Holding Period Calculator

Buying at triple digit PE ratio seems very risky, But buying at PE of 20 seems to be safe. 

So here I am putting an analysis which will suggest, if a company continues to grow with the same pace as it is growing from last 5 years then how many years will it take to reach PE of 20 assuming price of the stock remains same during these year.

This helps us to understand that these high PE of stocks are justified or not.

Only PE doesn't show the growth rate of last 5 year. If a company growing at 20% every year can not have low PE of 20 like HDFC bank. In the same way company growing at 6% cannot have PE 80-90 like Pidilite.

While buying these shares, we should use these values as the holding period reference. We should have in mind that at least this many years we have to keep the stock in our portfolio.

These share should be growth share, Which should be directly proportional to GDP and inflation.

Formula to calculate holding period.

20 = Current Price / (Earning per share*((1+(5 year earning growth CAGR / 100))^(Holding period)))

Holding Period Calculator

Current price = 5 years earning growth CAGR = Holding period = Current earning per share =

Keep changing holding period in oder to get 20 as resultant value. 

Holding period less then 10 seems to be good buy as 10 years seems ok for holding period. It depends on person to person what's their holding capacity.

Enjoy investing. Looking forward for your feedback.

Thanks for reading, please follow us on instagram to get regular update about stocks NSE BSE.

Relaxo: A tale of unique monopoly

Relaxo slipper is the cheapest slipper, you will find on Amazon.

It’s quite strange that Relaxo is selling slipper at 88 rupees, whereas its closest competitor is selling at 139 rupees. How is this possible ? This article is the story of family which created this beautiful business of cheapest slippers that no one in India can reach even close to it.

Relaxo has grown its sales on an average 10% every year. Relaxo profit growth has been 18% on average for last 5 years. Bigger companies like BATA has grown at 1/3 times of Relaxo. 

Relaxo maximum product lies between 100 to 400 rupees. Bata sales these product 4 to 6 times of this price. Yet profit margin is identical. Return on Capital is identical.

Relaxo selling its product 1/6th times of Bata price but growing thrice the BATA. How this is possible ?

How can you build business like this ?

This is the story of DUA family hailing from Punjabi Bagh, Delhi. He owns 74% of Relaxo. They were plastic wholesaler in 1980s in the NCR market. They use to sell their plastic to footwear industry. In the late 90s they entered the slipper market. They recruited Accenture for management consulting which lasted for 10-13 years. 

First thing Accenture observed that footwear industry doesn’t use SAP for supply chain management. Using this there revenue collection day came from 90 days to 30 days. SAP SCM is an SAP-integrated, supply chain software that increases business agility to effectively respond to changes in market demands. It allows organization to plan and execute logistics within supply networks and to perform workflow managment.

Any company which collects revenue quicker will generate free cash flow quicker. They took that free cash flow and keep on building factory after factory. Because everyone outsources footwear. As they were in plastic business they were able to get cheaper plastic compared to other brands. Nobody in India has made so much factory in the industry of footwear. In the last 16 years, they have created 9 factories in Bahadurgarh. Basically every other year they create a factory. And their ROCE gives a glimpse of that. When they are making factory ROCE goes to 26 and when it is made ROCE jumps to 30.

Even on the cheapest slipper they have gross profit margin of 60%. operating margin same as 16-17% same as BATA. 

2015-16 BCG and Deloitte come as consultant. They start building next level of competitive advantage. They have driven every one out of market. Now as you know BATA no longer makes hawai slipper. These consultant firm suggested them to replicate above formula in sandals and sport shoes. Some year ago plastic crox footwear came to India which was very expensive. The relaxo replicate that into flite the desi version. If you look at crox price and flite price you will drop your mouth. Paisa yahi banta hai boss. Entry level sports shoes Sparx with Akshay kumar branding it. They have started capturing market of entry level sport shoes and sandel. Their consultant advised them that they are using wholesaler. You cannot create competitive advantage by keeping whole sealer. 

5 year ago for whole of Rajasthan they will have one whole sealer. They can sell the way they wanted as long as relaxo getting timely payment. 

In 2016, 2017, 2018 they appointed distributor for jodhpur, Jaisalmer , Jaipur and so on. Then they pushed these distributors to appoint dealers on high street who will carry on their product. Result today is relaxo has 30000 dealers touch point. Twice as many as BATA, and Thrice as many as anyone else.

