Wednesday, February 22, 2006

Martin Whitman's rule of thumb for valuation of stocks

Here are Martin Whitman's ( a legendary value investor) rule of thumb for evaluation of stocks:

1. Financial-services companies and depositories: Stated book value.
2. Small banks: 80% of book value.
3. Mortgage portfolio: Calculate yield to maturity and perform credit analysis.
4. Financial-guaranty insurers: Adjusted book value - a publicly disclosed number that is book value plus the equity in the present value of certain future premiums.
5. Insurance companies: Adjusted book value.
6. Real estate companies: Private appraisal value or market value.
7. Real Estate (REITs): Appraisal value or discounted present value of cash flow from operations.
6. Broker/dealer and asset managers: Tangible book value plus 2% of AUM.
7. Operating companies: 10 times peak earnings or below "net asset value."
8. Tech companies: 2 times book value, less than 10 times peak earnings, 2 times revenue and cash larger than the book value of all liabilities.

Read the whole article by Brian Zen here.

What will be of interest to us are the rules for valuation of banks and tech companies. I have been searching for a reliable method for valuation of banks based on Shankar's comments on valuation of banking stocks though have not come across anything reliable so far.

Monday, February 13, 2006

Infomedia India

Here are the stats:
CMP = 196.00
P/BV = 3
PE = 9
Dividend Yield = 4%
Almost no debt.

Was a TATA company till it was taken over by ICICI Ventures which is the VC arm of the ICICI bank.

Why buy?

Good "moat". The company is in the printing and publishing space with very good titles like "overdrive" the auto magazine, "CHIP" the computer magazine and has introdcuced "Better Interiors" an interior design magazine and other magazines like "AV MAX" , "Better Photography" and "Circinfo magazine" .

Infomedia is also the media partner of many industry associations like CII, Society of Indian AUtomobile Manufacturrers (SIAM) etc.

Infomedia is the leading publisher of Yellow pages and business directories in most of the major cities in India.

Has decided to get into publishing outsourcing area and have recently taken over 2 U.K based companies. Also has a "publising BPO" in Bangalore.

The company has divested it's non-core business like film production to concentrate on its core business.

Infomedia has announced a share buyback plan at Rs 245 per share.

Thursday, February 09, 2006

My Current Portfolio

I started investing in stocks only from Jan 2006 onwards . So here goes:

Stock Average Purchase Price CMP Gain /Loss

Pricol 48.58 41.20 -15.9

PNB Gilts 22.00 21.20 -3.64

Tata Investment Co 430.53 424.50 -1.40

Infomedia India 210.92 198.20 -6.03

In the coming days, will post about why i bought these stocks. Meanwhile, suggestions, comments, criticisms welcome.

Monday, February 06, 2006

Sensex at 10,000? Oh no !!

The talking heads have gone crazy about Sensex touching 10,000. I'm sure tomorrow's papers will be full of "10,000" stories. Why the @#$% are they so happy? I cannot find anything to invest in. Help !!!