Stocks - Investment

Buy - Gujarat Automotive Gears

2013-01-13T23:33:00.003-08:00

High profit margins. Almost zero debt. Favorable PE ratio.

Gujarat Auto Gears is an excellently managed company. Following 3 are big reason why am positive about this company. Have give my analysis on company performance for the last 3 quarters. See the price moving from Rs 1200 to Rs 1500 in this quarter.

More information @ http://www.moneycontrol.com/india/stockpricequote/autoancillaries/gujaratautomotivegears/GAG

Note - Stock investing is an risky affair. Invest with caution. This information is a tool and use your
judgement before buy/sell calls.

Disclaimer - All stocks I write about is owned/held either currently or in the past by self/family.

Investing - Chapter 4

2009-11-29T10:29:00.000-08:00

In the last 3 chapters you read about two friends life. They had similar IQ but completely different financial success. And one's success at school did not guarantee success in life. To be successful you need street smartness or simply have GUTS! Ram goes to Ashwin's home to discuss further about his trouble and possible solution. He is expecting his friend to give him an tablet which will cure his financial illness. He is in for a big surprise. They have a coffee and talk.

Ram - "Let me come to the point, how could I get out of this financial trouble quickly?"

Ashwin - "Its going to be a slow and steady process.. could take years to get there. But its definitely worth it"

Ram - "Wow, years..?? I thought you will help me get better within days"

Ashwub - "There is no shortcut to success. I don't have any tablet which will cure your illness. But if you want to try, I will give you a solution"

Ram - "I am listening, pls proceed"

Ashwin - "How much is your total debt now?"

Ram - "30 lacs. I have paid back rest after selling the home"

Ashwin - "Ok. How much assets do you have? Car, jewellery, FD's,.. anything that can be sold or has a value?"

Ram - "About 10-15 lacs. If I sell all the jewels and take money out of everything"

Ashwin - "Excellent. Sell everything. And repay as much debt as possible. Do it quick, start from tomorrow."

Ram - "But.. those are my family property. I will never be able to show my face to family. They will think am a looser."

Ashwin - "Ahh ah, Most are trapped here. They believe its good to carry debt and assets in parallel. Thats not a good idea. Trust me, sell everything and close your debt asap"

Ram - "But my bank deposits pay 8% interest.. am I not earning money there?"

Ashwin - "Haha.. What's interest on your debt? 11-12%?"

Ram - "12%, floating rate"

Ashwin - "You earn 8% and pay 12%.. thats not smart?"

Ram - "I never did that maths."

Ashwin - "Now if you repay 10 lacs, quickly. You will save Rs 10,000 per month at 12% interest."

Ram - "Makes sense.. How come I bought this debt is still a mystery."

Ashwin - "We humans like stories. When you see an advertisement with a happy family in a beautiful home. We aspire that story. Markerters are great story tellers. They don't show what happens to someone who takes big debt, most sink in the real life!"

Ram - "True.. they said I am making a good decision taking a big home loan."

Ashwin - "Haha.. well, they made good decision by making you pay them monthly."

Ram - "Correct. Okay, Of 30 lacs debt, I will repay 10 lacs quickly within a 10-15 days. What next?"

Ashwin - "Great, after that you will have an extra cash flow of Rs 10,000 per month. Let discuss further that."

Ram - "I will take one step at a time. Thanks for your insight. I hope that I will get better than before"

Ashwin - "Hope is a good thing probably the best thing to carry with you. And no good things dies forever. You will be better, soon."

They agree to meet in a weeks time after Ram repays his debt partially. He still has a long way to go. Lets see soon what happens to him.

Investing - Chapter 3

2009-11-13T22:18:00.000-08:00

We read the story of Ram and Ashwin. Ram had professional education, great career and a loving family. But was in a financial hole. Ashwin had a mediocre beginning and went to do really well in his late 30's. They both meet at a restaurant and discuss their situations after initial pleasantries.

Ram - "Am in deep financial problem. My wife has lost a job, I have lost my home. I think I am losing it in life."
Ashwin - "Ohh, what happened? I thought you were doing just great."
Ram - "Well I made some wrong choices. Should not have gotten into huge debt"
Ashwin - "Ram, debt is game. Its played on everyone. Most get suckered into it not knowing the full impact of it."
Ram - "I dont get you. What do you mean by game? Its looks much bigger than that."
Ashwin - "The consequences of getting into huge debt are high. But it still is a game. Let me explain this in a different way."
Ram - "Interesting. Please proceed"
Ashwin - "Let me ask you this question. Where do you get your money from?"
Ram - "From my monthly salary. My company pays it"
Ashwin - "Yes, most of us get it that way. Your company is in-debt to you every month for the services you provide"
Ram - "Thats correct"
Ashwin - "Whom are you in-debt'd to every month?"
Ram - "My bank, I guess"
Ashwin - "Well.. you are also in-debt'd for telephone, electricity, internet, cable, child school, grocery shop...etc. Most of us will have to pay atleast 20-30 different folks every month"
Ram - "But those are small and most are necessities."
Ashwin - "Exactly, the point here is that we get money from one and pay many!"
Ram -"Hmmm.. true"
Ashwin - "In my case, I have about 300 students. Their parents pay me a monthly fee. And in turn I have to pay to 40 folks. I get from many and pay it to less number of people"
Ram - "You are a business man, so more people will pay you."
Ashwin - "Agreed, if you get money from one source and let it go to many. Most often than not you will run out of money. If you loose the job then it becomes real bad. On the other hand, if you get money from multiple source and have lesser number of outlet then you will have a positive cash flow with less risk."
Ram - "Wow, never thought about that. Oops.. sorry am getting a call from my office! Let me pick it"

