August 29, 2016

First Peaceful Investing Workshop conducted in Mumbai!

First “Peaceful Investing” workshop was conducted on August 28, 2016 in Mumbai. The workshop aimed at sharing equity investing knowledge with the participants that could help them gain confidence while taking their equity investment decisions.

Peaceful Investing workshop, Value Investing workshop Mumbai, Dr Vijay Malik Dr Stock Workshop

The workshop focused on highlighting those qualities of companies, which if analysed and identified in potential investment targets, would lead the participants to make their investment decisions with a lot of confidence. Such a confidence would lead the participants to have a lot of emotional stability around their investing decisions and they would be able to hold on to these stocks through the up turns as well as downturns of the markets.

The workshop aimed to point out characteristics of such companies, which once analysed and invested in, would make an investor happy when their share price goes up (as the investor is becoming wealthy) and makes the investor even happier when their share price goes down (as the investor would buy more of them). At the end of the day, then investor would be "Peaceful" with his/her investments.

August 13, 2016

3 Principles to Decide the Investable P/E Ratio of a Stock for Value Investors

Deciding about the valuation level of any company at which an investor buys its stock is one of the key aspects of stock analysis. It is said that even a very good company if bought at an overvalued price, might not prove to be a good investment. Therefore, every investor while analysing stocks for investment keeps on continuously asking herself, whether the current price presents an attractive valuation opportunity or whether she might get stuck in an overvalued stock if she buys the stock at current prices.

There are many parameters, which are used by different investors to assess the valuation levels of any stock at a given price. A few of these parameters are listed below:
  • Price to Earnings ratio (P/E ratio)
  • P/E to Growth ratio (PEG ratio)
  • Earnings Yield (EY)
  • Price to Book value ratio (P/B ratio)
  • Price to Sales ratio (P/S ratio)
  • Dividend Yield (DY)

An investor should read the following article to understand the above mentioned valuation parameters in further detail: How to do Valuation Analysis of a Company

Every investor has her own favourite valuation ratios, which she determines based on her own experience and preferences. I prefer using the price to earnings ratio (P/E ratio) as the valuation level for determining the attractiveness of a given stock price of any company.

P/E ratio is the most widely used parameter to analyse whether the stock of any company is overvalued or undervalued at any point of time. It is calculated by dividing the current market price (CMP) of a stock by profit/earnings per share (EPS). It represents the price an investor pays to buy ₹1 of earnings of a company.

To illustrate, if the P/E is 10, it means that to get ₹1 of earnings in one year from a company, the investor is paying ₹10. Similarly, if P/E is 20, it means that to get ₹1 of earnings in one year from the company, the investor is paying ₹20. If we compare P/E ratio of 10 and 20, in the above example, it would become evident that at P/E of 20, the investor is paying more money to get the same value of ₹1 in earnings than when P/E is 10.

Investors interpret P/E ratio and its derivatives in multiple ways to decide about valuation level of a stock: 
  • Comparing P/E ratio of the stock with the industry in which the company operates: Industry P/E ratio is the average of P/E ratios of all the companies of the specific industry listed on the stock exchange. If P/E ratio of the stock is higher than the industry P/E ratio, it is assumed to be overvalued and vice versa.

  • Comparing current P/E ratio with historical P/E ratio of the stock: if P/E ratio is lower than average P/E ratio of last 10 years, then stock is deemed undervalued and vice versa.
  • Comparing P/E ratio with earnings (EPS) growth rate (PEG ratio) and
  • Comparing P/E ratio in form of Earnings Yield (EY) with yield on other asset classes like government securities (G-Sec), Treasury Bills etc.

However, despite presence of such multiple ways of interpreting P/E ratio investors still find themselves unsure about the right P/E level that they should pay for any stock. The fact that the price of the stock is influenced by a multitude of factors like external factors (interest rates etc.) and internal factors (competitive advantage etc.), further increases the uncertainty about the right price to be paid for the stock of any company.

The current article is an attempt to help the reader tread on a guiding path to determine the right price i.e. P/E ratio to be paid for a stock. The article attempts to determine a few of the factors that influence the P/E ratio of the stock and tries to bring a some objectivity to the approach of determining the right P/E ratio that the investor might be willing to pay for the stock.

The article would focus on the key criteria that an investor should look at while deciding about the P/E ratio (premium or discount) that she may pay for any company. These criteria would help her in deciding about the maximum P/E that she may pay for a company, which she has initially bought at very attractive levels but the stock has now increased in price and P/E ratio. This would also help her in deciding her strategy for accumulating stocks which are already existing in her portfolio.

