February 7, 2017
by calminvestor

10 insights from HBO’s 2017 ‘Becoming Warren Buffett’ we hadn’t heard before

HBO released a documentary ‘Becoming Warren Buffett’, on the legendary investor earlier this year. It’s an almost intimate portrait of the most-quoted investor in the world. Worth the 1h 28mins. And summarized below, some of the more insightful  (and less often heard) nuggets providing insight into the man, and not just the investor.

10. On learning from the past:

Decorated his office with framed old newspapers from the local library of days of massive market crashes. He calls it “instructive art” that reminds him and everyone in the building that “in the markets, anything can happen”

9. On the circle of competence:

“Investing is a no-called strike business, which is the best business  to be in. I can look at a 1000 different companies, and I don’t have to be right on every one of them, not even 50 of them. I can pick the ball I hit. The trick in investing is to sit there and watch pitch after pitch go by, and wait for the one right in your sweet spot. And the people who’re yelling “Swing you bum!”, ignore them”

8. On the importance of concentrating on a few things:

Bill and Warren got along well after Bill reluctantly agreed on his mother’s insistence to go meet Warren with Melinda. Shortly after they met, Bill’s dad had them all write down on a piece of paper what they had gained the most from the meeting. Both, without discussion, wrote the word “Focus

7. On reputation and doing the right thing:

In front of a Congressional committee after taking over Salomon Brothers after the scandal, on his message to Salomon employees

“Lose money for the firm, and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless.”

6. On health:

“Let’s imagine you get to pick out a car of your choice. Any colour. It’ll be tied up with a bow and be at your house tomorrow. But the catch is, What if you could could only get that one car in your lifetime? You’d care very good of that car. Now, you won’t actually get just one car in your lifetime. But you will get only one body and one mind. And it has to last you a lifetime”

5. On civil rights:

“Wait till women discover, they’re the slaves of the world. My sisters were as smart as I was…but they got the message, a million different ways that their future was limited, and I got the message that the sky is the limit…On the flip side, it’s quite encouraging. If you look at what this country (USA) accomplished only using half its talent, just think of the potential for the future.”

4. On doing what matters to you:

Susie Buffett: “Whoever you are in this life, you don’t want to think you wasted a lot of your energy, love, and time on something useless”

3. On marriage:

“When you get married, it’s not a question of saying, I’m going to put a 14% factor on humour, and 17% on intellect, 22% on looks. It doesn’t work that way.”

2. On humility:

“When I was born in 1930, the odds were probably 40:1 against me being born in the United States. I did win the ovarian lottery on that first day, and on top of that, I was male. Put that down as another 50/50 shot, and now the odds are 80:1 against being born a male in the United States, and it was enormously important in my whole life. To think that makes me superior to anyone else as a human being, is just…I don’t follow that line of reasoning.”

1. On love:

“It’s a very strange thing, love. You can’t get rid of it. If you try to give it out, you get more back. If you try to hang on to it, you lose it.”

February 1, 2017
by calminvestor

Deep Work: Rules for focussed success in a distracted world

Three quick questions:

  1. How many times do you think you checked your phone today?
  2. If you’re reading this on a laptop or PC, how many browser tabs do you currently have open or have had open in the last hour?
  3. How many work emails did you receive and send today?
The Calm Investor | Deep Work

Source: Linkedin

What do the answers to these questions have anything to do with anything? Plenty, it turns out, according to Cal Newport’s book Deep Work. Cal is an Associate Professor of Computer Science at Georgetown University with a Phd from MIT. His focus has been on understanding  how to perform productive, valuable and meaningful work in an increasingly distracted digital age. In Deep Work, he argues that focus is the new I.Q. in the knowledge economy, and individuals who cultivate their ability to concentrate without distraction will thrive. This post is based on the book, the sections in […] are directly quoted, while the rest is selectively paraphrased.

