Benjamin Gram

Intelligent Investor: Chapter 19

December 2, 2020 by Laxman Sonale 2 Comments

Hello friends, in today’s article we see chapter 19 of the intelligent investor book. In this chapter, the author gives us the relationship between shareholders and management. so let’s see chapter 19 of the intelligent investor book.

Shareholders and management:- Intelligent Investor: Chapter 19

When you make an investment, the most important part is management. If your management is wrong then they will lose your money. So if you want to good investment, then you have to check the management is honest with skillful.

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How to Evaluate Management:

following are some pointers that help you to evaluate management

Shareholders should realize that they are the owners of the company: The author says, so many people make investments but they don’t think, they are the owner of the company. And they have the right to fire any mismanagement. they will do anything that helps the company with management. (Intelligent Investor: Chapter 19)
Two questions shareholders should ask: To get good management, shareholders must ask the following questions.

1. Is management reasonably efficient?
2. Are the interests of average outside shareholders receiving proper recognition?

Answering the above question you get the following answers

Ans(Q.1): to get the answer to these questions, you can get on the financial statement. Annual reports and you have to see the targets of the company. If the target is completed in previous years, and the company goes through that direction which is promised to investors. (Intelligent Investor: Chapter 19)

Ans(Q.2): To get the second question answers you have to read the Proxy statement. In this statement, you get the all information about the management and the company gives which type of recognition to management. So management is the core of investment and in this part, you have to check with your all knowledge and common sense.

So the author gives us some important points to analyzing annual reports and management, they are as follows.

While analyzing annual reports:

Never dig so deep into the numbers that you check your common sense at the door: So many investors read the annual reports. And make the calculations on that process. they forget the main reason behind that calculation. They miss the common sense approach. (Intelligent Investor: Chapter 19)
Always read proxy statements before and after you buy a stock: If you read the proxy statements you get the main information about the management and company contract. If your management only thinks about himself they get the benefit from the option, and they dump so many shares of the company. If they only think about building a big company, for this purpose they take the so much dept. so read the proxy statement before investment.

After this, the author said, ” stay away from the daddy-knows-best attitude.” In this case, the daddy is indicating to the management. so management is only working for you so you have all right about your company.

This is all about the shareholders and management in chapter 19 of the intelligent investor book.

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Next Chapter 20

Intelligent Investor: Chapter 16

November 30, 2020 by Laxman Sonale 5 Comments

Hello friends, today’s article is in chapter 16 of the intelligent investor book. in chapter 16, we see the convertible issues and warrants, and how they benefited investors, this is all information provided in chapter 16 of the intelligent Investor book.

Previous Chapter 15

Convertible Issues and Warrants: Intelligent Investor: Chapter 16

Convertible issues and warrants are types of financial instruments. These instruments are sold by the company to investors for increasing funds.

Convertible Issues: This is a type of bond which have the facility to convert the bond into a share. These convertible issues are helpful when you buy the bonds of the company. This bond can be converted into stocks when the stock price increases. This is one benefit of convertible issues. But, there is one thought that remains. If you know the stock price is increasing. why should you buy, these convertible issues? This convertible issue gives you a consistent minimum interest. And also has a high price for convertible issues. (Intelligent Investor: Chapter 16)
Warrants: Warrants are a type of stock option, so Benjamin gram criticizes convertible issues and warrants.

If the company has maximum warrants then you should stay away from that company. This type of company takes advantage of investor money for stupid financial instruments. If you invest in any company, then you have to decide which one you should buy is stocks or bonds. If you want the minimum return, then buy the bonds and if you want the maximum return then buy the stocks. This all decides on the company analysis, in this analysis you should read the notes of the company and financial statements.

Benjamin gram said,” Convertible issues and warrants are the worst of worlds” other things are that if you want to invest then diversify your portfolio in Cash, straight bonds, Domestics stocks, and foreign stocks.

So the salesman of convertible issues and warrants says,” this is the best in the world”. Because they have a big commission on that instrument so be an intelligent investor by staying away from this type of investment.

This is all about chapter 16 Convertible issues and warrants in The intelligent investor book.

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Defensive Investor Qualities

November 8, 2020 by Laxman Sonale Leave a Comment

Hello friends, in today’s article, we see the defensive investor qualities from the intelligent investor book, In this article, the author gives us two types of intelligent investors. They are defensive investors and enterprising investors. Defensive investor qualities help you to avoid stupidity and save money from losing money in the market.

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Defensive investor Qualities:-

The defensive investor has some qualities, which are as follows:

Emotionally Challenging: If you want to be a passive investor you have to be emotionally stable, so a defensive investor is more emotional challenges. (Defensive Investor Qualities)
Detachment from the hullabaloo of the market: They have to courage to ignore the market.

Some knowledge for defensive investor qualities:

The risk lies within ourselves: Investor is the enemy of himself, so the risk lies within ourselves. So do financially safe and make minimum trading.
Asset allocation has nothing to do with age: Making money in the stock market does not need any age. If you want to make an investment in the stock market you need money.
Fundamental circumstances: This whole depends upon the fundamental circumstances of our financial life.
How much money put in stock: The author suggests that in stock you put your all money of 25% in the stock market. remaining use for your lifestyle. never put 100% of the money in stock, Those only put 100% money who face the last market crash. (Defensive Investor Qualities)
Change allocation when your circumstances change.

When to put 100% in Stocks:

the author gives some criteria for putting 100% of the money in stock, they are as follows:

Survived a previous bear market.
Did not sell during a previous bear market.
Bought more stocks in the previous bear market.
Set aside cash for at least one year.

author strictly says’s ” Don’t fool yourself into believing that it’s easy if you haven’t lived through a bear market.”

Four rules for a defensive investor:

the author gives us some important rules for the defensive investor, they are as follows:

Diversification: defensive investors have to do the diversification of their stock minimum of 10 to 30 stocks.
Large, prominent, conservatively, financially comfortable company: choose this type of company for the defensive investor.
The long record of continuous dividend for 10 years: Those companies have to be a record of 10-year dividend yield. (Defensive Investor Qualities)
Limit on price: Benjamin gram Recommended 25 X average earnings over the past 7 years, a maximum of 20 X last year’s earnings.

after this rule, the author gives us some advice for the defensive investor.

Some advice for a defensive investor:

Buy the company stock at a reasonable price
after that then relax on investment
Turkish proverb is that “After you burn your mouth on hot milk, you blow on your Yoghurt.

Peter Lynch, the greatest fund manager: peter lynch gives the simple philosophy of investing for the defensive or common investor, that is common knowledge of the product that we use daily. after that, you can do an analysis of the stock. (Defensive Investor Qualities)

Benjamin gram gives us more advice for the defensive investor, they are as follows:

And some more advice:

Don’t invest in only one stock, buy a minimum of 10 stocks.
Trade less
Defensive investors win the race by sitting quietly.
Realizing that you can’t predict the future.
Dollar-cost averaging: This concept we see in the other article.

If you want to become a defensive investor you have to follow this rule and also advice. if you follow this you will be a rich man after a long-term compounding effect. (Defensive Investor Qualities)

Those people don’t have knowledge of finance and balance sheets or accounting, they also become defensive investors by Taking minimum charges of INDEX FUND. So this is all about the defensive investor.

Seth Klarman 30 big points on investing