Month: September 2011

About ten days ago – I opened up the Perfios contest where three lucky winners will get a free one year subscription to the popular money management software.

There are still 5 days left to participate in the contest so please do so if you haven’t done it already.

I have compiled a list of people who have already participated and I want you to verify that your name is present in that list.

If you did both things then your name should appear twice, so if you see your name missing or appear only once where it should appear twice please leave a comment and I’ll update the list.

Here are the entries so far.

(Updated List at Sep 30 2011)
1    Rajat Gupta
2    Rajat Gupta
3    Aashish
4    Ashish
5    Sivakumar
6    Ani Patharathil
7    Ani Patharathil
8    R K Tripathy
9    R K Tripathy
10    Uma Kanth
11    Uma Kanth
12    Raja52
13    Raja52
14    Alka
15    Harsha
16    Harsha
17    Aravind
18    Kiransunku
19    Kumaran
20    Vamsi
21    Vamsi
22    Manish Sep 20, 2011 7:34 PM
23    Manish Sep 20, 2011 7:34 PM
24    Vijay
25    Dr. Biju Paul
26    Dr. Biju Paul
27    Prashant Agrawal
28    Prashant Agrawal
29    Amit Tamhankar
30    Manish Sep 22 2011 at 12:17 AM
31    Rajesh Kabra
32    Rajesh Kabra
33    Kumaran Ilangovan
34    Akhilesh Shah
35    Ashish Balachandran Valiyaveedu
36    Anil Kuppa
37    Anil Kuppa
38    Parag Gupta
39    Abhinav Behari
40    Abhinav Behari
41    Chandrasekhar Joglekar
42    Ravi Kukreja
43    Anurag Sharma
44    Anurag Sharma
45    Anirban Chowdhury
46    Saumya
47    Kumar
48    Kumar
49    Sagar Biyani
50    Ams
51    Ams
52    Prashant 2011 9 30
53    Prashant 2011 9 30

Please leave a comment if you notice your name missing, and if you haven’t still entered the contest — there is still time.

A friend of mine had gone to the US to work when I was in college and one day I told him that he can buy stock in Warren Buffett’s company – Berkshire Hathaway, and that will take care of all his stock market related investments.

He asked his boss about it who told him that you need at least $50,000 to invest in it. I was a little confused when I heard that because I didn’t know that one share cost that much!

This was more than ten years ago, and the stock trades at more than $100,000 now!

That’s because Warren Buffett has never paid out a dividend, bonus or stock split or reduced the face value – things that are seen very often by other companies who want to increase liquidity, and the stock price as well.

He does have a Class B of Berkshire Shares that trade at a significantly lesser price of around $70, and that was also after a lot of small Berkshire shareholders wanted him to split the shares so that they could gift them or inherit them to their children.

Even these shares were priced much higher, and when they were introduced they had 1/30th value of the Class A shares, but only 1/200th of the voting rights. That means that until recently – the Class B shares traded at over $3,000.

Then last year when Buffett wanted to buy Burlington Railroad he had to split the Class B shares into 50 – 1 and thus the class B shares now trade around the $70 range.

With this backdrop, the world was surprised when Berkshire announced a stock buyback program for Berkshire Hathaway today.  What I found most interesting is that Berkshire has got about $47 billion of cash, and at current market capitalization and exchange rate – India’s biggest company – Reliance Industries is worth some $50 billion in all!

So, Berkshire is a very big company with cash reserves which can be matched by just a handful companies, and they have capped the buyback to a limit of cash reserves of $20 billion which is serious money in itself!

I read a lot of stuff about this today that made absolutely no sense at all, and I think people who wrote it were motivated more by their biases than facts.

However, I did read one article by the Pragmatic Capitalist that was devoid of all hyperbole, and presented two simple takeaways from this news which are that Buffett thinks Berkshire is selling a lot less for what it’s intrinsically worth, and relatively speaking – the rest of the equity market is not as attractive.

I can’t really think of anything else beyond this and rather than thinking too much about this decision, and what it could mean for the direction of the markets, the fate of stocks or in fact the fate of the man himself – people are better off accepting that not every action needs to have a complicated or sinister reason behind it, and these two simple factors could just be what prompted the man to take the decision.

I have discussed several stock portfolio tools here, and most of them give you a lot of options, and help you maintain your data the way you want. However, there are always some things that you wish the tool had that it doesn’t and it sometimes forces you to maintain Excel spreadsheets of your own.

The number one issue that I have had using Excel is that I couldn’t build one that auto – updated the stock quotes when I opened it. I know there are ways to do it, but I was never successful in it. I don’t mind entering the initial data there myself because I don’t have many transactions, but if the prices don’t update automatically then it becomes pretty much useless.

That’s why I created several Excel portfolio tools over the years, but never really used them frequently.

But I recently checked out Google Spreadsheets, and the feature of automatically updating stock quotes there is simply amazing. It’s very easy to use, and it works for Indian stocks as well.

I have a basic portfolio setup there now, and I think I’m going to use this for a long time to come.

You need a Google account to get started, which I’m sure everyone does, and then you need to go to Google Docs, and open up a new spreadsheet.

You can then setup your columns any way you want – but you would probably want these at the minimum:

1. Name
2. Quantity
3. Cost
4. Market Price
5. Value at cost
6. Market Value
7. Profit / Loss

The one that I set up looked like this.

The most important thing in this is the market price column – which is the column that has the latest market price of the stock you want to track, and you can see that highlighted in the blue.

The red ellipse shows you the formula that you need to input in the cell to get the market price.

It is simply:

=GoogleFinance(“Stock code”, “Price”)

You can find the stock code from Google Finance by typing the name of the share in the search bar, and Google will return you a list of matching names along with their codes. You can then use that code in this spreadsheet to get the price.

I’m sure this has been around for some time now, but I didn’t discover it until yesterday and I was really happy to see how easy it was to setup.

I’m going to make a lot of use of this going forward, and I hope you find it useful as well.

This is another post from the Suggest a Topic page, and today I’m going to write about how you an access the P/E ratios of various Indian sectoral indices and a few thoughts on this data.

The new NSE website makes it quite easy to get the P/E, P/B, Dividend Yield on all the main indices and here’s how you can do that.

First go to the NSE website and look for Products –> Indices.

Next, look at Historical Data, and View P/B and Dividend Yield.

And finally select an index and a time period to generate data for that.

The second part of the question was what is the average of the various indices, and if this information is even useful.

I don’t know how useful the average will be and my guess is that you are better off looking at a median and that too just for reference, and specifically to tell you of extreme situations.

A chart that I have used here quite often is the historical Nifty P/E Ratio data, and here is the latest chart for data from Jan 2001 till yesterday.

If you look at the chart above you will see that the Nifty P/E has never gone above 28, and has never fallen into single digits either.

So, when the P/E of this index is close to these numbers it gives you an indication that the market is cheap or expensive.

But, that’s only in hindsight.

In real time – you can’t be sure if the world is going to come to an end or if the world has discovered a new system whereby old economic cycles don’t matter anymore.

I think a great example of this is my own post from October 2008 in which I wrote about P/E ratios being the lowest in the past 8 years, and despite that investor interest being very very low in the stock market.

If you can remember the mood, and I certainly can – you will remember that the share market was the last thing that anyone wanted to talk about.

So, my take on the P/E ratio is that it can be and is indeed a useful measure but I’m really skeptical of people who say we will start investing when the P/E falls below this level, and start selling when the P/E rises beyond that level because I haven’t seen that working well in the real world.