Sunday, July 13, 2008
Golden Quote
Saturday, July 12, 2008
24 Buffet Ideas to win 365 battles every year
24 ideas Buffet has followed from day one.Your reviewer enumerates below these twenty-four ideas with his comments for your ready reference:
1. Choose Simplicity over Complexity
When investing, keep it simple. Do what’s easy and obvious.If you don’t understand a business, don’t buy it.
2. Make Your Own Investment Decisions
Don’t listen to the brokers, the analysts, or the pundits. Figure it out for yourself.Become a value investor. It’s proven to be a very rewarding technique over the long term.
3. Maintain Proper Temperament Let other people overreact to the market.
To succeed in the market, you need only ordinary intelligence. But in addition, you need the kind of temperament to help you ride out the storms and stick to your long-term plans. If you can stay cool while those around you are panicking, you can surely prevail.
4. Be PatientThink 10 years, rather than 10 minutes
Don’t dwell on the price of stocks. Instead, study the underlying business, its earnings capacity and its future. If the question is, “How long will you wait?” – “If we’re in the right place, we’ll wait indefinitely” says Buffet.
5. Buy Business, Not Stocks
Once you get into the right business, you can let everyone else worry about the stock market.Business performance is the key to picking stocks. Study the long-term track record of any company that is onyour buy list. Buffet looks for following five main things before investing in a company.(i) Business he can understand(ii) Companies with favorable long-term prospects(iii) Business operated by honest and competent people(iv) Businesses priced very attractively(v) Business with free cash flowDon’t think about “stock in the short term.” Think about “business in the long term”.
6. Look for a Company that is a Franchise
Some businesses are “franchises”. Franchise generates free cash flows.
7. Buy Low-Tech, Not High-Tech
Successful investing is rarely a gee-whiz activity. It’s less often about rockets and lasers and more often about bricks, carpets, paint, shaving blades and insulation.Do not be tempted by get-rich-quick deals involving relatively complex companies (e.g., high-tech companies).They are the most unpredictable in the long run. Look for the absence of change. Look for the business whose only change in the future will be doing more business, e.g Gillette Blades.
8. Concentrate Your Stock Investments
A the “Noah’s Ark” style of investing – that is, a little of this, a little of that. Better to have a smaller number of investments with more of your money in each.Portfolio concentration – the opposite of diversification – also has the power to focus the mind. If you’re putting your eggs in only a few baskets, you’re far less likely to make investments on impulse or emotion
9. Practice Inactivity, Not Hyperactivity
There are times when doing nothing is a sign of investing brilliance.Be a decade’s trader, not a day trader.
10. Don’t Look at the TickerTickers are all about prices.
Investing is about a lot more than prices. It is about value. It is about wealth.Abstain from looking at share prices every day. Study the playing field and not the scoreboard. Know the value of something rather than the price of everything.
9. Practice Inactivity, Not Hyperactivity
There are times when doing nothing is a sign of investing brilliance.Be a decade’s trader, not a day trader.
10. Don’t Look at the Ticker
Tickers are all about prices. Investing is about a lot more than prices. It is about value. It is about wealth.Abstain from looking at share prices every day. Study the playing field and not the scoreboard. Know the value of something rather than the price of everything.
11. View Market Downturns
as Buying OpportunitiesMarket downturns aren’t body blows; they are buying opportunities.Change your investing mind-set. Reprogram your thinking. Learn to like a sinking market because it presentsgreat buying opportunity. Pounce when the three variables come together. When a strong business with anenduring competitive advantage, strong management, and a low stock price come onto your investment screen.
12. Don’t Swing at Every Pitch
What if you had to predict how every stock in the Standard & Poor’s (S&P) 500 would do over the next few years?In this scenario you have very poor chance of being correct. But if your job was to find only one stock among those 500 that would do well? In this revised scenario you have a good chance. A few good investments are all that is needed.
