Monday, May 29, 2006

One billionaire's pudding is another's poison

Wonderful article ...

One billionaire's pudding is another's poison

Manali Rohinesh, | May 29, 2006

Managing Partner at TCI New Horizon Fund, Madhav Bhatkuly went to the London School of Economics, LSE, to beef up on the many theories that abound in the field of financial economics.

But he was always intending to come back to India because something here had caught his interest. It was the way the stock market works - the intricacy and the mechanism and the beauty of it appealed to him.

Inspiration & motivation

But another source who lit the fire within him about the stock market was his best friend's father, who was then the chairman of Citigroup. Bhatkuly told CNBC-TV18, "I had a close friend and his father used to be the chairman of Citigroup at that time and he used to lecture at the stock exchange, virtually after every budget. So I was chatting with his son one day and his father was preparing for the budget speech and I asked what is this? He said that I am going to talk about the stock market and the implication of the budget."

He recalled, "So I asked him what is the stock market and how does it really function? So he said if you want to be a part of a very big, successful and famous company but you don't have the money to own it, and you want to own just a small part to be part of the story, then the stock market is the place to go. And actually, in many ways that was the defining moment. It first got me interested, that here was an opportunity to be a part of history or a part of success."

At the LSE, he majored in derivative products. The entire field was new back then so he didn't have many textbooks to study from except the one written by Fischer Black & Myron Scholes, which had come out just a few years before he graduated.

He was lucky enough to study original research. But when he got back to India, he realised that all those theories he studied were of little use. It was really experience that counted.

He began his career with ICICI, which was purely a project finance institution at that time. Madhav recalled, "I was busy going to greenfield project sites and doing spreadsheets and cash-flow analysis on Lotus (software).

"But it was an extraordinary experience. That gave me insight into corporate India and helped and shaped me as an analyst. I think that job really taught me or gave me the bridge between everything that I had learned in theory and the real world - of what drives earnings models and businesses and also to work with entrepreneurs, which I think has actually contributed to the process of investing today."

Investing principles

He doesn't believe that investors reach a magical circle of competence, as supposed by some. But investing is a process of trial and error, just like everything else. He said, "I think with experience and consistently just simply going out and doing the job, you begin to understand some things naturally better than somebody else."

After all, even the billionaires of the world have not made their money following any one holy grail. Benjamin Graham has been quoted telling Warren Buffett, "Warren the money won't make a damn difference to you and I, our wives might just live a little better!"

All the same, some of these successful investors have followed their own path to riches. Warren Buffett has never invested outside the US. On the other hand, Sir John Templeton wanted to go out and buy the entire Indonesian Stock Exchange, the very first time he felt bullish about Indonesia!

George Soros keeps it simple - he buys when the price is not right and sells when it is - the very essence of stock market trading. So, each of these men are rolling in money but have all arrived at it, in their own individual style.

So which style does Madhav call his own? He explained, "If I have to identify myself with one particular approach, at heart I would call myself a value investor. But value can mean different things. Is it prospective value? Is it enduring value? Is it value based on history etc. I spent most of my early career or the last few years as well, in small cap stocks, where perhaps the market efficiencies were higher and maybe because they were illiquid or for whatever other reasons."

Evaluating businesses

He looks at different valuation methods for different businesses. For instance, if it's utility, he may use the discounted cash-flow method but for anything else, he might use a different concept.

He added, "But along with that, it was also important to understand leadership in the business in its entirety. And what I looked for primarily was whether there was hunger enough to inspire that CEO to want to make it into a bigger business. Also, was there a cogent strategy and more often than not if you meet a lot of business leaders, you will find that some of the best or the most successful leaders are very well put together in their thoughts."

Also managements which spend time in execution of strategic visions is what makes "the

difference between a good idea and a successful one." Madhav also believes in getting his facts and figures cross-checked with the mid-level managements of companies.

He explained, "It is important to visit second and third-line managements across the company. To first of all understand whether you were receiving the same soundbytes as you would hear from the top. But more importantly, were there processes. Was there enough in terms of execution capability and deliverable action points built into the system itself."

According to him, Sun Pharmaceuticals and Godrej Consumer Products are two companies, which demonstrated his belief in executing strategies and that had processes in place for doing so.

