Interesting reads

http://www.scribd.com/mobile/doc/118893112/embed?access_key=key-2afng6yx0zlb785zfsh4

Buying spread over 2 years! Case of fraud

http://www.scribd.com/mobile/doc/98207906/embed?access_key=key-qurjft9zksvuielburx

I like the spread sheet and ways to look for buying opps. Need to compile corporate actions to rss 

Feeder

Biotech blogs

http://molecularfuture.blogspot.com/

Charlie's angles:)

Charlie Munger : One thing that all those winning betters in the whole history of people who've beaten the pari-mutuel system have is quite simple. They bet very seldom.It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it ‑ who look and sift the world for a mispriced be that they can occasionally find one.

And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don't. It's just that simple.That is a very simple concept. And to me it's obviously right based on experience not only from the pari-mutuel system,but everywhere else.So you can get very remarkable investment results if you think more like a winning pari-mutuel player. Just think of it as a heavy odds against game full of craziness with an occasional mispriced something or other. And you're probably not going to be smart enough to find thousands in a lifetime. And when you get a few, you really load up. It's just that simple.

So the trick is getting into better businesses. And that involves all of these advantages of scale that you could consider momentum effects. How do you get into these great companies? One method is what I'd call the method of finding them small get 'em when they're little. For example, buy Wal-Mart when Sam Walton first goes public and so forth. And a lot of people try to do just that. And it's a very beguiling idea. If I were a young man, I might actually go into it.

Ideally and we've done a lot of this you get into a great business which also has a great manager because management matters. For example, it's made a great difference to General Electric that Jack Welch came in instead of the guy who took over Westinghouse ‑ a very great difference. So management matters, too. And some of it is predictable. I do not think it takes a genius to understand that Jack Welch was a more insightful person and a better manager than his peers in other companies. Nor do I think it took a tremendous genius to understand that Disney had basic momentums in place which are very powerful and that Eisner and Wells were very unusual managers.

So you do get an occasional opportunity to get into a wonderful business that's being run by a wonderful manager. And,of course, that's hog heaven day. If you don't load up when you get those opportunities, it's a big mistake.

However, averaged out, betting on the quality of a business is better than betting on the quality of management. In other words, if you have to choose one, bet on the business momentum, not the brilliance of the manager.

But, very rarely. You find a manager who's so good that you're wise to follow him into what looks like a mediocre business.

Yes bank - 10 Reasons to buy - Asset quality

• Dont know of any other bank which has consistently shown slippage ratio of sub 1%
• Peak slippage ratio of 0.7% as against market expectation of 3% if the valuations were to stay constant at CMP
• Prudence shown in several occasions including 1) SKS loan recall and then disbursing the loan later 2) Structuring of transactions in project finance type of loans could be different (i.e. SPV level financing) 3) Ultimately it is a call on the management's ability to get the money back when in distress (including the DC loan, which they partially were returned)
• Provisioning has most of the time been above 80% - could be managed up or down to manage earnings; as long as it is greater than 70%, I am ok
• This is the only way to test their underwriting practices apart from anecdotal evidences (often misplaced), because as an external party one cannot know the covenants in a debt transaction
• This opportunity reminds me of Wells Fargo transaction when Mr. Buffett put 40% of his networth to I guess make a five bagger latter (not sure if it was 5 x, but I know it was very profitable)
• The ability to sit through the pain of 50% down side and 2 x upside is what makes this fascinating! Think long term that is 5 years!

Yes bank - 10 reasons to buy (contd)

Jessy Livermore - trader or investor?

Money is made by sitting not trading
It takes time to make money
Wasnt my thinking, it was my sitting
Constant action is what disrupts
Buy right, sit tight
Dont give me timing, give me time!

Nice principles

Philosophy


The Resolute Way: Tom Stanley’s Investment Philosophy There are many ways to be a successful investor. I have no claim that what has worked for me in the past will continue to work in the future, but I would like to share with you some of the principles I have learned over the past 30 years that have helped me become a better investor.


Be a Long Term Investor
1. Too much emphasis is placed on short-term fluctuations. It is easier to anticipate long-term trends.
2. Have a Flexible Approach
   Change is the only certainty and as markets change, one should change as well.
3. Actively Look for Ideas
   I find many of my best ideas; they don't find me.
4. Don't Rely on a Single Perspective
   Understand biases and conflicts of interest from information sources.
5. Be Skeptical
   Check facts directly.
6. I Eat my Own Cooking
   My only stock market investment is the Resolute Performance Fund. This aligns my interests with the rest of the unitholders.
7. I Buy my Best Ideas
   I prefer to buy only my best ideas.
8. Filter out the Noise
   One of the greatest challenges is to filter out the noise and use only what is relevant.
9. Be ThriftyModerate costs facilitate moderate fees. Moderate fees facilitate performance.
10. Outperform by Being Different
    To have a chance of outperforming the market, invest differently than the market.
11. Know Your Limits
    It is just as important for me to know what I don't know as it is to know what I know.
12. Stay Humble
    Stay humble or the market will make you humble.
13. Being Small is an Advantage
    It is easier to outperform being small.
14. Apply Spiritual Principles
    An important measure of one's success is how much he benefited his fellow man.
15. Investing is Not a Team Sport
    The best decisions are rarely made by committee.
16. A Good Card Player Does Not Show His Hand
    Confidentiality is essential for successful small cap investing.
17. Too Much Emphasis is Placed on Precision
    I don't need exact numbers to make decisions.
18. You Don't Have to Win by being Original
    You win by being right.
19. Be a Contrarian
    Being a contrarian is harder in practice than in theory.
20. Strive for Effective Rationality
    Do the homework; know the facts; and make decisions based on the facts.