13. Ignore the Macro; Focus on the Micro
The big things – the large trends that are external to the business – don’t matter. It’s the little things, the things that are business-specific, that count.It’s possible to imagine a cataclysm so terrible that the markets would collapse and not bounce back. Externalities don’t matter – and you can’t predict them, anyway. And what can you do about them? Focus on what you can know: the workings of a good business.
14. Take a Close Look at Management
The analysis begins – and sometimes ends – with one key question: Who’s in charge here?Assess the management team before you invest. A investing in any company that has a record of financial or accounting shenanigans, (creative accounting, accounting jugglery). Weak accounting usually means weak business performance. Strong companies do not have to resort to tricks.
15. Remember, The Emperor Wears No Clothes on Wall Street
Wall Street is the only place where people go to in Rolls Royce to get advice from people who take the subway.Ignore the charts. A value investor is not concerned with charts. Invest like Benjamin Graham. Graham told investors to “search for discrepancies between the value of a business and the price of small pieces of that business in the market.” This is the key to value investing, and it’s far more productive than getting dizzy studying hundreds of stock charts.Offer documents of most mutual funds say – in small print – that past performance is no guarantee of future success. Buffet says the same thing about the market: If history revealed the path to riches, librarians would be rich.
16. Practice Independent Thinking
When investing, you need to think independently.Make independent thinking one of your portfolio’s greatest assets. Being smart isn’t good enough, says Buffet.Lots of high-IQ people fall victim to the herd mentality. Independent thinking is one of Buffet’s greatest strengths.Make it one of your own.
17. Stay within Your Circle of Competence
Develop a zone of expertise, operative within that zone.Write down the industries and businesses with which you feel most comfortable. Confine your investments to them.
18. Ignore Stock Market Forecasts
Short-term forecasts of stock or bond prices are useless. They tell you more about the forecaster than they tell you about the future. Take the time you would spend listening to forecasts and instead use it to analyze a business’s track record. Develop an investing strategy that does not depend on the overall movement of the market.
19. Understand “Mr. Market” and the “Margin of Safety”
What makes for a good investor? A good investor is one who combines good business judgment with an ability to ignore the wild swings of the marketplace.
When the emotions start to swirl, remember Ben Graham’s “Mr.Market” concept, and look for a “margin of safety”.Make sure that you also understand Buffet’s concepts of Mr. Market and the margin of safety.
Like the Lord, the market helps those who help themselves. But, unlike God, the market doesn’t forgive those who “know not what they do”.
Bide your time, and wait for Mr. Market to get depressed and lower stock prices enough to provide a margin-ofsafety buying opportunity.
20. Be Fearful when Others Are Greedy and Greedy When Others Are Fearful
You can safely predict that people will be greedy, fearful, or foolish. Trouble is you just can’t predict when or in what order.Buy when people are selling and sell when people are buying.
21. Read, Read Some More, and Then Think
Mr. Warren Buffet spends something like six hours a day reading and an hour or two on the phone. The rest of the time, he thinks.He therefore advises to get in the habit of reading. The best thing to start is to read Buffett’s annual reports and letters. Finally, restrict your time only to things worth reading.
22. Use All Your Horsepower
How big is your engine, and how efficiently do you put it to work? Warren Buffett suggests that lots of people have “400 – horsepower engines” but only 100 horsepower of output. Smart people, in other words, often allow themselves to get distracted from the task at hand and act in irrational ways. The person who gets full output from a 200-horse-power engine, says Buffett, is a lot better off.Make sure that you have the right role models. Strive for rational behaviour, good habits, and proper temperament. Write down the habits, practices and philosophies that you want to make your own. Then be sure to keep track of them and eventually own them. Financial success is a “matter of having the right habits”.
23. Learn from the Costly Mistakes of Others
This is self explanatory and need no comments!
24. Become a Sound Investor
Buffet says that Ben Graham was about “sound investing”. He wasn’t about brilliant investing or fads and fashions, and the good thing about sound investing is that it can make you wealthy if you are in not too much of a hurry, and it never makes you poor.To become a sound investor, you need to develop sound investing habits. Always fight the noise to get the real story.Always practice continuous improvement.
