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98 Words That Can Make You Very Rich

“Experience tends to confirm a long-held notion that being prepared, on a few occasions in a lifetime, to act promptly in scale, in doing some simple and logical thing, will often dramatically improve the financial results of that lifetime. A few major opportunities, clearly recognizable as such, will usually come to one who continuously searches and waits, with a curious mind that loves diagnosis involving multiple variables. And then all that is required is a willingness to bet heavily when the odds are extremely favourable, using resources available as a result of prudence and patience in the past.”

– Charlie Munger


PS – I strongly suggest that you read this statement multiple times to understand its real importance. And please do share your thoughts too.
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Some Stocks in My Portfolio are Up More Than 100%!! But…

Markets are rising. Now no credit to me for telling you that. Credit is only deserved by one person who has given us all a new hope to cling onto. 🙂

I am a perennial worshiper of stock market crashes…atleast for next 20 years.

But when everyone around me was talking about how stellar their portfolio returns were, I could not stop myself from having a look at my own portfolio. And when I did check, I saw shares of some very good businesses up more than 80% to 100% in last 3 to 6 months!

I want to believe that I am good at stock market investing.

But then I realized that markets are supreme and I am no good.

I repeat.

But then I realized that markets are supreme and I am no good.

And…

Rising Tide Stock Markets

Rising markets are loved by all. But it’s the pace of this rise that is frightening. Large caps are rising 10% to 15% every day and moving like big icebergs all over the place.

Not sure how long this would last. Lets see..

By the way, I hope you have pre-registered (free) for the launch of Ultra Long Term Stocks.

Pre-Registration closes on 25May-2014.

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More Than 400 Investors who have ALREADY Pre-Registered (Free) for Ultra Long Term Stocks.

Join them before 25th May 2014.


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This Stock is up 30,000% – So Why is my Relative Not Selling it?

What would you do..?

…if the stock you purchased is up more than 30,000% from your purchase price?

A common and a sensible reaction would be to sell it immediately & celebrate. If I would have been in your place, even my first reaction would have been the same. And more so if this appreciation had taken place over a very short period of time. 

But this particular one took almost 25 – 30 years.

And the stock I am talking about is Hindustan Unilever (HUL).

One of my relatives called me up last night for a general chit-chat. Since he is into long term investing, or rather passive & lazy kind of investing, we generally end up talking about stocks much more than anything else. And this time was no different.

He told me that since markets had run up so much due to election-induced-euphoria, many in his friend circle were asking him to sell this ‘mega-multibagger’ now. As mentioned above, he was referring to the shares of HUL which were a part of his portfolio. Adjusting for various bonuses, splits and dividend re-investments in last few decades, his average cost per share worked out to be less than Rs 2.

And the stock is currently trading at around Rs 580!

And as mentioned in the title of this post, this amounts to a un-booked paper profit of more than 30,000%

Now the question is, why isn’t he selling his shares? That to after a rise of more than 30,000%!!

In 2013-14, HUL paid/announced a dividend of Rs 13 per share.

So what does this information have to do with the decision to sell (or not) a stock which is already up more than 30,000%?

This means that my relative is earning a monstrous dividend yield of 650% per year, i.e yield-on-cost. Yield-On-Cost is the dividend yield of a stock on its purchase price.

Dividend Stock Wealth
Sometimes, its the only button you need on your Wealth Keyboard



For a stock having an effective purchase price of Rs 2, a dividend of Rs 13 every year means a yield of 650%. And since HUL generally pays dividends which increase with time, it is highly probable that this yield-on-cost will continue increasing in future too.

Now where else can you find an investment, which pays 650% every year?

And that is the reason my relative is not selling his shares. The logic which he gives is an extension of previous statement. If he sells his shares of HUL, it would be impossible for him to find an asset class which would provide him with such phenomenal annual returns.
Returns Assets India
Comparison of Annual Returns by various assets
** HUL in this particular case
And this makes a lot of sense.

Though I call myself to be a long term investor, I still think that it is really, really tough to buy stocks and keep them for more than 25-30 years. Really, I am proud to be a relative of this person. 🙂


You can read my article on the concept of Yield-On-Cost in world famous value investing website Old School Value here.

Important Details about soon-to-be-launched Ultra Long Term Stocks

Markets are scaling new highs every day. And as far as a common investor is concerned, he might start to assume that markets will continue to rise forever. This is exactly what happened in 2007 and we all know what happened after that.