Deep Work – Shallow Work

Carl Jung, Mark Twain, Woody Allen, Bill Gates. Influential individuals with a formidable list of accomplishments, each from different fields and timelines. What is common to them is their philosophy of carving out time and even space to do some of their most demanding work. Cal calls what they did as “Deep Work”

Deep Work – Professional activities performed in a state of distraction-free concentration that push your cognitive capabilities to their limit. These efforts create new value, improve your skill, and are hard to replicate

Compare that to how you and I typically work. Multiple applications open, powerpoint, a couple of spreadsheets, definitely a browser with multiple tabs. Switching back and forth as our email application constantly buzzes with the arrival of each new (urgent) email. The odd detour to check twitter or facebook, punctuated by the ubiquitous telesales call offering credit cards. i.e. lots of Shallow Work.

Shallow Work – Noncognitively demanding, logistical-style tasks, often performed while distracted. These effort tend not to create much new value in the world and are easy to replicate. A way to identify whether a task is shallow is to ask how many months would it take for a recently graduated college student to get trained on it. If the answer is less than 20+ months, then it’s a candidate for the shallow end.

Continue Reading →

January 20, 2017
by calminvestor

TCI Investment Note: Persistent Systems

This is a post with a difference. For the first time on this site, I’ve tried to articulate my thesis for a specific stock. Note that this is not a recommendation to buy or sell this stock but more a look into the various aspects to consider when identifying your stock picks, which I described conceptually in my post on investment checklists. The sources for financial data are the annual reports and screener.in, those for the industry analysis are various reports available online.

Disclaimer: I currently own the stock and therefore more than likely to be biased.

The Calm Investor | Investment Note Persistent Systems Jan 2017

Persistent Systems


The Calm Investor | Persistent Systems

The Calm Investor | Persistent Systems

Source: Techcrunch ‘The battle is for the customer interface”

This is an oft-repeated graphic on the internet, since it was published in a tech crunch article by Tom Goodwin in Mar, 2015. Below, a short excerpt:

“The value is in the software interface, not the products. It’s not just the smart home. Uber provides average cars in a premium way; Seamless makes the most disgusting of greasy kebab joints appealing and makes its margin from both sides. iTunes for many years took virtually all the profit made in the entire music industry by being just the thin software between the hard work making tunes and the money selling them.”

Persistent Systems is looking to capitalize on this need, for every business to digitally transform the way it interfaces with its stakeholders.

Persistent: Strong player in a niche segment

Unlike the outsourced IT services market worth over USD 500 BN of which IBM, Accenture along with Indian IT majors like TCS, Infosys, Wipro, are well known competitors, outsourced software product development is a niche segment with a 2016 global market estimate of USD 15 BN, growing at a steady rate of 4 – 5% annually.

Difference between traditional IT Services and Outsourced Product Development:

The Calm Investor | Persistent Systems

Product development needs a different set of operational skills to be successful. Established in 1990, Persistent has a demonstrated track record of it’s operational capability in outsourced product development.

In Q4 2016, Forrester classified the company as a “Leader” in the BPM Service Provider space, rated better than much larger overall competition like Accenture, Capgemini, TCS and Cognizant.


The Calm Investor | Persistent Systems

Source: Forrester Wave – BPM Providers

Part 1 – The Fundamentals

Continue Reading →

December 21, 2016
by calminvestor

Everybody’s doing it

In one of his memos at Oaktree Capital, Howard Marks refers to the market as a pendulum swinging between greed and fear. That at any given time, the pendulum i.e. the general consensus tends to be either too greedy or too fearful, and it is when the pendulum is at its fearful extreme that the value investor comes into her own to make intelligent buys. This will sound familiar to most investors.

“Mimicking the herd invites regression to the mean” – Charlie Munger

“Be fearful when others are greedy and greedy when others are fearful” – Warren Buffett

The point of this post is not to belabour the obvious but to highlight how difficult it actually is go against “general consensus” and to sell when the market is hitting new highs or to buy when the opposite is happening.

The Calm Investor | Conformity

Source: ProCon.org

There is stark evidence of how incredibly difficult it is for you and I to not succumb to the temptation of “going with the crowd”. The video below is the outcome of an experiment done by Solomon Asch, a pioneer in social psychology. The video was featured in an episode of a popular television series, “Candid Camera” in 1962

The experiment went like this. An unsuspecting subject enters an elevator. He’s joined by several of the show’s staff (the subject having no awareness that they are part of the staff). As the elevator makes it’s way up the building, the staff adopt various coordinated positions e.g. first by together facing the back of the elevator, facing the left, taking their hats off and so on. The objective is to observe the reaction of the test subject to these coordinated actions. What would you do if everyone around you does one thing?

