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Sunday 31 January 2021

Tools of the Trade

Every investor has a set of tools that he uses on a regular basis. I also have my toolset. In this post, I will cover these and try to describe how I use each of them. 

Hope you find these useful. Also, if you use any tool which is not in this list and find it compelling, do let me know. I gravitate towards free resources whenever possible, but if there is a great paid resource, then it is fine as well.

Information Management

Microsoft OneNote

This is my primary note-taking app. I have it on my laptop, tab and mobile. I have notebook for investing with the following sections, with each section comprised of many pages. For example, every company that I look at and study have a separate page, where I keep adding my notes over time.


I use Feedly as my repository of most of all my online blog subscriptions. Here again, I have separate tags like economics, fundamental, technoquant etc.


If I find a good article on the web, I use Pocket to save it for future reference. I use it extensively on all my devices.


I used twitter very sparingly before. Recently, I have repurposed my usage. I have made lists like News, Investing, People I know, Technoquant etc. This helps me in segregating my feed. I have also started using twitter as a short term micro note taking app for what I may be reading or thinking at any time. At the end of the week, I review what I have noted and then copy any notes in OneNote.


I have a gmail id where I save or forward all reading materials, especially broker reports, that I get from multiple sources like whatsapp or email or on the web. The benefit of using gmail is it is easy to search later.

JioNews App

I have migrated nearly all my reading to electronic form. JioNews app is a great resource where I can quickly skim through newspapers and business and current affairs magazines. 


I have been reading books on an e-reader for nearly 15 years now. I started with using an Infibeam Pi and then migrated to Kindle when it started becoming available in India. Currently, am on my 3rd Kindle device. I have the basic version with backlight and absolutely love it. nearly all my book reading is on Kindle. Highlights and note-taking are the main features I love in the Kindle.

Portfolio Tracker

Google Sheets

I track my portfolio and watchlist on google sheets. Again, the advantage is I can access it on all my devices and I can customize my views and reports.

Fundamental Analysis


The first port of call to look up a new company. I have a premium subscription. I use screener extensively for tracking my watchlist stocks, monitoring quarterly results, company announcements etc. Having added my favourite ratios to the company page, I can quickly view and understand the basic fundamentals of a company in under 5 minutes. I have customised the excel download feature and added some basic things I check myself. Although my custom excel is not as beautiful as a lot of others that are available, it seems to work well for me. 


The second port of call for getting up to speed on any company.


I use the "Discover" feature extensively. Helps in surfacing specific announcements based on topic/category. Also, their youtube channel now has a lot of concall recordings.


Concall transcripts are available here and is very  useful in skimming through.


Concall recordings


I will quickly go through tijori once in a while to see if something comes up  that has been missed in screener.


When in doubt about numbers or while searching for annual reports, BSE site is my port of call.


Data and visualisations for all macro data.


Interesting data, visualisations and reports on important topics.

Technical Analysis


I love tradingview charting but the free version has a lot of restrictions. investing.com uses the same tradingview charts but has no limitations (or at least none that I have found that hinders my usage).


Use this for basic explorations or scans.


Use Metastock nowadays only for slightly complex explorations which cannot be done on chartink.

Global Investing


A very good fundamental and technical scanner for US listed stocks


Perhaps the best dashboard app out there. I use it for looking at global stocks that I own or have on my watchlist.

Thursday 28 January 2021

Weekend Reading

Reading across disciplines is one of the best ways to improve our investment acumen. Here is a summary of some of the best articles I read this week. If you like this collection, consider forwarding it to someone who you think will appreciate it.

Growing a table in the lab

Researchers at MIT have developed a new method for growing plant tissues in a lab — sort of like how companies and researchers are approaching lab-grown meat. The process would be able to produce wood and fibre in a lab environment, and researchers have already demonstrated how it works in concept by growing simple structures using cells harvested from zinnia leaves.

Forestry has much more obvious negative environmental impacts. If the work of these researchers can eventually be used to create a way to produce lab-grown wood for use in construction and fabrication in a way that’s scalable and efficient, then there’s tremendous potential in terms of reducing the impact on forestry globally. Eventually, the team even theorizes you could coax the growth of plant-based materials into specific target shapes, so you could also do some of the manufacturing in the lab, by growing a wood table directly for instance.



