What does a child do when he builds a sand castle?

"He builds a boundary wall."

 He makes sure that the castle is well protected from ongoing water currents.

This innate sense we are born with to protect what we own what we feel belongs to us is a quality we must deeply use while selecting stocks.

When you buy a stock following value investing principles, you buy the stock of a company worth owning forever. It is common sense that a company well protected with high boundary walls will be the first option to own. It is therefore very important to understand a company’s Moat to predict its long term sustainability.

Warren Buffett is credited with coining the phrase “economic moat” to refer to the advantages some dominant companies have against competitive incursions – similar to the way a moat protects a castle from barbarian invasions.

Value investing simply teaches you to buy strong companies which get undervalued due to some bad news or temporary circumstances.

In a developing economy like India we have a number of competitors ready to attack any successful business. They are all geared up to imitate and improvise an existing successful business. We must therefore look for companies which have some form of differentiation which makes it difficult to be imitated.

What are some of the things we should study to decide if a company has a wide moat or not-?

Qualitative Aspect-

Brand- A company with a well established brand is definitely got a better chance of survival

Switching costs- If you had to replace something which is an integral part of your life, will the switching be worth the trouble.

Low Price- A company which can sell products at the cheapest rate can combat competition.

Patents- A company which has patents makes competition very difficult.

Entry Barriers - If an industry is very easy to enter there may be no Moat.

With so many different forms of moats available we must focus on identifying the one solid moat amongst them, which is the hardest to cross.

Companies with durable moats are the least risky forms of investments.

As you can see, a qualitative study can be quite tedious and may be very difficult to conclude. For this purpose I prefer to start my study by looking at the financials before I proceed to the qualitative aspects.

At MoneyWorks4me where I am currently working I have been taught to look at a company’s financial track record before I proceed. Simply put understanding five finance terms like ROIC, Net Sales, EPS, BVPS, Debt/Net Profit can greatly help in predicting a company’s sustainability.

A business strong on these 5 factors is an ideal candidate to have a strong moat. Its best to look at 10 years data for companies and see if they have a year on year growth rate of 12% and above for the first 4 factors. The Debt/Net profit ratio should ideally be below 3 however if it is more there should be a justification for it.
For illustration,lets take 2 companies X and Y from the Indian Stock Markets

Say for example company X’ financial track record shows the following picture-

And company Y’s financial track record shows the following picture-

It is no surprise which of the 2 companies you will consider to evaluate its moat.


So in conclusion we must make sure our investments are well protected even in an equity market which is considered a high risk investment.

This post has been authored by Sumayya Shaikh, who is a supporter of Value Investing.A new entrant in the blogging world, she has been making waves with her unique style of demystifying the Stock Markets.

If you have any questions on the same or Value Investing, she would be more than happy to respond.

Disclaimer:: This is long and a boring post.Moreover, there is no Investment or any kind of advice imparted in this article.So,please don't try this at home or anywhere:)
The title very much surmises my routine from 10:00 AM to 12:00 PM since two weeks.Blame it to the change in my project timings but then I had been waiting for this chance encounter with the seductress that goes with the name "Intraday Trade".Seductress you say?? Trust me, if you do manage to read till the end, you will do anything but agree with me.Before i get on with my experiment, i figure it wont harm to get into some de-jargonising some of the things that will be the essence of the post.If you are smarter than the avergae Joe, you might wanna skip the boring but essential definitions.
What is Intraday Trade:
Investopedia Way:: Another way of saying "within the day". Intraday price movements are particularly important to short-term traders looking to make many trades over the course of a single trading session. The term intraday is occasionally used to describe securities that trade on the markets during regular business hours, such as stocks and ETFs, as opposed to mutual funds, which must be bought from a dealer.
 So, basically what it means is that we decide the fate of our stock picks within a day.When you either buy/sell a share in Intraday, you are doing it to make profits from price movements within the course of that day itself.All the positions are squared off at the end of business hours that day.So, profit or loss, you book it.However, there is an option to convert Intraday positions to Cash, but we will keep that for another day.
Why should i do Intraday Trade
I may not be the right person to answer this, but here are some of the thing which i think make Intraday worth the risk

