INVESTMENT NOTES

1. What are Delivery based volumes and Delivery based

buying/selling ?
What other type of volumes and
buying/selling are available ?

Big Investor Blog

Of balance sheets and Tea !
BOOKS I LOVE11/12/2014
100 to 1 by Thomas Phelps, in 95 points.
100to1book
Those of us who ask little of life, get little. Those who ask
much, get much, but those who ask for too much get
nothing.
If you dont buy what has to be sold, you never really need
to sell anything.
The top 4 criteria
It must be small. ( Sheer size mitigates growth )
It must be relatively unknown. ( Popular growth stocks
are very likely to perform, but one has to pay for expected
growth too much in advance )
It must be a unique product that does an essential job
better, cheaper and/or faster than before or provide a new
service with great and long continued sale increases.
It must have a strong, progressive, research minded
management.
Look for stocks that professional managers like, but are
not sure of.
Unless a company that is operating in a foreign country is
conducting itself so that people of that country are better
off net, after the company has realised its profit, than they

would be if they had nationalised it and ran it themselves,

the company is living on borrowed time.
Stay with your most successful stock investments as long as
they are increasing their earnings.
Try to be associated with people whose self interests are
almost parallel to yours. Therefore it is probably more
important to see who is talking, rather than what he is
talking.
To make money in stocks, you need to have vision to see
them, courage to buy them and patience to hold them.
Patience is the rarest of the three.
Far more money can be made by good stock selection, than
by good market timing.
Many stocks could have been bought at 52 week highs for
many years and still turn out 100 to one winners. All one
has to do is identify them and stick to them.
Focus only on multi-bagger ideas, ignore the 100% profit
opportunities.
Consider every sale, a confession of an error.
When looking for the biggest game, never ever, shoot at
anything small.
A problem, well-defined is half solved.

Do not count losses in trading opportunities as loss in

profits. The shorter the time one has to hold the stock
before it is sold, the more palpable the error in buying it.
In bull markets, correcting mistakes often means taking
profits, despite the STCG tax.
The biggest problem in correcting errors in the market is
that stocks look best when they are at the peak and not so
great when they are at the bottom.
The ability to foresee is rare and the ability to continue to
hold the same buying rational when the stock drops for no
apparent reason, is much rarer. Therefore we find it less
attractive than before, though it should appear more
attractive.
A great deal of investing is one par with a fish biting an
inedible spinner simply because it is moving.
All good stocks rise and keep rising, but not everything
that is rising is a good stock.
The notion that cash is safe and stocks are unsafe is a
fallacy. Inflation loss is real.
Another fallacy is that avoidance of risk is more important
that seizure of opportunity. Opportunity can reward you
100 fold, risk on the other hand can only make you loose
1x of your capital.
Never for a non-investment reason should one take an
investment action. Such as:
My stock is too high.
I needed to set off STCL.
My stock is not moving. Others are

New management.
New competition.
I have already made 100 times profit.
If you think something is attractive in the market, buy it. If
it falls lower buy more. These differences may be the ones
that make 60x instead of 40x, but it is not worth missing
the opportunities all-together.
Even if one knew what the stock market is going to do, it
will still be more profitable in just keeping your head down
and continue to stock pick.
The more successful one is at market timing, the greater is
the temptation to rely on it and thus miss much greater
opportunities of buying right and holding on.
Most deception is bad, but self deception is worse because
it is done to such a nice guy
The shortest route to making money in the market is to
buy gold stocks when nobody likes it. The only problem is
that good stocks seldom have friends.
When you say good stock, most people think of earnings,
but the company can also have assets that are earning
nothing at the moment. Great assets are potential earning
power.
Rather than current ratios, use statistics to back up vision
and foresight. Do your research and have faith in it.
Patience is a virtue, have it if you can, seldom found in a
woman, almost never in a man.
It is more important to be right, than to be quick.
What one buys in the stock market is 3/4 times more
important that when one buys in the market.
Sometimes some stocks are just triumphs of lethargy
and nothing else. Here foresight has no relevance.