When to follow a system and when to go with your gut feel

Whether we are talking about football, investing, or medicine, decision makers are often faced with the question of whether to fully trust statistical models, go with their gut, or try to come up with a hybrid approach. If you are making a large number of decisions where the consequence of each individual decision is relatively small, perhaps it makes sense to let automation decide — to implement a “pure system”. The trouble arises when you are making a single important decision with enormous stakes. Then it becomes very tempting to disregard the models and go with your gut.



Don’t waste your time on bullshit

Things that lure you into wasting your time have to be really good at tricking you. An example that will be familiar to a lot of people is arguing online. When someone contradicts you, they're in a sense attacking you. Sometimes pretty overtly. Your instinct when attacked is to defend yourself. But like a lot of instincts, this one wasn't designed for the world we now live in. Counterintuitive as it feels, it's better most of the time not to defend yourself. Otherwise these people are literally taking your life.

Arguing online is only incidentally addictive. There are more dangerous things than that. As I've written before, one byproduct of technical progress is that things we like tend to become more addictive. Which means we will increasingly have to make a conscious effort to avoid addictions to stand outside ourselves and ask "is this how I want to be spending my time?"



The next wave of AI will be based on language

The 2020s are going to bring major advances in language-based AI tasks. GPT-3, a state-of-the-art natural language processing tool developed by OpenAI, will soon be able to produce short stories, songs, press releases, technical manuals, text in the style of particular writers, and even computer code. Cloud-AI services will enable the development of a new class of enterprise apps that are more creative (or “generative” — the “G” in GPT) than anything we’ve seen before. They will make the process of synthesizing words, intentions, and information in language cheaper, which will make many business activities more efficient, stimulating growth and innovation. In light of these coming changes, companies will not only need to rethink IT resources, but also human resources.



The art of doing nothing

The idea that “doing nothing” is actually an event in and of itself. The idea that we no longer run on a treadmill of activity from getting the kids ready for school, to brushing our teeth, to conference calls, to picking up kids, fixing dinner, and bed- only to start over again. The idea that our actions day to day become influenced by our instincts and no longer by routines, shoulds, and musts.

Fighting that urge to just do, that puritan work ethic instilled in all of us at an early age, is just as much effort as going to the gym and doing the stair climber. Yet the results of our restraint are well worth the hassle.

The kind of relaxation we are looking for, and we all yearn for, does not exist on the side of a volcano, in a rare flower, or on a desolate island far away. That kind of relaxation exists within each of us and is ours for the taking if we’re willing to put in the effort.

That kind of relaxation. The sweetness of doing nothing and enjoying where we are in the present moment is the greatest thanks we can give for the lives and blessings we have.


For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.

For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in

For momentum trend following systematic trading, subscribe to Quantamental at www.quantamental.in

Monday 25 January 2021

Budget - the next media spectacle

The next few days will see a lot of volatility. The annual budget is around the corner and although in most years it is a damp squib, yet all financial “experts” will spend or have already spent a great deal of time to tell the finance minister what to do or ask for favours from her. Most of it is a waste of time. So, productivity tip number one. Just skip over any pre-budget discussion in the newspaper or TV channel.  

The budget is not supposed to be a spectacle. And perhaps it wasn’t before the tyranny of the 24x7 media cycle. Now, the TV channels need something to talk about and they keep moving from one event to another. The only worthwhile thing to do for the budget is to either listen to it or better still read the synopsis in the next day’s newspaper. Everything else is a waste of time and effort.

The budget should not even be an event. Previously, people were interested in the tax measures announced in the budget. Now, the major part of it has moved under the GST council and the budget will not have anything to really say about indirect taxes. Direct taxes should not be tweaked every year so maybe once every five years there should be some minor changes to it.

The rest is all accounting. And boring. Because we all know that a lot is being left out and is financed through off-balance-sheet routes. That’s how it has always been. 

Yet, markets become volatile before budgets. People try to pre-empt different policy decisions and sectors or companies that are likely to benefit or lose out and then take positions accordingly. Some people sell and lighten up their portfolios due to event risk. The thing to remember is maybe once in many years we get a budget where some path-breaking decisions are taken. Rest of the time it’s just volatility. And for investors focused on holding businesses for the long term, it is just noise. The best thing to do is to ignore it.

