The Chennai real estate prices did not fall too much. It got corrected to some extent in the range of 10-20% depending upon the location. In my opinion, the Chennai RE has appreciated too much and there is less room to move upward. The higher income (IT and others) job losses make the situations worsens further.

The beaten down stock market shows some improvement. I think it is wise to invest in stocks now. I bought suzlon at 40 Rs. (6000 stocks). In 2 months, the stocks price jumped to 90 Rs. I got my investment doubled and it may increase further. This may not possible with RE unless we are heading for collapse.
I bought Bank of Ireland ADR (IRE) for 1 dollar (1800 stocks). It is now at 9 dollars.
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  • Simple but Equally powerful rules :)

    Originally Posted by contra
    Wiseman,

    First let me sincearly appreciate you for taking time and efforts for putting together good content about oil business. I really liked the links and other info provided.

    Now back to our discussion,
    Since you are very interested in green energy space and investing in this space, let me tell you it is a good space still to invest. Since you seem to have good savings given your Rs.100 in the pocket formula, you are in a position to put some excess cash into new innovations/technolgies and wait for long years to see them fruitify to get good returns. I totally support your startegy.

    However the topic of discussion "better to invest in stocks ........" and the simplicity with which jay2008 was advising about stock investing is what trigerred me into this whole discussion.

    See, stocks are not for everyone. People like wiseman follow the news, do research and know when to enter/exit. But not every one can do that or have so much money to take risks......that is my whole argument.

    By the way...I am not talking for myself but for anyone who cannot figure out stocks.



    Contra,

    Thanks for taking my response in the right spirit. Maybe I was a little strong in my language and my apologies for that! :D

    Now back to the simplest and surest way to safely invest in stocks and make a fortune over next 10-15 years!!!

    Pick the safest companies. Split your money into 3 pieces (optionally 4 for the adventurous!!!).

    First piece of 40% goes for Blue Chips and/or large cap stocks in the indices.

    Second piece of 25% goes into Midcap segment into companies showing good growth stocks which continue to show growth even today. I was glancing at the paper today and saw two stocks I have tracked and actually even bought and sold in the 1990s. Polyplex and Vikas WSP. Both have shown growth and very decent margins even in today's market. In fact Vikas WSP is a peculiar share and is 100% export (check it out :)).

    Third, allocate 25% of your money for small cap stocks. That leaves 10%. Use it to invest in good but very cheap penny stocks. These are stocks of companies that have lasted many years and may have even done decent profits in the past, but are down on their luck now. Use the 10% to pick up large quantities of these companies in the Rs.1 - 3 range.

    Now comes the timing issue. There are two very useful indicators that most people look at.

    Normally, markets are near their top when the P/E ratio of the Sen crosses 22-25. They are near the bottom when the Sen P/E ratio is nearing 12-15.

    Second is the Dividend yield ratio. When this ratio for Sen stocks goes beyond 2.5%-3.0% time to buy. When this drops to 0.5% - 0.75%, time to sell and move into cash.

    You will notice that, by following these rules, you would have passed over the false signals to buy or sell and caught the real longterm tops and bottoms. When Sen went above 20000 these levels were reached. When sen went below 8500, again the buy levels were reached.

    And these indicator are readily published by relevant authorities.

    Do you still think Stock Investing is difficult to do? I think this is the easiest way to make safe, secure and very high longterm returns with annual cash dividends and excellent longterm capital gains, both of which are very low in tax incidence.

    Can't think of a better way to make money. Besides, your general knowledge about companies will also make you a sought after speaker in general get-togethers!!! :D

    cheers
    CommentQuote
  • Originally Posted by wiseman
    Contra,

    You will notice that, by following these rules, you would have passed over the false signals to buy or sell and caught the real longterm tops and bottoms. When Sen went above 20000 these levels were reached. When sen went below 8500, again the buy levels were reached.

    And these indicator are readily published by relevant authorities.

    Do you still think Stock Investing is difficult to do? I think this is the easiest way to make safe, secure and very high longterm returns with annual cash dividends and excellent longterm capital gains, both of which are very low in tax incidence.

    Can't think of a better way to make money.

    cheers


    Again you are talking only about yourself.

    In my case i am not talking about myself but for people who don't know anything about stocks but enter & fall in trap.