5 Key Lessons From Top Money Managers
“Security Selection"*
Acquire companies with reliable cash flows. Look for firms that possess structural competitive advantages capable of protecting those cash flows from competition. A structural competitive advantage can be a dominant market share, a proprietary asset, low-cost producer status, or a defensible brand.* Calculate the present value of a corporation's future cash flows to determine its fair market value. Try to buy the business at a sizable (ideally at least 40 percent) discount to its value.* Buy companies just prior to the start of their profit cycles, looking for firms that are experiencing internal and/or external changes. Internal changes include such things as a new management team, a big acquisition or divestiture, a major restructuring, or a new product launch. External changes include new technologies and regulatory events.
Portfolio Allocation*
Maintain a garden-a portion of the portfolio that includes small positions in stocks that meet your requirements but have not yet entered their profit cycles.* Increase your positions in companies as they begin their profit cycles and move them to your crop-that part of the portfolio where you take bigger positions in firms that have proven their abilities to meet your growth expectations.* When a stock reaches your target price or its profit cycle begins to decelerate, reduce or eliminate your position in it-harvest it.* Do not time the market; always remain fully invested.* Reduce the size of your crop and increase the size of your garden to lower your risk during economic downturns when profit cycles are sparse.* Do not overconcentrate in a single sector of the market.”
About FCCBs, GDRs and ADRs
Foreign Currency Convertible Debenture -
A type of convertible bond issued in a currency different than the issuer's domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A convertible bond is a mix between a debt and equity instrument. It acts like a bond by making regular coupon and principal payments, but these bonds also give the bondholder the option to convert the bond into stock.These types of bonds are attractive to both investors and issuers. The investors receive the safety of guaranteed payments on the bond and are also able to take advantage of any large price appreciation in the company's stock. (Bondholders take advantage of this appreciation by means warrants attached to the bonds, which are activated when the price of the stock reaches a certain point.) Due to the equity side of the bond, which adds value, the coupon payments on the bond are lower for the company, thereby reducing its debt-financing costs.
A Global Depository Receipt or Global Depositary Receipt
(GDR) is a certificate issued by an international bank which can be subject of worldwide circulation on capital markets. GDRs are emitted by banks, which purchase shares of foreign companies and deposit it on the accounts. Global Depository Receipts facilitate trade of shares, especially those from emerging markets. Prices of GDRs are often close to values of related shares.
An American Depositary Receipt
(ADR) is how the stock of most foreign companies trades in United States stock markets.Each ADR is issued by a U.S. depositary bank and represents one or more shares of a foreign stock or a fraction of a share. If investors own an ADR they have the right to obtain the foreign stock it represents, but U.S. investors usually find it more convenient to own the ADR. The price of an ADR is often close to the price of the foreign stock in its home market, adjusted for the ratio of ADRs to foreign company shares.Depositary banks have numerous responsibilities to the holders of ADRs and to the non-U.S. company the ADRs represent. The largest depositary bank is The Bank of New York.Individual shares of a foreign corporation represented by an ADR are called American Depositary Shares (ADS).The level of compliance to be shown by the company, with the laws of the country where its ADRs or GDRs are traded will depend on the type of float it decides to have. Whether it just wants its stock just to be available to the foreign investors or whether it wants to raise money from foreign shores etc., will decide the depth of the compliance levels. The government came with a scheme during 1992/1993 to allow the Indian Corporate Sector to have access to the Global Capital Markets through issue of Foreign Currency Convertible Bonds (FCCBs)/Equity Shares under the Global depository Mechanism.The guidelines were liberalized from time to time and the recent initiatives are listed below:1. Pricing guidelines for Indian listed companies FCCB/ADR/GDR were brought in alignment with SEBI's guidelines on domestic capital issues. 2. Unilisted companies issuing FCCB/ADR/GDRs are now required to have prior or simultaneous listing in domestic stock exchange(s). 3. Unlisted companies, which have issued ADR/GDR/FCCB, now required to list in domestic market by 31 March 2006. However, unlisted companies which had accessed FCCBs, ADR/GDRs in terms of guidelines at 22 May 1998 and are not making profit, be permitted to comply with listing condition on the domestic stock exchanges within three years of having started making profit. However, no fresh issues of FCCBs, ADR/GDRs by such companies will be permitted without listing first in the domestic exchanges. 4. In order to rationalise the ADR/GDR guidelines further, Government exempted the companies, going in for an offering in the domestic market and a simultaneous or immediate follow on offering (within 30 days of domestic issue) through ADR/GDR issues wherein GDRs/ADRs are priced at or above the domestic price, from the requirement of the revised pricing guidelines. 5. Unlisted Indian companies, which had issued FCCBs, ADRs/GDRs prior to 31 August 2005 and are not making profit are also permitted to sponsor such issues against existing shares and are permitted to comply with listing conditions on the domestic stock exchanges within three years of having started making profits.