Saturday 23 January 2021

Lessons from the Japanese Great Depression

I have been fascinated by the “Great Depression” and the lost decades of Japan for a long time now. I have a personal fascination for Japan because it was the first foreign country I ever visited. It is intriguing because here is one example of one of the foremost economies in the world, with world-leading companies and yet they ended up in nearly 20+ years of economic depression. Bank of Japan had tried “pump-priming” which is a convoluted way of saying they tried to money-print their way out of the problem. Despite having near zero or very low interest rates for decades there has been no effective pick up of the economy.

I always thought it was a result of the socio-politico-economic structure of Japan that led it such a prolonged slump. A few days back I tweeted about this and asked twitterati about any good suggestions to read on this topic. @Relax_Cap suggested I read The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession by Richard Koo. The book and a few interviews of Richard Koo has been a wonderful revelation to me and I very thankful to @relax_cap for the great suggestion.

Balance Sheet Recession

Richard Koo’s main premise is as follows. Asset prices got inflated during the bubble years and corporates took on large debts to either acquire assets or fuel growth. Once the bubble burst, corporates were straddled with the debt and much less valued corresponding asset value as the market prices of the assets they owned had crashed. The initial tendency of the corporates was to save from their cashflow to repair their balance sheet. Central bank step in to bolster growth and starts by reducing rates. But there is no demand for debt as the corporates (and households) are trying to reduce their existing debt burden and are in no mood to add on to debt even at ridiculously low rates. This results in economic growth to falter and slacken and it continues in this manner till the corporate balance sheets are repaired. Richard Koo termed this as a “balance sheet recession”.

He has gone on to explain this in a lot of detail and has lots of examples related to US and Eurozone.

Indian Situation

I think we are seeing a part of this being played out in India as well post the 2008 Great Financial Crisis (GFC). We have seen a large reduction in corporate debt. Most of bank debt growth has come from the retail segment led by consumer spending. That explains the dream run of consumer-facing NBFC like Bajaj Finance. In India, IBC is another policy is likely to increase this balance sheet recession further. With erstwhile big businesses and “connected” promoters now losing their companies due to the new bankruptcy code. Add this to a post-Covid situation where both corporates and households suddenly realize the value of cash, it is possible that people increase their savings to shore up their cash balances. The only saving grace for India, unlike US or Europe, is that India is much less debt-ridden and so we are unlikely to get into a prolonged recession.

The implications could be:

  • Inflation will unlikely to pick up even though most “experts” think so
  • Financial savings and investment products like mutual funds or insurance companies to do well
  • Banks will have better CASA and deposits

Friday 22 January 2021

PE ratio can mislead. Use the PI (price-to-index) ratio instead.

PE ratio, perhaps the single most used, and abused, metric in the stock market, is a simple one. And perhaps that is why it has such widespread use. People use it as a shortcut for valuing companies. So, a company with a PE of 10 becomes cheap and one with a PE of 50 becomes expensive.

PE ratio is the ratio of profit after tax to the total number of shares outstanding. Another way of calculating it is the share price divided by the EPS. The share price is simple. The complexity starts with the earnings. It could be TTM (trailing twelve month earnings), current / previous year or the upcoming year (future). 

The PE ratio tells us the number of years at constant profits it will take to return the investment. So, a stock with a PE of 30 means, if the profit remains the same, it will take 30 years for the investment amount to come back to the buyer.

One of the biggest challenges of earnings is that it does not look at the capital structure of a company. In simple terms, it means **it completely disregards the debt taken by a company.**

PE ratio tends to capture the “agony and ecstasy” of the market. When the market is in a bear phase and investors are despondent about the future, the PE ratios of companies and indices will contract. Exactly the opposite happens during a bull phase. 

Ben Graham used PE ratio to determine a “*moderate upper limit to stay within the bounds of conservative valuation*”. On the other hand, William O’Neill, the father of CANSLIM, said “contrary to most investors’ beliefs. PE ratios were not a relevant factor in price movement”. In his detailed study of stocks between 1953 to 1988, O'Neill found that the average PE before a stock made a major bull move, had a PE of 20 as opposed to the average Dow PE of 15. Even in the Indian markets, I have seen enough anecdotal evidence to support the fact that there are some perpetual high PE stocks – Asian Paints, Berger, Nestle, Page Industries, Symphony, Pidilite, Dmart, Titan and many many more come to mind.

