NIFTY versus the Sectors

Market correction: “When” not “If”? We’ve all been bracing for it for a while now. At Price-Earnings of 25+, NIFTY PE is now two full standard deviations above its median value of 19, that suggests or rather shouts “correction coming!”. Simply put, we’re paying ₹25 for each ₹ of Earnings from the 50 companies in the NIFTY. Put it another way, if earnings of NIFTY companies stay at the current level, and if they pay out 100% of their earnings to shareholders, it will take 25 years to recover your investment. You’re thinking that makes no sense. Even the median value implies 19

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5 Lessons from Amazon’s stock price chart

Jeff Bezos recently made news (again) when he became ‘the world’s richest man’ with a net worth of over $90 Billion. Over $10B of that was added within a few days in October 2017 after Amazon announced it’s third-quarter earnings and the stock went up 15% since early Sep to Mid-November 2017. Since then, there have been a host of articles with titles like If you had invested right after Amazon’s IPO, you’d be a millionaire. In short, Amazon’s stock price is up approximately 57000% in the 20+ years since it’s IPO. This means, $1,000 invested in Amazon stock in May

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Is Bharat22 ETF a good investment?

The Bharat22 ETF opens for subscription for retail investors on Nov 15th. I was curious about this latest NFO (New Fund Offer) for two reasons: because it’s an ETF (Exchange Traded Fund) and not a Mutual Fund – My last post on Mutual Fund being India’s true sunshine sector, I had pointed out that 2017 investment in non-Gold ETF’s is 40 times what it was in Sep 2013 it’s a fixed portfolio of stocks with defined weights and not an actively managed fund, therefore possible to backtest the portfolio to see how it has done in the past The components of

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India’s true sunshine sector

As of this writing, the NIFTY is trading slightly below its lifetime high of 10,477 points, nearly doubling from 5,517 in early September 2013. In the same period, NIFTY Price-Earnings has risen from about 16 to over 26, a zone considered to be significantly over-valued compared to median values. Price multiples expansion typically accompanies improving prospects for earnings growth in times of general optimism. The problem, for India, has been the lack of translation of that optimism into earnings growth. While the NIFTY (Price) has risen by 17% annually for the last four years, NIFTY Earnings Per Share (EPS) has

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What if you were the world’s unluckiest investor?

[This post was inspired by Ben Carlson’s post: What if you only invested at market peaks?link on his fantastic blog ‘A wealth of common sense’. Highly recommend following Ben on twitter @awealthofcs] What would your returns look like if you were the world’s unluckiest investor? Fairly early, you decided you would diligently invest a fixed amount in Indian equities every year. You would even increase the amount invested year-on-year in line with your increase in income. However, you spend most of your year on remote oil rigs in the middle of the ocean or mines out in the hinterland, with no opportunity

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Investing and Life, Balance Sheets matter over Income Statements

How do you follow your investments? If you’re like a lot of people, you keenly await quarterly earnings announcements to track projected versus actual growth in Sales, EBITDA, Net Profit, EPS (Earnings per Share). Positive surprises mean high fives for the minor bump up in stock price. Negative surprises are explained with a range of reasons including “delayed project approval”, “rural distress”, “rising raw material prices” and so on. If the reason for the miss makes sense i.e. they seem significant enough that the company couldn’t have done much, you shrug and move on. The problem with Salient-Recency We use a

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For the next great investment story

We are wired for stories The human brain is an awe-inspiring feat of evolution. According to biologists, it has approximately 90 billion nerve cells which are linked together by, literally, trillions of connections called synapses. Taken together, this system of elaborate connections within the brain provides “hundreds of trillions of different pathways that brain signals travel through. Our internal and external senses transmit almost four hundred billions bits of information per second through these pathways. “In an effort to mimic this digitally, scientists a few years ago needed more than 82,000 processors running on one of the world’s fastest supercomputers to mimic just 1

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Difference between ROCE and ROIC and does it matter

Financial metrics and investment quality Deciphering financial ratios can be daunting for investors looking to differentiate potential investments on quality. But if you’re set on picking your own investments, then you need to be able to understand and interpret them. If there are better ways you could be spending your time, then leave it a mutual fund manager in spite of its drawbacks or even just buy a low-cost index tracker, which tends to beat most active investors anyway. When it comes to financial metrics, it’s important to understand the spirit more than the letter of the metric, i.e. what the

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