January 2017

The twelve most silliest things people say about stock prices ~ Part III

value investing, Peter Lynch Quotes, Pictures, Common Mistakes, Speculation, Trading, Gains, Losses, Indian Stock Markets  “All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out” ~ Peter Lynch ~ One up  on Wall Street.

 I have been reading ‘One up on Wall Street’ ~ Peter Lynch. The book is a classic and a must read for people interested in value investing.

This Part III is in continuation to earlier parts and thus completes the twelve most silliest things people say about stock prices as mentioned in the book. 

The earlier posts cover the previous 8 points of the common mistakes committed by investors which you can read here : Part I & Part II

I hope this trilogy will help you in your investing journey.

Thank you Peter Lynch for the wonderful book and  common sensical approach to stock investing.  Enjoy (points 9 through 12)….

9. What me worry, Conservative Stocks do not fluctuate much…
Peter Lynch gives examples of Utility Companies. Two generations of investors grew up on the idea that they could not go wrong with the Utility stocks. You could just put them in safety deposit and cash the dividend checks. However with the nuclear and the base rate problems, suddenly the nuclear plants became expensive and stocks fluctuated wildly over a couple of years.

Companies are dynamic and prospects change. There simply isn’t a stock that you can own and you can afford to ignore.

Near home, FMCG Stocks have always been considered conservative stocks with relatively low beta and good dividends. However, over the past 2 years most of the FMCG stocks have considerably outperformed the index. The valuations are stretched and stocks have literally become multi baggers. Can these stocks be considered be conservative any longer? Is anybody’s guess….

10. It’s taking too long for anything to happen
“PostDivesture Flourish”, a term coined by Peter Lynch, which means that after considerably waiting for a stock to do something, you give up, and when you finally sell the stock, the price of the stock starts to flourish and move northwards.

I have experienced this when I gave up on LIC Housing Finance in mid 2009 after holding the stock for almost 3 years. The stock went up almost 5 times in the next 2 years.
Learning ~ Do not give up on the stock if all is well with the company and the reasons for which I bought the stock have not changed.

The stock markets tests patience and rewards conviction.

It takes remarkable patience to hold on to an idea / stock that excites you, but which the market largely ignores. You begin to think everyone else is right, and you are wrong. But remember, where the fundamentals are promising, patience is more often than not ~ rewarded.

11. I missed that one, I will catch the next one
This is such a common mistake committed by a large number of investors.
Page Industries is one such stock, which has given phenomenal returns to investors over the past 3 years, and continues to do so. Investors who missed out on Page Industries are trying to catch onto other seemingly similar stocks like Lovable Lingerie.

This is a mistake because the performance of Page Industries is based on various factors like the company management, capital structure, earnings growth, streamlined and strategic supply chain, brand image, brand power and brand recall value, customer loyalty, vendor relationships, pricing power etc which is difficult for another company to imitate. The other company should be judged on it’s own merit for investment purposes.

It’s always better to buy the original good company at a higher price than to jump on to the next one at a bargain price. (Same logic applies when buying real estate as well…. I will talk about my views on real estate some other time though…)

12. The stock’s gone up, so I must be right or Vice Versa.
Peter Lynch terms this as the single greatest fallacy of investing. Believing that when the stock price is up, then you’ve made a good investment. Investors confuse prices with prospects.

If you purchase a stock at Rs 100 and it moves up to Rs 105, investors take comfort from this fact, as if it proves the wisdom of their purchase. Nothing could be further from truth. Investors commit mistakes based on this fallacy ~ Either selling a good company at a loss, believing that they committed a mistake or holding on to bad apples if the prices are up post the purchase.

Remember the Stock does not know that you own it.
Unless you are a short term trade looking for 20 odd % gains /loss the short-term fanfare means absolutely nothing.
A stocks going up or down after you buy only indicates that there was someone who was willing to pay more or less for the identical merchandise. That’s it

You can read the earlier posts here :  Part I & Part II 

With this I lay to rest the 12 mistakes committed by investors with the hopes that you, can avoid these common mistakes and in the process become a successful investor.

Happy Investing!!!

November 2012

Tara Jewels IPO Analysis

Tara Jewels IPO Analysis, Buy, Subscribe, Indian Jewelry Stocks, Gitanjali Jems, Rajesh Exports, Gold, .

Tara Jewels Limited is coming out with a 100% book building; initial public offering (IPO) of 79,77,778 equity shares of Rs 10 each in a price band Rs 225-230 per equity share. The issue will open on November 21, 2012 and will close on November 23, 2012.

  • Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
  • The issue opens for subscription on November 21, 2012 and closes on November 23, 2012.
  • The shares will be listed on BSE as well as NSE.
  • The face value of the share is Rs 10 and is priced 22.50 times of its face value on the lower side and 23.00 times on the higher side.
  • Book running lead managers to the issue are Enam Securities and ICICI Securities.
  • Compliance Officer for the issue is Amol Raje.

Profile of the company

Tara Jewels is an integrated player in the jewellery industry with experience ranging from designing to retailing of jewellery. It is conferred with the status of a Star Trading House by the Ministry of Commerce & Industry, Government of India and have been the highest exporter in gems and jewellery sector for the years 2008-2009 and 2009-2010. The company’s business can be divided into three operations namely, manufacturing, exporting and retailing. Its portfolio of products includes gold, platinum, honeydium, pristinium and silver jewellery with or without studded precious and semi-precious stones. The products have presence across different price points and cater to customers across high-end, mid-market and value market segments.