August 6, 2016

Analysis: Chaman Lal Setia Exports Limited (Maharani Basmati Rice) has a dedicated section for investment & stock specific queries of readers: “Ask Your Queries”. Overtime, readers have asked queries about multiple stocks in this section. Answers to these queries have been done post preliminary analysis of the stocks under consideration. Such analysis has been found helpful by readers.

Q&A Series is an attempt to summarize & share with all the readers, the key questions and their answers, which have featured on “Ask Your Queries” section. The primary aim of this new feature is to share the knowledge with all the readers of the website.

The current section of this series, “Q&A” covers: Chaman Lal Setia Exports Limited, an Indian basmati rice producer and exporter company owning the Maharani Basmati rice brand.


July 30, 2016

Follow My Portfolio with Latest Buy/Sell Transactions Updates (Premium Service)

Dear friends, has a dedicated page "My Portfolio", which until July 29, 2016, contained a list of stocks in my portfolio. The portfolio details were provided for the purpose of additional disclosure over and above the standard declaration about my ownership of any stock under discussion, to indicate any conflict of interest.

However, over time, I have received a lot of requests from multiple investors asking further details about the portfolio like:
  1. What are the stocks that I am buying in the portfolio at current levels?
  2. Which of the stocks in the portfolio still offer long term appreciation potential at current prices?
  3. What is the proportion of each stock in the portfolio?
  4. What is the average cost of different stocks in my portfolio?
  5. Since when I have been holding different stocks in my portfolio?

Follow track Dr Vijay Malik portfolio latest transactions updates value investing investor portfolio India bottom up fundamental analysis research

Until now, I have stayed away from answering these questions while highlighting that the portfolio details have been shared only as for disclosure purpose and were not there to serve as an indirect stock recommendation service.

However, with continued requests from readers, I have now decided to make available the elaborate details about my portfolio and the latest transactions as a premium service.

My stock portfolio has its origins in August 2011, when I invested my initial savings from my first job after MBA (2009-11). I have been able to invest in some of the fundamentally good stocks at the initial stage of their growth phase, which were later on discovered by research/brokerage houses and witnessed investments from institutional investors.

The recognition of stocks by key market players have helped to generate significant gains for the portfolio as the underlying stocks got rerated and increased in value. A few such examples are: Ambika Cotton Mills Limited, Vinati Organics Limited, Mayur Uniquoters Limited etc.

I started investing in Ambika Cotton Mills Limited in September 2014, when it was trading at very low valuation levels. The stock was later on identified by the well-known value investor Prof. Sanjay Bakshi, who invested in it through his fund “ValueQuest India Moat Fund Ltd” in March 2015.

Similarly, other stocks like Vinati Organics Limited and Mayur Uniquoters witnessed increased FII buying and thereby generated good returns by increase in share price. The increased FII buying led to the P/E ratio of Mayur Uniquoters increasing from 6.6 to above 30 and P/E ratio of Vinati Organics increasing from 7.7 to above 20. This increase in valuations led to significant increase in the contribution of these stocks in the portfolio returns.

The portfolio has generated an annualized growth rate (CAGR) of 71.67% (from August 8, 2011 to July 29, 2016) including dividends and realized & unrealized capital gains.

Readers/investors who wish to know about the details of my portfolio and the recent transactions with regular updates may subscribe to this premium service by paying ₹7,500 per annum at the following link:

Follow track Dr Vijay Malik portfolio latest transactions updates value investing investor portfolio India bottom up fundamental analysis research

The yearly subscription service for “Follow My Portfolio” involves the following features:
  1. Update by email about all the future transactions (buy as well as sell) in my portfolio at the end of the day of the transaction (after market closing hours) for one year from the date of subscription. The email update would contain the details of the stock bought/sold and the price at which the transaction was done.
  2. Access for one year to the premium section containing updated details of my portfolio and the last 10 transactions at the following link:

July 11, 2016

Dr Vijay Malik's Stock Analysis Excel Template

All of us are aware about the usefulness of excel templates in stock analysis. These templates help the investors in quick analyses of the data as it presents the data in easily comprehensible formats like a dashboard.

I use a customized excel template to analyse stocks as per my preferred parameters by using the data downloaded from website. The template acts as a dashboard of key analysis parameters, which help me make an opinion about any stock within a short amount of time (sometimes within a few minutes). I have used this excel template and the analysis output in many stock analysis articles published on this website.