Use the PI ratio (PE to Index)

The way I use PE is to divide a company’s PE with that of the index (Nifty). For example, Asian Paints has a PE ratio of about 125 as I write this. The Nifty PE is about 37. That is, a ratio of 125 / 37 = 3.3 times. In January 2006, the same ratio was 28 / 17 = 1.6. In Jan 2015, it was 60 / 21 = 3. If I do this exercise, I find that Asian Paints usually trades between 1.5 – 3.5 times of my PI (PE to Index) ratio. You can do a similar exercise for the stocks you are interested in and find the range. 

The PI ratio tells me how much a stock is being "valued" by the market with respect to the general market.

Never sell on valuations

Another practical experience that I have had is to never sell a stock on high valuations. It is always best to have a trailing stop (a stop loss that keeps trailing the price as the stock price moves upwards), because, stocks can remain at a high PE or can go to a higher PE during a major bull phase and selling out early often means I am not participating in the most explosive of price rise phase. Again, if you followed this suggestion, you would be comfortably riding stocks like Dmart even at 100+ PE and earning the wrath of closet value investors!!! The only exception to this is if you are invested in a very illiquid stock, where you may need to start liquidating on the way up.

** This first appeared in https://economictimes.indiatimes.com/markets/stocks/news/what-to-do-when-high-pes-give-you-jitters-heres-the-answer/articleshow/80400796.cms

Thursday 21 January 2021

Weekend Reading

Reading across disciplines is one of the best ways to improve our investment acumen. Here is a summary of some of the best articles I read this week.

I especially try to not post Corona related articles as that is all one gets to read in all traditional media.


If you like this collection, consider forwarding it to someone who you think will appreciate.

Jimmy Wales - The father of Wikipedia

With the benefit of hindsight, it may seem inevitable that someone, at some point, would have invented a platform like Wikipedia. But in truth, the creation of this online marvel was not predestined. Its creation required the determined efforts of an unconventional, original thinker: Jimmy Wales.

Wales was not a computer scientist or technology specialist, though he did learn to code. Through his involvement with user-generated content, two developments really caught his attention. First, the possibilities of mass participation: While playing the first generation of online fantasy games — such as Zork and Myst — Wales saw the power of computer networks to fuel large-scale, collaborative projects. Second, he saw the possibilities of idea exchange within communities. As email usage grew, Wales became a frequent contributor to early online discussion forums.



Who are the best investors of all time?

You probably thought of Warren Buffett or Peter Lynch or John Templeton or other renowned money managers, past and present. But did you think of the Walton family, the Rales brothers or Jeff Bezos? Why not?

Yes, we tend to think of them as entrepreneurs. But they do own stakes in public companies just like any of those other investors. In this case, the public companies are Walmart, Danaher and Amazon, respectively. The returns on these stocks have been, well... let’s just say they would be the envy of nearly any traditional money manager you care to name.

Investors put too much weight on factors a business owner does not. A business owner seems to have a different set of concerns, focused instead on the “central engine of success” of the business and the culture that keeps it alive and thriving.

I’d say as long as the business continues to generate strong returns on capital and grows and seems likely to do it for years yet… probably best to leave it alone. You want to put as much capital as you can stand in these kinds of businesses.



On the importance of good writing

You have five seconds to get people’s attention. Books, blogs, emails, reports, it doesn’t matter – if you don’t sell them in five seconds you’ve exhausted most of their patience.

Writing looks like a soft skill, so it’s easy for people in technical fields to ignore. But in every field, the person with the best story wins. Not the best idea, or the right answer, or the most useful solution. Just whoever tells the most persuasive story. A lot of good ideas are killed with bad writing.

Writing is an art, and art is subjective. Novelist William Maughan said there are three rules to good writing. “Unfortunately no one knows what they are.” I actually think there’s one: write the kind of stuff you like to read. Writing for yourself is fun, and it shows. Writing for others is work, and it shows.



An in-depth look at Indian real estate sector

2020 was a bad year for real estate. Having said that, sales during October to December 2020 picked up and 58,914 units were sold, which was 68% more in comparison to the number of units sold during July to September 2020. In comparison to October to December 2019, sales were down 27%, during the period.