Even if the near term outlook is bad, just continue to hold

on.
A man does not have to be able to lay an egg to tell a good
one from a bad one.
The only way to make more money than the going rate of
return on capital is to buy stocks whose values are not that
apparent to people. The past is there for every one to see
and when a stock has performed in the past, and is likely
to do so in the future, you can make money off it, but
outstanding returns are unlikely.
My advice to buy right and hold is to counter unproductive
activity, not to recommend putting them away and
forgetting them.
If a company grows at 20% for the next 6 years, it will
grow 6x in the next 10 years, and 9,100x in the next 50
years. Try to imagine if the company can grow that big. A
large factor is also the current size of the company, which
will help determine that.
When you pay for a stock you are not only paying for
average growth, but more importantly for superior growth
over the future. Therefore you have to evaluate the
company in a size 5-6 times its current size, after 6-8 years
and check if it still makes sense.
You can almost win any argument, if you are allowed to
make any assumptions.
Dont listen to opinions, unless you are also given an
insight into the assumptions made for making those
opinions.
In investing one always deals with probabilities and
possibilities, and no certainties.

Risk is an essential element in the quest for capital gain.

Dont be dismayed by a loss. Recognise it as one of your
costs on the way to a net gain.
A perfect track record can almost certainly mean that you
are also letting a lot of good opportunities pass you.
There is no system, philosophy that will keep an investor
from making mistakes or keep him harmless when he is
wrong. We never risk our money, unless the odds are
largely in our favour, our inescapable losses should
therefore look small compared to our profits.
One of the most persistent illusions of the business of
investing is that information is absolutely vital. Given that
assumption, every trade needs a buyer and seller, and if
both relied on the same information that the company is
giving out, there will hardly be the quantum of trades that
persist in the market today. Therefore, assuming that both
sides of the trades are made by institutions, its almost
certain that opinions on the stock matter way more than
common or rather secret information.
The fact without the truth is false. Always correct.
When you read a paper in the morning, never forget that
your homework has only just begun.
Look at opportunity ratio while evaluating. If you can gain
100 points by risking a loss of 10, the odds are 10:1. This
again isnt the complete story, its just the payoff. Equally
important is the chance that of the relative gain to the loss.
In the stock market as in poker, one must only bet when
the odds are heavily in your favour.
If the price is already down by discounting the worst, there
is very limited downside risk, focus on the upside and take
a call.

All values are relative in all aspects. In a kingdom of the

blind, a one-eyed man is a king.
Dont scoff at dividends when you are looking at capital
gains as, the route through highest capital gains is often
though valuation based on dividends.
Wise investors dont buy stocks just because they are going
up, they buy is because the current cost will seem
extremely cheap in the years to come, and dividends yields
of the future prices may still be 1-2%, but will be large on
the investment price.
The greatest gains in the market have been made by
simultaneous increase of earnings along with increase in
PE.
Increased earnings is just arithmetic progression, both are
almost geometric progression.
PE vs simple earnings increase
For a stock to grow 100 times on increased earnings if the
PE is same.
If a PE grew 4x, the company would only have to increase
earnings 25x.
The same is also a double edged sword when PE falls, in
fact it is much worse as if the PE halves, the earnings have
to double just to keep the prices constant.
There is no such thing as a correct PE or a correct relative
PE. The story, assumptions and risk reward are the most
important.
If a stock has gone up 50x after you bought it and with a
significant risk, if it can double, it will yield a 100x return.
You can run incredible amounts of risk for a reward of
that size.
In the stock market as in poker, the money tends to move
from stupid to intelligent hands.

