Three Pillar of Berkshire’s Intrinsic Value – What do we Learn?

I am not a hardcore follower of Buffett’s investing philosophy. It is not because I do not agree with Buffett’s/Graham’s investing philosophy, but primarily because, my situation is different. The environment which influences my investing decisions is quite different than in which Buffett makes his decisions. Having said that, I like to understand his thought process to see if there is anything that I can use. I may not be able to use them on ‘as is’ basis, but at least the notion behind them can be applied. For example, I like Buffett’s practice of asking its holding companies to share a significant portion of earnings in the form of dividends. He believes he is in a better position to use this capital than company management.


Buffett’s letter to shareholders is released as a part of Berkshire Hathaway’s (BRK) annual reports. In almost all cases, I completely ignore CEOs/MDs letters in annual report. They are pure garbage in a sense they do not tell you anything. That is not a case with Buffett’s letters. Each and every year, his letters provide an insight in his thought process. This year was no different. Continue reading rest of this article…

Overvaluation in Heated Market – In What Context?

I have mentioned of this blog, keep your investment ideas or processes or choices very simple. Remain focused on your objectives. You may keep dissecting into multiple styles and methods. All said and done, all it will do is add a little panache to your chit chat or it may make you look good for few hours. It is my view that style and panacea does not give sustainable results. In one of my earlier post, I mentioned holding companies can be good long term investments. Only question remains is “how do you define a holding company”. If you constraint yourself with definitions in financial literature, then it is likely you will miss the essence of a holding company.


To me, the essence of holding company is like a parent company. A parent who are trying to raise their kids, i.e. new businesses or future companies, in a hope that all of them will be able to sustainable themselves in future. Parents work hard take risk, and kids… you know what I am trying to say, right? Continue reading rest of this article…

Raising Capital by Rights Issue – What to Make Out of It?

We have all heard a lot about initial public offer (IPOs), follow-on public offer (FPO), Bonds, VC, Angel investors, etc. Right issues is one method (among many other) that is not widely discussed in open financial media. One the reason is it is an option available to existing shareholders only. By definition, the significance seems to the titled towards existing majority shareholders.


The essence of raising capital through rights issues is very simple. It allows existing shareholder an option to invest more money into business. It gives them that benefit as an existing shareholder.  Here, the company board of directors decides to sell new shares, at a pre-defined price, in order to raise capital. In general, but not necessarily always, the shares are offered at a discounted price than the prevailing market price at that point in time. It gives existing shareholders an option to buy new shares proportional to their existing shareholding. It gives them an opportunity to maintain their existing percentage shareholding and hence, not dilute their ownership. Continue reading rest of this article…

Interpreting Corporate Events of Raising Capital – Background Summary

The way Indian economy has bounced back from 2008 downturn, it has continuously fueled the sense of optimism. In the eyes of developed countries in west, India may be corruption ridden, India may not replicate China’s infrastructure, India may have slow decision making, India is in politically sensitive region, and many more negative connotations. China had been benchmark for western world. But bottom line is, the bounce back from 2008 has proved to the debt ridden western world, structurally, India has sound economic and governance system. The democracy makes it slow, but it provides freedom and openness.  It may not be the best as per the western standards, but it is free and open society (ignoring occasional nuisances from regional groups). What does this have to do with individual investing?


This optimism fuels growth of economy, growth of businesses, and capital investments. Folks who are optimistic, and believe there is ROI for their capital, they are willing to invest money in businesses. And where there is investment, there will be investors like you and me. Continue reading rest of this article…

Holding companies Can Be Good Long Term Investments

In writing this post, I am assuming that readers understand what holding companies mean. If not, then you may read a simple primer on holding companies (link to another blog). I do not have any particular bias against or for holding companies. As I have said on many in past, investing should be based on your objectives. These objectives should take into consideration your risk profile and time horizon. This blog is about long term sustainable wealth creation. Does holding companies fit into it? How?


I try to keep things simple and focused. Style and panacea does not give you sustainable returns. Your sustainable returns comes from substance behind those stocks. All holding companies are not created equal, and hence all cannot be  grouped together as good or bad. As an individual investor, you need to separate holding companies that have substance and fits your portfolio objectives. Continue reading rest of this article…

Future Order Book: What Does it Mean?

1193474_dark_question_1This post is based on a question from one of the readers, I sometimes see research reports of various broker-houses. They show future EPS. They say company has orders lined-up in order book. I am not sure how to get order book details and Future EPS of a company”. I thought this was an interesting question in a sense that how it is interpreted by us as individual investors. Like everything, this also can be interpreted in multiple different ways.


In my view, there is no effective way to measure the impact of future order book on future EPS. Theoretically, it is possible to translate this into future EPS. But I believe it can only be done by company executives. It is company insiders who know the operating cost, raw material cost, possibility of order completion, taxation, and when the revenue is likely to be realized (i.e. received by the company). I cannot understand how brokerage houses or independent analyst can make that estimate.  I would like to know if anybody can share the methodology? To me, it only has a marketing value, nothing beyond that. Let me use an example. Continue reading rest of this article…

Determining ROI from TIPBlog

ROI_imageWe as human beings are always objective or goal oriented. We may not know it, but sub-consciously, we are always attempting to do a given task or an activity towards certain goal. Many folks will not agree with me, because there is a perception that ROI is always related to money. To me, it is not. If I spend time with my family, its because the pleasure I get (that’s an ROI). If I did not get that pleasure, overtime it will automatically create a rift. Similarly, if I play any team sports, or go out with friends, it builds our relationship, it builds camaraderie, a sense of togetherness. It is not necessarily for getting any money in return, but to be part of social community. You cannot live alone in this world, right? Keeping with this, the question I am trying to answer today is what is my ROI from this blog? I need to know what I am getting out of this blog. Here also, I will use the framework provided by Avinash. There are multiple parameters to determine ROI from the blog. Continue reading rest of this article…



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