It’s well worth the 2 min 31 seconds watch. Make sure to listen to the voiceover for context on what’s happening.

A million years ago, if everyone around you was screaming and running away from the big shadow moving towards your settlement, trying to be contrarian would mean you were quickly weeded out of the gene pool. The very fact that you exist means your ancestors did not make the mistake of pausing to question whether their screaming neighbours might be wrong. The need to conform to the behaviour of the crowd is deeply etched into your lizard brain, like a normal reflex action.

Which is why so few investors beat the market consistently. And it is also why it is an essential skill to develop, to be successful in the long run. Next time the lizard brain tells you to take action out of fear, of missing out, or of losing your savings, pause.

And consider this Rudyard Kipling classic:

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,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:

If you can dream – and not make dreams your master;
If you can think – and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;

If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to broken,
And stoop and build ’em up with wornout tools:

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss;

If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: ‘Hold on!’

If you can talk with crowds and keep your virtue,
Or walk with kings – nor lose the common touch,
If neither foes nor loving friends can hurt you,
If all men count with you, but none too much;

If you can fill the unforgiving minute
With sixty seconds’ worth of distance run –
Yours is the Earth and everything that’s in it,
And – which is more – you’ll be a Man an investor my son dear reader!

Additional Reading

What bad design can teach us about investor behaviour – link

December 14, 2016
by calminvestor

Beware advice from the successful

The Calm Investor | Survivorship Bias

Source: Pinterest

Survivorship Bias OR How a mathematician helped win a war

In 1942, in the middle of the bloodiest wars ever seen, the United States military, brought together some of the brightest minds borrowed from the top universities around the country and called it, the Applied Mathematics Panel.

“Here is how it worked: Somewhere inside the vast machinery of war a commander would stumble into a problem. That commander would send a request to the head of the Panel who would then assign the task to the group he thought would best be able to resolve the issue. Scientists in that group would then travel to Washington and meet with top military personnel and advisors and explain to them how they might go about solving the problem. It was like calling technical support, except you called a computational genius who then invented a new way of understanding the world through math in an effort to win a global conflict for control of the planet.”[Source]

One of the members of this group was the Hungarian-born son of a Jewish baker. Abraham Wald had fled to the US in 1938, as the Nazi threat in Europe was reaching it’s pinnacle. The group within the AMP that Wald worked with specialized in air combat and the latest problem he worked on was keeping airplanes in the air.

“In some years of World War II, the chances of a member of a bomber crew making it through a tour of duty were about the same as calling heads in a coin toss and winning. As a member of a World War II bomber crew, you flew for hours above an entire nation that was hoping to murder you while you were suspended in the air, huge, visible from far away, and vulnerable from every direction above and below as bullets and flak streamed out to puncture you. “Ghosts already,” that’s how historian Kevin Wilson described World War II airmen. They expected to die because it always felt like the chances of surviving the next bombing run were about the same as running shirtless across a football field swarming with angry hornets and making it unharmed to the other side. You might make it across once, but if you kept running back and forth, eventually your luck would run out. Any advantage the mathematicians could provide, even a very small one, would make a big difference day after day, mission after mission.”

Given the limitation on how much weight a bomber could carry, military engineers wanted to know “the best places on the planes to add protection (extra armour)”. The military commanders already had a plan in mind. They had done extensive analysis of bombers that had returned from enemy territory, and meticulously tracked where the planes had taken the most damage. Their analysis found bullet holes tended to be clustered around the wings, the tail gunner, and down the center of the body. And this is where they wanted to add extra protection.

Would you agree? Did Wald and his team agree? Continue Reading →

November 6, 2016
by calminvestor

Mean Reversion: The Value Investor’s secret weapon

 The Calm Investor | Mean Reversion

Successful Equity Investing

To become an equity investor, you need three foundational elements:

  1. to tell a fundamentally strong company from one that is not based on it’s financial statements, it’s business model, and the dynamics of it’s industry
  2. to put those fundamentals in the context of the prevailing market price and how those prices are subject to variation based on swings in the nebulous concept called market sentimentand
  3. to recognise, and protect against the potential influence of those market sentiments on our decision-making i.e. our susceptibility to behavioural biases when making investment decisions

These elements are common sense, but they take a lot of conscious effort (learning) to understand and even more effort to implement. Most investors aren’t able to.