Fallacies in using the PE independently:

Earnings are not as easily comparable as prices. In many
ways purely comparing earnings is like comparing cows vs
horses.
Quality and composition of earnings are vital in drawing
effective comparisons by using the PE.
Just PE can be as deceptive as drinking martinis.
Just as fastening a seatbelt can save your life, scrupulous
attentions to the change in quality of earnings can save you
your fortune.
The best safeguard against the sleigh of hand booking
keeping is to have nothing to do with it or with the men
who practise it.
The greatest mistake of the public is to pay attention to the
prices instead of the value.
Earning are way more manipulated than stock prices.
But for the gullible, there would be no manipulators. In
Africa, where there are no antelopes, there are no lions.
Stocks are bought and sold on the market because both,
the buyer and seller hope to benefit by their
actions.Neither are there to do another a favour.
Technical analysis is not an alternative to fundamental
analysis, it is at most to be used as a tool for an entry and
an exit after a finalised decision to buy or sell.
Basic economic principals
All market value is in the mind.
All laws made by men, can be changed by men, will be
changed by men ass soon as people decide that they would
be better off if the laws are changed.
No ones title or right to property is worth anymore than
his fellow creatures willingness to defend it.

If a company seems to be operating in ignorance or

defiance of these 3 principles, dont stop and figure RUN.
There are 3 approaches to investing
Psychological
Statistical
Spiritual
Remember that a man who will steal from you, will steal
from you.
Ask yourself if the company you plan to invest into is going
to make the world a better place. If no, avoid it like the
plague.
No matter how profitable, stay away from men, companies
and ventures that are based on defrauding rather than
helping their customers.
Most fraudsters are not so selfish as myopic, not so much
greedy as stupid.
When morally derelict men reach the top of corporations,
and stay there for a a few years, the evil done by them lives
on.
It is thus unwise to be too excited about an a quick
turnaround in any organisation whose management has
displayed a lack of moral principle.
When you invest into a selling to a bigger fool venture,
you might be the biggest fool, and just dont know it yet.
In racing there is a huge difference between the 1st, 2nd
and 3rd prize. Investment returns are no different.
Bet on individuals and organisations fired by the zeal to
meet human wants and needs, imbued with enthusiasm
over solving mankinds problems. Not just ones that are
there for the profit.
The corporate economist thinks of making the company
bigger than more profitable.When you see a company

delivering a low return on capital and continuing capital

expenditure year on year to improve market share you
probably are dealing with a corporate economist.
The last emotion to die in humans is pride.
Check if the Main man has people smarter than him or is
he always hogging the limelight. Generally people who
share limelight with CFOs and other heads tend not to be
egomaniacs.
Inflation is the cruelest tax.
If ones head is held under water until he agrees, it is
extortion, not an agreement.
All power corrupts. Absolute power corrupts absolutely.
In no civilisation has the value of currency increased, ever.
Interest is the price of time.
Debt is never bad. What one does with it determines the
goodness or the badness of the debt.
Hunting ground for 100-1 winners
Inventions that can make you do what you always wanted
to, but could do in the past. Cars, Airplanes, Televisions,
Smart phones etc.
Things that simplify or make existing tasks easier, faster or
at a lower cost Computers, earth moving machinery.
Processes or equipment that allow you to maintain quality,
while reducing or eliminating the labor required for it.
disposable syringes, frozen foods, xerox.
New and cheaper sources of energy kerosene, atomic
generated electricity etc.
Doing old essential jobs organically. using neem as pest
control instead of pesticides.
Methods or equipment for recycling. water purification
Transportation on land that can be done without the wheel
or fire.

Four categories of stocks that have yielded 100 baggers

Recovery from depressed, rock bottom economic cycles.
Change in supply demand ratio for a commodity, reflected
in a sharply higher commodity price.
Leverage in capital structure, in long periods of expanding
business and inflation.
Result of continuous investment of re-investing earnings at
high rates of return on capital. MOATS
The basic reason very few of us have made 100-1 on an
investment is that most of us havent even tried to do so.
Understand the difference between earning and earning
power.
Sales growth
Profit Margins
RoE
RoCE
Book value build up
What mathematics cannot do, common sense sometimes
can.
In Alice in Wonderland one had to run fast to stand still, in
the stock markets, one who stands still can really make
money fast.
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3 replies on 100 to 1 by Thomas Phelps, in 95 points.
Nitin Siddamsetty 11/04/2016 AT 9:34 AM
Reblogged this on Big Investor Blog.
REPLY
sunil 11/04/2016 AT 2:31 PM
hi short and apt . good work
REPLY
Aejaz 11/04/2016 AT 8:22 PM
Excellent work
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