    In my very first few posts in this chennai forum sometime in march, was the first to write bullishly about buying indian stocks like Reliance Industries or DLF ( have no time to paste those links to prove them, those interested can browse through my earlier posts) . Got 80%-100% returns in the rally, and sold them all. Even yesterday sold BEML after buying just 3 weeks ago and made clean 27% returns in 3 weeks ( anticipated a rally in BEML before railway budget this friday since it is a railway stock).

    Now i prefer conservative stocks like Indian Oil which still have a mouth watering P/E ratio of just 9 given its potential. Will sell this as well after getting 25% or above returns in next few months.

    But i sincearly don't simplify to anyone to just enter in stocks just because someone else is getting good returns. Gold and real estate (government approved land or bank approved apartment) are the only good investments for those who want safety as well as good appreciation.
    CommentQuote
  • You may be right! But for the wrong reasons!

    Originally Posted by contra
    Again you are talking only about yourself.

    In my case i am not talking about myself but for people who don't know anything about stocks but enter & fall in trap.

    In my very first few posts in this chennai forum sometime in march, was the first to write bullishly about buying indian stocks like Reliance Industries or DLF ( have no time to paste those links to prove them, those interested can browse through my earlier posts) . Got 80%-100% returns in the rally, and sold them all. Even yesterday sold BEML after buying just 3 weeks ago and made clean 27% returns in 3 weeks ( anticipated a rally in BEML before railway budget this friday since it is a railway stock).

    Now i prefer conservative stocks like Indian Oil which still have a mouth watering P/E ratio of just 9 given its potential. Will sell this as well after getting 25% or above returns in next few months.

    But i sincearly don't simplify to anyone to just enter in stocks just because someone else is getting good returns. Gold and real estate (government approved land or bank approved apartment) are the only good investments for those who want safety as well as good appreciation.



    Contra,

    I'm not at all talking about myself alone (I'm quite sure about my ability to make very good money in the stock market and have done so for 27 years now). I was talking to the layman about stocks and how to make money on them without much risk to them. After all, the simple rules I put forth is childs play except for the mentally challenged (which I don't think anybody is on this post!). Do you remember the popular cooking serial on TV, "If Yan can cook, so can you"? His basic funda was, cooking is so easy that if a guy like Yan can cook, well, then who can't? Well, if Wiseman can invest, so can you!!!

    But I agree with you that most people fail in the stock markets. And, in my opinion the reasons may not be the inability to understand basic Financial Math or things like P/E ratio or dividend yield!

    After all, if these very same people can figure out the price movements of pattani (peas) and buy when its Rs.6 per kilo and stay away when its Rs.80 per kilo. Same logic. So, inability to understand does not seem to be the problem and the reason for this failure.

    I think the real problem is that most people approach the stock market as a gambling den. Laga to achcha, otherwise loss.

    When people do so much research about safety and returns between FDs giving 8% per annum and corporate bonds giving 12%, how can they be so frivolous and expect 100% returns from stocks? Where is the rigor in doing some simple, common-sense research (I buy Vadilal because they make some excellent icecream and I can see more and more people eating Vadilal's)? In addition, once the correct companies are identified, they further make the cardinal error of not buying when its good value and compound it by buying high and selling low based purely on emotional response (just like the example of not buying Suzlon at Rs.35 and showing profit last year, but jumping in at Rs.100 when it shows losses!).

    You can also see the exact same behavior in RE. Only thing is, the product is such that it forces them to hold it for 20 long years and then they see good returns. Well, if people bought good stocks and simply put it away forcibly for 20 long years, do you think they will not get great returns?:D

    If they reverse the timing and be fearful when they become greedy (at the top like 20000+ Sensx) and greedy when they are fearful (at the bottom like 8000-8500 Sensx), and they also see stock as good for 15%-25% return per annum (and not 70%-100% per annum) with some years showing book losses, as well as make sure that they invest in a Unilever (which has significant investments in technology, processes and brands) rather than a fly-by-night RE builder's stock, then they will see that stocks will be even more safe, secure and rewarding than most other avenues over the long run!

    It is this short-term, high-risk, high-return, gambling approach which is the culprit behind why people fail with stocks. Not their ability or the complexity or risks in the markets!!! I'm fully confident that at least 99% of the people on this forum can, given 1 month, easily learn the basics of financial math, common-sense company analysis and stock investing and start a very good portfolio for the long term by starting with baby steps with Rs.5000 and slowly increasing it as they learn the nuances of the market. Anyone willing to take up the challenge?