• A good way to counter the volatile markets.Volatility in Stock Markets may not provide the Investor with long term investment decisions.Hence, In Intraday we can actually play our cards based on daily volatility basis.For eg:: If a company X bags a big order or wins a legal lawsuit, there is going to be lot of speculation around it when the news breaks out.So, instead of buliding long term positions, we can utilize the particular day to make a killing in the stock.
• A Cash Cushion in the form of margin.Intraday trades allow us to build positions for much larger amounts than we actually have available.This margin acts as the cushion and is provided by your trading account broker.So basically, you can actually place a buy order of 100 shares of X trading at 100 CMP with 1000 bugs in your account instead of 10,000.The % might actually vary depending upon the broker.

The reasons mentioned above are not exhaustive but tempting enough to make the plunge.And I made the plunge too.Now with the details of the
experiment.


Experimenter: Yours Only
Stocks Involved :: Tech Mahindra(TECHM)      
Time Frame: 1-2 weeks

To start with, please don't even ask me to disclose why i chose TECHM as the stock to fiddle with.Frankly, even i don't know.But, what i did watch for before making the plunge was huge volatily, good volumes and a graph with lot of crests and trough.Since, I am not a technical guy, thats all I thought is necessary to get into the IntraDay game.
If i remember correctly, i started trading the stock around 477 CMP on a fine Monday morning.Now, call it implusive trading or the post election hype, I was bullish on the stock.
So, I placed a BUY order and kept stalking the movement(Mistake1). A rise to 485 odd levels and I placed a SELL call.(Mistake 2)Voila!! Was i delighted or what.Profits booked without blocking any cash.But the stock was still moving in the positive direction.So, i place another BUY order at 490 CMP(Mistake 3).The stalking started again.Suddenly, the stock tanked to 480 again and there i was cursing myself and TECHM.There i went clicking again and executed a SELL call at around 480 booking some loss(Mistake 4).For the sake of Experiment terminolgy, lets say the major part of the experiment continued with lot of interations of Mistake 1,2,3 and 4 with occasional bouts of Mistake 1,2,1,2,3,4,2 and so on.
PS:: In the end, even thought the outcome has led to capital gains in the portfolio, but then it also made me realise the foolishness on my part.
Lessons Learnt From Intraday Experiment

Mistake 1: Stalking the price movement every other second can only lead to anxiety and even serious cardiac disorders if you are weak hearted.Yes, I am alive and kicking but belive, i went numb quite a few times.
Mistake 2: Booking profits at the first sign of an upscale or rather not having a pre-determined target (ROI).This leads to frequent BUY-SELL calls with a comparitive lesser profit margins.Moreover, You end up paying a lot of overhead costs as Brokerage.So, when you are making peanuts, your broker is minting cash.
Mistake 3: This is ver much an outcome of Mistake 2.If the Stock is zooming, there is every chance it would have gone higher then the price you sold it at.What this presents is another oppurtunity to place a BUY call. Trust me, if you watch the movement of TECHM, you would be seduced to enter another BUY call.Now again, the vicious circle starts with the repeation of Mistake 1 and 2.
Mistake 4:  Enter the contrast to Mistake 2.With no brains and only impulsive sentiments at play, there is every chance of entering the stock at its peak and see it tanking.What do i do, book losses at the first signs of the price going down to keep my losses at bare minimum.This again is a classic case of not pre-deciding the kinda downside risk you are ready to take.The best part happens when the stock rise again the next moment and there starts the vicious circle of Mistake 2,3,4 and so on.

If you are any saner then me, it would be clear by now of the horrible experiment and its much horrible outcome.But as i mentioned of still being in positive, it is only *good luck* at play.
The experiment has foolishness written all over it.
But then, we all learn from our mistake, don't we.So, off i was discovering the right way to indulge in Intraday Trade.
I have discovered some real good resources and methodoligies associated with IntraDay trades.But, there is so much more to know.
But I am sure, i am gonna do a sequel to this post with some useful insights into Intraday Trading.If you did like reading the article, you won't wanna miss the next post .So, feel free to subscribe to the posts to ensure you don't miss out on it:D
Infact, it would be interesting to know if you can give a term to each of the 4 mistakes mentioned.I sure could identify them.I will keep them for the next post. If however, your answer is going to be 'FOOLISH', you are right, but then go ahead and get more creative than that :)
Hope to see some feedback on this one.

