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

Read more

Can buying cheap NIFTY stocks beat the index?

Legendary value investors, past and present, and the best value investing blogs offer this as the one consistent message. Focus on buying stocks trading at relatively lower valuations to the market and the returns will take care of themselves. Ironically, the most-quoted “value investor” in the world, Warren Buffett deviated from this simplistic strategy a long time ago when he started buying “wonderful businesses” (brand, pricing power, future ability to generate cash with minimal capital) at fair prices over fair businesses at “wonderful prices” (current low price to book / other earnings multiples”. The term “wonderful business” has since then

Read more

5 things not commonly known about the NIFTY

Earlier this week, NSE announced effective Sep 29, 4 stocks (ACC, Bank of Baroda, Tata Power, Tata Motors DVR) will be dropped and 3 (Bajaj Finance, Hindustan Petroleum, UPL) will be added to the NIFTY. When analysts talk about the performance of the “Indian Stock Market”, they are typically talking about the NSE NIFTY Index, and the BSE Sensex Index (to a lesser extent). Most investors know the NIFTY consists of 50 stocks (currently 51), of the largest companies by market capitalisation trading on the Indian markets. 5 things not commonly known about the NIFTY: 5. How the NIFTY 50

Read more

Evaluating stocks with TCI Rapid X-Ray

So many stocks…So little time Investing is largely a process of elimination, and the more efficiently you can eliminate investments that do not check the boxes on your investing checklist, the more time you can spend diving deep into the ones that do. For equity investors in the Indian Stock Market, there are about 1,500 listed stocks on the NSE and nearly 5,000 on the BSE, to choose from when making investment decisions. Sure, there are ways to whittle that list down using filters of market capitalisation and sectors, but you’re still left with a few hundred potential investments to

Read more

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. Persistent Systems Introduction This is

Read more

So many stocks…So little time

This is a practitioner’s post for someone looking for help to develop their own investment process, using a freely available resource: screener.in Rule #1: Don’t f*** up The financial newspapers have a section on them everyday – top ‘Buy’ and ‘Sell’ recommendations from brokerages. Financial news channels have a segment called something like “Top Trading Ideas for today”. During other segments, every interviewee, whether head of research at a brokerage / mutual fund house / hedge fund gets asked this question about top stock picks to invest, in India. They all oblige, with a fresh set of stocks (companies), every day, that will

Read more

The NIFTY in 2016

A little over a year ago, I published predicting Indian stock market returns based on historical analysis of the NIFTY and the CNX500. I did this with tongue firmly in cheek, given the very concept of value investing accepts inherent unpredictability of markets, especially in the short-term (anything less than five years) as laid out in my calm investing principles. “Anyone who says they know where the market will be a week / month / year from now is guessing (or has super powers)…“ Since I am yet to find evidence of my super powers, except for my ability to order the best thing on any restaurant

Read more