The company has four manufacturing units, of which one is located in Panyu, China. The other three units are located in Mumbai out of which two units are situated in SEEPZ and one in MIDC. For the two months period ended May 31, 2012, Fiscal 2012, 2011 and 2010 the company has achieved an aggregate production of 554.77 kgs, 10,616.40 kgs, 4,753.25 kgs and 2,562.91 kgs of jewellery, respectively. The manufacturing units are spread over an area of 84,584 square feet employing 35 designers and 955 craftsmen, as on September 30, 2012.

It exports studded jewellery which is manufactured by it and by third party manufacturers. The company exports studded jewellery to jewellery chains including Christ Uhrean and Schmuck and retailers including Walmart. Tara Jewels primarily export to Australia, China, Canada, European Union, South Africa, UAE, UK and USA. In the European Union, the company export to 12 countries including Austria, Germany and Switzerland. The company’s income from export operations has grown at a CAGR of 19.77% from Fiscal 2010 to Fiscal 2012. For the two months period ended May 31, 2012, Fiscal 2012, 2011 and 2010, the income from export operations constitutes 78.82%, 80.90%, 80.99% and 97.59% of the company’s total income, respectively.

IPO Grading

CARE has assigned an ‘IPO Grade 3’, indicating average fundamentals, to the initial public issue of the company.

Proceeds is being used

  • To meet the expenses of establishing retail stores
  • For repayment or prepayment of loans; and
  • For general corporate purposes

Industry Overview

US is the world’s largest market for jewellery followed by China, India and the Middle East and in Europe, the UK and Italy are the largest consumers. (more…)

August 2010

What is Mutual Fund Service System (MFSS)

Mutual Fund Service System (MFSS) is a new online order collection system (to be noted, not live trading of MF….) for placing subscription or redemption orders on the Mutual funds based on orders received from the investors.  This has been implemented by the both Exchanges, NSE and BSE.

MFSS Eligibility criteria for Investors:

One should have a Depository and Trading account with a Broker and should also sign the relevant  agreements for MFSS.

Investors already having a Demat account :  Will have to sign additional terms and conditions for MFSS in order to activate this facility in addition to the existing equity account.

This is how the system works:

You can buy or sell Mutual Funds using the MFSS system (the same way in which you buy or sell shares). MFSS is available between 9.00 am and 3.00 pm on all the working days of the Exchange.  All are  settlement happens on T+1 (working days). (Trade Date + 1 working day)

An order confirmation slip is sent to the investor by the Broker and is the conclusive evidence of the transaction.

The pay-in of funds for subscription shall be through the Broker’s Clearing Bank Account but Pay-out of funds (redemption proceeds) will be directly sent by RTA to investors through appropriate payment mode such as direct credit, NEFT or cheque as decided by AMC from time to time, as per the bank account details recorded with the RTA.

As of now, SIP/STP/SWP is not available in MFSS. ( I am not sure how this can be implemented… Will have to wait and watch)

Please note that all other scheme characteristics mentioned in the KIM remain the same.

Conversion of Existing Mutual Funds into Demat :

The following needs to be done

1. You need to Collect Conversion Request Form(CRF) from your broker, duly fill it up and submit along with latest Statement of Account evidencing the holding of MF units.

2. You need to Ensure name and pattern of holding of your account are same as in the Statement of Account.

3. You might be required to use separate CRF is required for each folio number, free units and for locked-in units

4. You need to Ensure from your broker (or you can refer to the list below)  that the MF units submitted for conversion is eligible to be held in demat and ISIN is allotted.

5. Your Broker might charge you a minimal amount to get the Mutual fund units converted into demat.

Advantages of MFSS : Convenience !!!!!! All equity related assets are in one place. It is easier monitor. Easy to transact.

Disadvantages of MFSS : Costs !!!!!! Brokerage Costs may be involved when buying or selling mutual funds through demat.  At present there are no entry and exit loads on equity mutual funds. (Please talk to your broker for more information,  most of the brokers are offering free transactions costs for couple of months )

Funds List of Schemes of following AMCs are eligible in MFSS. Please find the attached excel file containing the eligible scheme list of various Asset Management Companies (AMCs).

List of Eligible scheme for MFSS (Refer latest NSE Circular for updated list)
AIG Global Asset Management Company (India) Private Limited
Benchmark Asset Management Company Private Limited
Birla Sun Life Asset Management Company Limited
DSP Blackrock Investment Managers Private Limited
FIL Fund Management Pvt. Ltd.
Franklin Templeton Asset Management India Pvt Ltd.
HDFC Asset Management Company Ltd
ICICI Prudential Asset Management Company
IDFC Asset Management Company Ltd.
JP Morgan Asset Management India Private Limited
Kotak Mahindra Asset Management Company Ltd.
Morgan Stanley Investment Management Private Ltd.
Principal PNB Asset Management Company Pvt. Ltd.
Quantum Asset Management Company Pvt. Ltd.
Reliance Capital Asset Management Ltd.
Religare Asset Management Company Ltd.
SBI Funds Management Pvt. Ltd.
Sundaram BNP Paribas Asset Management Company Limited
Tata Asset Management Ltd.
UTI Asset Management Company Ltd.