Of course, the real estate sector wants us to believe that demand is back and all is well with the sector. Nevertheless, this jump in sales can be because of pent up demand. Whether it sustains in the months to come remains to be seen.

More than the stamp duty cut, a substantial drop in prices, especially for homes priced at more than Rs 2 crore, is the main reason for the sales in the city picking up.

One reason for a fall in prices is the fact that businessmen who run small and medium enterprises have been facing a tough time since covid broke out. And they are looking at alternate avenues to raise money to keep their businesses going. This includes selling the real estate assets they have accumulated in the past. There is some distress sale as well.



Investing in a bubble

People have been calling for a bubble for a number of years now and frankly, they’ve been wrong. In fact, Grantham himself went bubble-hunting in 2014, predicting the cycle would run its course with a bubble by 2016 at an S&P 500 target of 2,250.

The S&P is currently above 3,800 and up more than 130% on a total return basis since those initial warnings.

It’s possible Grantham’s expertise in predicting bubbles is a case of the old saying that to a man with a hammer every problem looks like a nail. To be fair, the timing of these types of calls is basically impossible.

Bubbles are driven by human nature and human nature is impossible to predict in terms of when it’s going to turn.



For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.


For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in


For momentum trend following systematic trading, subscribe to Quantamental at www.quantamental.in

Thursday 14 January 2021

Weekend Reading

Reading across disciplines is one of the best ways to improve our investment acumen. Here is a summary of some of the best articles I read this week.

I especially try to not post Corona related articles as that is all one gets to read in all traditional media.


If you like this collection, consider forwarding it to someone who you think will appreciate it.

Increasing intelligence

What we call 'intelligence' is as much about virtues such as honesty, integrity, and bravery, as it is about 'raw intellect’.

Intelligent people simply aren’t willing to accept answers that they don’t understand — no matter how many other people try to convince them of it, or how many other people believe it, if they aren’t able to convince themselves of it, they won’t accept it.

It’s also so easy to think that you understand something, when you actually don’t. So even figuring out whether you understand something or not requires you to attack the thing from multiple angles and test your own understanding.

This requires a lot of intrinsic motivation, because it’s so hard; so most people simply don’t do it. 



Aging is mandatory, but senescence is optional

EVERYONE WANTS TO LIVE LONG, but no one wants to get old. So for centuries people have sought ways to slow aging and defer death. Not long ago, quacks would have tried to lure you to consume tobacco, mercury, or ground-up dog’s testicles to postpone your eternal rest; today’s peddlers of immortality hawk human growth hormone, melatonin, testosterone, mega-doses of vitamins, or alkaline food. For millennia, however, the most sensible advice has always included exercise. Just about everyone knows what countless studies confirm: regular physical activity slows the aging process and helps prolong life. I doubt anyone was astounded when Hippocrates wrote 2,500 years ago that “Eating alone will not make a man well; he must also take exercise.”

The more physically active women died at about one-third the rate of those who were unfit, and the fitter men had mortality rates about one-third to one-fourth lower than those who were least fit.

Aging is inexorable, but senescence, the deterioration of function associated with advancing years, correlates much less strongly with age. Instead, senescence is also influenced strongly by environmental factors like diet, physical activity, or radiation, and thus can be slowed, sometimes prevented, and even partly reversed.



The power of negative thinking

We should all spend more time thinking about the prospect of failure and what we might do about it. It is a useful mental habit but it is neither easy nor enjoyable. We humans thrive on optimism. We must be careful, then, when we allow ourselves to stare steadily at the prospect of failure. Stare too long, or with eyes too wide, and we will be so paralysed with anxiety that success, too, becomes impossible. Care is also needed in the steps we take to prevent disaster. Some precautions cause more trouble than they prevent.

But just because it is hard to think productively about the risk of failure does not mean we should give up. One gain is that of contingency planning: if you anticipate possible problems, you have the opportunity to prevent them or to prepare the ideal response.

A second advantage is the possibility of rapid learning. The third advantage of thinking seriously about failure is that we may turn away from projects that are doomed from the outset.