You may read about various stock analysis articles written by analyzing companies using the excel template in the "Author's Response" segments on the following link: Stock Analysis Articles

In the past, many readers/investors have asked me to provide the copy of this excel file. However, until now, I have not put the excel template in the public domain for download.

I have always advised investors to customize the standard screener excel template as per their own preferences and their learning about stock analysis from different sources. Customization of excel template on her own can be a very good learning exercise for any investor.

However, due to repeated requests for sharing the excel template, I have decided to make the customized excel stock analysis template, which is compatible with and provides stock data as a dashboard, as a paid download feature.

Investors who wish to get the customized excel stock analysis template may download it by paying ₹1,000 from the following link:

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July 2, 2016

"Second Peaceful Investing Workshop" (Last for Mumbai in 2016) at September 11, 2016

One of the key methods to generate significant wealth from stock markets is to buy & hold fundamentally sound stocks over long periods of times extending to years and many a times to decades. However, such long investing duration invariably contain periods of exuberance & distress where the market price rises & falls significantly. It leads to strong emotional reactions from investors that make holding stocks for long term a difficult proposition. 

Therefore, the patience to hold stocks in fluctuating markets requires very high level of conviction from the investor in her investing decisions.

“Peaceful Investing Workshop” aims to focus on stock selection and analysis skills, which would make us much more confident about our stock decisions. It would ensure that our faith would not shake with day to day market price fluctuations and we would be able to reap true benefits of stock markets to fulfill our dream of financial independence.

Full day fundamental stock investing workshop focusing on value investing by Dr Vijay Malik at Mumbai at The Mirage Hotel

The workshop would focus on fundamental stock analysis of stocks with detailed analysis of various sources of information available to investors like annual reports, quarterly results, credit rating reports, online financial resources like screener. 

The workshop would help an investor learn in-depth analysis of stocks that would help her make her own opinion about the strengths & weaknesses of any stock. The participants would be able to use the stock analysis with their preferred stock selection approach like value investing or growth investing.

The workshop would cover basics of investing and simultaneously focus on key concepts needed for stock analysis both for a beginner and seasoned stock investor. I believe that a person does not need to have an educational background in finance to be good stock investor and the workshop has been designed keeping it in mind.

Please Note: 

This workshop would be the last Mumbai workshop in 2016 as during Oct-Dec 2016, I plan to organize workshops in other cities like Delhi, Bangalore, Chennai, Hyderabad etc. Next workshop in Mumbai would be in 2017.

Full day fundamental stock investing workshop focusing on value investing by Dr Vijay Malik at Mumbai at The Mirage Hotel

The workshop had 40 seats and has been completely sold out. You may pre-register and express interest for a workshop in your city by clicking here.

June 26, 2016

Understanding & Interpreting Quarterly Results Filings of Companies

One of the key requisites of being listed on stock exchanges is that the listed companies are required to disclose their performance on a periodic basis. This is true for publically listed companies across the world. Different countries stipulate different disclosure requirements on the companies listed in their respective stock exchanges. However, the common requirement in all the markets is to disclose information about critical developments on an ongoing basis and financial performance on a regular basis.

Most of the markets, including India, stipulate disclosure of financial performance at least once every quarter. Therefore, companies listed in Indian stock exchanges publish their financial performance at least four times in each financial year (April – March) within a prescribed timeline from the end of the stipulated period (end of the quarter):
  • April to June: within 45 days from end of June quarter
  • July to September: within 45 days from end of September quarter
  • October to December: within 45 days from end of December quarter
  • January to March: within 60 days from the end of March quarter

If due to any reason, a company is not able to disclose its results within the above mentioned timelines, then it is a red flag. The investor should be warned that the company is facing some issue and she should not ignore such delay in disclosure of results as being trivial in nature. Most of the times, delays in filing of quarterly financial performance are linked with ongoing frauds and corporate governance issues within the companies.

The example of Ricoh India Limited is pertinent here, which published its results for September 2015 quarter on May 18, 2016. The company has initiated proceedings against its senior management for possibility of perpetrating fraud.

The current article focuses on understanding the key information contained in the quarterly results published by companies and their interpretations. The articles is aimed at helping the reader to develop a framework in getting the critical information from quarterly filings within a short amount of time.

A simple guide to understand and interpret key information from quarterly results of companies, Ricoh india Limited, Ambika Cotton Mills Limited