A slightly edited version of this post was originally published in Morningstar.
The price to earnings ratio, or P/E ratio, is probably the most commonly used valuation metric in the stock market. It is a mathematical expression calculated by dividing a company’s current market value by the net profits of the current year.
Murphy’s Law says “Anything that can go wrong will go wrong“.
Today, the management of VIP Industries would probably agree to it more than anyone.
We have extensively covered (here and here) the progress of VIP Industries over the last seven quarters.
Recently, COVID-19 has led to many ugly surprises for VIP that no one could have envisaged.
And that reminds me of this quote by Robert Rubin:
Condoms aren’t completely safe. My friend was wearing one and he got hit by a bus.
Risks often play out in the most unanticipated ways.
“I will call you on the weekend.”
“Let’s have lunch sometime.”
“I will follow up tomorrow”.
“I am really busy at the moment but would definitely check the mail in the evening and revert”.
We often make these statements all day long to people around us. Do we really check later if we actually perform those tasks as said?
Let’s be honest. Most often, we don’t.
Diwali, in India, is a very good occasion to spend some quality time with friends and family and take a break from work. I spent a part of that time with some very old friends of mine.
Friends, whom I haven’t met for a long time.
Yes, I had been feeling guilty of not reading books for a long time.
Hence, picking up a few books and going through them during the Diwali break of 2019 was a refreshing way to get back among old friends!!.
Intelligent Fanatics of India, co-authored by Rohith Potti and Puja Bhulla, was one such book. Read More
I started working sometime in the year 2005.
When friends or colleagues used to meet, our topics of discussions would invariably include the following:
Investing groups were small and not very popular. They remained within themselves doing the hard work. They never liked marketing about themselves.
In our quest to spread awareness on research and investments in the stock market, we keep sharing some of our research works on this blog. The idea is not to give any recommendation or stock calls, but just to let you, our readers, have a look into our world of research.
Ask any successful long term investor about what he/she looks in a business. A majority would list at least half a dozen key characteristics like:
I have not come up with something new or unique here.
Instead, in this post, I will just pick one of the above characteristics and go deep.
And I pick Debt for this post.
In 2018, over eight lakh people died of cancer in India. Disturbing but not shocking. What’s shocking is that if you visit the Tata Memorial cancer hospital, you will find the longest queue in the lung cancer department. Numbers attest to this observation. According to figures published on Cancerindia.org.in, close to 40 % of all cancer deaths were accounted for by tobacco use (smoked and smokeless).
The reason I call this statistic shocking is that 90 % of lung cancer cases are preventable. The biggest impact solution in cancer research isn’t about finding a cure for the disease but discovering a method that can convince people to quit smoking.
Return on Equity (ROE) is often hailed as the most important metric in judging the efficiency of a business. It is indeed an important metric. Legendary investors around the world have repeatedly highlighted ROE and its importance in investment decisions. One of the world’s most famous investors, Warren Buffett, has time and again expounded on the importance of ROE.
But the matter of fact is that very few new investors have a thorough understanding of ROE and its composition. So, the purpose of this piece of writing is to provide clarity on the concept of ROE and to lay down a practical framework as to how one should use the same to gain insights into the working of a business or an industry.
Simply put, ROE is a measure of profitability that calculates how many rupees of profit a company generates with each rupee of shareholders’ equity.
In one of our previous posts, we had written about this project of dividing all the letters of Warren Buffett into six parts representing six decades of Buffett’s investment journey. We also wrote about our learnings from the letters of Warren Buffett in the first decade (1957-1966).
This post is on our learnings from his letters in the second decade (1967-1976). For our readers’ convenience, just like the last time, we’ve put together an illustrated version of the letters. Please click here to download it.
Here are the eight big learnings from the second decade of Warren Buffett’s investment journey.