Investing in IPO

Hi

There are quite a few IPO which are now available for subscription in the next one week and they are

a. Eris Life scriences, which is open since 16th and closes on 20th

b. CDSL, which is a depository and subsidiary of BSE opens for subscription ON Monday and closes on 21st. 

c. GTPL Hathway  Limited is also open in the coming week from 21st to 23rd. 

In addition to the above, we have other IPO which are likely to hit the market like

ICICI Lombard

SBI life Insurance

HDFC Life insurance as the Max merger has not gone through

the details of PSU sale are given in the link for you to have a look. There will be  also offer for sale of shares in select companies. 


http://www.business-standard.com/article/companies/govt-eyes-rs-35-000-cr-from-psu-stake-sale-117041500042_1.html



Should you Invest in IPO?


A Common question in every one’s mind is, Is it good to invest in IPO?

Is it the right time? 


As you all know, the markets are at an all time high with the sensex over 31 k and enough liquidity is there in the market and currently there is no sight of the market coming down drastically or correcting itself. One is thinking twice to invest in the current market. IPOs provide an opportunity for you to invest. 

How the IPOs which came earlier have fared?

 Look at the image below and see the performance of the various IPO which came about since April 16 and most of them have given decent returns. 

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How much you need to invest?

Most of the IPOs require anywhere between 14k to 15k per lot and you can investment more in multiples of the minimum lot size. 

Who should invest?

Both short term investors and Long term investors can consider investing. Short term investors can look to take listing gains. 

Where as long term investors can choose the IPO on fundamental strength and invest. 

What happens if the listing price is lower than the IPO price?

It is possible you need to hold and should have the ability to hold. Take IPO like ICICI pru life insurance from the listing price of 335 it went down to 261 and it has bounced back 70% from there and trading around 440

Same is the case with VArun beverages.

Caution. 

Do not borrow money and invest in IPO. You should invest only with your surplus money.  Otherwise, on a downturn, you can lose heavily and interest cost on the borrowed amount can be higher. 

In case you need any further details do contact me. 

Varadharajan vs

Ckar.vsv@gmail.com

Bungee jumping and Investment

Hi

I am sure all of you know about Bungee Jumping and am also sure that some of you must have tried it as well. It is an activity and you can feel the flow of adrenaline.
Some people call it a sport. This is for a very short duration.
The bungee jump involves, jumping from a diving platform with the ankles of the diver, firmly tied and held to a spring. As you jump from the platform, you fall by gravity and as you reach the bottom most point, you are pulled back by the spring force and you go up. On reaching a higher level, usually below the platform, you fall again and go up. This process gets repeated and slowly you stay at the lower end, where you are guided to the nearest landing point with help
bunjee6
What are the forces at play while doing a bungee jump?
There are three main forces at play. 
1. The gravitational force, which pulls you down as you jump
2. The force the spring provides which helps you from not falling and also enables you come up. 
3. The force or the resistance offered by air. 
But for the air resistance, you can keep going up and down. But the air resistance, acts on the spring force and reduces your ascent back every time when finaly the fall and climb ends. 
The important thing is that when the gravitation force does positive. work the spring does negative work and when the spring does positive work gravitational force does negative work. All the time air resistance does negative work.
This is akin to Your Portfolio appreciating or depreciating but inflation always does negative work and erodes the purchasing value. Your portfolio has to do super positive work to over come inflation and grow 
click on the link, to read more about the force 
This is classic conversion of potential energy to kinetic energy and back. 
But why we need to know this and what relevance it has got with investing. 
Market
Market is a place where people buy and sell goods or services. In stock market, people buy and sell shares or other instruments. There is difference in perception of the buyer and seller and hence exists a price difference. 
Like three forces exists, In a market there exist
a buyer, a seller and volatility 
Appreciation, depreciation and inflation
What you buy may appreciate or depreciate in value depending upon the market forces
Energy
There are basically two energies on display. 
The potential energy, the height from which the jump takes place and 
The kinetic energy which is either due to the gravity or the spring force. 
However the level of energy gets reduced for every movement due to the air resistance
Markets see that  the stock prices or NAV of a fund, move up and down depending on the energies which is the momentum on selling side or purchasing side. And the air resistance is similar to inflation and does constantly erode growth in wealth.
Hide original message
See how some stocks have done bungee jump in the last one year
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Who can do bungee jump?
Anybody can do bungee jump. 
a. IN bungee jump, there is a trainer who guides you and helps you, take the jump and also land safely after you finish your jump/
This is similar to an advisor, who guides you through the process of investing and enabling you to reach the goal or the destination. 
b. You get to experience the ups and downs and the resistance offered by air. You get to see the world with a different point of view. 
While staying the course of investing, in order to reach your goal, yet get to see all the risk, volatility, momentum and performance at play. 
c. Your behaviour is controlled and your are disciplined during the jump. If you can exhibit a similar discipline and behaviour in investing, you are sure the winner. 
d. Fortunately you dont get to hear any noise during the jump as you are isolated from the media. Avoid noise from the media while investing. 
e. More importantly you have to indulge in the activity to gain and like wise, you have to invest to create wealth. 
d. When to jump. 
You cannot take to bungee jump, whenever you feel doing it. It depends upon the weather, the time of the day, availbility of the trainer etc.
Follow the 5W 2h process in all activities you do
What, why, where, who, when 
How and the new one you add is ” How Much”?
I am your trainer and do contact me for the experience of bungee jump in investing. 
Thanks
Varadharajan VS
ckar.vsv@gmail.com