Its late in the evening and Ram gets a call from his employer. He has to report to office for an emergency. Ashwin feels pity that his friend has to work at night to fix someone's problem. Ashwin tells Ram to come to home on next weekend and talk more about this. We will see what happens further in a weeks time.

Investing - Chapter 2

2009-11-04T22:17:00.000-08:00

In the previous chapter you read about Ram. A young, bright professional who got into financial trouble in his late 30's. On the other hand his childhood friend Ashwin prospered financially in late 30's. Ashwin and Ram were neighbors and had similar childhood. Lets look at Ashwin's life.

At 18 yrs of age, Ashwin joined college. He enrolled in maths major as he did not have enough grades to qualify for professional course. He worked part time in a pizza parlor. What struck him was that the owner of the shop had been a school drop out, but had 10 pizza shops in the city and drove in Benz. He realized quickly that to become financially free he will have to think differently.

At 21, he became a school teacher with a monthly salary of Rs. 5,000. He knew well that it was not enough to support him or raise a family. As a child he learnt a few important lessons from his Parents. First, to live within means. Second, to work hard and take calculated risks.

At 23, he earns his Masters degree while teaching. He also starts giving tuition in his small room. Only two students joined. His monthly salary was Rs 7,500. Income from tuition was very negligible. At 25, he manages to attract 10 students, and move to a bigger home where he could live and teach.

At 27, his tuition has attracted 80 students. He has employed physics and chemistry teachers to have a bigger tuition center. He works at the school for free and school lets him to take tuition without charging him rent. His monthly earnings exceeds Rs 100,000.

At 28, he gets married to Anita, a teacher in the same school. Both were seeing each other for 4 yrs, but decided to wait until Ashwin could get hold of his business. After marriage, Ashwin makes a big shift. He employs a bright young maths teacher to replace him from full time teaching. He works on improving his educational business. With all his earned money and a bank loan of Rs 3000,000 (30 lacs) he buys a small piece of land nearby. Builds a coaching center with 10 rooms to house upto 200 students.

At 30, he becomes dad. He quits the school and moves the tuition center to the new building. He employs 10 permanent staff. The monthly income per student is Rs 300. His income-expense is given below.

At 35, he repays all his debt. He has a small but beautiful home with two kids. He manages his business and teaches only for his satisfaction. His income is increasing every year. He does a lot of charity and educates 10 poor kids for free. He believes that very soon he will build school, colleges and universities in multiple cities.

This is when Ram and Ashwin meet at a hotel. Interesting conversation follows. Ram is very much surprised about Ashwin's growth. Ram initially thinks Ashwin was just purely lucky. Ashwin is deeply concerned about his friend. They sit down and decide to talk.

Lets wait for the next blog to learn more about their discussion and what happens to Ram.

Investing - Chapter 1

2009-10-30T11:55:00.000-07:00

Having a home, a great family and earning a regular income is the goal for many. Most believe that getting a better job, a promotion with higher salary will help achieve financial safety. Sure it does help a little, but you get used the money quickly.

Lets take Ram, 23 yrs old and fresh out with a professional degree. He is smart and has a got a job with Rs 20,000 monthly salary. He is young, carefree and likes to have fun even if it means big spending.

At 27, still young, he is earning Rs 50,000/month. In these years, he has switched jobs. His tastes now includes IPhone, Samsung, Citibank, Nike & Toyota. He has some tax saving investments but nothing other than that. He has 4 credit cards which gives him discount from gas to groceries. He has been planning to buy an apartment which will cost Rs 5,000,000 (50 lacs). It looks a like a steep price.

At 29, he is married to Lakshmi. Both work and bring in little more than Rs 100,000/month. They are newly wed and have DINK (Dual Income, No Kids). They have bought an apartment for Rs 7,000,000 (70 lacs) with a 20 year mortgage of Rs 6,500,000 (65 lacs). One of their salary goes in paying for home mortgage and the other is used for home maintenance. They decide have child 4 yrs later, as they would like to reduce their mortgage before having the kid.

At 31, they have a beautiful daughter Arthi. Lakshmi wants to focus more on Arthi, naturally. Her focus on work goes down and they both accepts it. The interest rate on mortgage increases. The rice, wheat & sugar prices have doubled in the last 2 yrs and they are bringing in the same income of around Rs 100,000/month.

At 33, Ram's family expenses for a month is given below.

