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Thursday 25 October 2018

Weekly reading: Some Interesting Stuff


An account of how Amazon is working with local shop owners in rural India to bring online shopping to the rural masses

The primary risk is a permanent capital impairment or substantial mark-to-market losses. Any investor who has been putting money to work for some time will know that losses can come hard and fast, erasing years of returns. Avoiding these at all costs is, in my opinion at least, worth sacrificing a few percentage points of returns for.

5 Lessons from Jeff Bezos's 21 Years of Shareholder Letters

Wonderful letter to investors from Rajeev Thakkar of PPFAS mutual fund. Easy to read, takes on some very interesting and often asked questions and discusses about it.

James Clear has recently come out with a new book - Atomic Habits. This article is about how to take small (atomic) actions to create good habits or reduce bad ones.
It is remarkable how little friction is required to prevent bad behavior. When I hide beer in the back of the fridge where I can’t see it, I drink less. When I delete social media apps from my phone, it can be weeks before I download them again and log in.
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Friday 19 October 2018

Weekly Reading: Some Interesting Stuff

Extraordinary comparison between the Amazon of today and Sears of a century ago to show how uncannily similar they were.

From the start, Sears’s genius was to market itself to consumers as an everything store, with an unrivaled range of products, often sold for minuscule profits. The company’s feel for consumer demand was so uncanny, and its operations so efficient, that it became, for many of its diehard customers, not just the best retail option, but the only one worth considering.

In the decade between 1895 and 1905, Sears’s revenue grew by a factor of 50, from about $750,000 to about $38 million, according to Alfred D. Chandler Jr.’s 1977 book The Visible Hand: The Managerial Revolution in American Business. (By comparison, in the last decade, Amazon’s revenue has grown by a factor of 10.)

Sears was not content to be a one-stop-shop for durable goods. Like Amazon today, the company used its position to enter adjacent businesses. To supplement its huge auto-parts business, Sears started selling car insurance under the Allstate brand. 


A good profile of how Oberoi Realty is bucking the trend in the crowded real estate market.


To be honest, I had never heard of Robert Vinall before this week. He is the owner and fund manager at RV Capital based out of Frankfurt Germany. His fund completed 10 years and he has written a wonderful letter. It encapsulates a lot of learnings that most of us go through. Definitely worth a read.

From a financial perspective, my sell decisions demonstrate that whilst it is correct to sell when a flaw in the investment case becomes apparent, it is often not when the valuation appears rich. In all but the broadest strokes, the future is unknown and unknowable. Where I know the company and its people well and, crucially, trust them, the surprises have normally been positive. What appeared at the time to be a high valuation, was not.

If you are starting today, my advice is to be fully invested, but only to hold the companies you would own if you knew the economy was on the brink of collapse. Incidentally, this is the correct way to invest all the time.


EU is planning to impose a tax on big Tech (google, facebook etc) based on digital presence rather than physical presence. If implemented, it will open up a new frontier of taxation and my guess is most if not all countries will then follow suit.

Read the full article here: https://www.bbc.com/news/business-45813754


Paul Allen, the co-founder of Microsoft, passed away earlier this week. Here is an obituary written by Bill Gates.

Paul foresaw that computers would change the world. Even in high school, before any of us knew what a personal computer was, he was predicting that computer chips would get super-powerful and would eventually give rise to a whole new industry. That insight of his was the cornerstone of everything we did together.
In fact, Microsoft would never have happened without Paul. In December 1974, he and I were both living in the Boston area—he was working, and I was going to college. One day he came and got me, insisting that I rush over to a nearby newsstand with him. When we arrived, he showed me the cover of the January issue of Popular Electronics. It featured a new computer called the Altair 8800, which ran on a powerful new chip. Paul looked at me and said: “This is happening without us!” That moment marked the end of my college career and the beginning of our new company, Microsoft. It happened because of Paul.


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Thursday 11 October 2018

Weekly Reading - Some Interesting Reading

The politics of oil price, inflation targeting by the RBI and import duties present a bleak picture for the Indian economy

The story of Nokia's comeback.

Whitney Tilson ran a reasonably successful fund which he wound up after consistent under-performance. Now, in his new avatar as investment coach to wannabe fund managers, he professes his new, "Make Money" investing style!!
In this presentation, Tilson discusses the pitfalls of both value and growth investing and how he is now combining value and growth in his new strategy.

A very interesting interview of Cliff Asness, one of the pioneers of quantitative investing, discussed on various aspects of quant investing and how it is continuously changing

I usually do not put links to collaborativefund or farnam street blog articles, simply because I expect everyone to read all of their articles. This time I am making an exception, because I think it is very timely for us in India.