In this context, Warren Buffett gave a beautiful quote which goes like this:

Warren Buffett Rising Tide


There is nothing wrong in rising markets. After all, we only want that we get a good price for our investments when we sell. In an ideal world, a market would continue to rise forever and each & every investment we make would become profitable.

But we live in real world.

And problem starts when common investors like you and me start believing that with rise in markets, the risks are getting reduced.

But this notion is wrong.

Rather, its the other way round.

With continuous rise in markets, the risks also rise.

And when an investor invests in rising markets, and that too in shares of businesses which are not even worth calling a business, he incurs heavy losses when markets correct. And in the end, he develops a feeling that markets are rigged and its impossible for common investors to make money.

But to become rich, all he needs is very few simple ideas. This when combined with loads of patience can create unimaginable wealth in stock markets.

But that won’t happen overnight.

It will take years. And that is what successful long term investing is all about.

Warren Buffett is one of the richest man ever. He did not make money by regularly buying or selling questionable businesses. He just bought few very good businesses and stuck with them for decades.

It sounds simple but it is not easy.

I make genuine efforts to invest and stay along with such businesses which can withstand the test of times and recessions and everything else. And as an extension to this thought, I announced that I would be launching a service on 15-June-2014 to address above mentioned issue.

Rest of the post will provide you with more details about Ultra Long Term Stocks and what you can expect from it.

What You get by Joining Ultra Long Term Stocks?

Long Term Stocks Stable Investor

Every 45 days, you will receive a 10-15 pages worth of solid, no-nonsense report titled Ultra Long Term Stocks. The report would be practical, actionable& written in a manner that you can take your long term investment decisions with confidence.
The report would have sections dealing with:

I) Detailed analysis of a company which is worth investing for decades.

      – Analysis based on multiple parametersevaluation.

      – Future triggers and past/current events which can affect the business.

      – Should you buy more if share prices of the company falls 50% in near term?

      – Is this company worth holding for next 10 or 20 years?

      – Will this company survive the next recession?


II) Current state of Indian markets and how this could influence your decision to buy/sell.

III) How to invest in this company (one-time / regularly / staggered & lumpy)

And when you do join Ultra Long Term Stocks, you’ll also get… 

Additional reports analyzing Special Events which cause temporary undervaluation in wonderful companies.

These reports would be sent as and when such special situations arise and will help you take profitable advantageof such mis-pricings in markets.

In all, you can expect to receive atleast 8 and upto 12 reports a year (including additional ones). Don’t worry, I will not bombard your inbox with weekly or daily reports. 🙂

Who Should Subscribe?

  • Those looking to invest for years and not just months.
  • Those who know its tough to find multibaggers.
  • Those who know stock markets are one of the best wealth creators over long term (Even better than real estate).
  • Those who know money can be made by not taking too many risks.
  • Those who know we can’t time the markets.
  • Those who believe in power of compounding.
  • Those who understand that without systematic and well-thought out approach, it is impossible to become rich in stock markets.

           
Who Should ‘Not’ Subscribe?

  • Those looking to become rich overnight.
  • Those who trade regularly and find day trading glamorous.
  • Those who think long term investing is just a sham and Warren Buffett is just plain lucky.
  • Those who know they can time the markets.
  • Those who know they can predict stock market movements.
  • Those who think compounding works only in mathematics textbooks.
  • Those who think markets are always rigged.
  • Those who are waiting to win a lottery.

Answers to few questions you might have


45 days is too much. Can’t I get a report every week?

Investing for long term is simple, but not easy. Its not easy to get ideas which can be acted upon and held for next few years (or decades). Good ideas are rare. The number of ideas worth taking decisions on also depends on current state of markets. Number of such ideas would increase in Bear markets and reduce in Bull markets. This is in stark contrast to what generally happens with commercial stock market research houses and brokerages. Generally, these players increase the number of BUY calls with rising markets. And that is against common sense. You buy more during SALE(s) when things are available at discount. Isn’t it? Same should be the case with stock markets. Buy when stocks are available at discount (lower prices).

The stock discussed by you fell more than 30% in few months. What should I do?

