Reblog: The Drawbacks of Behavioral Finance During a Market Correction
Because of the havoc they can wreak on our portfolios, investment professionals and advisors often instruct their clients to ignore their emotions during times like this.
Sensex ends 391 pts higher led by financials, IMD forecast
The benchmark indices settled over 1 per cent higher on Friday after falling for two consecutive days, led by a rise in the financial stocks and a ‘normal’ monsoon forecast during August-September by the India Meteorological Department (IMD). They also rose taking cues from their Asian peers which inched higher following a tech-led rise on Wall Street.
The S&P BSE Sensex ended at 37,556, up 391 points while the broader Nifty50 index settled at 11,361, up 116 points.
Among sectoral indices, the Nifty Bank index rose 1.24 per cent led by a rise in the shares of Axis Bank, YES Bank and Punjab National Bank. The Nifty Fin Service index, too, settled 1.54 per cent higher led by Indiabulls Housing Finance and Edelweiss Financial Services.
Shares of VIP Industries have moved higher by 10% to Rs 538 per share, also their record high on the BSE, after the company reported a strong 55% year on year (yoy) jump in its consolidated net profit at Rs 634 million in June quarter (Q1FY19). The company, which is engaged in manufacturing and marketing of luggage and bags, had a profit of Rs 410 million in the same quarter year ago.
Reblog: How to Tell a Stock Market Correction From a Crash
News that the Dow Jones Industrial Average is down several hundred points sends shivers down the spine of even the most weathered investor. Such drops, while infrequent, can be scary because it’s impossible to predict how severe or long-lasting losses will be. And even if you trust the market will eventually rebound (as it always has), it’s hard to watch the value of your investments shrink before your eyes.
In the immediate term, people will argue about what to call it — a crash? A correction? Leave the vernacular to others, and instead understand what’s causing the market to fall. This knowledge may not bring your money back right away, but it could help you prepare for the market’s next move up or take advantage of lower stock prices in the meantime.
Defining a drop in the stock market
Reblog : Warren Buffett – “It’s Not What You Look At That Matters; It’s What You See.”
Warren Buffett provides a great lesson for all investors in the book – The Warren Buffet Way, by Robert Hagstrom. The lesson is that investors can spend weeks and years reading and analyzing information on prospective companies, but according to Buffett, “It’s not what you look at that matters; it’s what you see.” The lesson learned by Buffett happened during his investigation of IBM back in 2011.
Here’s an excerpt from the book:
Buffett confessed that he came late to the IBM party. Like Coca-Cola in 1988 and Burlington Northern Santa-Fe in 2006, he had been reading the annual reports for 50 years before his epiphany. It arrived, he said, one Saturday in March 2011. Quoting Thoreau, Buffett says, “It’s not what you look at that matters; it ’s what you see.” Buffett admitted to CNBC that he had been “hit between the eyes” by the competitive advantages IBM possesses in finding and keeping clients.
The information technology (IT) services industry is a dynamic and global industry within the technology sector, and no one is bigger in this industry than IBM. Information technology is an $800 billion-plus market that covers a broad spectrum of services broken down into four different buckets: consulting, systems integration, IT outsourcing, and business process outsourcing.
The first two, combined, contribute 52 percent of IBM ’s revenues; 32 percent comes from IT outsourcing; and 16 percent from business process outsourcing. In the consulting and systems integration space, IBM is the number-one global provider—38 percent bigger than the next competitor, Accenture. In the IT outsourcing space, IBM is also the number-one global provider—78 percent larger than the next competitor, Hewlett-Packard. In business process outsourcing, IBM is the seventh-largest provider, behind Teleperformance, Atento, Convergys, Sitel, Aegis, and Genpact.
Sensex ends at new closing high of 37,337; ITC up 5% post Q1
The benchmark indices ended at record closing high for the second straight session on Friday on strong quarterly results. The gains were led by index heavyweights like ITC, RIL, and Hindalco.
The S&P BSE Sensex settled at a record high of 37,337, up 352 points, while the broader Nifty 50 index settled at a new high of 11,278, up 111 points.
In intra-day deals, the S&P BSE Sensex hit a fresh all-time high of 37368.62 while the Nifty50 index touched its record high level of 11,283.40.
Leading the gains is ITC, which has surged over 5 per cent on the BSE. Beating street estimates, diversified conglomerate ITC on Thursday posted a 10.07 per cent jump in its net profit at Rs 28.19 billion for the quarter ended June 30, 2018 with its total revenue, inclusive of other income, registered at Rs 112.78 billion.
Among other gainers, Reliance Industries was among the top contributors to the NSE index, up over 1.5 per cent ahead of its quarterly results later in the day. The oil-to-retail conglomerate will also report results of its telecom arm Reliance Jio.
Nifty Bank index also hit an all-time high, ending 0.8% higher for the day. IDFC Bank, Federal Bank, and Axis Bank were the top gainers in the pack, up between 2 per cent to 2.6 per cent.
Reblog: Are We In A Bear Market?
You might be feeling it’s an odd title given CNX Nifty (which consists of India’s top 50 companies) is merely 3.7% below its all-time high of 11,171, hit in Jan 2018.
Median drop in Nifty 50 Stocks from their 52-week high though is 17%, but the index is holding up thanks to a few heavyweights like HDFC Duo & Reliance hitting lifetime highs.
But what about broader markets?