By far they have created 4 things in last 15 years:-

1. Widest range of product at entry level.
2. The widest range of dealership by far
3. Lowest cost structure
4. And tightest working capital cycle.

 

Why this is monopoly because they sell 18 crore pairs per annum.

India has 130 crore people. India has 100 crore people who live in less than 1lakh per annum. These people will not be able to afford Nike and adidas. For them only organized brand is relaxo. That’s why this chappal is enormous wealth creating machine. If 18 crore pair is sold by Relaxo that means 80% of market is with informal sector (Slipper made in street of kanpur, kolapur and other small places). As we can see covid, GST, demonetization is completely compressing these informal sector. As these informal sector dies the entire market will go into the hands of one company Relaxo and DUA family. It’s a straight 10 years point. As they will create more factory and they will have more price bargaining power. New companies come but they will never be able to provide so cheap slipper as relaxo as they will not have volume. If company big as BATA was not able to survive this segment who else will. 

In a decade of 10 years it will be 5 times of what it is today. 

I thank Saurabh Mukhrjee for enlightning us with these beutiful businesses. Thanks everyone for reading.

Please follow us on instagram @paisaconsultant.

 

Venkys: A value Investing story

 The Company is in poultry sector that includes production of 

• SPF eggs (primarily used in vaccine making), 
• chicken eggs processing, 
• animal health products, 
• Poultry feed & equipment, 
• soya bean extract and many more. 
• The Company sells its product primarily in India. 

SPF is Specific Pathogen Free eggs. In Oder to produce an SPF poultry flock one has to select pure lines on the basis of characteristics like disease resistance, egg shell quality, feed intake, superior production and maximum livability. These birds are then cleaned for any type of disease for three generations. This process take 6-7 years. So producing these kind of egg is very rare and its only done by this company in India. They produce this egg at half the price of world.

Apart from this they supply chicken and egg to Quick service restaurant like KFC in India. They also supply to 5 star restaurant in India. Normally poultry is unorganized sector in India. As time passes and per capita income of India increases protein consumption will increase. Protein consumption comes from soya bean but in same area protein production from chicken can be of 5 times. This company has great monopoly due to its technology advancement. They call themselves as protein production house.

Currently company margins are suffering due to disrupt supply chain due to Covid. The maize and soya price which is its raw material is seeing sharp rise in price. But according to management India is importing soya bean and in September 1st week soya crop will be ready to cut. So as soya supply will increase these prices will go down. As raw material price will go down we will see rise in margin of business. 

Company has done all capital expenditure, now they will utilize their available capacity to grow the production. 

Some important data's of this company includes.

• Company has good book value of 784. 
• They have shown sales of 14% CAGR for last 10 years. 
• They have shown profit growth of 14% CAGR.
• Recently it has achieved ROCE of 30%.

According to buffet we should look for company which has big moat and has competitive advantage. A company should be market leader. A company should be slow growing boring industry. Dividend sharing is less than 10% of earning. Continuous growth of cash flow from operating activities. last year it produced 2420 million of cash.

From last quarter FII and DII are increasing their share. Promoter has 56% of share. Its founder is awarded with 4rth highest civilian award in India for his work in poultry sector.

The technology they have in this field is great moat. As poultry business is very risky business. When you deal with poultry industry if you are not able to sell your product at right time your birds will die and hence huge losses. So running those business require high level of intelligence needed which can only be acquired by experience which they have.

India is a protein deficient country and the Company, being in the business of poultry, strives to provide protein rich sources of food at affordable prices. This is the foregoing objective of the Company resulting in promoting wellbeing of the society. This initiative will help them to improve ESG value too.

It is a known fact that the vast gap between India’s per capita consumption (79 eggs and 4.5 kgs of meat prior to outbreak of Covid-19 pandemic) and National Institute of Nutrition (NIN) recommended level (180 eggs and 11 kgs of meat) offers high potential for the growth of poultry industry for the next two decades or so. The industry’s growth rate is expected to resume once the normal life returns. This gives immense growth opportunity for this company as market leader.

Decoding Mohnish Pabrai

Mohnish Pabrai has achieved 25.7% of annual return over 18 years of time horizon. Today we will try to decode his investment strategy from his book "The Dhandho Investor" and his some famous interviews available on YouTube. My goal is to collect information which can make us better investor in coming times. So here are some of his brilliant thought in a simple English.

