If I do a quick analysis of my portfolio, I have made money largely from companies very high on compliance. The groups are Tata, Murugappa, Sundaram, Birla, Hdfc, Multinational companies.

Not sure whether clubbing Multinational companies in one group makes sense – largely it is the American companies which have shared their prosperity with their Indian shareholders. Companies like Greaves Lombardini – are the ones which immediately come to mind when we talk of MNC failures. Of course we may have been willing to pay a huge premium for equity shares of Coke and Pepsi – but it never came!

I have traded and even held shares like Oracle, Biocon, Hero Honda, Gnfc, Gsfc, Bharti Airtel,  – some held for a few years…and shares like Hero since inception. Also held and made money on shares like Reliance, but never had a big holding and now my holding is insignificant – except what is held through Mutual funds that I own.

Even now I find it very difficult to respect companies where the top management gets paid well and has no connection at all with the shareholder’s rewards. Too many such companies.

I know of a CEO who recently ‘sponsored’ the Ganpati event – spending a couple of lakhs. Why did he do it? Well it is the society in which he lives. He actually peddles a low end product and none of his neighbors would ever touch this product!

I know of an auditor who bought a car from a client – at book value and sold it in the market at a higher price. Why? a car is a personal asset if you do not claim depreciation…so this is is an indirect way to remunerate the auditor.

I know of a company which gets a lot of vendors to display their wares and then creates its own software. It is amazing how they can beg, plead, cajole for a demo. Sadly there are too many vendors…you know the story.

I know of a CEO who flew down on a Friday from a foreign location to be in India on Saturday (and flew back Sunday) – this was because he was in a meeting there! Why did he want to be in India? He wanted to be with family and friends for his birthday!

Then of course there are companies which organise ‘meets’ at a time when a senior executive has a personal function. This allows the company to claim all the travel and stay expenses….

When you invest you do keep your ears open. Mine were closed about 10 years ago when I quit active broking – still whispers do come in.

I find it difficult to invest in such companies. Sure I missed investing in some companies which have done well. Still call it bias or whatever I find it difficult to invest in companies that do not pay TDS, PF dues on time. I even find it difficult to invest in companies that cheat vendors, emloyees, financial institutions – as a minority shareholder you stand no chance in hell that such a guy will reward you.

So I come back to the 20 companies where I have 90% of my money. At the periphery there would be Punj Lloyd…and the types….but really I do not know where to invest, so keep putting more money into shares that I already have. After all if the best Fertiliser share is already in my portfolio, I should not be searching for more…na?

 

 

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  1. nice one… Along with balance sheet and P&L statements, I also evaluate management, but only by going through their annual report. I look at %PAT as salary to promoters and if there are related party transactions etc (SUN has written off loan to related party !!). You also get news about them once in a while. So, you can avoid them. But there can be many more like that and it would be very difficult to find if some management is good or not. You have named some companies in this. Would it be possible to list companies you own+planning to own and also those you do not want to own ?

    Also one dilemma. I somehow have good opinion about Mahindras. But their ‘mahindra holidays’ has many dissatisified customers. Does this rule out investing in M&M?

    Warm regards,
    Bhushan.

  2. do not think life is so easy. M holidays is in an area of COMPLETE MONOPOLY – Sterling is no patch, at least not today. M H R L will earn money – but we may require patience. I know complete downright thieves who have made money for their shareholders, and completely dumb but ‘nice’ people who have lost money for shareholders. You have to decide are you running a 100 M dash or a 100km Ultra Marathon. The answers could be different.

    No I do not have a list as of now…and am not a license holding portfolio manager (thank God for that!)…

    so you are shopping in the wrong market…

  3. I think one of the ways to look for is dividend pay out ratio. If company is distributing at least, say one third of its net profit by way of dividend, it provides some sense of genuineness to net profit figure and, also, minority share holders get some share of profits in hand.

  4. Sir, I am not sure if you give comments on individual stocks. But, I was researching stocks this weekend and feel the company Kothari Products (makers of Pan Parag) is available almost free. The company has more cash than the current market cap and debt. Its mcap to sales is abt 0.3 and is trading at about .6 book value. EBIT and net profit is definitely disappointing, but I still feel its a steal!! Am I missing something here?

  5. Hey Sreedhar…I have a zero edit policy on the comments section…but my success has been in doing research for 364 days to invest/ review on 1 day…Sorry but K P is not on my radar at all.

  6. Hi Subra
    Just wondering where do you hear these news/infos ?
    I find it nearly impossible to be aware of this kind of news.
    Wonder should i ever invest in Stocks or keep it simple with MFs and be satisfied with low returns.

    DM

  7. hey Sreedhar,

    I beleive Kothari looks cheap but is a value trap. Lot of Value investors got fooled by this share. Analyze it with a magnifying lens before u invest. It is cheap for a reason.

  8. Subra Sir, one more point noted to checklist for choosing stock, Thanks. But the one question pops up to my mind (as others will also have). We can analyse the Financial strength of the company using Financial statements but how do you analyse the ethics? Is there any way for minority share holder to know how ethical a company is (minority share holder having no contacts/friends in higher management 🙂 )?

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