Click here for my question in an earlier post.
After chat with my friends Pramod and Reddy(mrpr, M Ravi Prakash Reddy), I got some clarifications.
- Reddy: In short term it is gambling!!! Its your choice to gamble or not, to make money or lose money.
- P/E of 10 means of 10 years of operation of business gives back returns in terms of EPS. If some other company wants to buy it, it would be expected to pay so much per share to acquire the company.
- Reddy: Our aim of seminars is clear [Note: We three did one seminar on fundamentals of investing in stocks on 31st May 2008, in Konark hotel, Bangalore]: We want to educate people taking them from "unknown to known". We can't change the mindset of people (say day trading) through our seminars. For changing mindset, workshops like Landmark Forum, courses from Bharat Chandra are required.
- If people are doing trading frequently just for capital gains without knowing how stock investing works, its their mistake. Its their responsibility to be aware of what they are doing, know the risks involved etc.
- Short term investors (day traders/speculators) do not really bother about company performance. They simply want to ride on the news (spilt, getting big contract,dividend announcements) that can give them short term profits.
- Long term investors: Think like business men. Share value of 100 with P/E of 10 means EPS of Rs.10 for ten years gives back my money. After that whatever I earn is profit. I would not bother like "EPS is not what I get as share holder, only part of it is what I get, may be its just 1-5% of share price" "Share value is simply jacked up by making P/E as significant among crowd of investor community etc - People are made to believe something is right value to buy, hold or sell"
Infosys bought Axon (UK) in all in cash deal for $750million = 2 times revenues in 2007 (operating margin = 15%) ==> This means expecting a 7.5% returns on the investment. By their value addition they would increase operating margin to required levels. Infosys operating margin is 30%.
Idea Cellular bought Spice at Rs.77 per Spice share.
Mamari,
ReplyDeleteI'm really impressed by the research and the study you guys have done. First of all hats off to that. I thought a lot of times of sharing my ideas with the people. i'm also a huge fan of business and investment but there is no direciton to it. I do my research and invest for medium term. And do some day trading as well but not for the learning sake but for the sake of earning some quick money. I will surely follow all your posts. I have not finished reading. Many more comments to fill your mail boxes in future. watchout. :)
Ravikiran
Ravi,
ReplyDeleteThanks for your encouragement.
Prakash