1. Be a shameless cloner: Simplest way to find bargain is to be a cloner. Every quarter smart people and mutual fund has to disclose what they own. Keep track of these information. Find what they are buying. Reverse engineer them. We don't need an analyst. This is a very smart and very obvious strategy from a niche but only few people do this. Every quarter most well known investors and mutual fund are legally required to show what stock they own. So Mr Mohnish strategy is to find the investor who has given good return in past and one that you trust. Simply copy their investment. For this you have to just search super investor holding India on google you will find tons of website.

2. Buy a stock with moat: 

                               (Moat is water surrounding the castle obviously used as protection) 

Moat is a competitive advantage that company has that allows it to earn better then average rate of return over a extended period of time. Some have narrow moat, some have broad moat and some have deep moat which gets filled easily. So what we want is deep moat with lots of piranha, which is getting deeper and deeper day by day.  Now for investing moat is used as an analogy used for business that has strong competitive edge. Even if more competitors come and try to take piece of business, the moat (competitive advantage) is so big that so many piranhas (cash) will eat it. So its too hard for competitors to attack. For example Facebook: its not easy for competitor to come in and replicate it as user based is so strong that impossible to replicate it. So when you buy stock make sure that company has big moat or we can say big competitive advantage. We all know what happened to Thums up when coca cola entered Indian market with lot of cash.

3. You make money by waiting: Mr Pabrai says that "he think the biggest edge he has is his attitude". Charlie Munger use to say "you don't make money when you buy stocks, you don't make money when you sell stocks, You make money by waiting". So the biggest single advantage a value investor has is not IQ, its patience and waiting for right pitch.  You might have to wait for years for the right pitch. As Blaise Pascal's says "All men's miseries stem from his inability to sit in a room alone and do nothing". 

4. Don't engage in short selling: He also don't engage in things like short selling. He says "Why would you want to take bet where your maximum upside is double and maximum downside is bankruptcy". It never make sense to him. 

5. Low risk High uncertainty: It is really something he borrowed from entrepreneurs. Patel's in India or the rich of the world, if you study them there is misnomer that entrepreneur takes risk. They get reward because they take risk. In  reality entrepreneurs do everything they can to minimize the risk . They are not interested in taking risk. They want free lunches and they go after free lunches. So if you study any entrepreneur from Ray Kroc of MC Donald to Herb Schultz of Starbucks and to Buffet and Munger they have repeatedly made bet which are low risk and have high return possibilities.

They are not going for high risk & high return. They are going for low risk high return. First thing he look into any business is how he can loose money in that company. Can he minimize his downside. Important thing that value investors focus is downside protection and that's what entrepreneurs do. Protecting the downsize is the only relationship between entrepreneur, investor and value investors. 

6. Have a checklist: Checklist of Mohnish Pabrai has 80 items on list. We will discuss that in detail sometime but for now on lets concentrate on some of the important ones. When he is studying a business he goes through normal process of analyzing the business and once he is done with it, he goes through his checklist before buying stock.

He check all his 80 points and if he finds 7-8 checklist with no answer, he goes and find these answers. If he found red flag on any of this checklist, he knows this is my downside risk. If he is ok with these red flag he pulls the trigger else he move to other company. 

He has created this checklist from his mistake and other great investors mistake. One of his famous example from his checklist is: 

• Can this business be decimate by low cost competition from china or other low cost countries.
• Is this win win business for entire ecosystem. He say if this business is not doing good for society like tobacco or liquor business this may end up due to higher tax by government or regulations. So he pass those investments.
• Is there too much leverage in the business. 

You can make your questions and checklist too by looking at the business which lost peoples money. For example Dexter shoes is the company where warren buffet loose money due to low cost Chinese competitors.

Another example of Charlie Munger is Cort furniture which was bought during dot com bubble, where people where buying lot of furniture for offices. So demand for rental furniture was rising. Once the dot com bubble end these offices got close and so the earning of Cort furniture. So from here checklist question arises are we looking at normal earning or boom earning.

He says you don't have to sit in front of TV to see every tick of stock market. You just have to learn from history and do simple things which successful investors have done in past.

Analyzing IPOs

Business: What is the company business ?