Pasted from <http://www.blogger.com/blogger.g?blogID=373883812131625003#editor/target=post;postID=2198643359948140657;onPublishedMenu=overview;onClosedMenu=overview;postNum=0;src=postname>

Yes bank - 10 reasons to buy

Contraction in multiples unjustified!

First graph - 15 X jump in Book Value since 2005 ; only 4 x jump in stock price; critics will say and rightfully so that P/B has contracted due primarily to the fact that multiples have compressed significantly

Second graph - Last 4 years BV up 1.6 x and stock has been up 1.1 x ; I think the catch up trade will happen as and when RBI starts easing liquidity again - taking a 3 year view, this is bound to happen!

Yes bank - 10 reasons to buy at the current valuations

Asset Quality

- Diversification of the book since 2008:, Mid corporate exposure was 45% - today it has reduced to 20%
- Most corporates are rated now and level of risk level may have reduced as indicated by:
 RWA proportion of total assets - this metric reduced from 89% to 68% currently
- Investment (credit substitutes book) is AA+ - names include Tatas, Reliance and other large corporates - it is quite clear that this market does not exist for smaller players still
- GNPA, slippages and NNPA are lowest in the industry and have been so for a period of time; highest provision cost was in 2009 of 0.33%; also has negligible restructuring book
- Top 20 loan accounts form 16% of the loan book - not a very reliable metric
- More importantly, bank came out of problem accounts ahead of other banks in several instances

Assuming that the bank trades at its historical average valuations - the current price =>
credit costs to increase by 300 bps, which is a highly unlikely event

Assuming that the bank trades at 1 SD away - the current price =>
credit costs to increase by 80 bps - It is highly unlikely that this is a permanent damage to the book multiples

Computation below:

Price	270
Book Value
FY13	162		1.67
FY14E	193		1.40
Book Value at average valuation
FY13	112.5		2.40
FY14E	135.0		2.00
Book Value at 1SD
FY13	150.0		1.80
FY14E	180.0		1.50
Book Erosion at average valuation
FY13	49.5		No. of Shares
FY14E	58.0		35.862
Book Erosion at 1SD
FY13	12.0
FY14E	13.0
Implied NPA formation at average valuation (in INR MM)
FY13	1775	3.3%			53971
FY14E	2080	3.2%			64186
Implied NPA formation at 1SD
FY13	430	0.8%
FY14E	466	0.7%

Yes Bank - 10 Reasons to buy at current valuations

Reason 1: Capital adequacy is not an issue:

• Over the last 25 quarters - Company had a higher than 9.5% Tier I only 30 percent of the time
• Whether it is riskier to run the book with this kind of leverage is a different question and is separate topic of discussion
• It has raised capital in 3 occasions previously:
• INR 120 crores in Dec 06 at a price of INR 120 and pre-money P/B of 4.3 x and post of 4.1 x
• INR 330 crores in Dec 07 at a price of INR 225 and pre-money P/B of 5.0 x and post of 4.8 x
• INR 1034 crores in Jan 10 at a price of INR 270 and pre-money P/B of 4.1 x and post of 2.6 x

• What's interesting from the above data is buy and hold DOESNOT work!

1. stock doubled between Dec 06 to Dec 07; if you bought and held it till today (CMP of INR 300) - it is about 16 percent IRR;  if we bought in Dec 07, return comes to 6.3 % (< than fixed income returns)
2. Now consider that stock ranged between 44 to 270 post December i.e. one should have averaged out without hesitation; same should be the case now if it corrects further - effectively keep increasing the stake until it finds its natural bottom:)

• Likely pre-money P/B would be 3.5 x (assuming mgmt. would consider growth sacrifice)

1. reverse computing - the mgmt. will manage the show until price moves up to INR 560+; Assuming they raise $ 300 M post-money P/B comes to around 2.6 x; which is broadly in-line with the last fund raise

• They can aaram se manage growth without rushing to raise capital
• Key inherent assumption is it is a strong bank and can find investors to fund (a fact that has been validated more than 3 times before)
• Also, after the recent Basel III classification of capital - There is 3% more room in Tier II => they can grow at 25% without raising capital for a period of time (RoE is 25%)

Next Reason: Asset Quality in next post!

Yes Bank - Norwest Buys in

On July 31, 2013 DB International Asia Limited sold 35,40,799 shares of Yes Bank  at Rs 292 on the NSE.
  
However, Norwest Venture Partners X FII - Mauritius bought 35,40,799 shares at Rs 292.

In the previous trading session, the share closed at Rs 323.80, down Rs 25.10, or 7.19 percent. It has touched a 52-week low of Rs 288.55.

The company's trailing 12-month (TTM) EPS was at Rs 36.27 per share. (Jun, 2013). The stock's price-to-earnings (P/E) ratio was 8.93. The latest book value of the company is Rs 161.48 per share. At current value, the price-to-book value of the company was 2.01. The dividend yield of the company was 1.85 percent.

--------------------

Awsome deal - they have done it better than all the retail investors out there!

Key Qs:

- Asset quality deterioration given macro

- Credit growth slowdown

- Capital raise - if it does not happen