All around us are failures — of business models, of pandemic planning, even of our democratic institutions. It is fanciful to imagine designing slip bases for everything. Still: most things fail, sooner or later. Some fail gracefully, some disgracefully. It is worth giving that some thought.



You can beat the fund manager

Investing is one of those rare pursuits where amateurs can have an advantage over the professionals.

It happens in almost no other field. If I competed against any professional sports person, I’d lose every time. If I was asked to perform dentistry or heart surgery, I wouldn’t know where to start. I don’t have the years of training needed to perform these highly specialised tasks.

However, good private investors, who know what they’re doing, out-perform the pros on a regular basis.

Professional investors bump up against liquidity restraints all the time. This is why most professional investors tend to steer clear of very small businesses, or they run excessively diverse portfolios to avoid owning too much of any one business. The limitations of this approach should be evident.

Most professional fund managers can’t afford to have long time horizons. A year or two of poor performance and they risk the sack. This problem is compounded by the short-term behaviour of many private investors, who pile in to funds that have recently performed well and sell those that are having a tougher time. Short-termism is further fuelled by the incentive structures of professional investors, which often do little to encourage long-term thinking.



Learning compounds due to memory

Memories are never an exact representation of a moment in the past. They are not copied with perfect fidelity, and they change over time. Some of our memories may not even be ours, but rather something we saw in a film or a story someone else told to us. We mix and combine memories, especially older ones, all the time. It can be hard to accept the malleable nature of memories and the fact that they are not just sitting in our brains waiting to be retrieved.

When we learn something new, it’s against the backdrop of what we already know. All knowledge that we pick up over the years is stored in memory. The authors suggest that “how much you know in a broad sense determines what you understand of the new things you learn.” Because it’s easier to remember something if it can hook into context you already have, then the more you know, the more a new memory can attach to. Thus, what we already know, what we remember, impacts what we learn.


For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.


For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in


For momentum trend following systematic trading, subscribe to Quantamental at www.quantamental.in

Friday 8 January 2021

Weekend Reading

Reading across disciplines is one of the best ways to improve our investment acumen. Here is a summary of some of the best articles I read this week.

I especially try to not post Corona related articles as that is all one gets to read in all traditional media.


If you like this collection, consider forwarding it to someone who you think will appreciate.

2021 - The year of the Stockdale Paradox

The Stockdale Paradox is a concept that author Jim Collins found a perfect example of in James Stockdale, former vice-presidential candidate, who, during the Vietnam War, was held captive as a prisoner of war for over seven years. He was one of the highest-ranking naval officers at the time.

During this horrific period, Stockdale was repeatedly tortured and had no reason to believe he'd make it out alive. Held in the clutches of the grim reality of his hell world, he found a way to stay alive by embracing both the harshness of his situation with a balance of healthy optimism.

Stockdale explained this idea as the following: "You must never confuse faith that you will prevail in the end — which you can never afford to lose — with the discipline to confront the most brutal facts of your current reality, whatever they might be."

In the most simplest explanation of this paradox, it's the idea of hoping for the best, but acknowledging and preparing for the worst.



How to make decisions - By Barack Obama

I think you should read the whole article and not just the below snippet.


In just a few short weeks on the job, I had already realized that because every tough decision came down to a probability, then certainty was an impossibility — which could leave me encumbered by the sense that I could never get it quite right. So rather than let myself get paralyzed in the quest for a perfect solution, or succumb to the temptation to just go with my gut every time, I created a sound decision-making process — one where I really listened to the experts, followed the facts, considered my goals and weighed all of that against my principles. Then, no matter how things turned out, I would at least know I had done my level best with the information in front of me.

Even in situations where you have to act relatively quickly, as was frequently the case during the financial crisis, it helps to build in time to let your thoughts marinate.

It’s not always clean and straightforward. But as my mother would say to me, “The world is complicated, Bar. That’s why it’s interesting.”




The Amazon fake reviews racket

Fake reviews have been an issue for Amazon since its inception, but the problem appears to have intensified in 2015, when Amazon.com began to court Chinese sellers.

But the ensuing rush to the marketplace has spawned thousands of indistinguishable goods (chargers, cables, batteries, etc.). And it has prompted sellers to game the system.

“It’s a lot harder to sell on Amazon than it was 2 or 3 years ago,” adds Naim. “A lot of sellers are trying to find shortcuts.”

