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Investment Insurance - Value investing: The secret market mantra that nobody follows

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Title: Investment Insurance - Value investing: The secret market mantra that nobody follows


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Investment Insurance
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Value investing The Secret Market Mantra that
Nobody Follows
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  • Some time back, I came across an article with the
    rather provocative headline, '30 Years Ago,
    Warren Buffett Gave Away The Secret To Good
    Investing And Correctly Predicted No One Would
    Listen'.
  • Attention-grabbing headlines on websites rarely
    tend to be true, but this one is an exception.
  • In fact, the secret that Warren Buffett gave away
    had been revealed 50 years earlier by Benjamin
    Graham. It was 1934, the year Graham and his
    collaborator David Dodd published their seminal
    tome Security Analysis.
  • Even though 80 years have gone by, the basic
    principles that are at the heart of this book
    continue to hold true. They also remain
    thoroughly ignored by investors. 
  • Here's what Buffett says the followers of these
    principles do, "...they search for discrepancies
    between the value of a business and the price of
    small pieces of that business in that market."

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  • There are two parts to this. One is to think of
    stock investing only as an evaluation of a
    business for the purpose of buying a piece of it.
    And the other is to stay focused on this gap
    between the value and the price. Put together,
    this is what is called Investment Insurance.
  • Value investing has few followers in India, but
    that's something that needs to change as our
    equity markets evolve. For long, equity investing
    in India has mostly been about chasing growth.
    Even our largest companies often grew at a pace
    where it became less important to try and guess
    the inherent value of the business simply because
    that value could change so rapidly.
  • However, I believe those days are gone forever. A
    sensible focus on the underlying business, as
    well as a fair evaluation of its intrinsic value
    is now indispensable for the Indian equity
    investor. It's often said that a rising tide
    lifts all boats, but many of the boats are too
    leaky to stay afloat no matter how high the tide
    rises. 

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  • The most extreme 'anti-value' investing that
    appears to be going on in India is in e-commerce
    and related fields.
  • Here, in what is a throwback to the worst
    excesses of the dotcom era, we have venture
    capitalists throwing thousands of crores of
    rupees at businesses that have no easy way to
    profitability. 
  • It takes my mind back to India's original
    high-profile ecommerce portal, one jaldi.com
    which was run by a company called KLG Systel
    during the boom. KLG Systel was liquidated in
    2014.
  • Will the current e-commerce darlings eventually
    face the same fate? Given their CEO's open
    disdain for profits, the tenets of value
    investing say that they might. 
  • Source http//economictimes.indiatimes.com/wealt
    h/savings-centre/analysis/value-investing-the-secr
    et-market-mantra-that-nobody-follows/articleshow/4
    7307990.cms

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