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…
What is common between “searching for needle in a haystack” and “going fishing”? The common thing is you are trying to get one small thing (needle or fish) in a sea of unknowns. That’s where the commonality ends. The approach one takes is different in both cases. In case of fishing, you place your hook in the water and wait for fish to get trapped. Yeah, you may try to fish in location known to be breeding ground. But in the end, fundamentally, you have to wait for the fish to get trapped. In case of searching for needle, you are making a proactive effort to clean the haystack knowing there is at least one needle somewhere in there. A dumb person will try to dive in, but a smart person, will carefully remove small blocks of haystack to reduce search space. You cannot do that with water. Can you reduce water to increase your probability of catching your fish? Probably not.
As a do-it-yourself investor, I enjoy the process of investing much more than finding my next company I will invest in. Admittedly, the process is much more challenging than finding the winning stocks. Yes, you read it right! Investing process is very difficult in many different contexts. Managing the portfolio requires wearing different types of hats. Sometimes you have act and behave like a leader, sometimes play the role of manager, and on many occasions you work like an employee.
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…