Yes that is what i decided to become one, even if that meant I ran the risk of putting in a few extra pounds :) and I was sure of becoming poorer by a few thousand Rupees :D.
Stripes are back in Fashion: Stripes which were previously considered as a design favored by people who were mentally disturbed are now back in Vogue. British designers are busy designing dresses with stripes says a news Item.
Well, believe that Stripes are going to remain in Vogue for at least a couple more years :) , any second opinions ???
Yeah it is an attempt at understanding how important is Understanding Culture in picking up Stocks? Sounds bizzare, doesn't it? I bet we wont feel so, if we were to look at this at a deeper level.
Consider this, Coca Cola, Gillete some of the gems in the crown of Warren Buffet. These are not only good companies but also companies which are a part of American Culture. Put in Simple words, to Americans water and soft drinks are almost similar.Shaving everyday again is a part of their culture. Sounds silly isnt it? Well believe me, it is not so easy and understanding this seemingly easy but rather difficult facet of Investing is in my opinion a key to the monumental success of Warren Buffet. Once you have got this in place, you start zeroing in on the companies which operate in that sector and then all your valuation principles come into play.
Now, this process will help you in picking companies which can give you consistent returns over a long period of time regardless of the economic conditions, thus forming the foundation of your portfolio.
OK now to Indian Context, what are the companies I can think of which form a part of Indian Culture? Too hard as the country is extremely culturally diverse. However if this Organization is made into an Institution, I will be the first person to go ahead and get a stake for myself.
This Organization employs about 14,000 people, runs Universities, manages thousands of acres of assets and rakes in around 100 million US dollars and above all manages the activities of the most temple, which is the most visited in the world. In case if you have still not got it, it is none other than TTD(http://en.wikipedia.org/wiki/Tirumala_Tirupati_Devasthanams).
If at all anything the recent crisis have made more people to turn to this place with the hope that God(if there is one?) will bail them out of the crisis. Hope TTD is listening :)
Well on a serious note, lets start our homework and hope to hit on something which can form the bedrock of our portfolios. It could be anything from a Beer Company( the changing demographics might make it a reality) to a Hospital ( the amount of Junk Food and Unhealthy life style) to a Fast Food Joint or of all a company which supplies clean drinking water ( don't be surprised if that happens :) )
This New Year has opened with a bang. Mr Raju of Satyam has given Hollywood and Bollywood a wonderful script, has given Media with loads of fodder for them to conduct debates and discussions and special programs,has given People like us material to discuss during lunch breaks, has given Employees with Uncertainity,fear and finally has given Investors, the best possible shock.
It has been an amazing story to say the least.Enough and more has been written about in the media. Hence i refrain myself from presenting the numbers again. But i would like to put forward just a doubt that is just killing me.
Mr.Raju says that he has been fudging the accounts to keep the company going and neither he nor his family members have taken a rupee nor derived any benefit out of this fudging process. Ok let us assume this to be true for a minute.
My doubt is that, the company has been and it is still doing the business of providing IT service. The company's workforce is around 50k. The company derives its revenues by billing the clients who are mostly Fortune 500 companies. The billing rates of the company are almost on par with most of the other IT Majors like Infosys, Wipro and TCS. This means that money has been flowing into the coffers of the company.
Now lets look at the expenditure side, the company is half as big as Infosys technologies Ltd, which pays twice as much as employers as Satyam does. Now looking at the Remuneration which Satyam pays to its employees, it is again on par with Industry majors.
Hence based on the aforementioned points we can safely conclude that Satyam has and must have got enough money to keep the cog moving. So the claim of Mr. Raju that he has brought in 1300 crores of his own money to keep the company moving is baffling to say the least. What has happened to the money which the clients must have paid Satyam?
Now let me give my version of what could have happened. Mr.Raju must have siphoned off the money to fund his real estate purchase and other purchases. He must have pledged his shares and obtained money for those activities. As long as the share price remained high and the prices of real estate was moving up he must have been a happy man. Once the Share Price of Satyam started to fall he must have been worried as his borrowing capacity was decided by the price of the Share.
His statement that All his efforts such as dividends and bonuses must have been to infuse confidence in the Investors was to make sure that his borrowing capacity remained intact. Global recession played spoil sport and it took down the price of real estate and the Sensex down.
This meant that he could not sell off the real estate holdings to bring back the money which he has siphoned off and he could not borrow any more and in fact on the contrary needed to pay the lenders for the drop in the share price. Our man was struck in catch 22 situation and then came out with a master plan to purchase stakes in Maytas using Cash that was not there. Had it gone through he would have made Maytas poor but carried on with the game, unfortunately it failed and he decided rather was forced to confess.
Readers let me know if u feel otherwise :)
Mr.Raju has come out with the Joke of 2009 so early in the year when he said that "None of the Board of Directors knew about what was going on in the company"
P.S: Why didn't SEBI remove the Satyam counter from F&O segment? The removal would have meant Satyam could not have fallen by more than 10-20% max in a day. This fall has wiped out millions of Rupees, all of which belong to the average Indian. While I do understand that exit routes needed to be provided for Investors, I believe in this case a freezing at least on temporary basis until the situation was brought under control would have definitely helped the common Investor.