Don’t lose hope and more importantly don’t relax. Colgate Vs Crest –Nice read

Hi

I came across this articel and thought of sharing it with you.  Read on

Success is never permanent and there is always competition fighting to take your spot. So how does one battle a position that was lost? Looking at the toothpaste wars in the US can give us some lessons.The toothpaste brand “Crest”, owned by Procter & Gamble, was the favourite toothpaste for 40 years in the US since launching in 1955. However, in 1998, Colgate-Palmolive’s “Colgate Total” kicked out Crest from its champion spot.

 
 

Game changer delivers leadership position

How did a brand that was #1 for 40 years lose its spot in its market? Colgate-Palmolive had market leadership in more than 170 countries as the toothpaste champion but in the US, it was forced to contend with second place. The story changed in 1998 with the launch of Colgate Total and Crest tumbled from its leading spot. It took Crest almost a decade of fierce competition to regain the #1 position in the US in 2007 and the toothpaste battles continue. The way Crest won back its #1 position holds valuable lessons for us in the fund management and the financial distribution businesses.When Crest was first launched in 1955, Colgate was the market leader in the toothpaste category. In 1960, Crest became the first brand of toothpaste to receive an endorsement from the American Dental Association (ADA) that Crest was shown to be effective in fighting cavities. P&G took the market by storm with the endorsement and was able to dominate the US toothpaste marketover the next several decades with a product that was marketed as having both cosmetic and therapeutic benefits. Till the 1990s, Crest retained its leadership spot in the US market with around a 35% market share, while Colgate had about 20 percent.

CREST VS COLGATE 1

Resting on past laurels

Over the years, P&G did not vary the sales pitch or the look of the brand. However, competition did not stay still. Rival toothpaste makers started to concentrate on other aspects of oral care beyond cavities to appeal to consumers – yellowing teeth, sensitive gums and bad breath. Crest meanwhile continued as the cavities fighter toothpaste but its fall was a slow decline. Between 1987 and 1997, Crest’s market share slipped from 39% to 25%.

In 1997, Colgate-Palmolive launched Colgate Total which promised to fight everything – cavities, tartar, plaque, bad breath, and, most importantly, gingivitis. An estimated 100 million Americans suffer from gum disease. Gingivitis is an inflammation of the gums which is usually caused by bacterial infection and can result in symptoms such as bleeding gums. If left untreated, it can lead to more a serious infection known as periodontitis. Gingivitis and periodontitis are major causes of tooth loss in adults. According to dentists, gingivitis can be prevented by consistent and proper oral hygiene.

CREST VS COLGATE 2

Colgate Total capitalized on this consumer concern and Colgate Total was marketed as the only toothpaste approved by the Food and Drug Administration to prevent gingivitis, as well as by the American Dental Association to fight plaque and gingivitis. By the end of 1998, Colgate had grabbed 30% of the toothpaste market knocking P&G off its leadership spot in the US.

How did P&G get left behind? Even though P&G had all the technology that competition had exploited for years, the company continued its old approach and focus on what it used to do. The company was not quick to recognize the change in consumer trends and respond accordingly. P&G had a gingivitis fighting toothpaste in testing for at least 6 years but its slow and meticulous culture meant Colgate, with a much smaller research budget, was able to reach the market first.

