enjoys premium margins with only a few players dominating the industry globally. The company has three production facilities in Maharashtra -one in Ambernath, one in Badlapur and one in Dombivli.  As at March 31, 2017, these three facilities have a combined installed capacity of approximately 64,300 tonnes per annum.  FOIL is in the process of setting up an additional production facility in Ambernath with a planned installed capacity of 32,000 tonnes per annum and expects it to commence operations in the fourth quarter of Fiscal 2019. In addition, it is planning to set up a new production facility in Leipzig, Germany with a planned initial installed capacity of 10,000 tonnes per annum and expects to commence operations in the third quarter of Fiscal 2020. This facility will be owned and operated by a joint venture company with 50% equity interest by FOIL.

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Reblog: Peter Lynch Investment Tips


This is an oldie but goodie – Peter Lynch on how to pick stocks. By chance, we were also doing the Lynch book list and ran into some confusion if anyone knows please let us know

Here are the obvious three

One Up on Wall Street Peter Lynch 1989
Beating the Street Peter Lynch 1993
Learn to Earn Peter Lynch 1995

The Davis Dynasty: Fifty Years of Successful Investing on Wall Street says its by John; Peters S. Lynch (foreword) Rothchild, I would assume the foreword for a book about Shelby Davis would be the investor Peter Lynch but we were unlear if he had a middle S initial (or if he did not, is that a typo? – obviously can read the book itself but hard to find some of these out of print books and we only have so much time and rsources) in the end we were not sure so would want to exclude it. We will have our list for better or worse soon. We also transcribed the following video – it is not verbatim and is for information purposes only

Enjoy

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Reblog: Some Mistakes…


So much has been written about vicarious learning i.e. learning from mistakes of others. It is humbling to admit that despite all the knowledge out there, I failed to learn vicariously. The purpose of writing this piece is to put down the learning’s (very expensive ones) over the last decade or so.  I hope to smarten up in the future though.

Before writing about what did not work, it is important to set the context. There is no best or the right way to invest – investors have successfully generated huge returns from different investing strategies – be it buying and holding quality companies, chasing growth even at high valuations, buying cheap companies betting on turnarounds etc. People have made large amount of wealth by having concentrated as well as diversified portfolio. So investors have to explore what works for them, given their financial requirements, temperament, skill and time horizon.

Two important factors to consider while looking at the mistakes (and lessons) are:

  1. Allocation strategy: diversified or concentrated. I go with a concentrated strategy so these mistakes are more relevant in that context.
  2. Portfolio approach: It is important to look at the portfolio return and how the portfolio is structured. This is different from trying to maximize returns from each individual stock.

The major mistakes (with very high opportunity cost) made over the past years:

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Reblog: A Moving Average Trading Strategy That Actually Works


You’ll LOVE today’s lesson because…

I’m going to teach you a Moving Average trading strategy that I’ve been using for years (and no it’s not Moving Average crossover).

In fact:

It’s a “buy low sell high” trading strategy that can be applied to the Forex, Futures, and Stock markets.

I’ll reveal the full details of the trading strategy and leave no stones unturned.

This includes the exact trading setup I look for, entries, exits, and stop loss.

And how you can use this strategy to capture a swing for consistent income or, ride massive trends and grow your wealth over time.

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Reblog: Mark To Market Definition: Day Trading Terminology


Mark to market refers to an investment measure or accounting tool used to record an asset’s value to reflect the market value of the security rather than its book value.

The tool is commonly used on futures accounts and helps to ensure that all margin requirements have been completed. When it comes to mutual funds, mark to market refers to how a fund’s net asset value is calculated every day based on the underlying investment closing prices.

Why It’s Important

In security trading, when a portfolio or investment is marked to market, then its value is usually changed in order to reflect the current market price. Investors usually take advantage of this when they are holding a position through the end of the year. Instead of being forced to close it out to realize a loss or gain, you can simply to choose to mark to market the position which will establish the position at the market price for when you file your taxes.

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Reblog: How To Trade Thin Markets


A thin market refers to a market characterized by a minimal number of buyers and sellers plus high price volatility. Also referred to as a narrow market, it is also characterized by high bid-ask spreads and low trading volume.

This type of market does experience lots of drastic swings thus making it difficult for traders and investors to trade systematically. As a result, it is quite common in a thin market for price fluctuations to be larger between transactions and slippage can be a common occurrence.

As said earlier, a thin market is characterized by a small number of traders – buyers and sellers- which results in a low volume of transactions and illiquidity. Due to this, price movement becomes more volatile.

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Reblog: Charlie Munger on Getting Rich, Wisdom, Focus, Fake Knowledge and More


“In the chronicles of American financial history,” writes David Clark in The Tao of Charlie Munger: A Compilation of Quotes from Berkshire Hathaway’s Vice Chairman on Life, Business, and the Pursuit of Wealth, “Charlie Munger will be seen as the proverbial enigma wrapped in a paradox—he is both a mystery and a contradiction at the same time.”

On one hand, Munger received an elite education and it shows: He went to Cal Tech to train as a meteorologist for the Second World War and then attended Harvard Law School and eventually opened his own law firm. That part of his success makes sense.

Yet here’s a man who never took a single course in economics, business, marketing, finance, psychology, or accounting, and managed to become one of the greatest, most admired, and most honorable businessmen of our age. He was noted by essentially all observers for the originality of his thoughts, especially about business and human behavior. You don’t learn that in law school, at Harvard or anywhere else.

Bill Gates said of him: “He is truly the broadest thinker I have ever encountered.” His business partner Warren Buffett put it another way: “He comes equipped for rationality… I would say that to try and typecast Charlie in terms of any other human that I can think of, no one would fit. He’s got his own mold.”

How does such an extreme result happen? How is such an original and unduly capable mind formed? In the case of Munger, it’s clearly a combination of unusual genetics and an unusual approach to learning and life.

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Reblog: The 6 Stages Of A Trader’s Development Part 2


This is the second part of the article. The first part can be accessed here.

Stage Four: The Determined Trader

  1. This is the stage in which you learn to specialize in certain markets and trading methods.
  2. Without realizing it, you have finally found your style of trading after hours of hard work and research. You stick to your method and you improve it
  3. You realize that you need an edge whether its tape reading or being a Fibonacci expert. The important thing is you are slowly transforming yourself into a specialized trader
  4. You test your methods and they seem to work. You gain tremendous market knowledge.
  5. You reflect back on yourself and you can’t help but laugh at your foolishness.
  6. Although you have not made enough money to call yourself successful you are proud of your journey and accomplishments
  7. You realize that the Holy Grail is not about technical indicators or price patterns
  8. You calculate risk before profits and place strict money management on all your trades.
  9. You cut losses short and learn to scale out on your winners.
  10. You start accept losing as a natural part of the game
  11. You take high probability trades that you have tested and feel confident about your setups because you understand that trading is a game of probabilities
  12. Your psychological makeup has changed from an amateur mindset to a professional one.

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