1. The main parameter to look at is the P/E. Investors may also look at the Profit/Profit Before Tax to neutralize the effect of taxes.
2. Investors should also focus on Return on Equity(RoE) but analyzing a company on the basis of DCF is an utter waste of time. Arora contends that DCF cannot be looked at for more then one or two sectors. This is because you really have no idea about what will happen to a company beyond three years.
3. Buy good businesses. In a bad business, the value that a good management can add is very low. An ordinary management in a good business often keeps its momentum. But fraudulent managements should always be avoided
4. For a normal steady business you can never rely on the EV/EBITDA.
5. A tax-saving company is perhaps the worst company in India because it lets taxes determine its strategy
6. There are several instances where Samir Arora used his veto to get directors changed in private companies just to help them get a higher P/E.
7. In many cases, money has not been made by buying the best managements but the managements that want to become the best.
8. High P/E do not come because of high earnings or because that company is in a good industry. 9. It is earned over a period of time
10. If one learns how to invest in India, he can invest almost any where in the world. Investing in India teaches the analyst how to identify managements that are cheating their share holders. One also understand why two stocks in the same sector don't get the same rating.
11. Arora started buying HDFC Bank after it got listed in 1995. At that time the stock traded at Rs30. It remained a dog till 1998. Suddenly it flared and went up to Rs250.It stayed there for a while and then started its course to Rs 700. Arora liked such stocks and kept buying them because as long as the company’s earnings kept growing at 30% and the stock remained stagnant it would become cheap and ripe for another rise.
12. He also bought 5% of Satyam in 1995. The stock did not move much for two years. But once software was in demand Satyam did not stop.
13. The most difficult thing is selling a stock when its valuations become too high. Arora advises investors to sell on company disappointments rather than on valuations.
14. Churning high PE stocks for low PE stocks within the same sector is never a good decision. Post the tech bubble while Infosys and Wipro fell 60%, virtually every small stock fell 90-95%. Technology stocks like Infosys and Wipro had the highest P/E in January 2000 and had fallen the least by November 2001.
2. Investors should also focus on Return on Equity(RoE) but analyzing a company on the basis of DCF is an utter waste of time. Arora contends that DCF cannot be looked at for more then one or two sectors. This is because you really have no idea about what will happen to a company beyond three years.
3. Buy good businesses. In a bad business, the value that a good management can add is very low. An ordinary management in a good business often keeps its momentum. But fraudulent managements should always be avoided
4. For a normal steady business you can never rely on the EV/EBITDA.
5. A tax-saving company is perhaps the worst company in India because it lets taxes determine its strategy
6. There are several instances where Samir Arora used his veto to get directors changed in private companies just to help them get a higher P/E.
7. In many cases, money has not been made by buying the best managements but the managements that want to become the best.
8. High P/E do not come because of high earnings or because that company is in a good industry. 9. It is earned over a period of time
10. If one learns how to invest in India, he can invest almost any where in the world. Investing in India teaches the analyst how to identify managements that are cheating their share holders. One also understand why two stocks in the same sector don't get the same rating.
11. Arora started buying HDFC Bank after it got listed in 1995. At that time the stock traded at Rs30. It remained a dog till 1998. Suddenly it flared and went up to Rs250.It stayed there for a while and then started its course to Rs 700. Arora liked such stocks and kept buying them because as long as the company’s earnings kept growing at 30% and the stock remained stagnant it would become cheap and ripe for another rise.
12. He also bought 5% of Satyam in 1995. The stock did not move much for two years. But once software was in demand Satyam did not stop.
13. The most difficult thing is selling a stock when its valuations become too high. Arora advises investors to sell on company disappointments rather than on valuations.
14. Churning high PE stocks for low PE stocks within the same sector is never a good decision. Post the tech bubble while Infosys and Wipro fell 60%, virtually every small stock fell 90-95%. Technology stocks like Infosys and Wipro had the highest P/E in January 2000 and had fallen the least by November 2001.
- Thanks To Neelu Kedia For Sharing This Article.