    Its really that simple!!! Ask the pros on this forum.:D

    cheers
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  • Basic finacial terms

    Net profit margin
    Operating margin
    EBITD margin
    Return on average assets
    Return on average equity
    P/E ratio
    Earnings per share

    Can somebody define the above terms and explain their significance in deciding about a company’s financial health, growth rate and returns.
    Also, are there any other indicators which needs to be considered to gauge a company's fundamentals and how do we know whether a company is run by a good management team?
    CommentQuote
  • We are drifting into making this a Stock forum!

    Originally Posted by themonk
    Net profit margin
    Operating margin
    EBITD margin
    Return on average assets
    Return on average equity
    P/E ratio
    Earnings per share

    Can somebody define the above terms and explain their significance in deciding about a company’s financial health, growth rate and returns.
    Also, are there any other indicators which needs to be considered to gauge a company's fundamentals and how do we know whether a company is run by a good management team?



    Themonk,

    We are slowly drifting into a serious stock discussion and I will opt out from that on this forum at this point! :)

    But here are some of the books I found useful in my education. Of course it also helped that I did an MBA and took finance as one of my disciplines with a focus on Capital Markets. I had the good fortune some of the foremost academics in the country in those days as my teachers, LC Gupta, IM Pandey and so on. It definitely makes a difference when people like this throw light on a subject. Subjects like Security Analysis and Portfolio Management give you a solid fundamental basis on which you lay your experience.

    Nevertheless, anyone can come upto 80% of this simply by reading books of the masters. I definitely liked the entire "Vision Books" series on the basics of investing, fundamental analysis, technical analysis and so on. Then there are the classics like "Technical Analysis of Stock Trends" by Edwards and Magee and the perenial favorite, "Security Analysis" by the father of Value Investing, Ben Graham, who was the guru of Warren Buffet.

    In the 1980s, life was so vastly different. These books needed to be imported and were frightfully expensive and took months to procure. But on the flip side, there were so few people into stocks and so much hidden value in stocks, which, if invested in gave huge returns 20 years later.:D

    Ultimately, like cycling, cooking and other essential skills, knowing how to do financial math is also an important life skill - so that you can evaluate the true value of any asset you are looking to buy. If you approach this as a lifelong learning experience, have the necessary passion to keep on learning by making mistakes and thinking about them and putting your money where the mouth is and sticking by the rules you make for yourself whatever be the circumstances, one can, given enough time, actually build serious wealth. This is how Warren Buffet did it (more often than not, he was ridiculed about his actions - remember how people in 1999 commented about how he lost out on the Dot Com boom and how his philosophy of not investing in what he could not understand came true in 2001 when his critics lost their shirts!!!:D)

    These things like P/E ratio and other ratios are very simple to learn, if one only picks up the book a computer (spreadsheet) and starts doing the stuff. I also find that, now-a-days there is too much reliance on just having what you need packaged and spoon-fed, like say visiting McDonald's to get a packaged burger. There is no substitute to the hard part of learning all the concepts around the actual stuff you want! Example, you might want to be thorough about NPV, IRR and the effects of compounding, before you know about whether Suzlon is good at Rs.100 today!!! It helps take the average joe from being another average joe to starting to become another Warren Buffet!

    I will now close all my stuff on Stock Markets on this forum except for occassional references, lest some people take offence (justifiably) :D

    cheers
    CommentQuote
  • Originally Posted by contra
    wiseman and jay2008,

    interesting!!!

    but i doubt anyone would dare to borrow a loan of 30 lacs to invest in stocks even if he/she would not hesitate to borrow 30 lacs to invest in flat.

    stocks which have low P/E ratios during bear markets can suddenly climb 100-200% in P/E rally. futuristic stocks (technology & dotcoms in 1990s, Green & renewable energy now) are always favourite of speculative young people(typically unmarried) with huge cash. young bachelors with excess cash are attracted to latest technology and future vision:D

    Though i am young, prefer Indian oil shares and Chennai real estate though both are giving some negative returns now.

