http://www.ndtv.com/video/player/value-investing-decoded/investing-with-sanjoy-bhattacharya/362798
Value Investing is 85% psychology
Three things that matter in Value Investing
- What you pay to own the business
- Time horizon
- What you can afford to lose (Bet size)
When you are buying stocks you need to think like a good business man and think what kind of business I want to own
Moats
Can be a low cost producer. Ex Balkrishna Tyres. Manufactures in India and sells in Europe. Has 9% of the worlds farm tyre business
Can have products that have differentiated products that allow it sell them at a premium. Ex Nestles Maggi and Cerelac.
Companies that have properietary advantage. Concor was spun off from Indian Railways and had access to wagons. Now that advantage has reduced by entry of private players like Gateway Distripark etc
Do not get carried away by the grand vision of the management
Avoid business that rapidly change
Money can be made with Probability of event X Expected value of the event. So for (low probability) X (high expected value) like in drug discovery, the chances of making money is low
Buying cheap is very critical. Great companies at high prices will not make good investments. If somebody had bought Infosys in 2000 when the P/E was at 100+, after 8 years the return would have been 4%.
The price to be paid for buying a stock would depend on
- Sustainable revenue growth
- Effective usage of capital (ROCE)
- Capital allocation
- Management
For example a company with higher ROCE will be have to be paid a premium against a company with lower ROCE, all other factors being equal
Sanjoy said GDP growth is not related to individual stock movement
Do not take up reported earnings at face value. Give more importance to Cash Flow because it cannot be fudged
With Global capital flow and global events having a greater influence on Indian stocks, we cannot blindly advocate Buy and Hold forever
Smart selling is as important as smart buying. Sell when
- When the purchase was a mistake
- Stock has run up, much more than ones imagination
- When we have found a better oppurtunity
