Transcript of Bangalore stock exchange session july 2015
- 1. Investing under current market Scenario 26th July 2015
- 2. RichRich RetireRetire
- 3. Most of us dontMost of us dont get richget rich as we do not
haveas we do not have a clear definitiona clear definition of the
wordof the word RichRich
- 4. Robert Kiyosaki
- 5. You are richYou are rich when you canwhen you can maintain
yourmaintain your lifestyle, even iflifestyle, even if you stopyou
stop working for everworking for ever
- 6. Definition of rich YouMonthly Cash Inflow Cash outflow /
Monthly expenses Savings = Assets Returns from assets Capital
appreciation
- 7. Definition of rich YouMonthly Cash Inflow Cash outflow /
Monthly expenses Savings = Assets You are rich when your monthly
income from assets exceeds your monthly expenses Returns from
assets Capital appreciation
- 8. The key to becoming rich focus on ROI YouMonthly Cash Inflow
Cash outflow / Monthly expenses Savings = Assets Capital
appreciation You have to beat inflationYou have to beat inflation
by a good marginby a good margin to become richto become rich
ROIROI
- 9. The key to becoming rich focus on ROI YouMonthly Cash Inflow
Cash outflow / Monthly expenses Savings = Assets Capital
appreciation If you can get a 15-20% ROIIf you can get a 15-20% ROI
consistently, then you canconsistently, then you can get rich in
7-10 yearsget rich in 7-10 years ROIROI
- 10. PassivePassive incomeincome
- 11. Passive incomePassive income is incomeis income received on
areceived on a regular basis,regular basis, with little effortwith
little effort required torequired to maintain it.maintain it.
- 12. The secret ofThe secret of those who arethose who are
rich:rich: they have multiplethey have multiple sources ofsources
of passive incomespassive incomes
- 13. YouMonthly Cash Inflow Cash outflow / Monthly expenses
Savings = Assets Passive incomes Capital appreciation The rich
haveThe rich have multiple sources ofmultiple sources of passive
incomespassive incomes
- 14. How doesHow does one getone get rich?rich?
- 15. The GET RICH planThe GET RICH plan Between the ages of 20
and 30 focus on building active income and saving. In this period
learn investing so that you can get a 15-20% ROI. Between ages 30
and 40 build up financial assets and focus on building passive
income. Active income will also automatically grow. By the age of
40 you would have enough passive income to call yourself RICH and
follow your passions.
- 16. Your definition of richYour definition of rich :: By year
____ , I will haveBy year ____ , I will have assets worth Rs
____,assets worth Rs ____, giving me a ROI of x% ,giving me a ROI
of x% , giving me capitalgiving me capital appreciation of Rs____
and aappreciation of Rs____ and a passive income of Rs_____passive
income of Rs_____
- 17. What are theWhat are the financialfinancial assets I
canassets I can build to getbuild to get rich?rich?
- 18. Various asset buildingVarious asset building optionsoptions
Debt based asset building options when should I go for fixed
deposits? Insurance which insurance I must buy and which scheme I
must avoid? Commodity based asset building options Investing in
Gold and Silver?
- 19. Various asset buildingVarious asset building optionsoptions
Real estate based asset building options the various options and
what should I do? Equity based asset building options Should I
invest in stocks and if yes, how do I pick stocks? Mutual funds
based asset building options the various kinds of MFs and how to
identify the MF that I must invest in?
- 20. Various asset buildingVarious asset building optionsoptions
Real estate based asset building options the various options and
what should I do? Equity based asset building options Should I
invest in stocks and if yes, how do I pick stocks? Mutual funds
based asset building options the various kinds of MFs and how to
identify the MF that I must invest in?
- 21. EQUITY BASED ASSET OPTIONS
- 22. Let me understand you better How many of you invest in
equity markets through direct stocks and equity MFs How many of you
have more money invested in equity MFs than direct stocks?
- 23. My stock portfolio performance as of 24th July 2015
- 24. My MF portfolio performance as of 24th July 2015
- 25. Today I will share the following How do I select an equity
Mutual fund? How do I shortlist a stock - my checklist At what
price do I invest in the stock some details will be discussed more
details are in my book Decision on amount of money that I put in
each stock My views on exiting an investment ( Stocks or MFs or
even Real estate or Gold)
- 26. How do I select an equity Mutual Fund?
