Warning Signs To Look For In Annual Reports

freedigitalphotos.net/David Castillo Dominici

Warning Signs serve a very important role in our lives.  They caution is in advance about the imminent dangers if we do not follow the guidelines or rules. We come across warning signs everywhere and they provide the information through signs so you immediately recognize them and take appropriate precautions.  So, what does this have to do anything with investing?  Just like any other activity investing is also filled with lot of dangers for the reckless investor.
Corporate governance is still a big concern in India and it is found to be lacking in both small as well as large companies.

Untangling Skill and Luck - Michael Mauboussin

This is great presentation by Mike Mauboussin on  Skill and Luck.  He explains where luck and skill apply and how they work together.  Very interesting and informative video.  This touches a bit on the behavioral aspects of our mind as well.

Time To Get Cautious

Markets are up and midcaps are doing pretty well. Even though the retail participation is still less, there is some cheer in the market with the current rally. I am sure most of you would be happy now that most of our investments (specially mid caps) are doing good. Market is in a cheerful mood and right from TV anchors to analysts are saying that nifty next target is 6700 and so on and so forth. When market starts going up it catches lot of attention and it becomes main news thereby attracting lot of people who stayed out for most of the time as the market was not giving any returns.

For those that are thinking of making an entry into stock market right now I would like to caution them about timing their entry.If you see the reasons for market rally, it is primarily based on the factors given below

Portfolio Quarterly Updates - Dec 2013 (Q3)

Review And Outlook:

Third quarter has been mixed quarter of sorts as far as corporate earnings were concerned.  While the economy continues to drag with high inflation and low growth, Mr. Market is in a very happy mood as he thinks that Mr. Modi will will the next elections and he would be able to bring in positive changes to the economy.  His enthusiasm has started pushing many midcaps into limelight.  Midcaps made handsome gains in price terms due to this general happiness of Mr. Market.

While the market is generally not over valued yet, the current valuation is high compared to the current inflation and the economic cycle.  Most of the businesses continue to be overvalued with very low expected returns in the future.  In some cases, the prices have increased substantially while the net profit of the company has shown degrowth.

When the market is in a cheerful mood, it becomes difficult for us to hunt for bargains.  If the current mood persists, we will have lot of difficulty in finding any new ideas with adequate expected future return and margin of safety. Most of the businesses in our portfolio has grown handsomely since Mar13 qtr.  On portfolio level, our business market value grew by around 34% while the sensex growth was at 8%.  Most of this is attributed to valuation growth by the market.  In pure intrinsic or networth growth terms, our business business grew by 20% which is great.

Performance Goals for 2014

Goal setting is very important for anyone to ensure progress.  This is applicable in aspect of life be it personal, career or finance.  Goals puts in motion the continuous improvement process which is what we should seek in our like.  As part of my investing journey, I wanted to set some clearly defined investment process goals which I want to achieve.  If we take care of the process the outcomes will take of themselves. Business performance goals for the calendar year 2014 are given below.  At the end of the year, I would like to review the goals.