Industry Growth: At what rate that industry is growing and how much scope of growing is still left. As in case of Zomato or burger king we can see these companies still needs to expand in Tier 2 and Tier 3 cities. There is opportunity of it growing 3 times at least.

Competition: Who are its competitors. Are competitors strong enough to eat their market share. What is the competitive advantage of this company.

Company growth: What is the rate at which company is growing its sales. (At least greater then 10% every year)

Funding of expansion: Expanding by its internal profit or taking loans. Because V mart is growing by using their earning where as Big Bazar grew by taking loan. We know what happened to both of them.

Idea of expansion: How many outlet or factory they currently own. In future how many more plant or outlet they want to open. Example if company owns 10 outlet and has revenue of 1000 rupees, then we can easily guess that in future if company is planning to open 5 more outlet it should tick revenue of at least 15000. In this way we can track in long term if companies is performing according to what they say or not. We will keep our self invested till company is saying and fulfilling what they say.

Technology impact: How they are adopting to new technology. As they are trying to go online or just trying to put offline only. 

Valuation: (Profit making IPO's): 

Example of company

As we can see company is growing its sales from 12 to 15 %. So we can assume that it continues to grow this pace and next year it achieves target of 12% sales growth. It also maintains 20 % profit margin.

FY22 is profit is calculated.

With 290 rupees profit and 20PE we can calculate market cap. Which is equal to 20*290=580.

580/number of total share = gives you price of each share.

This way we can find the expected target price for next year.

Let us know if you want to know more about loss making companies IPO.

Reliance shopping spree

Netmed: Bought 60% stake for 83 million dollar in 2020.

Urban ladder: 96% stake for 25 million dollar in 2020.

Zivame: A controlling stake from Roonie screwala. Reliance could pay 160 million dollar for 100% stake. Currently it owns 15%.

SkyTran: 55% stake for building pod taxi prototyping.

Haptic : (An AI system) 87% stake for 100 million dollars in 2019.

Embibe: Education technology bought in 2018.

Saavan: (Online music)104 million dollar in 2018.

Grab: (Logistic start up) for 14.9 million dollar.

Asteria aerospace: New age technology.

Nowfloats: (Platform that allows individuals and businesses to easily build an online presence) for 20 million dollar.

Radisys:(Technology for telecommunication) for 74 million dollar in 2018.

Just dial: Now in 2020.

Zomato IPO: Valuation of loss making company

It's very hard to do a valuation of the loss-making company. As the company is a loss-making we don't have any earning. When we don't see any earnings it's difficult to understand the PE ratio. If we don't have the PE ratio how will we know it is undervalued or overvalued.

In this scenario, we use enterprise value (EV) and sales revenue ratios. 

Zomato EV/sales = 25 (according to economic times)

The share price of Zomato is 76 rupees. Now the company's total sales revenue is 3 rupees,(75/25) as mentioned in the EV/sales formula. 

If the company turns profitable and has a 10% margin, it's earning per share is 0.3 rupees. 

So PE of profitable Zomato will be 75/0.3=250

It's highly overvalued.

If Zomato continues to grow with 100% every year, which it has grown from last two years, Then it will take another 5 years to earn 10 rupees per share.

So after becoming profitable Zomato has to double every year for 5 years to give me a PE of 7.6. If it happens then It is good to buy at the current price.

It will become the next Asian paint of India, as it is sitting on a pool of data collected until now. Zomato knows at which area, at what time, what people like. Its data knows the taste of every corner of India. These data will help them to create beautiful business verticals. I don't see it as a delivery company, I see it as a tech company.  

Real Estate: Creating asset for generations.

Real estate is a concept that has not been yet tapped by Millennials in India. It takes generation to understand how real estate helps us to beat inflation, create wealth and asset for generations.

To make you understand this I will take 3 book references.

Intelligent Investor by Benjamin Graham (Helped me to understand what investment really means)

Factfullness by Dr. Hans Rosling (Helped me to understand how a country grows from an underdeveloped nation to a developing nation to a developed nation).

Rich Dad Poor Dad by Robert Kiyosaki (Helped me to understand the real asset and liabilities).