- 27. Mutual Fund OperationMutual Fund Operation Flow ChartFlow
Chart
- 28. How do I select an equity Mutual fund? My knowledge of MF
market comes from Peter Lynch Peter Lynch managed the Magellan Fund
for Fidelity between 1977 and 1990 His fund averaged a 29.2% annual
returns and was the best performing Mutual fund The Assets under
management of his fund grew from $18 M to $14,000 M under his
stewardship
- 29. How do I select an equity Mutual fund?
- 30. As per Peter Lynch Most MF managers have to have a short
term focus as investors measure them almost daily The better the
returns, the more thay are able to attract investor money The more
the money they manage, the higher their own ranking in the MF
industry Equity investing needs a 3 plus year timeframe
unfortunately MF fund managers look at monthly and quarterly
ROIs.
- 31. Kenneth Andrade Chief Investment Officer at IDFC MF
- 32. Kenneth Andrade Chief Investment Officer at IDFC MF Kenneth
is considered one of the best fund managers in India Forbes called
him the mid cap Mogul in 2011 He managed IDFC Premier Equity fund
and IDFC Equity opportunities fund managing appx Rs 7700 crores of
AUM IDFC Premier Equity fund gave 19.33% annually for the past
seven years vis a vis 8% of BSE 500
- 33. Kenneth Andrade Chief Investment Officer at IDFC MF He quit
his role recently and this is what he told Forbes - There is always
pressure on the fund manager to beat the index I wish that it was
more about buying businesses than buying stocks. Most investors
stay with a mutual fund only for 18 month Amongst the various
options -he is also looking at venture capital / private equity
space
- 34. How do I select an equity Mutual fund? First filter - I
look at the fund house the larger the operation, the better.
- 35. The top ten fund houses as of 30/6/2015 (based on AUM)
- 36. How do I select an equity Mutual fund? First filter - I
look at the fund house the larger the operation, the better. Second
filter I decide which type of fund I want to invest. -- Equity Vs
Debt funds Large cap vs Small and mid cap Mix of equity and debt
Sector funds
- 37. Equity vs Debt funds Equity funds are for long term,
inflation beating, capital appreciation where as Debt funds are for
short term parking of funds Long term means 2 years and above
- 38. Large cap vs Small and mid cap HDFC Top 200 fund HDFC mid
cap opportunities fund
- 39. Sector funds Sector funds are available focussed on Infra
sector; Banking sector; FMCG sector; Pharma Sector; Technology
sector; etc
- 40. Sector funds
- 41. Sector funds
- 42. Sector funds
- 43. How do I select an equity Mutual fund? First filter - I
look at the fund house the larger the operation, the better. Second
filter I decide which type of fund I want to invest. Look at the
top two funds (based on AUM) in the category that I want to invest
Decide based on the returns (more than one year), fund manager
between these two funds
- 44. Selecting a mid cap fund
- 45. Investing through direct equities
- 46. Some basic learnings Both long term and short term
investment strategies work. Levels of activity /inactivity and
holding period depends on your style. Chose what you are
comfortable with and stick to it
- 47. Some basic learnings I am a long term investor. I buy and
hold. If I like the stock I buy more in subsequent years and hold.
Long term for me, right now, is 5 years. Ideally I would like to
grow beyond this 5 years and go to ten or more years
- 48. Some basic learnings In financial markets, money always
flows from mediocre, under performing companies to stable, growing,
high return on capital companies.