Flip the game back – and win

Until P&G came up with its cavity fighter, toothpastes were largely marketed around their cosmetic value. For the next 40 years, Crest and Colgate slugged it out on therapeutic values – cavity fighting, gingivitis fighting, bad breath control, toothpastes for sensitive teeth and so on. This was a game that Colgate was playing better than Crest.

What P&G did next was not to find yet another therapeutic utility – but to flip the game back to where it originally started – cosmetic value. And, it thought beyond toothpastes to fight and win in the oral care market.

In 2000, the company introduced a 14-day tooth-whitening system, Crest Whitestrips. Compared to products used in dentists’ offices, the whitestrips allowed consumers to whiten teeth faster in the comfort of their own home at less cost. P&G was able to capitalize on the Crest brand name to ease any customer uneasiness about using the product at home without a dentist’s supervision. While the initial price of $40 was high for a P&G product, people were willing to buy the product as they trusted the Crest brand name.

CREST VS COLGATE 3

Since approval from dentists formed the core of the Crest brand, P&G also had to win over dentists with Whitestrips. The company used its research to demonstrate the products safety and efficacy as well as developing a more powerful whitening product for dental-office use.

Whitestrips in its first year generated $200 million in revenue. It then introduced a complementary product – Night Effects and line extensions like Crest Whitening Liquid Gel and finally Crest MultiCare Whitening Toothpaste. If you wanted whiter teeth (as most consumers aspire for), Crest rolled out an impressive array of solutions in different formats, at different price points – to ensure that you went only to Crest and nowhere else. Over the years, P&G have expanded the Crest brand to include other products that combine oral care and aesthetics such as power toothbrushes, dental floss and mouthwash. By 2007, Crest was able to win back the #1 position in the US toothpaste market from Colgate.

Lessons for us

1. One cannot be complacent when your portfolio is performing well.

2.  Understand the stocks, that may be under threat and face competition.

The example currently is of FMCG brands, Vs  Patanjali Brand.  The impact of this not known yet. Be watchful

3. Good management will overcome turbulent times. Hence one of the criteria in stock selection would be the capability of management. With ability and governance

4. You can equate with the FDA issues the pharma companies . Well managed companies will improve their process quality and controls and adhere to compliance and scale up their business.

This post is  to remind us all that there is nothing permanent but never lose hope and more importanltly never relax

varadharajan VS

ckar.vsv@gmail.com

Heads I win! Tails you lose!!

Hi

The subject says it all and that is what every investor expects.
Before that let us read a small story. This story is a little old when not much transportation was available.
A man set out on a long journey, say dream journey, to fulfill his goal and starred the journey with all preparations. The story should be read keeping in mind, that the travel is not modern day travel, but by walk. He was very happy and made quite a progress and stopped midway to rest.  His journey was also very smooth. He just turned back and looked at the path he traveled. To his surprise he saw two pairs of foot prints on the pathway. He was very surprised, as to,  who was the other person following him. He was worried and shouted as to who was following him.  A voice, answered him.  “It is me” , God  said and continued that he has been with him.  The man was very happy to know that God was with him and that he need not worry.
After the break, he set out again on his journey and this time, the journey was not very smooth. He faced lot of problems some being trivial to some being severe. He got tired of facing and overcoming the problems. He once again stopped to take rest. This time, he looked back to see the path, he traversed. This time he saw only, one pair of foot prints. He got shocked and thought God had left him and that is why he was undergoing all the problems, he had been facing. He shouted and asked “God. Where are you? ”  God answered him and said that he was very much with him.
The man then, asked, if that is so, why only one pair of footprint.  God replied, ” The foot prints you see are of mine”.  You were very tired and exhausted midway. I had to carry you on my shoulders and that is the reason why you see only one pair of foot print.”  The man realised and thanked God for being with him throughout.
Sometimes, while investing, many an investor, feel their portfolio, showing positive returns, as the market goes up and are very happy to see that growing every day. At that time, they think, it only due to the market and no effort of any body else is involved.
When the market comes down, they see their portfolio, come down or in the red, they think of the advisor and some even blame him for choosing bad stocks or funds.  They follow the headline statement.
Tails I win!  Heads you lose!!
But the investor advisor relationship has to be like the relationship as mentioned above and the advisor stays with the investor till the goals are realised. He handholds, the investor when needed, discourages emotional decision and encourages rational thinking. Have faith in your advisor, trust him.
In dynamics, the law of motion says
V = U + AT
the relations ship between the advisor and you as an investor is
We  = You  + Me too
All the advisor does, make your travel like travelling in the mumbai suburban train.  Either to board the train or alight from the train, you need to be in the right place at the right time. The crowd take you in or out of the train.  If you are at the wrong place, you will be thrown out of the train, in a destination, which was not your intended one.
Have a safe investing journey.
Do stay in touch.
Thanks
varadharajan VS
ckar.vsv@gmail.com