Book Building
IFRIC issues Interpretation on construction of real estate
July 2008:
The International Financial Reporting Interpretations Committee has issued an Interpretation, IFRIC 15 Agreements for the Construction of Real Estate. IFRIC 15 standardises accounting practice across jurisdictions for the recognition of revenue by real estate developers for sales of units, such as apartments or houses, 'off plan' – that is, before construction is complete.
Observations about IFRIC 15:
Fundamental issue. The fundamental issue is whether the developer is selling goods – the completed apartment or house – or is selling a service – a construction service as a contractor engaged by the buyer. Revenue from selling goods is normally recognised at delivery. Revenue from selling services is normally recognised on a percentage-of-completion basis as construction progresses. IFRIC 15 provides guidance on how to determine whether an agreement for the construction of real estate is within the scope of IAS 11 Construction Contracts or IAS 18 Revenue and, accordingly, when revenue from the construction should be recognised.
IAS 11 or IAS 18? An agreement for the construction of real estate is a construction contract within the scope of IAS 11 only when the buyer is able to specify the major structural elements of the design of the real estate before construction begins and/or specify major structural changes once construction is in progress (whether it exercises that ability or not). If the buyer has that ability, IAS 11 applies. If the buyer does not have that ability, IAS 18 applies.
If IAS 18, service or goods? Even if IAS 18 applies, the agreement may be to provide construction services rather than goods. This would likely be the case, for instance, if the entity is not required to acquire and supply construction materials. If the entity is required to provide services together with construction materials in order to perform its contractual obligation to deliver real estate to the buyer, the agreement for the sale of goods under IAS 18.
Implications of IFRIC 15. The main expected change in practice is a shift for some entities from recognising revenue as construction progresses to recognising revenue at a single time – at completion upon or after delivery. Agreements that will be affected will be mainly those currently accounted for in accordance with IAS 11 that do not meet the definition of a construction contract as interpreted by the IFRIC and do not transfer to the buyer control and the significant risks and rewards of ownership of the work in progress in its current state as construction progresses.
IFRIC 15 is effective for annual periods beginning on or after 1 January 2009 and must be applied retrospectively.mail to me at casatbirgill@gmail.com for bare act of IFRIC 15
IFRIC guidance on hedge of an investment in a foreign operation
IFRIC 16 clarifies three main issues:
Whether risk arises from (a) the foreign currency exposure to the functional currencies of the foreign operation and the parent entity, or from (b) the foreign currency exposure to the functional currency of the foreign operation and the presentation currency of the parent entity's consolidated financial statements.
IFRIC 16 concludes that the presentation currency does not create an exposure to which an entity may apply hedge accounting. Consequently, a parent entity may designate as a hedged risk only the foreign exchange differences arising from a difference between its own functional currency and that of its foreign operation.
