Saturday, January 28, 2006

Every investor should read this

It's called "Seven Secrets of the Investing Masters". Read, re-read the text because it gives you a wonderful glimpse of how the worlds best investors have earned their wealth from investing, from trading, getting rich overnight and other strategies/tactics.

The article features -
1. Benjamin Graham
2. Warren Buffett
3. Peter Lynch
4. Anthony Gray
5. George Soros
6. Jim Slater
7. Anthony Bolton

I am reminded of Charlie Munger, who has often related investing with psychology. It's often called the madness of the crowd. Please find enclosed a most fantastic text - Extraordinary Popular Delusions and the Madness of the Crowds by Charles Mckay which'll help you understand bubbles. Since the text is too long, sincerely request all to definitely read the chapters on the South Sea Bubble and the Tulipomania.

5 Comments:

Blogger Prasanth said...

Shankar,

This is in response to your question on Teledata. My comment about Teledata was purely based on a casual conversation with my cousin. We were discussing relative merits of the value investing apprach and Tech analysis approach and in passing, he mentioned that Teledata is a favourite among his (speculative) circles and that they expect the stock price to go up to 160 or so. After your query, decided to furthur check on Teledata and here are the results:

1. I checked with my cousin again and he told me that it is purely a rumour and knows some people who on the stock. He personaly does not own it.

2. I checked the website of the company (www.teledata-usa.com) and tried to download the Annual Report. The AR was in 2 sections and the section one itself was 97 MB (which i downloaded) and the section 2 was 215 MB or so which i could not (almost like they did not want anybody to download and check).

In it there is an audit comment by the auditors of the company and here it is :

Auditors comments contained in their Auditors Report for the year ended 31/3/2005
a) Company's internal control system needs to be strengthened to make it commensure with the size and nature
of business. Comparative quotations for purchase of certain software is not feasible as they are of specialised
nature.
b) Company is not regular in depositing the undisputed amount of TDS

Scary is'nt it? If the company auditors (after all paid for by the company) has to put in a comment like that, then i can only guess at other irregularities going on there.

Also, another comment that caught my attention was that the Company has extended unsecured loans to individuals against the company policy.

3. The company has been making a huge noise on them buying 4 US based enities and they have also issued GDR's. Nothing wrong with that.

4. They own some 4 to 5 companies and one of them that caught my attention was BITECH. Back in 1997 when i was working on projects for Hindustan Lever, BITECH was one of the companies which was having a T&M contract for custom application development and maintenance but later they stopped working for HLL. I'm acquainted with some of the guys working for Bitech at that time and will check up with them on this. Anyway BITECH was a bit player at that time and did not amount to much.

5. A lot of hype has been created around the company - The management claimed that the company will grow from some 100 Crores to 1000 Crores (sales) in a year (target March 2006). I'm very doubtful on this - How can they manage to? no information given on this.

In view of all this, my recommendation is not to buy this stock.

However an interesting and (surprising) tit bit i saw in Hindu Business Line (dated August 2005) was that T. Rowe Price Associates (known for thier value investing approach) have taken a 5.66 stake in the company. A rare mistake for T. Rowe perhaps? Or does T. Rowe know something we don't?

Whatever the case may be, based on the information i have, i will not buy the stock.

3:05 PM  
Anonymous Sai said...

Hi Shankar & Prashanth,

I too am interested in the value investing approach and was looking for such info when i stumbled upon your blogs. Pretty interesting, keep up the good work folks.

BTW was wondering whether there is a way to screen stocks.. check this out - doing something like this would be very interesting but i am not sure where one can get such data - http://3gv.blogspot.com/2006/01/magic-formula-part-4.html

Cheers,
Sai

7:14 PM  
Blogger Shankar said...

Hi Sai,

Ian has an excellent blog in 3gv. His posts are fabulous. Cant blame him, the US is also seeing a surging stock market like India. Prasanth and I have been raking our brains on some stocks - Teldat being one of them. Our next project will be to find ways of valuating Banking stocks using Graham's principles.

Do give ur inputs on how the blog can be improved.

Warm Regards
Shankar

8:03 PM  
Blogger Shankar said...

And prasanth, the company is rather scary :-) If this was an Alice in Wonderland situation, then why aren't people buying it ??? No we know why.Thanks for checking the company.

Rgds, Shankar

8:05 PM  
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8:15 AM  

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