Kaju, Kismiss & the Dilemma

Hi

This is about a leading company, in India making innovative products and their latest innovation was a new machine.
It was called “The Rat killing Machine”.
Inline images 2
This is a very simple machine. The rat in search of the food comes to the position as shown in the picture.
It is drawn into the position by attracting with kaju (cashew)  at one end and Kismiss (Raisins) at the other end.
It turns its head, looks at Kaju and then Kismiss and when it does three or four times, its head moves against the blade and gets killed.
This company is a established firm and good sales team and launched the above market to be a pioneer and market leader. Initially the sales was very good and over the years, there were lot fo competitors who could produce this cheaper and the company was losing share.
The sales team wanted the company to make a low cost machine so that it can increase the sales based on the price.
The company did come out with a Rat Killing machine (Economy Version)
This machine is the same as the earlier version, except that there is no Kaju and No kismiss.
The rat comes to the same position as it is used and finds that there is no Kaju and No kismiss and like in the earlier case, after three or four times the rat gets killed.
Though this works on the principle that every one falls for a bait and given options, are in a dilemma and unable to choose one of the options.
We as investors are also perennially in a dilemma
Is it Kaju or Kismiss?
Is it a bull market or a bear market
Is it Kaju or Kismiss?
Should I buy or Sell?
Is it Kaju or Kismiss?
Should I buy Debt or Equity?
Is it Kaju or Kismiss?
Should I buy equity funds or Direct Equity?
If we keep pondering over the situation, we will always be in a dilemma and never invest.
Like the rat gets killed, the value of our money will get killed by inflation.
Dont try to time the market. Rather the time in the market.
We all know that
                              n
A = P ( 1+ r/100)
We constantly worry out r the rate of return than  n the no. of years.
A small “r” with a big “n”  will earn much more than a birg “r” and a small ‘n”
Inline images 3
Be different. Think differently.  You can create wealth.
Start your investments today. Do contact me.
Varadharajan VS
ckar.vsv@gmail.com

Inventory & Investment – Don’t spend money. Use it!

Hi

What ever is bought with money needs to be monitored and managed. You cannot manage if you don’t monitor it effectively.

Both inventory and investment are bought with money and how they help you earn returns is measured. In inventory, the  turn over of the inventory or the rate at which the inventory is rotated is a measure. Many traders and distributors operate on a thin margin of as low as 2% and rotate the inventory multiple times with the same capital to maximise their returns.

Similarly, Return of Capital employed is a measure and this for investor means Return on Investment ( This is the sum of capital appreciation and dividend earned)

Inventory management is an important one in all organisations and also households.

Though inventory is counted as current assets, it will become a liability if not managed effectively.

We don’t buy anything because we have money.

Understanding of Inventory Management 

Let us understand how inventory is managed.

There are different control mechanism and methods in managing inventory. At least you can count 9 important ones.

The most common ones which we can look at are

ABC analysis

VED anallysis

FSND analysis

ABC analysis.

This is done based on valuations of the individual parts. Generally 20% of the parts constitue 80% of the total value of inventory and major attention is given to manage the parts of high value which are known as A. The least value items are classified as C

In the second one, VED analysis, the classification is done based on importance of the part. A part which is when not available, can halt a manufacturing process, or difficult to get, and a combination of these determine its vitality and Similary, E is essential and D deisrable.

This analysis supercedes the previous one, as it is on vitality and not on price.

The FSND focuses on the rate of consumption of the parts whether they are fast moving, slow moving or even Dead inventory.

Understanding of Portfolio management

Like wise when you do an investment, do you review your portfolio.

VED analysis.

Construct a portfolio and identify the stocks you must hold, which are vital for the portfolio.

This may vary with individuals as the investment horizon, objective and risk tolerance would vary.

 Having too many desirable stocks, compromising on vital stocks, may lead to lower portfolio return.

 This is normally done, drilling down sector wise and picking the stock that you must have in your portfolio.

