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Intelligent Investor: Chapter 20

December 2, 2020 by Laxman Sonale 20 Comments

hello friends, in today’s article we see chapter 20 of the intelligent investor book. In this chapter, we get the Margin of safety, its advantage, and how it is important for us. Chapter 20 of the intelligent investor book, is a famous chapter and also important for investment.

The margin of Safety:-Intelligent Investor: Chapter 20

Let’s understand the margin of safety with examples, let’s consider the one bridge that has a 200-tonne capacity, on this bridge you try to pass the 199-tonne capacity truck. Most of the time your bridge is broken. So to avoid an accident, you have to take the margin of safety. If you pass the truck which has a weight of 150 tons, then you can pass the bridge without an accident.

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So when you make an investment in the stock market. you have to consider the margin of safety. Investment with a margin of safety is good, and the best is the margin of safety with your life. (Intelligent Investor: Chapter 20)

So the author gives some points you should know.

Things to know:

Relationship between the margin of safety and diversification: When you use the margin of safety or diversification, there is only one motive is to minimize the risk of investment. so there is some relationship between the margin of safety and diversification.
The secret to how to get rich is “Don’t lose”: In investment, the most important part is that don’t lose principal money, If you lose money, then you can not recover the loss of money. so recover this loss you have got a 100% gain or sometimes 1000% gain. So the best way to get is don’t lose money. (Intelligent Investor: Chapter 20)
Always remember you can’t time the market: so many traders or some investors try to time the market for quick money, but most of the time lose their money. The intelligent investor doesn’t try to time the market. They always leave away from trading.
Don’t pay so much for a stock that you will have to regret it later: The author is telling about overvalued stock buying.
Some questions to ask yourself before making a decision: for this, you can ask yourself is that the worst condition of the company can be recovered in past, and also if your all money is lost, you will be fine with that. You can also ask what is lost in the company instead of the probability of that succeed.

This is all about the margin of safety from chapter 20 of the intelligent investor book.

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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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Intelligent Investor: Chapter 18

December 1, 2020 by Laxman Sonale 2 Comments

Hello friends, in today’s article we see chapter 18 of the intelligent investor, which is on A comparison of eight pairs of companies. In this chapter 18 author give the different types of companies, and which one we have to choose. so let’s see chapter 18 of the intelligent investors.

A comparison of Eight pairs of companies:-Intelligent Investor: Chapter 18

Benjamin gram gives us eight pairs of companies and also explains which one is good and bad. so let’s see the pairs of companies as follows.

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About the pairs:

REIT and REOC: These are two companies, in this REIT is a good stable company and provides the maximum dividend. In REOC companies, they take the dept and don’t give the maximum dividend. Remain with his dept they buy the asset capital which appreciates in the future. In the long term, REIT is a good performance as compared to the REOC. (Intelligent Investor: Chapter 18)
Value Stocks vs Growth Stocks: One is value stocks and the other is the growth stocks. In a short period, the value stocks perform poorly, and growth stocks perform well. But value stocks outperform in the long term as compare to growth stocks.
Bothe overvalued: Both companies are overvalued. One is more overvalued than the other companies.
One overvalued: One company is overvalued, but still went 35% up from that level. So the author gives us advice, is don’t short sell, like these companies. Because we don’t know how much time these companies stay overvalued.
One company successful but highly overpriced other companies cheap but poor fundamental: Both companies are not good investments. (Intelligent Investor: Chapter 18)
One was a publication: In this period this companies IPO is overvalued and which stocks fell later and other companies have a reasonable investment. in that other companies perform well in the long term.
One was a conglomerate: In conglomerate companies, these companies buy the shit loads or shitty modes of financing. After a few years, these companies sell some shit loads because they not perform well, so don’t buy like these companies. Another company is a diversified portfolio, and this company does well in the long term.
One didn’t pay dividends in 13 years and had acquired 24 companies: This type of company is not good for the investment, because these companies not have the focus vision with his companies. so stay away from it.

so this is all eight pairs, with that, the author gives some advice, they are as follows

Some takeaways:

sometimes there are good cause and bad cause of the company.
In the stock market, there are no such things as good stocks.
There are only good stocks price which come and go.
For example, one company discovered that rear cancer recovery drugs. Another company is a garbage company. (Intelligent Investor: Chapter 18)
In these companies, people think the rear cancer discovery drug company does well, but actually, they found the very less customer to treat whatever the treatment price as compare to the garbage company. So the author said, ” In the short-run, a market is a voting machine but in the long run it’s a weighing machine.”

So there is all about chapter 18 of intelligent investors.

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