I have been getting several questions of this type
– what should be my buying strategy ?
– Should I buy immediately or wait for the bottom?
– Is the price of stock ABC good for buying or should I wait?
I have very simple approach and answer to all the above questions (from my perspective)
Step 1: understand the company well. Have confidence on your analysis
Step 2: Evaluate intrinsic value. Be realisitic in your evaluation. Be neither too pessimistic or too optimistic
Step 3: check price. If selling below intrinsic value (I personally prefer 50% below intrinsic value, you can choose your own number), buy. Otherwise do nothing
Step 4 : Every quarter analyse the results of the company and check if your assumptions are still valid. Recalculate intrinsic value if required.
Personally I decide on the position size and then invest around 40-50% of the full position if the price meets my criteria in step3. The rest of the buying is done in the next couple of months.
This approach cuts both ways. In a rising market, I am unable to build a full position. In a bear market, I am able to average down on price. However while I am doing this I am not looking at the overall market levels or trying bottom fishing. I personally think bottom fishing is a futile exercise and a 5-10% difference in the price will not matter in the long run. If it does, then one is cutting it real close
Do not invest
There is caveat to the above suggestion. If you do not understand the company well, cannot evaluate the intrinsic value or do not have confidence on your analysis, please don’t invest. A bull market is forgiving and you may make money inspite of poor analysis. However a bear market is brutal. If you analyse a company incorrectly or do not have the confidence, the market will not bail you out.
Finally, if you ask for the all time best strategy – Create an SIP (systematic investment plan) on the index for the next 15 years and don’t disturb it.
What I am looking at now?
The market is moving pretty fast these days. As a result I have been reviewing my holdings and looking at new companies. As I plan to keep the total number of holdings fixed (more on that later), I am comparing new ideas with the exisiting ones. A new idea has to be more attractive than an exisiting one, to get into the portfolio (and push out the less attractive stock)
Some companies I am looking at
Lakshmi machine works
Ingersoll rand
ICSA (later)
SKF bearing
HTMT global (cash bargain)
Denso india
Sonata software
Torrent software
The above list is not a recommendation list. It is just a list of stocks I am looking at and may or may not invest in any one of them. I will post on stocks which I find attractive when I complete the analysis and am able to write a post on it.
Hi Rohit,I started investing in stocks around 1 yr back and I am almost 50% of my amount (considerable amount) I invested. This is first time I am seeing the bear market. some of my friends are in panic and suggesting to sell all my holdings as they are expecting more free fall. I would appreciate if you can share your views on bear market. How things pan out after beark market? And what type stocks go bust after bear market?What should be the best strategy to adopt in bear market? Patience? Holding your positions? Thanks in advance,Pankaj
Hi Rohit,The stocks (as mentioned in this post) that you will be looking into, where does this come from? Is this as a result of your filters? or from other sources?Thanks,Vikas
Hi pankaji am sorry that. most of the investor are facing similar losses. there is no simple answer. i will try to post on it soon.vici look at icici direct and use PE as a filter to create the initial list.regarding the stock list, i will start analysing them after some. I am currently tied up with list above and would be looking at other stocks after thatregardsrohit
Hi Rohit,Checking latest annual report of HTMT,Unquoted investment – 391 cr (incl 388 cr in subsidiary) Cash & bank balance – 8.68 crOther current assets – 22.78 crSundry debtors – 77.8 crLoans & advances – 49.94 cr Current liabilities – 92.75 crNet current assets – 66.45 crDebt – 74.74 crTotal outstanding shares – 2.053 crPrice – 160 Market cap – 328 crAre you considering 391 cr of unquoted investments as cash or equivalent? or am I missing some thing here?Appreciate your comments.RegardsPrashant Dubey
Hi Rohit,Appreciate your views on Prithvi Info:Cash & bank balance – 214 crOther current assets – 34 crSundry debtors – 414 crLoans & advances – 136 cr Current liabilities – 177 crNet current assets – 724 crDebt – 372 crTotal outstanding shares – 1.8 crPrice – 65 Market cap – 117 crThis stock is trading one third of (working capital – Debt)RegardsPrashant Dubey
Hi Rohit, Can you please have look at Tata Chemicals . The valuations are attrcative as well .