Steve Lee, a Los Angeles-based vendor, is among them: “You have to play the game to sell now,” he says. “And that game is cheating and breaking the law.”

A recent ReviewMeta analysis determined that in March of 2019 alone, Amazon was hit with a flurry of more than 2 million unverified reviews (that is, reviews that can’t be confirmed as purchases made through Amazon) — 99.6% of which were 5 stars.

“They’re almost all for these off-brand, cheap electronic products: Phone chargers, headphones, cables,” says Noonan. “Generic things that are super cheap to manufacture, have good margins, and get a ton of searches.”



Zoom background books for shelves available for wholesale!!

Books by the Foot, a service run by the Maryland-based bookseller Wonder Book, has become a go-to curator of Washington bookshelves, offering precisely what its name sounds like it does. The Wonder Book staff doesn’t pry too much into which objective a particular client is after. If an order were to come in for, say, 12 feet of books about politics, specifically with a progressive or liberal tilt—as one did in August—Wonder Book’s manager, Jessica Bowman, would simply send one of her more politics-savvy staffers to the enormous box labeled “Politically Incorrect” (the name of Books by the Foot’s politics package) to select about 120 books by authors like Hillary Clinton, Bill Maher, Al Franken and Bob Woodward. The books would then be “staged,” or arranged with the same care a florist might extend to a bouquet of flowers, on a library cart; double-checked by a second staffer; and then shipped off to the residence or commercial space where they would eventually be shelved and displayed (or shelved and taken down to read).



First principles in thinking

First principles thinking, which is sometimes called reasoning from first principles, is one of the most effective strategies you can employ for breaking down complicated problems and generating original solutions.

“I tend to approach things from a physics framework,” Musk said in an interview. “Physics teaches you to reason from first principles rather than by analogy. So I said, okay, let’s look at the first principles. What is a rocket made of? Aerospace-grade aluminium alloys, plus some titanium, copper, and carbon fibre. Then I asked, what is the value of those materials on the commodity market? It turned out that the materials cost of a rocket was around two per cent of the typical price.”

Instead of buying a finished rocket for tens of millions, Musk decided to create his own company, purchase the raw materials for cheap, and build the rockets himself. SpaceX was born.

Within a few years, SpaceX had cut the price of launching a rocket by nearly 10x while still making a profit. Musk used first principles thinking to break the situation down to the fundamentals, bypass the high prices of the aerospace industry, and create a more effective solution.


For building a solid long term portfolio, look at subscribing to www.intelsense.in long term advisory.


For technofunda investing and positional trading, subscribe to our Hitpicks advisory service on www.intelsense.in


For momentum trend following systematic trading, subscribe to Quantamental at www.quantamental.in

Wednesday 6 January 2021

Annual Investor Letter - 2020

You can download this as pdf from here.

As we bid farewell to a year, we would all like to forget but likely never will, here is a short note of some of the thoughts going on in my mind at this time.

The long term portfolio continued to perform as expected. It is comprised of strong businesses and our investment into the Pharma sector early in 2019. So, we were able to participate quite nicely in the pharma rally. As I have said many times, I believe the pharma and chemical sectors are in a secular growth phase and are likely to perform well for the next 2-3 years or more. So, the objective is to buy prudently and then sit and wait. The most important aspect in a long term portfolio is to wait patiently for the compounding to work its magic over time. The constant urge to do something is one of the worst enemies for an investor. It pays to always remember that investment return and frequent activity are not correlated in any way.

The markets today are overvalued by any methodology you care to use. The future continues to be uncertain, as always. The only thing that is keeping the markets flying high is the global liquidity flows. But the counterpoint is, the tap does not look to be stopping anytime soon.

Sometime this year, we are likely to see a sharp correction. Unfortunately, investors across the world have probably taken the wrong idea from both the global financial crisis in 2008 and the Covid crisis in 2020. That the central banks will bail them out always. What people seem to forget is that money printing can never be a long term solution. It is a kick-the-can down the road kind of approach. The more debt-ridden the global economies become, the longer and harder it will be to get back on to real prosperity. The new investors who have never really seen a prolonged bear market, which includes people like me, who have been in Indian markets for only about 20 odd years, cannot really fathom the outcome of a long drawn bear market. In fact, to be fair, we Indians have never really seen a long drawn bear market which also coincided with a recession or prolonged phase of low growth in the real economy, the likes of which Japan has seen for 30 years from the late 80s till about a few years back.