Following is some eye-popping performance data about the 1,584 stocks listed on BSE with a market capitalization of more than Rs 100 Cr. as on 25th June 2018:
| Fall from 52-week high (Source: Ace Equity, Stalwart Advisors Research) | No. of Stocks |
| >= 60% | 106 |
| 50% – 59% | 175 |
| 40% – 49% | 289 |
| 30% – 39% | 359 |
| 20% – 29% | 336 |
The median fall for these 1,584 stocks from their 52-week high is 34%.
Reblog: IPO Analysis: HDFC Asset Management Company (AMC) Limited
Verdict: A ‘no-brainer’ Buy
IPO Snapshot:
HDFC Asset Management Company (AMC) Limited is entering the primary market on Wednesday 25th July 2018, with an offer for sale (OFS) of up to 2.55 crore equity shares of Rs.5 each, by both the promoters, HDFC (34% of OFS) and UK’s Standard Life (66% of OFS), in the price band of Rs. 1,095 to Rs. 1,100 per share. Representing 12.01% of the post issue paid-up share capital, total issue size is Rs. 2,800 crore at the upper end of the price band. The issue closes on Friday 27th July and listing is likely on 6th August, which will be the 5th listing from HDFC stable.
Company Overview:
HDFC AMC, 56.97% subsidiary of HDFC Ltd, with foreign JV partner UK’s Standard Life owning 37.98% stake, is India’s second largest AMC (behind ICICI Prudential) with asset under management (AUMs) of Rs.2.91 lakh crore (31-3-18) and 13.7% market share. Company is the largest AMC with equity oriented funds (at 51.3% of AUM vis-à-vis industry average of 43.2%), which also helps it become the most profitable AMC in India, having earned net profit of Rs. 722 crore in FY18 or 18.1% market share of the industry PAT, due to higher fees earned in equity as against debt product. Thus, with only 13.7% market share in total AUM, 16.8% market share in actively managed equity-oriented AUM help the company garner 18.1% market share in net profits of the industry, comprising of 42 players. Besides high profitability, company also enjoys benefit of retailisation of portfolio, with 62% AUM coming from retail investors, unlike industry average of ~50%, again highest market share in retail AUM of 15.7%. Systematic investment plan (SIP) products, with average ticket size of Rs. 3,800, also provide high revenue visibility, as 77% of company’s SIPs are signed up for 5 years.
Reblog: Risk Is Not High Math
Smead Capital Management letter to investors titled,”Risk Is Not High Math.”
Long term success in common stock ownership is much more about patience and discipline than it is about mathematics. There is no better arena for discussing this truism than in how investors measure risk. It is the opinion of our firm that measuring a portfolio’s variability to an index is ridiculous, because it is impossible to beat the index without variability.
We believe that how you measure risk is at the heart of how well you do as a long-duration owner of better than average quality companies. In a recent interview, Warren Buffett explained that pension and other perpetuity investors are literally dooming themselves by owning bond investments that are guaranteed to produce a return well below the obligations they hope to meet.
Buffett defines investing as postponing the use of purchasing power today to have more purchasing power in the future. For that reason, we see the risk in common stock ownership as a combination of three things; What other liquid asset classes can produce during the same time period, how the stock market does during the time period, and how well your selections do in comparison to those options. Why would professional investors mute long-term returns in a guaranteed way? The answer comes from how you define risk.
Indices end higher as PM Modi likely to win no-trust vote
Benchmark indices gained on Friday, as the Modi government is expected to win the no-confidence vote, to be held at 6 pm today. In the 545-member (including the Speaker) Lok Sabha, the BJP-led NDA can bank on around 311 members.
The S&P BSE Sensex ended the day at 36,496, up 145 points while the broader Nifty50 index settled at 11,010, up 53 points.
IT and pharma stocks gained as the rupee hit an all-time low. The Nifty IT index was trading up by 1.5 per cent with Infosys, Tech Mahindra and HCL Tech up between 1.6 per cent to 2.6 per cent. Meanwhile, in the pharma sector, Sun Pharma and Cipla gained over 2.5 per cent each.
Among individual stocks, Bajaj Finserv hit a record high, after the Bajaj Group-owned asset & wealth management firm posted a 41 per cent surge in its first-quarter profit on Thursday.
Bajaj Auto, on the other hand, dipped 9 per cent after the company reported a lower than expected 21% year on year (YoY) growth in standalone net profit Rs 11.15 billion in June quarter (Q1FY19). Analysts on an average had expected a profit of around Rs 13 billion for the quarter
Reblog: Bill Nygren: Value Investing Principles and Approach
Bill Nygren is a fund manager at Oakmark Funds. He is also Chief Investment Officer for U.S. Equities at Harris Associates. He’s particularly well-known for being a value investor who doesn’t fear the technology sector.
This post summarises key takeaways from his talk at Google in December 2017. While he reinforces many core value investing principles, he also challenges us to think differently.
The difference between gambling and investing
A value investor recognizes there are different ways she can put capital at risk and the difference between gambling (negative expected value) and investing in stocks (positive expected value)
Buying stocks like you would buy groceries
Bill observed the way his mother shopped for groceries by buying more of something that was on sale and deferring her purchase of something that wasn’t yet on sale
Smart money is not always smart
He spent two years as a research analyst at Northwestern Mutual Life where he pitched ideas of companies that he found were trading below their asset values. However, the portfolio managers chose not to buy such stocks until after they were recommended by 2-3 Wall Street analysts, by which time the price had moved to above asset values.