A few months is a very small period when you are investing for decades and want to leave a rich legacy for your children or grandchildren. This service is good for you only if you are not scared of short term volatilities of the market (and for a good business, a 30% cut in few months is a good opportunity to buy if the trigger causing this correction is temporary in nature or dependent on external market conditions)

I am preparing a list of other questions which I would share at time of launch. If you have any other questions, then please do not hesitate to inbox me at stableinvestor@gmail.com

By the way, if you still haven’t pre-registered for Ultra Long Term Stocks, then please do so. Pre-Registration entitles you to special offers on launch day. And I will be closing pre-registration on 25th-May-2014 for the benefit of those who showed interest early on.

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Click Here To Join 333+ Investors who have ALREADY Pre-Registered (Free) for Ultra Long Term Stocks


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A look at major Indian stocks during the bottom of 2009 stock market crash

Everyone remembers the bloodbath on Dalal Street in January 2008. But what panned out over the next one year was something which changed lives of many people who had the courage to take bets on great businesses. 

    
With markets trading at a PE of 28, a correction was always on the cards. And correction, or rather a crash is what happened in January 2008. Markets (Sensex) tumbled down from 21000 to 8000 in a period of just 14 months.

It has now been almost 4 years since markets touched their bottoms in absolute terms (Sensex@8000) & rock bottoms in valuation terms (PE>12)

A few days back, a perennial Indian Bear (read Shankar Sharma) predicted that we might be heading towards 2008 lows. So just out of curiosity, we decided to analyse price performances of large cap companies (& a few smaller ones) since 2009. This exercise has no significance apart from the fact that it dispels the myth that only small and mid caps can give big returns in short term.

We have nothing more to add except that please do focus on numbers in Light-Red-Colored Absolute Returns column of the table.

The figures (in %) are free of typos, i.e. there are no errors in calculations.

We hope you got the hint 🙂

Since 2009 Lows…
Click to enlarge


To quote Joshua Kennon, “It was such a bizarre time. (In 2009) People lost their minds on the upside, and gave up all hope on the downside. Anyone with money (& courage) during these dark days got very rich.”

Note – CMP figures as of April 5, 2013

Disclaimer – Long term positions in few stocks mentioned in this post.
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Multibagger of Long Term Investing

Wouldn’t you be shocked if we told you that someone has turned Rs 10,000 into Rs 3,69,00,00,000 (Rs 369 Crores) in 32 years?. And that too by doing nothing in stock markets!! We bet you would be… 🙂


Your next question would definitely be – Who has done it?

Our answer is that we don’t know. But we are pretty sure that promoters of company would be one of them. They would have held shares for 32 years and made a killing. By the way, turning Rs 10K to Rs 369 Cr is same as growing your money 49% year on year for 32 consecutive years. Even great Warren Buffett managed a ‘paltry’ 25%…  So even if we told you earlier that you cannot become Warren Buffett, here we have data, which suggests that you actually can!!

(In comparison, banks pay 8% per year on deposits)

So now you’ll ask – How has it been done?

Before we answer this question, we would caution you that data given below has been collected from various sources and may or may not be correct. So, take it with a pinch of salt.

The company is WIPRO. Suppose you invested Rs 10,000 in its shares in 1980. You would have got 100 shares @ Rs 100 each. Now shares of Wipro have gone through multiple splits & bonuses. So we adjust them as and when splits & bonuses happened.

1980 – Bought 100 shares @ Rs 100

1981 – 1:1 Bonus = 200 shares

1985 – 1:1 Bonus = 400 shares

1986 – Stock Split to Rs.10 face value = 4000 shares

1987 – 1:1 Bonus = 8000 shares

1989 – 1:1 Bonus = 16,000 shares

1992 – 1:1 Bonus = 32,000 shares

1995 – 1:1 Bonus = 64,000 shares

1997 – 2:1 Bonus = 1,92,000 shares

1999 – Stock Split to Rs. 2 face value =9,60,000 shares

2004 – 2:1 Bonus =28,80,000 shares

2005 – 1:1 Bonus =57,60,000 shares

2010 – 3:2 Bonus =96,00,000 shares

Value of one Wipro share is around Rs.385.

So as of today, your investment of Rs 10k is worth a staggering Rs.369 crores!!

And we are not finished yet. If you know about benefits of dividends, you would realize that Wipro has been a regular dividend payer. Last year it paid Rs 6 per share as dividend.  So you would have earned  Rs.5,76,00,000 (Rs 5.76 Crores) last year alone as dividend income. Just imagine how much you could have made from dividends alone in last 32 years. 🙂

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