"A young investor might have 40 years to save for retirement. But can they withstand a day like yesterday, when the market fell 3.5%? Can they stay optimistic during a deep recession? Avoid chasing what’s done well in the last month? Can they leave their money alone to compound when they’re tempted to buy a boat? You can buy a 10-year bond. Can you put up with a two-year rout?"
"Long-term focus is great. But the long run is just a collection of short runs that need to be managed."

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Friday 5 October 2018

Weekly Reading: Some Interesting Reading

I’ve been trading for 15 years now and we’ve made over 50 percent compounded, as a rate of return (each year),” he says, adding, “Nobody can teach you trading; it’s more of a learn by experience kind of a job—each time you make a mistake, you learn from it, and try and avoid that mistake in the future.” -- Nikhil Kamath of Zerodha in Forbes

An extremely good article on how "fake news" is created to manipulate us by using our existing beliefs.
Fake news may now represent an existential threat to democracy, not just because it can be used to subvert and countermand the will of the people, but also because it can be used to destroy the people’s will to act together.
The term “fake news” should not be used to refer to something the reader dislikes or disagrees with.  Likewise, fake news no longer refers to a simple lie. Modern fake news is carefully designed so that its intended readers will not be able to detect that it is false. As importantly, it is crafted individually for each group of readers, to resonate with those readers and to produce the strongest possible emotional response.

A look at how Google is thinking about changing search - moving from answers to journeys, queryless way to get information and use of more visual way of searching.

Google is paying Apple $9 billion in 2018 and $12 billion for remaining the default search engine in Safari browser. All this money for a "free" search service!! So, the question is who owns a user's private data? This article tries to grapple with this question.

Segregating money managers into categories, this article provides an interesting take on the potential evolution of a money manager

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Friday 28 September 2018

Weekly Reading - Some Interesting Stuff

A fascinating account of a brave journalist covering the drug lord El Chapo of the Sinaloa cartel and how he lost his life for sticking to his professional ethics.

Fitness, not body weight, is what matters.
Studies have found that anywhere from one-third to three-quarters of people classified as obese are metabolically healthy. They show no signs of elevated blood pressure, insulin resistance or high cholesterol. Meanwhile, about a quarter of non-overweight people are what epidemiologists call “the lean unhealthy.” A 2016 study that followed participants for an average of 19 years found that unfit skinny people were twice as likely to get diabetes as fit fat people. Habits, no matter your size, are what really matter. Dozens of indicators, from vegetable consumption to regular exercise to grip strength, provide a better snapshot of someone’s health than looking at her from across a room.

The Android is 10 years old. Today it is ubiquitous in the mobile world. A quick look at the journey. Also, what next? Will Android be replaced by Fuchsia?

Ultimately we will have automation in areas where it is incomprehensible today. The question remains, what then will be the role of humans?
The people who command six-figure salaries to negotiate multimillion-dollar deals with major brands are being replaced by software that predicts what shoppers want and how much to charge for it.

A nice article on Haigreve Khaitan, a man who has built one of the largest and most elite law firms in India. Today its client list includes marquee companies such as Mahindra & Mahindra, Reliance Industries, Vedanta, Aditya Birla Group, Welspun, and JSW Steel. There’s also Tesla, BMW India, Harley Davidson, Volkswagen India, and private equity firms Advent, Apax Partners, Blackstone, Arpwood Partners, and Kedara Capital. Of the top 12 bankruptcy/insolvency cases in corporate India today, Khaitan & Co is working on nine, including Essar, Electro Steel, and ABG Shipyards.

