Notes on value investing

VIJAY KEDIA’S 10-POINT FORMULA FOR SUCCESS IN STOCK MARKET (i) Never be dependent on the stock market for your livelihood or day-to-day living. Have an alternative source of income. This will insulate you from the volatility of the market and give you holding power; (ii) Never buy a stock except after thorough study into the stock’s fundamentals. The stock market is not a gamble. You must also be fully aware of news and developments that affect your stocks and learn to “ connect the dots ”; (iii) Invest according to your risk profile. Ensure that other asset classes also have an allocation. This will again insulate you from the risk that equities carry and give you holding power; (iv) Never trade in stocks. Never use borrowed funds to buy stocks. It is extremely risky and can lead to “ instant death ”. Less than 1% of the trading population makes money. Also, trading requires special aptitude which a normal person lacks; (v) Invest for a minimum period of five years. “ Rome was ...

THE WHISTLE - by Benjamin Franklin WHEN I was a child of seven years old, my friends, on a holiday, filled my pocket with coppers. I went directly to a shop where they sold toys for children; and, being charmed with the sound of a whistle that I met by the way in the hands of another boy, I voluntarily offered and gave all my money for one. I then came home, and went whistling all over the house, much pleased with my whistle but disturbing all the family. My brothers, and sisters, and cousins, understanding the bargain I had made, told me I had given four times as much for it as it was worth; put me in mind what good things I might have bought with the rest of the money; and laughed at me so much for my folly, that I cried with vexation, and the reflection gave me more chagrin than the whistle gave me pleasure. This, however, was afterwards of use to me, the impression continuing on my mind; so that often, when I was tempted to buy some unnecessary thing, I said to myself, Don...

An excellent overview of 16 businesses. Interesting and educative. 

This is an excerpt from interview by Safal Niveshak (SN). Acknowledge copyrights of Safal Niveshak. SN: When you look back at your investment mistakes, were there any common elements of themes? HH: Among the three things I look for in an investment – business, management and price – most mistakes happen in evaluating management. This happens especially if the management does not have a public history which can be evaluated. The typical management behavior which hurts investors is their overconfidence. Business managers rarely will admit that they cannot deploy the cash which the business is generating. They will find some or other use for cash and eventually deploy it in a poor business. Hence, it is best to use a higher threshold for management quality in case the business has historically retained most of the cash it generates. Also public history of management is a very good guide. Don’t expect the management’s behavior will change because you bought the stock. It almost ...