For example, you may identify L&T in the capital goods sector which could be vital for you, Siemens could be an essential stock and stocks like, VA Tech vabag or carborandum universal could be desirable one.

2. FSND Analysis

 Though this cannot be adapted like inventory management, identify stocks which are not performing well and see no scope but you have in your portfolio.

 Some of you may still be holding Jayaprakash associates, Unitech, Indian overseas bank. Which or either dead or recovery would be very long. These are Dead and D in the FSND technique.

 FSN, can be us can also be linked to the ability to liquidate  the stocks at the earliest, large caps, midcaps will have a great liquidity. There are few illiquid stocks, like Benares hotels, which is a TATA group stock and trading thing. Depending on the return, liquidity and availabilty of capital

3. ABC analysis

 Unlike in inventory, this is redundant. Our primary focus would be earn return and reduce risk and reduction of risk done using diversification.

But generally investors have myth and that is stocks which are over say Rs. 1000 are costly and stocks less than 100 or even 50 are cheaper.

 Bajaj Finance moved from 4000 in April 15 and is now at 10000 though it is trading trading at 1000 after bonus and split.

Have ABC in relation to the value the stock offers and not the price.

 Therefore to sum up, use the grid below and pick your stock.

 abc-ved

Summary & Takeaways

Know what you want to do with your investment.

Clarity of purpose  and clarity of action are

There are three types of assets

A appreciating asset which creates wealth over time

A depreciating asset, which depreciates your investment, but does not erode the wealth.

A dead asset, depreciates and becomes a liability. Know what you have, monitor and manage it

It is possible you may not know and understand the above. Have a chat with your advisor

Do contact me for any clarifications.

varadharajan VS

ckar.vsv@gmail.com

F A B technique in Gold investing.

Hi

Wishing you all a very happy new year.

Feature Advantage Benefit
Whenever you buy a product, you will have to understand the features they have and the advantages it brings and the benefit the user gets
All advertisements in the TV/ Media will always talk about this technique.
The widely advertised toothpaste Ads use this very effectively. Be it a paste or a brush you can see this. Let us take an example.
You see the ad where one talks about salt  in tooth paste.
Though this is not common salt, they are Sodium Flouride and Stannous flouride.
The advantages of having these salts in the tooth paste are that
It protects Gums, Prevents formation of Tartar and Protects teeth
Benefits
Fresh mouth, no bad breath, clean teeth.
This FAB technique can be used in investing also.
In investing, apart from FAB, you also need to understand the risk involved in investing.
Each investing idea can be filtered through the FAB technique and checked for suitability of the investors.
Let us discuss one of the Asset , Gold.
Gold is primarily an asset class which is used as a hedge against inflation.
Secondly, this is the reference point for international trade. In the earlier days, this was the universal currency. However over the decades, US dollar has without doubt gained supremacy for international trade.
Whenever there is weakness in US dollar, Gold gains in value.
Many people buy Gold for investment, Some to flaunt their wealth and sometimes is used to show ones social status. Gold in such cases is combined with Gems and Diamonds,
Gold can be purchased in any one of the following ways
1; Gold bar
2. Gold coin
3. Gold jewellery
4. Gold Mutual funds
5. Gold ETF
6. E Gold through commodity exchange
7. Sovereign Gold bonds issued by the Government of India.
While the first three on in physical form, the others are in electronic form. Given below is a comparative FAB details of the above mode of investing in Gold.
Inline images 1
Should one invest in Gold?
Generally Indian markets and Gold have a negative correlation.  +1 on correlation indiex indicates that it is positively correlated and -1 negatively correlated. ( Which means, when sensex goes up, Gold goes down)
However in the last 8 years the correlation has been close to zero. This means both have remained close the zero correlation but in percentage terms. Gold has given a 300% returns compared to Sensex which is 120%
Also the USD and Gold have a negative correlation as seen and the correlation has come down in the last four, five years. See the chart. Blue line is Gold and the orange line is USD
Inline images 3
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Summary
It is good to have have Gold in one’s investment portfolio and ideal to have around 10 % of the total investment as GOLD.
As the geo political risks across the globe increases, Gold will be a hedge and it is therefore useful.
Also when India was in deep financial crisis, in 1991, We did pledge gold with IMF
Use the FAB technique and choose the option which you think suits you.
For any clarifications do contact me.
Thanks & regards
varadharajan
ckar.vsv@gmail.com