Ryan Shmeizer, in his post on “Cached thoughts” drew a parallel between how we typically think about any topic to a computer retrieving data stored in it’s RAM, or cache. He says, when a concept is spoken of, our mind dips into it’s memory cache to access precomputed thoughts instead of computing our opinion or understanding of the topic based on the facts available to us at the time.

If our information diet consists only of a twitter stream of borrowed quotes by Buffett, Munger et al, we’ll be able to readily access phrases like “buying for less than intrinsic value”, “buy stocks like you would buy groceries, not like perfume” thinking we really understand value investing, but our investment results will suggest otherwise.

We need resources rich in insight, that will help us build understanding of those foundational elements to keep learning, unlearning and relearning.

What has worked in investing

One such resource, is a paper “What has worked in investing – Studies of investment approaches and characteristics associated with exceptional returns” by Tweedy, Browne Company LLC. It is a compilation of the findings of over 50 major quantitative studies over 50 years, some academic, others by investment companies about the returns from various schools of investing.

The key findings of the paper, as to what works in investing according to Tweedy, Browne are:

  1. Low Price in relation to Asset Value: Stocks bought at less than book value or even more conservatively, at less than Net Current Assets (cash, receivables, inventory minus liabilities)
  2. Low Price in relation to Earnings: Stocks bought at low Price / Earnings offer high earnings yield when considering their potential dividend payment to prevailing stock price
  3. Insider buying: Inside information on likely improvements, not a tough one to imagine
  4. Significant Price decline: Poor recent performance resulting in lowered expectations
  5. Small Market Capitalisation: Smaller base, higher growth rates and therefore more price appreciation

These findings  apply to studies done for markets outside the US, a couple included India.

The full paper is available at the end of this post.  Continue Reading →

November 4, 2016
by calminvestor

Latest News and impact on Online Trading (Sponsored Post)

This is a sponsored post

It is a truth universally acknowledged that a man (or woman) wanting to be in possession of a good fortune needs the services of a reliable spread betting brokerage company. Yes, I’m paraphrasing Pride and Prejudice but with the current state of the Sterling, savings rates at their lowest since 1960, the continuing volatility of the stock market, “hard Brexit” seeming to be the preferred government option and to top it all the possibility (albeit increasingly remote) of a Trump presidency choosing profitable forms of investment has become like Harry Potter chasing the golden snitch.

How low can it go?

The pound, since that June day has plummeted to its lowest exchange rate with the US dollar since February 1985 when it bottomed out at $1.05. The current predictions by spread betting companies such as CMC Markets is that Sterling won’t stabilize during the remainder of 2016. Mark Carney, governor of the Bank of England, however, continues to be perceived as a safe pair of hands who when he speaks inspires confidence in the pound.


The annual average saving rate is the lowest it has been in the last fifty years and with such a fragile economy the Bank of England may hold off raising interest rates for longer than planned. Employing a wait and see policy there is a chance that if there is no sign of stabilization then interest rates may indeed be lowered.

Stock Market Volatility

The continued uncertainty is placing some pressure on the UK’s top companies resulting in a stock market which although strong in comparison to the currency is still not in the best of places.

Hard Brexit

It was sometimes thought that although the UK had voted to leave the European Union it would still want to keep its place in the single market accepting a degree of free movement in exchange for this concession. As time has gone on and positions have become more entrenched this degree of rapprochement is looking exceedingly unlikely. The “hard brexiteers” seem happy to forego the benefits of the single market in exchange for maintaining the sacrosanctness of the UK borders.

President Trump?

Brexit would be a ripple in the pool compared to the hurricane which could hit the financial markets if Donald Trump was elected to the White House. Where Hillary Clinton could be regarded as a safe pair of hands the loose cannon which is Trump could throw everything to the four winds.

Why spread betting?