    Hmm. If one had one crore he will buy RE, not stocks unless ofcourse he is worth say 10 to 100 crores. In other words hard earned money is put into safe high yield instrument like RE not into Stocks. Ofcourse one right move with a margin of 200 times can yield huge amounts in Dow trade for me. Can I therefore sell a property and trade that way?
    RE is for safe and secure growth.
    Stocks is for unsafe and insecure growth.
    Trading is high risk game for the best analysts only!
    CommentQuote
  • Originally Posted by Natarajg007

    Trading is high risk game for the best analysts only!



    I really don't know how you came to this conclusion.
    If you know the basic fundamentals of the market and the performance of the company, you will get good return.

    I recently bought a REIT stock. The stock symbol is "BEE". I bought at 1.03 dollars; it went to 1.70 within a month. I want to keep it long as long as my stop loss is not triggered.

    If you are buying a plot or apartment as your primary residence, then go ahead. If you are buying from an investment angle, the return in stocks will be much higher compared to RE. If you are not clear about stocks, it is better to stick with RE itself. RE is safe investment. The only question is how much return one will get from the much appreciated RE.


    CommentQuote
  • Originally Posted by wiseman
    Themonk,

    We are slowly drifting into a serious stock discussion and I will opt out from that on this forum at this point! :)

    But here are some of the books I found useful in my education. Of course it also helped that I did an MBA and took finance as one of my disciplines with a focus on Capital Markets. I had the good fortune some of the foremost academics in the country in those days as my teachers, LC Gupta, IM Pandey and so on. It definitely makes a difference when people like this throw light on a subject. Subjects like Security Analysis and Portfolio Management give you a solid fundamental basis on which you lay your experience.

    Nevertheless, anyone can come upto 80% of this simply by reading books of the masters. I definitely liked the entire "Vision Books" series on the basics of investing, fundamental analysis, technical analysis and so on. Then there are the classics like "Technical Analysis of Stock Trends" by Edwards and Magee and the perenial favorite, "Security Analysis" by the father of Value Investing, Ben Graham, who was the guru of Warren Buffet.

    In the 1980s, life was so vastly different. These books needed to be imported and were frightfully expensive and took months to procure. But on the flip side, there were so few people into stocks and so much hidden value in stocks, which, if invested in gave huge returns 20 years later.:D

    Ultimately, like cycling, cooking and other essential skills, knowing how to do financial math is also an important life skill - so that you can evaluate the true value of any asset you are looking to buy. If you approach this as a lifelong learning experience, have the necessary passion to keep on learning by making mistakes and thinking about them and putting your money where the mouth is and sticking by the rules you make for yourself whatever be the circumstances, one can, given enough time, actually build serious wealth. This is how Warren Buffet did it (more often than not, he was ridiculed about his actions - remember how people in 1999 commented about how he lost out on the Dot Com boom and how his philosophy of not investing in what he could not understand came true in 2001 when his critics lost their shirts!!!:D)

    These things like P/E ratio and other ratios are very simple to learn, if one only picks up the book a computer (spreadsheet) and starts doing the stuff. I also find that, now-a-days there is too much reliance on just having what you need packaged and spoon-fed, like say visiting McDonald's to get a packaged burger. There is no substitute to the hard part of learning all the concepts around the actual stuff you want! Example, you might want to be thorough about NPV, IRR and the effects of compounding, before you know about whether Suzlon is good at Rs.100 today!!! It helps take the average joe from being another average joe to starting to become another Warren Buffet!

    I will now close all my stuff on Stock Markets on this forum except for occassional references, lest some people take offence (justifiably) :D

    cheers


    Wiseman,
    thanks for the information. will try to study the books u referenced to learn the basics.
    CommentQuote
  • Originally Posted by Natarajg007
    Hmm. If one had one crore he will buy RE, not stocks unless ofcourse he is worth say 10 to 100 crores. In other words hard earned money is put into safe high yield instrument like RE not into Stocks. Ofcourse one right move with a margin of 200 times can yield huge amounts in Dow trade for me. Can I therefore sell a property and trade that way?
    RE is for safe and secure growth.
    Stocks is for unsafe and insecure growth.
    Trading is high risk game for the best analysts only!


    Natarajg,

    thanks, you agree with me.

    Stock trading is for best analysts only (one need not be a analyst by profession but have a strong analytical mind, insightful and capable of connecting many discrete things into a whole and steadily follow the news).

    For the rest of the population who don't have general knowledge and not analytical : Real estate and Gold are best options. By the way RE & gold are not average they have provided good returns too.