There has been a lot of global changes in socio-politico-economic structures which have made macro analysis a very interesting but utterly worthless exercise to do!! Nevertheless, as investors, we need to be aware of the context of our investments.

The next decade is more likely to focus on themes around technology adoption in different industries, climate change, supply chain redundancy creation, nearshoring or insourcing of manufacturing, more social-focused spending led by ESG. The more adoption of technology we see, the more jobs moves away from the unskilled to the skilled and the more social and economic divide increases, the more social and political strife we will see. It is a vicious cycle and I don’t know how it will play out. But the global socio-political situation is what really scares me. Emerging countries in Asia and Africa are better placed for economic growth with their young populations for the next 2-3 decades. And we are likely to see this slowly playing out. With the backs to the wall for all central banks, the flow of cheap money is unlikely to abate anytime soon. It’s like being on drugs. Once you get started on it, you can’t really get off it that easily without going through an enormous amount of pain.

This year I launched two different advisory services in addition to the long term advisory that I had started last year. The first one was Quantamental which was started in March and then Hitpicks, based on technofunda principles, in July. Both were to add to the different needs and mindsets of investors and also to address my need to diversify my style of investing.

Quant was a result of a couple of years of delving into quantitative, systematic and trend-following techniques. All this started as a result of trying to fill my own lacunae in investing that I could identify. Being a quality-focused long term investor, I was realising that I could not capitalise on short term strong business and stock price momentum. In addition, due to my interest in behavioural psychology, I was convinced that the biggest determinant investment result is the mindset. Any system that could capture these short term bursts and also codify the big decisions required during an investment would be beneficial in getting better results than otherwise possible. As I keep learning, I intend to refine and improve the current Q30 system. I also keep exploring other types of systems. Primarily there are three types of systems possible - momentum, mean-reversion and shorting. The final objective, at some future point in time, is to be able to have these three types of systems running concurrently or a single system which blends all three.

The second advisory I started was Hitpicks with Hitesh Patel. Hitesh has been a friend a mentor in technical analysis for me over the last couple of years. It is an exploration into the world of technofunda. Hitpicks is not intended to be a short term trading advisory, where one gets "calls" to day trade or swing trade. As in the long term advisory, here also, our focus is on identifying good businesses which have some interesting technical chart pattern. The usual timeframe for a recommendation to play out is about 3-4 months. Like in any trading system, we have had a fair share of good and wrong picks. But, overall, I think we are on our way to meet our objective of good compounded returns over the next 2-3 years.

The focus for me continues to be able to generate above-market returns without taking a great deal of risk.  I am happy making less money than the next person, but I am not willing to take any undue risk which will jeopardise my capital. So, the focus on quality first will continue.

As always, do keep sending in your thoughts, comments and questions. They do help me immensely in thinking about different aspects that I may not have focused on.

Wishing you a healthy, happy and enriching 2021.



You can download this as pdf from here.

Monday 4 January 2021

Hitpicks Advisory - UPDATE

The main idea about the Hitpicks advisory service is to provide good entry points for entry into fundamentally good companies. We are not in the day-trading or very short term trading game. Neither are we much interested in F&O. 

We focus on stocks with good quality that have a good technical structure and that can provide a good risk to reward ratio for us. The typical holding period is 2-6 months for a stock.

Some stats below (you can see this anytime by clicking on Hitpicks Performance Tracker):

Currently Open Recommendations
Num of Gainers6
Num of Losers0
Total Num of Calls6
Avg of Gains / Loss13.48%
Win Ratio100.00%
Recommendations (Since Inception 01-Jul-2020)
Num of Gainers10
Num of Losers5
Total Num of Calls15
Avg of Gains / Loss11.00%
Win Ratio67%
Max Gainer80.20%
Max Loser-15.21%

For further details, visit Intelsense - Hitpicks

Some Interesting Technical Charts

Here are this week's interesting technical charts. You can download the document from here

Disclaimer: These charts are for educational purposes only. It could be used to idea generation for both trading and investing purposes.