Mr. Grahm in his book suggests "the best investment is the investment which guarantees you the protection of your principal money". I think its very difficult to understand anything in this world which guarantees you the protection of principal money. But let me explain how real estate is different. Lets take an example of house made up of iron, steel and cement. It also include years of manufacturing by engineers, labours and architect creating a hidden value for house. Not to mention all the clearance from the fire department, forest department, and aviation department you have to take in oder to create a house. As the year passes, iron prices increase, steel price increases, engineering prices increases. Everything including land prices increases. Now after 10 years if you want to create a house is it going to cost you the same. No, now creating that house will cost you more money and more clearances. Hence people decide to rent or buy an old house even at 4-5% less to any newly launched project. A newly launched project will cost more as the prices of raw material has gone up. This is how real estate never let your principal money devaluate. Not to forget the rented income you earned over the time.

My next knowledge comes from book Factfullness. In this book, author starts his story by saying his childhood story. He was once playing near the riverside in his small village. While playing he unknowingly falls into the river, but fortunately his grandparents were able to save him. His chances of surviving during that period of 1930 was very less as sometime children die due to animal attack or due to medical reasons or falling into river. But as he grew up animal where in jungle or zoo, river where fenced and lot of medical cure was found and as a result children surviving rate increased. This is a small example of how a country develops and you can notice that by seeing a small examples around you everyday. All parent now want their children to grow in a safe environment. Thats why we see people in India migrating from small town to big cities in search of good facilities and livelihood.

Indian is a very diverse country. Some places in India have grown with an immense pace. If you see the metro city in India and a remote village of Bihar, there is a lot of difference. When you go and buy real estate in the metro there is a story that will play in the coming future. There is the plan of government that the first step is land acquisition, then allotment of plot, then giving basic needs like electricity water and other needs. Then private builders develop properties. People come from different places buy properties. Then commercial comes, then the metro and public transport come. These things take 10-15 years to happen. In India, it is a slow process. But if you go to a remote areas of India this story may take a generation to complete.

Buying real estate is all about playing the story of development, which is going to take place in the coming future. I have seen people saying Chandigarh property is in the boom and then the other person says no no Mumbai property is on a boom, someone says Delhi is on a boom. But it is very important to understand the story of growth. If you invest in Mumbai without understanding the story of growth you will end up devaluating your money. If you understand the story of even remote location of Bihar you will invest with the best decision. 

For example, the land as an asset has a tremendous return in states like Bihar. So every place, every city has a different story of development. You have to understand the story and then play that story. Your return totally depends on how well you understand the story. You will understand the best story of the place you have grown up. So as Mr Buffet say "Invest in bussiness you understand". I say invest in real estate whose development story you understand.

Sometimes, people make mistakes even when they buy property at the place where they have grown up. It's because they have not worked on the development story and verified the story from different government sources. 

People debate stock gives you the best return and real estate gives you a bad return. It's our understanding which creates differences, not the property. If you buy a bad stock you will end up losing money. If you buy good real estate you will make money. As I say it is about understanding the story of development. If you understand the business of an company then you will make money. The stock can perform bad if demand of that companies product goes out of market and hence business can end. But everyone will require roof on their head and as the population grow the demand for house will increase.

Mr Kiyosaki helped me to understand what is asset and what is liability. If you buy a home on loan and you stay in that home then it is not an asset, its a liability as it is taking money out of your pocket. If you buy a real estate with earned money and then you earn rented income over that, then it is an asset. People generally get confused that if they buy house that is an asset. But what they don't understand is the important of location. People think they buy house in so and so remote area, that is an asset. But that is not an asset. Who will take your property on rent if you put it in remote area. As a result you will only end up giving maintenance cost. Location is very important. When you buy property in prime area even in covid period when there was reverse migration, the property at prime location was on demand. If you are buying property buy at the best location. Think like that, if someone comes to take rent in your locality your house should be the first on demand. Now you will find number of reasons to choose right property like market is near, metro is near, easily assesible to main road, police facility, hospital facility near by and school facility near by. These requirement can vary in different areas according to different development story.

With time in India people will migrate to metro city, as metro city is the place where jobs are available. Everyone wants to work a white collar job. Everyone wants to give their children best education, best medical facility and they need best people to socialise with. People want a place with best social security where they can go anywhere without thinking of their home security. Place having these things will always keep on pulling the demand. When demand is good the price will be good. 

So to become a best chooser of real asset you must understand the story of development. Its all about understanding the story of development. I would request you to read these books mentioned above. 