Indian stories

Analysts need to be able to spot what's going to provide a margin of safety with regard to every stock their looking at. It could be prospective earnings or absolute assets. He spotted this safety point in the shares of Oriental Bank of Commerce, OBC, when it was in the red and was burdened wth NPAs that were not serviced.

He elaborated, "We were the first foreign investors in OBC, at roughly about Rs 55 a share. It went through a terrible period as a result of which it had accumulated non-performing loans in excess if 9 per cent.

"But two years prior to that, there was a change in leadership. There was a new leader who had cleaned the processes. So as a result of, which the company had begun to have a shift towards identification and greater disclosure.

"We also found that interest rates in India had fallen so much, that OBC had 41 per cent of it's book in Indian government bonds or treasuries, and that the unrealised gains on the securities portfolio was greater than the market cap.

"This meant good news - that it could have wiped off the NPAs in one shot! So the margin of safety was very clearly visible."

He found absolutely great value waiting to be unlocked in United Breweries. He reiterated, "I think United Breweries is a very good example of startling value. The company went through two phases.

"One, when it was a consolidated entity and it had non-core assets including 40 per cent holding in McDowell as well as huge real estate holdings. So there was huge value which could be harvested at some point of time."

He added, "If you look at or dissect the management of the business in two facets - corporate governance and market leadership. They have delivered dramatically on market leadership, I mean, here was a company which clearly knew what to do in the market place, Kingfisher made up 40 per cent of the Indian beer market for several years and eventually went up to 50 per cent. Kingfisher as a standalone brand was 27 per cent of India's beer market. So obviously the company knew what to do in the marketplace but it wasn't translating that into profits."

Spotted deals

"When we first looked at just the beer business, we spent a lot of time figuring out what normalized earnings would be because the company had no profits. So what was the intrinsic worth of those profits?

"For that we looked at a company in Sri Lanka called Lion Beer, which was a Carlsberg's joint venture in Sri Lanka. We were just trying to do a little bit of analysis in terms of the dynamics and what the costing was and we figured that the margin of safety was very large and there was an opportunity here." : R.O.B. Magazine

Comments from best trader in the Bay Street to be a trader. Intersting do you find similarity of gorden gekko (Wall Street ) in this one.

"Trading is 40% art, 40% science and 20% luck. To be a good trader, you have to be lucky, but to be lucky you have to be good. You wake up early, you do your routine—going to the gym, or whatever you do that gets you going in the morning, that inspires you in the morning—and you come into work charged up, you're ready to go, so you put yourself in the right place. Therefore you're lucky. It's like being in the right place at the right time. If you miss everything, you're never going to be lucky. Bad luck is never good. I tell my people bad luck is bad for me, just don't be unlucky. It's a bad career decision."

Thursday, May 25, 2006

One more interesting change

Please note down the ticker scrolling above this post. Friends you can customize this based on your portfolio click the edit and plug in the code for the company you want to track for.

Real estate in India is there a lot of money.. May be

For many these number wouldnt have made much sense. But this is the real estate market caps of top players in company. Do you think its a comprehensive list. No ofcourse not even close. Because I personally know many people who is more wealthier than in the list and not in public. In india trump strategy is not how many people using. If you asked me its good or bad ( Even an opportunity) I cant reveal my thoughts unless you personally ask me Vijay Chandran.

Notably I looked in to the snap shot and history of the companies and they are moderately new and surpirsed to see that how can they bring this much market cap. We need more Kushpal Singh ie people with great vision and capable of even thinking about a 2 billion USD aka (10,000 crore indian Rs ) IPO. kudos to you and good luck with your endeavours.

Company Name Market cap in Crores of Indian Rs
D S Kulkarni 587.29
Ansal Housing 461.36
BSEL Infrastruc. 415.54
Lok Housing 413.06
Vipul Ltd 311.15
Prime Property 267
Arihant Found. 248.79
Ansal Buildwell 219.48
Marg Constn. 136.65
Ashiana Housing 126.34
Lancor Holdings 77.06
Eldeco Hsg.&Inds 62.42
Vijay Shan. Bui. 60.54
SAAG RR 49.84
Thakkers Develp 29.45
Radhe Developers 23.01
Narendra Propert 18.36
Kadamb Const. 17.2
Sudsun Hsg. Dev. 15.59
Kamanwala Inds. 14.42

Data pulled from Capitalline on May 25 2006 11:20am EST. Thanks to my Good Buddy K for his help in gathering the information

Thursday, May 18, 2006

VC vs Private Equity

Thanks Paul Kedrosky well said I was trying to explain the same but U made it crisp and clear.