PS:: The draft of this post has been sitting for quite sometime.At the time of writing this and making this post live, I am fortunately in positive as far as the Returns On the Investment is considered.

Tip To Self:: Go take some serious lessons on how to tame this Intraday seductress better.And make sure I blog about it too!!!

Image Credits: IllustrationOf via Google Images

The Stock Markets have been on steroids for quite sometime.Infact, when the so called market pundits had completely written off the Indian Stock Markets, #Sensex just came roaring out of hibernation.The rise from 8k to 15k levels has been anything but phenomenal and maddening.Investors are bound to be happy and so it seems.But here is the catch, Investor would be a lose term to use here since there are atleast two categories of Investors that i would like to think of,

Institutional Investors:: The so called big sharks of the Stock Markets who have the power to manipulate the market.These folks/organizations BUY/SELL in crores and they can definetely be attributed with the rise and fall of markets.Again, Instituional Investor here ain't a well categorized one,since there are Foreign Investors and Mutual Fund Houses(AMC's) who also form the bulk of Big Volume Investors.

Are these folks happy? You bet they are, since the NAV's of Mutual funds have gone up considerably.

The second set of the Investor is what me and you probably fall into. I would be delighted to know if the reader is from the Big Shark category,it will make my day

Retail Investor:: Welcome to my world.Retail Investor or the AAM Admi makes up this category.We are supposedly the backbone for any organization coming up with their IPO's. Any press conference will not go without the CEO saying it umpteen times ," it is for the masses that we want to share the ownership with". If only we remember the recent Bollywood Movie "GURU"
Is the Retail Investor happy? You bet they are, since they see the markets in green and jump in joy.The right question to ask here would be "Is the Retail Investor making money". I so want to say YES, but I can't
Why? Because the retail investor is a slave of the two horrible beasts that continue to haunt us all through our Equity Investments

Fear (Bearish)::
                           "What If The markets fall down more?"
                           "What if the Rally is too short lived?"
                           "Some XYZ is predicting the markets to go down further,shouldn i wait before Investing?"
If you have asked any or all of the questions, and acted likewise without looking deeper, Welcome to the Club.It is this fear that makes us miss the bus and keep waiting for a Bottom that may or may not come.I relate it to Bearish sentiment only with its coherence with the Negative Sentiment. Bearing Bearish is not bad, but acting bearish without reasoning is.
So, I keep waiting for the markets to fall to 7k levels to invest my hard earned money when at 8k levels, the markets presented me with a wholesale buying offer.That is that, and i miss the bus.The next thing i know, is the markets at 15k levels.
What do i do now??I hear all talks about the markets bouncing and the Morgan Stanley's announcing their Sensex reaching 21k predictions.But then, I start cursing myself for not buying the stocks at 8k levels and just feel sorry.
Ok, i joined late but eventually i did join the foray at 14k levels with some supposedly value buys.That's where the other villian joins the Foray.

Greed(Bullish): This might not go well down with many, but then lets face it.It does happen to all of us.I have stocks that i bought at various levels giving me a decent average buying price.With the markets reacting to positive news(Like the election results), my portfolio is suddenly shining all green all over.Hell, one of them is offering me returns as high as 100%. What do i do, give myself a pat on the back and start waiting for it to reach the 200% mark.There i the Retail Investor gets slaughtered again.
This school of thought may not go down well with the Idea of Long Term Investing with a 5-6 timeframe but then, thats that.

The point here is that the retail investor that I am , loses his rationale with fear and greed overpowering.
The Solution:: I don't have any or else I wouldn have been writing this one.But yes, I have made some progress to tacke the second beast Greed  with what i would like to call as Target Price. Before investing in a certain stock based on whatever research that i carry out, i decide on a fixed ROI %. Once I have penned it down, it is only a matter of following it to the hilt.I don't hesitate to book profits as and when the stock breaches my target ROI.There are again few exceptions to this given the condition of markets but yes, I have been able to do that for sometime and it atleast lands me up with a decent return and cash reserves to be prepared for another downtrend.Only If I could overcome my Fear, I would atleast be loaded with cash to make those value buyings.