Hi Rohit It would be nice if you cant post something on “How to evaluate intrinsic value of a share”Its really required by a lot of people. Manish http://finance-and-investing.blogspot.com/
Rohit,I had posted another question, don’t see it here yet. I assume it is waiting for your approval.Vikas
Hi prashanti am referring to cash holding in the HTMT subsidiary. the company is holding around 540 crs of cash in subsidiary (dont know why in the sub). they have however earmarked it for accquisitions.have a look at their consoldiated statement.i will have a look at the other company. however cannot promise you a fast response. vic – did not get your other comment.manish – i have done a post on it in the past . here is the link – http://valueinvestorindia.blogspot.com/2008/04/what-is-intrinsic-value.htmlregardsrohit
Hi Rohit,Ok, here are my two questions again:1) You mentioned “Finally, if you ask for the all time best strategy – Create an SIP (systematic investment plan) on the index for the next 15 years and don’t disturb it.” Are you referring to buying an Index (e.g. Nifty BeES) in an SIP fashion?2) Can u tell us which stocks (of the ones that u analyzed such as BL, BEL, Glaxo Con) trading close to 40-50% below intrinsic value?Thanks,Vikas
Hi vicyes ..i mean nifty or bse sensex via nifty bees. i dont think you can set automatic sip though. you will have to do it manuallyall the the stocks except glaxo cons. i have mentioned my estimates of intrinsic value for all the ideas on my blog. so it should be easy to compare with current priceregardsrohit
Hi Rohit,Some brokers do allow you to do auto SIPs like Sharekhan ( monthly, weekly and even daily!!). And to the person who made the comment on Prithvi Info, just want to check if the FCCB is factored in as debt? Prithvi Info is one of the Lehman-invested company and as such got beaten down crazily. I think at current conversion price of the FCCBs, there will be downward revisions and hence equity dilution and reduction in cash per share…Prashant
Hello Rohit,Some of the stocks discussed in your blog are trading trading close to 40-50% of intrinsic value like Guj Gas, Novartis, Blue Star.Can u tell us other stock you have analysed / not posted and trading close to 40-50% intrinsic value, together with intrinsic value?Thanks in advance
Hi Rohit,I was just surfing through the web site of Revathi Equipments, and i found staggering similarities in the Chairman’s letters to share holders with Berskshire’s letters. How this guy Abhishek Dalmia can lift word to word from Berk’s letters? Even other reports contain great similarities with Berk’s.Can you please throw some light on revathi? if you have any idea?regardsAni
hi rohit,hey wat do u think abt gandhi special tubes?
Hey Rohit,In 2005 you had written http://valueinvestorindia.blogspot.com/2005/11/my-problem-with-stock-screens.html this article. in which you wrote few lines for Mercator Line.Currently has come below it's Book value 38. CmP is 35. Except Debt ratio 1.2, i found everything OK which is found in dynamic and growth company. What is your take on this company? Currently Shipping sector is hit by recession. so the SCI, GE & mercator are trading below their Book values. Which one of these could be value play?regardsAni
hi anonymousmost of the stock, i would almost all the stocks i have analysed in the past are definitely trading at 50% of intrinsic valuehi anithe chariman of revathy is clearly influenced by warren buffett. it is a good company and i have looked at investing in the company, but the price has not been right. i have not seen mercator. but i would prefer GE shipping over others as it is the biggest company and fairly well run one.hi sandyi will have a look at the company and let you knowregardsrohit
hi rohitwat r ur views abt investing in the us stock market?lotta good quality companies are available at attractive levels and also one can can learn a lot abt their business reading 10ks and literature available on these companies…i have come across some nice opportunities in the us market….why just limit ourselves to the indian market?can we discuss abt us stocks?
Hi Rohit,Somehow my comments/posts are missing. I posted few on Friday but don’t see them yet.Any suggestions?Thanks,Vikas
hi vikasnot sure what is happening. i had approved the comments on friday and they are not appearing on the blog. this seems to be happening on and off for various commentersi only censor spam ..no other commentsregardsrohit
Hi Rohit,Ok, I’ll try posting this again.:) Hopefully, will work this time.I wanted to elaborate on what you confirmed earlier:“Finally, if you ask for the all time best strategy – Create an SIP (systematic investment plan) on the index for the next 15 years and don’t disturb it.”I thought you’re a pure value investor. I mean Indexing is just the opposite of Value. An indexer believes that the markets are efficient, all the market/business etc. factors are already priced into the stock. But A value investor thinks the opposite.So I’m confused. Are you leaning more towards Indexing Vs Value Picking based on your experience? Your thoughts on this will be a great help.Thanks,Vikas
hi vikasi have elaborated on this earlier on my blog.any active investing strategy should beat the index. also active investing takes time and effort. passive investing – indexing is however low effort and still one can get decent returns in an absolute terms. which is why i think even if you are a value investor, some part of the portfolio can be indexed.it is similar to holding a FD even though you invest in stocks. each investment type serves a different need and level of riskregardsrohit
Thanks, appreciate your input.Vikas