- 49. Some basic learnings The best companies to invest in are
companies with high ROCE /ROE, low debt, high growth prospects and
which can reinvest its earnings and generate high returns on the
money reinvested These are what I search for these are COMPOUND
INTEREST MACHINES
- 50. Some basic learnings We have to have clarity in what ROI we
are aiming at. I aim at a 20% per annum ROI. I believe that as long
as the company is growing its top line and bottom line at 20% CAGR
- the share price will also go up by 20% CAGR (over a long
term)
- 51. An example HDFC Bank a compound interest machine
- 52. An example HDFC Bank a compound interest machine Date HDFC
share price 12 month ROI 10 July 2000 57 10 July 2001 42 -26.32% 10
July 2002 42 0.00% 10 July 2003 58 38.10% 10 July 2004 74 27.59% 10
July 2005 131 77.03% 10 July 2006 158 20.61% 10 July 2007 229
44.94% 10 July 2008 209 -8.73% 10 July 2009 276 32.06% 10 July 2010
391 41.67% 10 July 2011 498 27.37% 10 July 2012 581 16.67% 10 July
2013 672 15.66% 10 July 2014 826 22.92% 10 July 2015 1076 30.27%
Average Annual ROI 23.99% CAGR of 21.63% per annum Data from
Moneycontrol.com
- 53. How do I short list companies for study Large caps and mid
caps I take up industries/ companies based on market news and I
study them through public data available Small caps through my
friends in the equity analyst industry and reports available
through them Small caps - Following well known investors through
data from - http://rakesh- jhunjhunwala.in/ -----
- 54. My checklist as I study companies I have broadly followed
Warren Buffets checklist that is publicly available Business Do you
understand the business? Does the company have consistent operating
history? I look at operating margins for the past 10 years Does the
company have favourable long term prospects? I look at product
lifecycle
- 55. My checklist as I study companies Business Does the company
have strong pricing power? As India has inflation around 10%, if
Net profit margins are maintained over 10 years, it means it has
pricing power Does the company have moats? I study as to how it
manages its market share and grow it
- 56. My checklist as I study companies Management Is the
management trust worthy I look at past 5 years chairmans statement
and Management discussion for action plans and see if they have
followed up these with actions in subsequent years Are the managers
following extravagant and lavish lifestyles? Salary drawn, press
reports about the CEO etc throws some light
- 57. My checklist as I study companies Financials Does the
company have high ROE and ROCE Does the company have low or zero
debt? All these are available through financial statements
- 58. My checklist as I study companies What price should I buy?
PE ratio this should be high as that denotes growth companies
ideally 20 or more PEG Ratio this should be close to 1 or less than
1 the lesser the better as that denotes that the market is
undervaluing the company For large and mid caps I forecast the
share price based on past ten year financial data. For small caps I
am flexible as my exposure is also low.
- 59. My checklist as I study companies Companies to avoid as per
Warren Buffet Commodity companies eg TATA STEEL, STERLITE Cash
guzzling businesses -AIRLINES Industries that I do not
understand
- 60. My sources of Information Company website Moneycontrol.com
www.screener.in Analyst contacts
- 61. My allocation approach I use equity MFs for parking funds
till I find the right stock. For large caps or high conviction mid
caps I allocate between 2% and 5% of my portfolio For mid caps and
high conviction small caps I allocate between 1 and 3% of my
portfolio I do not add any new stock less than 1% of my
portfolio
- 62. My allocation approach I wait for 4 quarters once allocated
to watch the company performance and whether my assumptions are
right. If I am more convinced about the company I buy more stocks
in that company in subsequent years I typically get 4-5 new stocks
per year at best.
- 63. My current portfolio Around 20% of my portfolio is MFs HDFC
top 200, HDFC Mid Cap opportunities fund and HDFC tax saver. Around
52% of my portfolio is six shares (appx 9% each) - Gruh Finance,
Page Industries, Asian Paints, Pidilite, Sundaram Finance and KRBL
Around 25% of my portfolio is seven stocks (appx 3% each) Kitex,
HDFC Bank, Igarashi Motors, Amrutanjan, Shriram Transport, Mahindra
and Mahindra and Nandan Denims
- 64. Some of my compounding engines Company name Sales growth 10
yrs Profit growth 10 yrs PEG Gruh Finance 29.59% 28.62% 1.66 Page
Ind 35.33% 37.31% 2.32 Pidilite 20.98% 22.76% 1.88 Sundaram Finance
18.28% 13.22% 1.19 KRBL 20.92% 40.27% 0.33 Asian Paints 18.74%
23.20% 3.98 Kitex 18.47% 41.15% 1.14 HDFC Bank 27.18% 31.47% 0.85
Shriram Transport 28.50% 27.20% 2.1 Nandan Denim 35.28% 40.02% 0.12
Shilpa medicare 33.82% 44.25% 1.15 THESE ARE RECOMMENDED FOR YOU
TOO AT CURRENT PRICES
- 65. My views on exiting an investment Exiting an investment is
only for three reasons: 1. You need the money 2. The company /
stock price is not performing as per your forecast for this you
need to give it 3- 4 quarters 3. There is a better ROI investment
available
- 66. You can reach me through my websiteYou can reach me through
my website
http://get-rich-and-retire-early.comhttp://get-rich-and-retire-early.com//
- 67. You can join my private mailing list forYou can join my
private mailing list for equity - http://get-rich-and-retire-equity
- http://get-rich-and-retire-
early.com/equity/early.com/equity/
- 68. You can also get all updates throughYou can also get all
updates through the FB pagethe FB page