Do you feel the same when it comes to the plight of the retail investor at large.Share your thoughts and add to the insights:D

PS:: This post came by as a result of one of those conversations with Arun of @trakin where he also wondered whether the retail investor has contributed to the recent rise in Stock Market.So, credit goes out to him too for this post coming alive. There i reserved one Re-Tweet I think :D
Don't forget to join me on twitter at @ankit_a . You will neva get bored there unlike this place :D

Disclaimer:I have no itensions of maligning any individual.But, yes this article expresses my anger towards one of the best Corporate Houses in India and it makes me sad that things got this worse.

If you are wondering why I am blaming the TATA's for not letting me blog, please be rest assured that they are one of the biggest if not the only reason for my blog being deserted.Infact, i have utmost respect for the TATA group and the Man Of Steel - Mr.Ratan Tata. But then, didn't someone say " A bad fish can spoil the whole bunch"

Culprit  :: TATA Indicom Broadband Connection
It has been 3 unfortunate months i signed up for a broadband connection from Tata Indicom.Ironic as it is, i am a repeat customer so it makes it even more worse.There has not been a single day i had uninterrupted internet access, forget me ranting about the speed et all.
Adding fuel to the fire is the oh-so f*** up Customer Care Center who have gone that extra mile to ensure that my complaints are always registered but never acted upon.For the sticker for details, and if anyone from the TATA Indicom group reads this,please leave a comment and i will provide all the complaint numbers.
Did i hear someone say, 'Itne Paise Me Itna hi Milega'. Common, i am shelling out 1.4k/month for a supposedly 484kbs connection.I wouldn say that is cheap.

I can go on bitching about the worst ever ISP that the Tata Indicom Connection has become but then, i guess it is gonna end up falling on deaf ears.
On the business note, i see it as a clear case of business diversification going wrong.The Tata's foray into communications sector was never a run away success.Call it bad marketing or the lack of adequate sector knowledge, it has been a sorry state affair when it comes to TATA's and the telecommunications sector.It is even more saddening that this time around, the screw up has been from the Customer Support too. Tata's subsidaries have always been known for decent if not exceptional service.But with TATA Indicom broadband, it is CRM fail too.
I am gonna end it right here with the hope that my agony will be heard and atleast help someone choosing a better connection.If you can relate to the situation i am in, i will request you to spread the word.Let the world know about business's taking the customers for granted.

Again, if you think this is too stupid a reason for not blogging,i have been active in the microblogging platform-twitter.The conversations there have been anything but enlightening and i have been doing a lot of reading.
Here are some of the jewels i got a chance to read in the past few days,

Evolution of exchange traded derivatives -- A dive down into the history of Derivatives.A bland, lengthy but highly informative article.

Stock Pick- Geodesic  -- One of the best stock pick anaylsis i have read in sometime.An exhaustive anaylsis covering most of the metrics.

Corus and Ranbaxy - Acquisitions gone wrong? - I did discuss the Ranbaxy Deal repurcussions with respect to Block Deal at the time of deal.And this article just justified that.Oh Boy!! and TATA's are at the party again with Corus

Also, it has been a roller coaster ride with me playing around with Tech Mahindra stock in Intraday trades.Will probabaly have a post coming soon with my learnings.

PS:: This post has been written from the office.My Internet Connectivity at home is as usual down

Investing of all things is considered as an ART by many.The so called trade pundits (read professional brokers) rant at length about their predictions and their knack of picking multi-baggers out of nowhere.But,they always leave us begging for their analysis.Why u ask? Because they call it art, and hence,it is not everyone's cup of tea.

I am no expert at deciphering technical charts and the jargon's which rule the Stock Markets.What i am is your next door investor who believes in the mantra of "Less is More" and KISS(Keep it Simple and Stupid).So,if you are looking for technical gyan this post may not be for you.

Without further ado,lets get on to the Heart of The Matter.Investing is about + - * /

We identified the flavours that make up Investing descions.We(I) said that Investing is about the four mathematical symbols.Unfortunately,it ain't that simple or any 1oth grader would have been a millionaire by now:D

What makes a real Green portfolio is to know where to use which symbol(+ - * /).One mistake of misplacing any of these symbols and the results can be worse than getting a big ) on your score sheet.