What is the difference between spread betting and the more conventional trading? When a conventional trader buys shares, currencies or any other type of asset they are speculating that the price will rise enabling them to sell at a profit. A spread better trader recognizes that they have the potential to profit from both rising (going long) and falling (shorting) prices as long as they correctly predict which it will be, providing many more opportunities for trading. For instance, a company such as Talk Talk is about to publish their annual report and the spread better trader considered opinion is that the information contained in the report will be detrimental to the share price. They can place a trade based on their opinion and have the added advantage that spread betting is tax free. The degree of accuracy in the prediction determines the potential profit or loss.

A further advantage is that since spread betting is a leveraged product it can allow the spread better trader to make a deposit of as little as 1 to 10% of the total trade value. It should be remembered however that while this does allow for any potential profits to be much higher than those gained by more conventional methods of trading the same holds true for any losses incurred. The importance of choosing a reliable spread betting broker or company which adheres to a regulatory authority and with a competitive range of commodities therefore cannot be over emphasized.

October 22, 2016
by calminvestor

Five great free value investing resources

The Calm Investor | Value Investing Resources

“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time – none, zero.” – Charlie Munger

And so, here’s a short list of valuable value investing resources that I’ve found, offer insight into developing that mindset essential to successful investing. You’re much better off spending your time absorbing the content from resources like these than seeking out ‘Buy’ and ‘Sell’ recommendations in the pink papers.

Farnam Street


Named after the street in Omaha, Nebraska where Berkshire Hathaway keeps it’s headquarters, Farnam Street is run by Shane Parrish, who apparently worked with an intelligence agency with a three-letter acronym before enrolling and almost dropping out of an MBA course because of the lack of insight into decision-making. He persevered and started this valuable site.

The best place to start on this site is the helpfully titled “Best Articles” link.



Monevator is a UK-based site, run by two bloggers with slightly differing perspectives on investing as evinced by their handles; ‘The Investor’ and ‘The Accumulator’. The underlying theme of the site is to “get rich slowly” as opposed to offering “sure-shot strategies”.  Some of the content is relevant only to UK citizens but there are still tons of articles to help develop your investing personality.

Best of Monevator here

Musings on Markets – Aswath Damodaran


He’s the professor of Corporate Finance and Valuation at the NYU Stern School of Business and literally wrote the textbook: Damodaran on Valuation. His ability to break down the most complex valuation questions to arrive at a number for any company is legendary, an example, his techcrunch article on why he believes Uber is overvalued.

He posts on contemporary issues, like his latest post is about the ailing Deutsche Bank. While the companies he discusses are not necessarily of relevance to Indian investors, they provide hints on how to think about breaking down a seemingly complex task to arrive at a fair value for any business.

Jason Zweig


Jason is a personal finance columnist with the Wall Street Journal. His articles appear in many prominent publications including Time, Money magazine. What is likely to really get your attention is that he’s the editor of the revised publication of The Intelligent Investor by Ben Graham published in 2003. His articles are similarly insightful, while staying away from financial jargon.

A compilation of his responses to the most frequent investment questions here

Michael Mauboussin


A veteran of the investment management industry, Michael is the author of The Success Equation, He’s even better known for the lucid papers he writes in his role as Head of Global Financial Strategies at Credit Suisse which have been compiled into a book More Than You Know – Finding Financial Wisdom in Unconventional Places and named as “The 100 Best Business Books of All Time” by 800-CEO-READ, one of the best business books by BusinessWeek (2006) and best economics book by Strategy+Business (2006).

A link to some of his best papers is available here helpfully compiled on valuewalk.com

Bonus resource: The writings of Charlie Munger

One of the legends of the value investing world, Charlie’s work on mental models is considered path breaking and gives insight into applying different frameworks to understand pretty much anything and to apply it to investing. Problem is his book Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger is not in publication and can only be obtained at significant cost. To meet this unmet demand, a host of copy cat publications and sites using various combinations of the phrases “mental models” and almanack have sprung up. Hence I was exultant to find a resource with some of his best speeches and writings compiled here (hat tip to Indraneal twitter id @omnilogist for pointing me to this resource)

My suggestion, explore these sites, click through the various source links, immerse yourself in the insight, think about how it might apply to you, then apply and assimilate into your investment philosophy. Become a calm investor, untroubled by the noise.

What are the best resources you’ve come across? Send me a note and I’ll add them to this post here.