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Wednesday 26 September 2018

ET Article - Focus on your stocks

Rudyard Kipling’s famous poem “If” started with these lines, which can be extended to investing as well.
If you can keep your head when all about you   
    Are losing theirs and blaming it on you,   
If you can trust yourself when all men doubt you,
    But make allowance for their doubting too;   
If you can wait and not be tired by waiting,
    Or being lied about, don’t deal in lies
The last one week has been very eventful. For an investor with a reasonably long time horizon, one of the most important things to do, is to take a step back (or rather many steps back) in such situations and focus on the really important aspects. 
Today the noise and chatter on news and social media about credit, liquidity, bond rates, asset liability mismatch has risen to a fever pitch. I am not sure if all the commentators really understand the nuances of the problem or if they are just regurgitating what they are seeing and hearing. I for one, sure don’t understand the intricate details of credit and liquidity crunch well enough to have an informed opinion.  I realize that if liquidity is a problem and it gets big enough to cause major harm, then the authorities will step to provide that liquidity. Much the same way that the US Fed did during the 2008 financial crisis. In well functioning economies, financial systems are not allowed to collapse. Too much is at risk for all stakeholders. As Seth Klarman recently mentioned in his lessons from 2008 article, “The government – the ultimate short- term-oriented player – cannot with- stand much pain in the economy or the financial markets. Bailouts and rescues are likely to occur, though not with sufficient predictability for investors to comfortably take advantage. “
There are other macro headwinds like oil prices and currency fluctuations. Some of these feed off on one another.
With that premise, at times like this, it is always better to take a hard look at one’s portfolio holdings and ask himself these three questions: 
1. What really has changed? 
2. How have the changes affected the value of the investments under consideration? 
3. Am I sure that my analysis and understanding of the changes is rational and is not being overly influenced by the immediacy and the severity of the news?
As investors, our job is to understand the business we are invested in. We need to continue to focus on that business and the reasons why we have bought those businesses. Most of the time we get pulled into fruitless macro discussions, without pausing to ask how it impacts the companies we are invested in.
I am a strong believer in Warren Buffett’s statement that he never has an opinion on the stock market because, if he did, it would not be any good, and it might interfere with opinions that are good. I have tracked the short-term market predictions of many investors and have found that they were correct less than half the time. Bottomline is that no one knows what the future holds. And we can’t make an investment case by looking at the macros.
Another learning over the years is that if I have conviction in a particular stock, it is always prudent to buy on the way down in tranches. Most of the time, we wait till the dust settles, but by that time, the prices are back up again. Buying high-conviction stocks at a time of major uncertainty has proven to be a profitable exercise. 
In ending, let me also say that these are times, when it is good to take a break from the markets and catchup on the book that you always wanted to read or the Netflix or Amazon prime show you always wanted to binge watch but never really had the time 😊

This article first appeared in Economic Times ET Markets - https://economictimes.indiatimes.com/markets/stocks/news/credit-liquidity-bonds-but-what-do-they-have-to-do-with-my-stocks/articleshow/65961776.cms

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Tuesday 25 September 2018

Book Review: Phil Fisher - Common Stocks and Uncommon Profits

With so much happening in the Indian markets this week, I thought I will revisit one of my favourite investment gurus - Phil Fisher. His seminal classic Common Stocks and Uncommon Profits and Other Writings is a book that every investor should read. 

 These are good times to take a step back from the market and read the classics to reinforce our understanding of the long term nature of markets and try to filter out the short term noise from the actual important signals.

 Here are Phil Fisher's 8 principles.
Buy into companies that have practical plans for achieving dramatic long-range growth in profits and that have inherent qualities making it difficult for new entrants to share in that growth.
Focus on buying these companies when they are out of favour. That is, when, either because of general market conditions or because the financial community at the moment has misconceptions of its true worth, the stock is selling at prices well under what it will be when its true merit is better understood.


There are a relatively small number of truly outstanding companies. Their shares frequently can’t be bought at attractive prices. Therefore, when favourable prices exist, full advantage should be taken of the situation. Funds should be concentrated on the most desirable opportunities. 
Hold the stock until either (a) there has been a fundamental change in its nature (such as a weakening of management through changed personal), or (b) it has grown to a point where it no longer will be growing faster than the economy as a whole. Only in the most exceptional circumstances, if ever, sell because of forecasts as to what the economy or the stock market is going to do because these changes are too difficult to predict. Never sell the most attractive stocks you own for short-term reasons.


For those primarily seeking major appreciation of their capital, de-emphasize the importance of dividends. The most attractive opportunities are likely to occur in the profitable, but low or no dividend groups. Unusual opportunities are much less likely to be found in situations where a high percentage of profits is paid to stockholders.
Making some mistakes is as much an inherent cost of investment for major gains as making some bad loans is inevitable in even the best run and most profitable lending institution. The important thing is to recognize them as soon as possible, to understand their causes, and to learn how to keep from repeating the mistakes. Willingness to take small losses in some stocks and to let profits grow bigger and bigger in the more promising stocks is a sign of good investment management. Taking small profits in good investments and letting losses grow in bad ones is a sign of abominable investment judgment. A profit should never be taken just for the satisfaction of taking it.
A basic ingredient of outstanding investor is the ability to neither accept blindly whatever may be the dominant opinion in the financial community at the moment nor to reject the prevailing view just to be contrary for the sake of being contrary. Rather, it is to have more knowledge and to apply better judgment, in a thorough evaluation of specific situations, and the moral courage to act “in opposition to the crowd” when your judgment tells you you’re right.
In handling common stocks, as in most other fields of human activity, success greatly depends on a combination of hard work, intelligence, and honesty.
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