    Ofcourse in stocks, a super brain can make 300% in one year(in bull market) and atleast 20% (in a falling market by hand picking defensive stocks)...but than he/she is a super brain.....the others should not even attempt to try.
    CommentQuote
  • Contra,
    a. I never disagreed about that view, so your saying that I agreed is redundant, but to repeat I agree with you that RE is the best investment avenue for the average human investor.
    b. As I write this, my money has increased by 15% in the past few minutes in Nifty, but it can decrease the same in the next few minutes. Also your view of bear market in stocks is incorrect. One can make 300% or anything including -ve values in stock trading in BOTH bull and bear markets. Trading is about entering and exiting, it is also about leverage. It is not about bull or bear market. Trading in RE on the other hand is very very difficult. You cant short RE, can you?
    In summary RE is the best investment in India. Gold is a safe investment though it has not returned enough in the 80s and 90s.
    As such we never had a disagreement in view as far as RE bullishness is concerned.
    Take care.
    CommentQuote
  • Contra and Nats, you missed my point entirely ...

    Originally Posted by contra
    Natarajg,

    thanks, you agree with me.

    Stock trading is for best analysts only (one need not be a analyst by profession but have a strong analytical mind, insightful and capable of connecting many discrete things into a whole and steadily follow the news).

    For the rest of the population who don't have general knowledge and not analytical : Real estate and Gold are best options. By the way RE & gold are not average they have provided good returns too.

    Ofcourse in stocks, a super brain can make 300% in one year(in bull market) and atleast 20% (in a falling market by hand picking defensive stocks)...but than he/she is a super brain.....the others should not even attempt to try.



    Contra,

    I explained a simple, no-brainer way of investing in the stock markets for great, longterm returns, both in the form of Cap.Gains as well as Dividends, both of which have almost nil income tax incidence on you!!! The impact can be very powerful since CapGains tax on Stocks is even lower than RE!

    The method was to buy when P/E ratios of the Sensx were in the low teens (12-15) and Dividend yields in the 2.5%-3.5% levels and sell when the opposite happens - P/E ratio between 22-28 and dividend yield in the 0.5% - 0.75% level.

    Please note that these levels happen once every 5-8 years only. The lows happened in 2002 and again in 2008-09. The highs happened in 1999-2000 and again in 2007-08.

    So, where is the question of Trading? I was talking about investing.:D

    cheers
    CommentQuote
  • still there are stocks at 10% yield

    Iagree with wiseman
    there are stocks with an yield of 10% even today
    if one is patient and a long term portfolio investor stocks are the best
    NO DOUBT
    CommentQuote
  • It looks like moderator did not want my views posted.
    CommentQuote
  • Originally Posted by wiseman
    Contra,

    I explained a simple, no-brainer way of investing in the stock markets for great, longterm returns, both in the form of Cap.Gains as well as Dividends, both of which have almost nil income tax incidence on you!!! The impact can be very powerful since CapGains tax on Stocks is even lower than RE!

    The method was to buy when P/E ratios of the Sensx were in the low teens (12-15) and Dividend yields in the 2.5%-3.5% levels and sell when the opposite happens - P/E ratio between 22-28 and dividend yield in the 0.5% - 0.75% level.

    Please note that these levels happen once every 5-8 years only. The lows happened in 2002 and again in 2008-09. The highs happened in 1999-2000 and again in 2007-08.

    So, where is the question of Trading? I was talking about investing.:D

    cheers


    The following stocks have even now very attractive P/Es even less than 10 (You say P/E between 12-15 is good buy)

    Tata Steel, Orbit Corp, Ashok Leyland, Indian Oil- all are good long term bets ,

    (disclaimer: I currently hold the last 2)
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  • Guys, interesting thread this. i liked wiseman's thoughts.
    have a coupe of qs
    1)which is the best site to analyze the companies? I am aware of moneycontrol. but has excessive ads and irritating.
    bseindia site seems to be good. but it doesnt mention P/E ratio in the company profile.
    2)where can i see all the penny stocks? bseindia has large/mid and small cap companies. i know its a gamble investing in penny stocks. but since these cost very less ( i know cost is not the right word as low stock price doesnt imply its a cheap stock) we can buy in large quantity and then forget it. if it does well, then its good. else not much lost. in fact wieman too mentioned it in one of the posts. ( asset allocation)
    thanks in adv
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