Posts in category All News
Aditya Birla Nuvo Limited – Analysts Meet (16-09-2015)
Forensics and the art of triangulation (16-09-2015)
Two broad concepts I wanted to share that I have found useful in thinking about these things:
Concept #1: Know the type of error you will be comfortable with.
Statisticians have a very useful concept of errors called Type 1 error and Type 2 error. It basically means you either err on the side of caution or on the side of aggression; a false negative or a false positive. Let us say you are not so sure about, after all analysis, whether management mis-appropriates funds that is generally expected to be minority shareholders'. You either drop the firm however cheap it may be or you go ahead with putting it in the consideration set. Now if it turns out that you dropped them and management was really "clean" then you have made a Type 1 error. If you give a green signal and you find they are mis-appropriating, then you are committing Type 2 error. Maybe you can ask yourself if you are OK with Type 1 error or Type 2 error. As for myself, in areas of integrity towards minority shareholders, I err on the side of extreme caution (or at least tell myself so ) however cheap the stock maybe.
Concept #2: Promoters' may be divided into 3 groups based on their "ethical nature". - this concept is raw in my mind but I find it useful to apply.
I find there are really 3 groups of people.
Group #1 are those who will wilfully violate the law irrespective of enforcement. They will not let law come in the way of their desires or ambitions. If an employee comes and tells them that this will violate this rule, the promoter will say, where is your value-add for the salary you take?
Group #2 are those who will violate the law depending how strongly or lightly it is enforced. To give you an idea recall many years ago a lot of employees were sacked at Intel in Bangalore because they 'fudged their LTC'. Now when I was an employee in a company considered highly ethical (about 22 years ago) I was just told to fill it up to get maximum tax benefit irrespective of whether I took a holiday or not. The general thinking was - this is strictly incorrect, but who looks. But once enforcement increases or at least the threat of enforcement, compliance goes up. So the moment Related Party Transactions need to be disclosed, Group #2 promoter will call up his finance guy and ask him how to manage while complying.
Group #3 are those who do not need any law to be ethical. They are by nature ethical and actively 'seek to know their duties and obligations'. They certainly err on the side of caution while interpreting the law in spirit and comply irrespective of costs. The real good news is that many such people exist, irrespective of whether they are rich or poor. An extract from a letter by Abraham Lincoln to his son's teacher captures this well: "..But teach him also that for every scoundrel there is a hero, that for every crooked politician, there is a dedicated leader." The bad news is that they may be running really poor businesses!
In my own assessment or rather theory, bulk of Indian promoters are in Group #2, some are in Group #1 and some in Group #3. In my view Group #3 is slimmer than Group #1. And more often than not our first impression of these promoters of which group they fall in turns out to be true.
Warm regards,
See gap up opening led by strong global cues: ICICIdirect (16-09-2015)
![See gap up opening led by strong global cues: ICICIdirect See gap up opening led by strong global cues: ICICIdirect](http://www.moneycontrol.com/news_image_files/2014/m/mkt4_200_3517.jpg)
IOC to invest Rs 1.75tn in 7 yrs, eyes 100mt output (16-09-2015)
![IOC to invest Rs 1.75tn in 7 yrs, eyes 100mt output IOC to invest Rs 1.75tn in 7 yrs, eyes 100mt output](http://www.moneycontrol.com/news_image_files/2014/i/IOC_200.jpg)
Oil prices extend gains on stock-draw (16-09-2015)
Sensex, Nifty likely to open in green on firm global cues (16-09-2015)
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The BSE Sensex and NSE Nifty are likely to open in green tracking SGX Nifty and global markets. (Express Photo)
The BSE Sensex and NSE Nifty are likely to open in green on Wednesday tracking SGX Nifty and global markets.
At 8.07 am (IST), SGX Nifty was up 63.50 points, 0.81 per cent, at 7,886.50.
Asian shares followed Wall Street higher on Wednesday, while short-term US bond yields held near 4 1/2-year highs as investors braced for the possibility of the first interest rate hike in the United States in almost a decade.
Hang Seng, Nikkei and Shanghai were up 1.29 per cent, 1.03 per cent and 0.12 per cent at 21,732, 18211 and 3008.84, respectively.
US shares rallied over one per cent overnight, in part helped by data showing healthy growth in consumer spending though price action is likely to have been exaggerated by low trading volume ahead of the Fed’s policy verdict on Thursday.
Back home, Sensex and Nifty fell 0.58 per cent and 0.55 per cent at 25,705.93 and 7829.10 on Tuesday. The FIIs as per Tuesday’s data were net buyers in equity while they were net sellers in debt segment, according to data released by the NSDL. In equity segment, the gross buying was of Rs 2,647.93 crore against gross sell of Rs 2,511.80 crore. Thus, FIIs stood as net buyers of Rs 136.13 crore in equities. In the debt segment, the gross purchase was of Rs 603.28 crore with gross sales of Rs 719.78 crore. Thus, FIIs stood as net sellers of Rs 116.50 crore in debt.
(With inputs from agencies)