This is tipping point, the income-expense is in a balance. Any further expense will create major problems. But further expenses are on the way. Baby Arthi is 3 yrs old and they will need send her to school. They want Arthi to go to the best school in the town.

At 35, there is a big recession and Lakshmi looses her job. Its been predicted by economists that in life span of 70 yrs, there will be three recessions and one depression that you will face. Still, Ram holds steady and brings in Rs 75,000/ month. But the expense is more than income and they still have 14 yrs of mortgage to pay.

This is when Ram breaks down. He sells his house unable to pay mortgage. Tensions in the family peak and there are frequent arguments. He fails more often at work. From a star performer he becomes average. His life stagnates. This is called 'Mid Life Crisis', it happens so fast that Ram did not see it coming.

What went wrong here? Ram was bright, handsome and full of energy. How did he get into this hole? We will look at another story of Ashwin in the next blog and compare it.

Family - The Secure Base

2009-10-24T08:58:00.000-07:00

What is common with peak performers, great leaders and innovators? "Happy childhood". And what is common with psychopaths, sociopaths and sadists? "Bad childhood". Lets take an example of two people Gandhi and Hitler - the epitome of good and evil.

Gandhi as a child was well cared by his family. He was brought up in a big family and received love and affection. He was very close to his parents. Gandhi owed much of his vast knowledge of religion to his mother Putlibai. The religious teachings of his mother essentially came to influence Gandhi's ideas right from his childhood. It is evident in his philosophy that the old moral and religious beliefs formed the basis for belief in truth and non-violence.

Adolf Hitler was the 4th child of Klara Hitler and Alois Schickelgruber. As a child, Adolf Hitler had a troubled childhood. Alois Hitler, Adolf’s Father, worked as a civil servant and the family lived a middle class existence. Klara, Hitler’s Mother, was unable to defend her children against her husband who was pompous, status proud, strict, humorless, frugal and pedantically punctual. His temper would flare up unpredictably both at home and work. His father left a deep impression of violence on Hitler.

Now lets talk about the science behind this. A newborn child's brain weighs 400 grams. A 5 year old's brain weight about 1000 grams and a full grown brain weighs 1400 grams. This means the baby's learning curve is sharpest in the initial years. A child will absorb emotions and imitate them from birth. Children are very vulnerable to the surroundings. Parents act as a natural shield protecting them. When parents are not available or ignore to protect and nurture them, serious damage is done to the child's mental abilities. This means the child will grow with emotional imbalance, leading a turbulent life.

Question: Why didn't Hitler's siblings become a tyrant or why didn't Gandhi's siblings become a great soul? I leave it to the readers to answer.

What we stand for and why we exist?

2009-10-22T21:00:00.000-07:00

One day, I saw a squirrel eating apple. I realized that the apple tree exists for providing fruit and shelter to others. Squirrel exists for dispersing the seeds and thereby creating more trees. And finally the earth exists for providing enough for all.

Then I asked myself "What I stand for and why I exist?". I could not find an answer. I was better a squirrel with a purpose than a human being without any. I could not believe that I had lived half my life without any real purpose. I was just surviving, not living.

Months passed by, I still had no answer. One rainy evening, I saw a small bird hopping. It was not able to fly. In the past I have ignored these situation. I would turn other side because it was not my problem. But this time it was different. I realized that my purpose of life then was to nurse that bird. I took the bird, it was a little one which has been trying to fly high. It was raining and hence the young wet wings was not able to flap.

I dried its wings and held it near a fan. In a few minutes, the little one soared again in the sky. I was very happy and satisfied. I found the purpose in life then. I wrote down,

My purpose in life is to serve.

When you chase things they run away

2009-10-20T21:15:00.000-07:00

It was Jan 2003. I was doing my final semester. I was getting nervous about job after college. I could speak a little bit of English and did not find any other skill that will get me a job. The first company to come to our college was a Call Center company. Even though I did want to be a calling agent, I attended the interview. During the discussion the interviewer said I was looking desperate. I did not understand what he meant then & was rejected.

Later realized that the I was my problem. I wanted a job badly which was causing trouble. One of my friend came to me and asked "What will happen if you don't get a job while in college? You will definitely get one later. But if you feel this way, you might never get one!" It was then I decided to do my part and not think about the outcome.

The moment you get too attached to things, people, money, your job you invariably screw it up! The challenge of life is to appreciate everything and attach yourself to nothing. When you chase things too hard they run away. Did you ever need to sell something, desperately? A car, a house, who wanted it? Nobody! So you dropped the price. Who cared? Nobody! The principle? When you are desperate, nothing happens!

Desperation pulls you into a descending spiral – and the more your worry, the less people you attract! Detachment is major reason rich people get richer. They do not care so much, they are not desperate.

On the mental and physical level, we are dealing with natural laws. Nature does not understand desperation! Nature seeks balance and you cannot be desperate and balanced. Life does not have to be an endless struggle. Let things flow. It is not indifference, it is neither forcing things.

Finally, I had 2 excellent jobs to choose. More importantly I realized, life is like a butterfly which will sit on your shoulders if you don't run for it.