Which entity within a group can hold a hedging instrument in a hedge of a net investment in a foreign operation and in particular whether the parent entity holding the net investment in a foreign operation must also hold the hedging instrument.
IFRIC 16 concludes that the hedging instrument(s) may be held by any entity or entities within the group.
How an entity should determine the amounts to be reclassified from equity to profit or loss for both the hedging instrument and the hedged item when the entity disposes of the investment.
IFRIC 16 concludes that while IAS 39 must be applied to determine the amount that needs to be reclassified to profit or loss from the foreign currency translation reserve in respect of the hedging instrument, IAS 21 must be applied in respect of the hedged item.
IFRIC 16 is effective for annual periods beginning on or after 1 October 2008 and may be applied prospectively.
Mail to me at casatbirgill@gmail.com for bare act of IFRIC 16
TREKKING IN THE MOUNTAINS
Golden Quote
CONGRATULATION TO CA'S
CONGRATULATION TO THE FOLLOWINGS ON BECOMING CHARTERED ACCOUNTANT:-
1. CA BHUVAN GOYAL
2. CA CHAMAN LAL GOYAL
3. CA VIKAS KAPAHI
4. CA MANIT KAUR (40 TH RANK)
5. CA VISHAL AGGARWAL
6. CA POOJA RANI
7. CA HEMANT
8. CA VIVEK SAWHNEY
9. CA ABHISHEK KASHYAP
10. CA AKHIL CHOPRA
11. CA RAGHAV (10TH RANK)
12. CA SHUKHVINDER SINGH
13. CA RICHA SAINI
14. CA HARPREET KAUR
15. CA SANDEEP SYAL
16. CA GURVINDER
17. CA ABHASH KUMAR
18. CA NITYA GUPTA
19. CA ANURAG VERMA
20. CA VIHSAL PURI
21 CA DIVYA SHARMA
22 CA ESHA
23 CA CHITRA ANAND
24 CA AMIT SOOD
25 CA NARESH KUMAR
CONGRATULATION TO FOLLLOWINGS ALSO FOR PASSING THE GROUP:-
1. ANKIT WALIA -2ND GROUP
2. DEEPAK KUMAR WADHAWAN -2ND GROUP
3. RISHU MAGGO -2ND GROUP
4. ASHUTOSH -1ST GROUP
5. VIKAS CHANDEL -1ST GROUP
“defeat is not when you fall down, It is when you refuse to get up!.....”
“JAB WE MET CA “ IS WITH ALL :-
“The movement you think of giving up ,think of the reason you Held so long ……..Do or Die is an old saying ,Do it before you die is the latest ….”
TO ALL OTHERS WHO COULD NOT PASS , “JAB WE MET CA” GROUP IS WITH THEM
DO NOT WORRY. PLEASE APPLY FOR REVALUATION WHICH IS THE RIGHT OF EVERY STUDENT AND START STUDING AGAIN .PLEASE ANALYSE WHERE WAS LACKING AND TRY TO IMPROVE THAT I KNOW MANY FRIENDS OF MINE WHO COULD NOT CLEAR THE LAST EXAM BUT HAD CLEARED THIS EXAM WITH THE EXCELLENT RECORD. IF ANY MEMEBER NEEDS ANY HELP ON ANY TOPIC/STUDY MATERIAL “JAB WE MET CA” GROUP IS BEHIND THEM TO HELP ON ANY TOPIC.
“If the path is beautiful, let us not ask where it leads…..And if the destination is beautiful, Let us not ask how is the Path .”
Keep Walking…………
Please visit http://www.jabwemetca.blogspot.com/ regularly to keep youself updated.
I BELIEVE INVESTMENT IN THE KNOWLEDGE IS THE BEST INVESTMENT.
WITH REGARDS
CA SATBIR SINGH
NOTE :-IF ANY CORRECTION/ADDTION IS NEEDED IN THE ABOVE DATA PLEASE LET ME KNOW.