"The Venture Capital Trap
I had a funny conversation with a startup CEO this morning. We agreed that the trouble with most venture capitalists is that they don't actually want to be venture capitalists. They actually want to be private equity investors. After all, they want completed management teams, fleshed-out product plans, material revenue, and a finished product with minimal technology risk, etc.

Trouble is, early-stage companies rarely/never have those things, so they're re forced to settle. It pisses them off to no end -- leading to all sorts of silly and protracted discussions -- and then they take out their exasperation on poor investees in board meetings. Nasty."

Friday, May 12, 2006

DLF files draft for largest-ever IPO

People who know me. I warned about this guy earlier "Kush Pal Singh".

Sorry Mittal to see you going away ( I repsect your strategies and great business model). Any way I am happy that this guy is over there. Sigh!!! He is in the same domain as we are in "Real Estate and Construction". I admit we are a much smaller player. But we are doing good according to our standards. Being small is good we can do multi tasking and Diversify much quicker quirp..

DLF files draft for largest-ever IPO

From rags to riches, in 18 minutes

Good read for lesser souls. I understand the nature of people. So people spend all their money on unnecessary stuffs and cry that they are poor.

When you say you dont have money. Look for where did you spend the money on. I am not a savings person. But I know where my money goes and I look for long term benefits.

I like the below story. Systematic investment planning and its great and food for your burgeoning thougts ..
From rags to riches, in 18 minutes

You Tube Story --Turning viral videos into a net brand

Read about Steve Chen and Chad Hurley the founders of You Tube. I admire them to any extent. I have the respect to them as to Larry Page and Sergey. They are all set for a 10 million dollar revenue /Month and still want to be away from that. The multiple valuation of the company is is nearly 2.5 billion.( Its my valuation based on EBITDA and Industry comparables).

I like the fact that they are not greedy and care about users. trsut me its really hard when your similar friends travel in Jumbo Jets and Lamborginis.

Good luck and I really think your love for users are going to pay off. All the best budiies

Read beloe from CNN Money
Turning viral videos into a net brand - May 15, 2006

Monday, May 08, 2006

5 mistakes a small-business owner should never make - May. 8, 2006

5 mistakes a small-business owner should never make - May. 8, 2006

1. Too little cash
2. Thinking small
3. Skimping on tech
4. Underestimating the importance of sales
5. Losing focus

Crisp and up to the point. Worth a read. - U.S. Home

"WACHOVIA STRUCK a $26 billion deal to buy Golden West, the U.S.'s second-largest savings and loan. The purchase pushes Wachovia deeper into the mortgage business, while extending its ambitions to become a national banking player."

I mentioned before that there is only room for big players.

Next one. What abt Micro financing.. Any takers, Dont tell me you don't. Any one interested or with me we can share a thought or two.

Tuesday, May 02, 2006

Billion Dollar Secrets for Companiess

For any CEO. Want a big bonus and make value to share holders .Each of your step should be accomodating one of these things. Never waste your time managing internal affairs and stuffs. Leave it to managers and other people. Leverage your skills to make in to the lead..

1. Create and sustain a breakthrough value proposition.
2. Exploit a high-growth market.
3. Focus relentlessly on cash flow.
4. Leverage big-brother alliances.
5. Pack your board with industry experts.
6. Use marquee customers to build credibility.
7. Build an inside-outside leadership team.

Read more in detail
FSB: 7 secrets of success - Apr. 28, 2006:

Monday, May 01, 2006

FSB: 7 secrets of success - Apr. 28, 2006

Great one
FSB: 7 secrets of success - Apr. 28, 2006

Fresh Crop of Investors Grows in Silicon Valley

Angel Investing the mantra of Silicon valley. What i thought is that funding can be raised only in the order of million and all. I have few business models and what will I do if I need is not a million dollar.

Now I know whom to approach read below from WSJ. - Fresh Crop of Investors Grows in Silicon Valley