Latest stories

Gujarat gas – Recent review

By Rohit Chauhan
In Investment ideas, Uncategorized
September 23, 2007
2 Min read
4 comments
G

I invested in Gujarat gas back in 2003 and exited my position by 2006. I recently read the following post on ranjit’s blog. As Gujarat gas is one of his top 5 holdings, I decided to re-look at the company to see what I am missing out as I had exited my position sometime back and did not feel that the company is under-valued.

I found the following positives

– Gujarat gas now sources almost 95% of its gas requirements at market prices now and has been able to maintain the operating margins. In 2003, a substantial portion of gas was procured at subsidized rates and hence there was a risk of margin reduction. The company has been able to manage the transition very well.
– There has been a substantial reduction in the transmission income. The company has managed this well by expanding the other lines of revenue
– There is substantial expansion in progress at Vapi and Jaghadia. Vapi will contribute to revenue in 2007
– Gas volumes, no. of retail customers and bulk customers are all increasing at a heatlhy rate. This should provide good growth over the next few years
– The CNG business is now in growth phase and should provide for healthy growth of revenue and profits.

Overall the company is firing on all cylinders. It also has expansion plans in place and is investing heavily. I have updated my company analysis (valuation template-gujgasaug2007) and uploaded the same. The earlier analysis of the company from 2003-04 is also uploaded in the valueinvestorindia google groups.


Disclaimer: I am not recommending this stock. I do not hold the stock as of now and may or may not have a position in the future.
Read on4 comments

Feeling smart …like the duck

By Rohit Chauhan
In General thoughts, Uncategorized
September 21, 2007
1 Min read
2 comments
F

In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond. – Warren bufett – Letter to Berkshire Hathaway shareholders, 1997.

I generally check my portfolio performance once a month and with a runaway stock market (YTD +18% ) , it is diffcult to do badly. So I felt smart – like the duck 🙂 . You have to just throw darts on a stock list to make money these days. Lets see what happens after the music stops !

So are you feeling like the duck?
Read on2 comments

Hidden value – Kirloskar oil engines – Report card

By Rohit Chauhan
In Investment ideas, Uncategorized
September 18, 2007
3 Min read
11 comments
H
I posted on Kirloskar oil engines in oct 2006. I had noted that the company has investment holding in other group companies and JV’s of around Rs 95/ share. My own intrinsic value calculations were in the range of 320-350 Rs/ share. So how did the stock fare?

My personal history with the stock is below. I started investing in the June-july time frame and had an average cost of around 182 Rs/share. I sold at an average price of around 315/ share resulting in an annualized gain of around 75%.

So was it a smart pick ? more of that later. First I bought in june at an average price of around Rs 182/ share and price shot to around 300 by Nov time frame. Had I liquidated then, my annualized gain would be around 125%. Is this hindsight bias? I don’t think so. Let me explain – My approach has generally been buy and hold. The original thesis for this stock was that the company was selling below intrinsic value due to investment holdings and once it approached intrinsic value, I would sell it around 90-100% of the intrinsic value. However old habit die hard. I continued to hold on to the stock due to my muddled thinking.

I later read mohnish pabrai’s book – Dhando investor and also read some lectures by professor bakshi and have expanded my investment approach to buy and hold and to graham type stocks (which I sell once they reach 90-95% of intrinsic value). So the next time around when the stock approached my estimates of intrinsic value, I offloaded it completely this time.

Coming back to the issue of whether it was smart pick. The company is trading around intrinsic value, so it is tempting to claim that I was right. Frankly I am not sure. I also agree with prof bakshi’s comment in his interview that if the corporate structure is flawed, wherein the hidden value will not be unlocked, then such ideas are value traps. I have seen several such stocks where the investments in group companies makes them look undervalued. However I am wary of investing heavily in such stocks.

Final note: I did my personal analysis in june-july and posted it in oct 2006. So please do not blindly follow my suggestions when I publish them. I would suggest that you should do as I do on such stock analysis by bloggers. There are a number of like minded bloggers I read regularly. Whenever they discuss a stock, I make it a point to analyse it myself. I may not agree with the analysis eventually, but I know for sure that blogger has done some analysis and if it has passed his screens, it is definitely worth looking at closely.

Read on11 comments

Book notes – Way of the Turtle – Final post

By Rohit Chauhan
In Book review, Uncategorized
September 15, 2007
2 Min read
Add comment
B

Final post on my notes with my comments in italics

Earlier posts on the same book here,here, here and here

The thirteenth chapter discusses how robust systems can be developed. Systems which work in varying market situations are robust. The author gives an example from biological systems. He refers to the concept of simplicity and diversity. Simpler organisms are most resilient than complex ones which are adapted to specific environments. Also nature develops diverse organisms so that the ecosystem is shielded from the effects of a radical change in the environment. So systems or approaches built on these two concepts are more robust.

An investor following a simple and diverse approach will be more successful than others. For example, a value investor (simple approach) following a graham style approach, aribtrage and DCF based approach (diversity) can be fairly successful in varying market circumstances.

The fourteenth chapter discusses about the role of ego in investing. The simple rules discussed in the book are effective and profitable. However these simple rules do not feed the ego. When beginning traders use descretionary trading and use their own judgement, any win feeds the ego and feels good. You can now brag to your friends on how smart you are. The author mentions that this behavior is prevalent on online trading forums.

The same is applicable for value investors too. Value investing is a very effective and simple approach. However very few have the discipline to follow it consistently.

The author makes a very valid point for traders (and investors) that one should not wrap his ego around every trading win or loss. A failed trade or investment does not mean that you are an idiot or that a winning trade or investment does not mean that you are a genius. One should view failure and success in the market in the right perspective and not take it too personally (although it is easier said than done)

The last chapter discusses the Turtle trading rules in detail. It is however difficult for me to discuss them in detail here.

Read onAdd comment

Subscription

Enter your email address if you would like to be notified when a new post is posted:

I agree to be emailed to confirm my subscription to this list

Recent Posts

Select category to filter posts

Archives