Addition(+) : How many times have you  thought "If only I would have bought this stock in plenty when it had tempting valuations".Or, "What If I had spent more time understanding the dynamics of this stock". At least,I have and that's where the Addition gets its significance

• Add those pieces of fundamental/technical research analysis to arrive at the best Investment decisions.Its only when you add all those little pieces of information that will give you a true picture of What are you Investing In.That's what we at MONEYVIDYA are all about:D
• Keep adding those gems to your stock portfolio which you derived from the Step1 above.Even if you have to get them at a little higher price than you bought earlier.
• Add some time to monitor the stocks you hold.Why u say? The dynamics of Stock Markets have been changing ever too fast.So,the Investment rationale that made you buy into the stock may not hold true today.

Subtraction(-) : How many times have you thought "Should i book losses or continue to hold the scrip". This is something that has troubled me for a long long time now.Why, because we are scared to lose money and optimist about the Stock Markets.optimism is a good thing but then , blindfolding oneself ain't.Let's be frank,we all make bad investment decisions sometime.The reasons could be external/internal.Case in point, I had piled up a lot of HFCL Scrip at a staggering market price of 40 rupees.Why?One of my friend recommended it and it was from the technology sector.I dont even need to tell it is trading at 8 rs CMP and the impact it has on my portfolio.

• Subtract(Avoid) the urge to take investment decisions based on half-baked information.
• Keep the heart to subtract the duds from your portfolio even if you have to book losses.The fact is,if the scrip has no potential,it will only add to the misery of your portfolio.Rather,book losses and use whatever money you get out of it to (+) the better researched ones in your portfolio.
• Avoid turning a blind eye towards the SELL calls made.It might be embarrassing initially to have your investment rationale challenged,but then there is always someone with better reasons.Karan,RubberDucky are some of the users who have made some real timely SELL calls.That doesn't make them Bearish, it is only their unbiased rationale.

Mutliply(*): This symbol is my personal favourite.It is a no-brainer that multiplication out of all these symbols gives you the maximum.That's why we are all into Stock Markets right.To maximize our gains.It would make more sense to see this multiplication not only in terms of sheer gains but also creating those extra cash generating vehicles.

• Go heavy on scrips that have a history of giving great Dividends.I wrote a post sometime back on ,Why Buying Dividend Stock will make you rich .Head over and find out the power of dividends.
• I am not sure if many agree, but i have of-late resorted to 'Buy and Book Partial Profit' Strategy rather than 'Buy and Hold' Strategy for some momentum stocks.The scrips in context could be those of Unitech,Nagarjuna Fertilizers etc.The advantage you ask,these are momentum stocks which fluctuate a lot in short frame of time.The funda i follow,sell 50% of the holdings at 20-25% gains and re-invest when they go down again.The same has been serving me well,since it gives me decent profits without my cash being blocked for long frames of time.For me,cash in hand to re-invest is as good as multiplying my profits.

Divide(/): This is again one of the rather basic albeit an important parameter when it comes to investing right.Another nagging question that i had when i started my Investment Journey was,"Why did i put all my investment money in Stock Markets".Some might argue that direct equity will give you the maximum returns but then diversification is an important aspect.Diversification has to be determined based on the Risk Profile.I plan to write an article on "Risk Profile" Assessment soon,which I have followed for sometime now

• Divide your Investment Instruments even in the Equities.Never put all the eggs in the same bucket.Never go heavy too heavy on a single scrip, no matter how foolproof it may sound,Diversify a bit.It will help you bail out of those unforeseen circumstances.We never know when another Satyam Fiasco might happen:D
• If you have a long term investment goal,diversify your Investment Bucket into a mixed bag of Direct Equity,Mutual Funds and Term Plan Investments.It will help you maintain a balance between the short term goals and the long term investment objectives.

This brings me to the end of a rather long and seemingly no-brainer post.It may not contain any of those expert knowledgeable articles that you might have been used to here, but i figured if these simple facts could be of good use to even a single person, it will be worth the effort on my part.