Thanks for reading. For more knowledge and update follow me on my Instagram. Paisaconsultant.

Nifty 50 PE Calculation

 What is PE?

PE is a price-to-earnings ratio. It is the amount of money we pay for a company in order to earn 1 rupee. 

Suppose you buy a house of 50 lakh. Now you have rented that house for 15000 per month. Your annual income from that house is 15000 X 12 = 180000. Now PE of this asset (house) is 50 lakh / 1.8 Lakh = 27.7

Here the conclusion is that you have paid 27.7 rupees to earn 1 rupee. Is this a fair deal? I leave this question up to you?

As the company grows its earnings keep on increasing, so as its stock price. But on average PE remains the same.

But these PE values can change if the company is expecting big profit in the coming future. Vice versa its PE can decrease if has no further growth plan or expected loss.

These values help us to decide when to enter stock or exit stock.

In my below analysis, I am trying to compare the companies current PE with its average 5 years PE.

The PE values in RED are overvalued companies. If you are not expecting any big earning in the upcoming future, you shouldn't buy those stocks any further.

The PE values in Green are undervalued company. If you think these companies are stable and will continue to make a profit in the coming future then it's a good buy.

This is not a buy or sell recommendation. This is only for educational purposes.  Analyze the future growth of the company then only invest.

Currently, Nifty PE is at 41. 

Thanks for reading. You can follow me on Instagram: paisaconsultant

PROTECTION AGAINST INFLATION: What to do when inflation is high.

Your 1 lakh in the bank account will devaluate to become 98000 next year. Shocked! well, as inflation will rise by 5% and saving account interest will give a 3% return, you will lose 2%. So it is very important to understand when inflation starts going to 7-8% what should we do?

What is inflation?

Suppose this year price of tomatoes is 10 rupees. Next year this price becomes 11 rupees. So there is the rise of 10% inflation. Inflation can be healthy sometimes depending upon the countries economy. 2-6% is considered to be healthy inflation. 

Why it is required?

Suppose you work very hard for one year and then you asked for an increment next year from your boss. If you do not get that increment then you become demotivated. So there is a need for a raise in salary. So there is a need for rising inflation to keep the country motivated to grow. 

How inflation happens?

Earlier when gold was the currency the countries were allowed to print the note according to the quantity of gold. Suppose a country has 1 kg gold and they printed 100 rupees. Now the price of gold is 100 rupee per kg. The government thought to print more currency in order to create more liquidity and jobs in the market. 10 more rupee was printed. Now gold price will become 110 rupees per KG. So there is a rise in inflation of 10%. This is one of the simplest ways to raise inflation.

Current situation.

This year due to the pandemic government all over the world has started to print more currencies in order to buy the vaccine and to create infrastructures that more jobs can be created. More jobs will give money in hands of people. When people have the money there purchasing power will increase and hence the economy will grow. Within this process, if things get out of control then inflation can go out of control and hyperinflation will be created. So in order to preserve your money you have to do proper investments so that you don't lose the buying power.

What is hyperinflation?

When inflation goes out of control like in Zimbabwe where to buy bread you have to sell your house. In the last 3 years, zimbabwe's government has printed 90% of the total money circulated in the economy. When money went into the hands of financially uneducated people they start putting money in the stock market. As a result, the Zimbabwe stock market gave a 600% return in the last year (left image). Well is Zimbabwe creating Google facebook in their backyard? No, it's shocking how this bubble is created. So it is very important to understand the right investments so that you don't get trap into these bubbles.

 

What is real Investment?

We are giving up a certain amount of buying power now in order to have more buying power in the future. For example, we are investing 1 iPhone money in order to purchase 5 iPhones after 10 years. This investment has increased your buying power.

In the 1979 annual letter of Warren Buffet it was written: "Just as the original 3% saving bond, a 5% passbook saving account or an 8% U.S. Treasury note have, in turn, been transformed by inflation into a financial instrument that chews up, rather than enhances purchasing power over their investment lives, a business earning 20% on capital can produce a negative real return for its owner under inflationary conditions not much more severe than presently prevail."

Inflation can be bad times for business too. Inflation eats away their purchasing power as well. Businesses general need to buy a lot of stuff to keep operating. If this stuff is now all of sudden very expensive they are trapped in a dilemma either they pay the higher price to operate and make less profit or they try and raise the price and hope their sales volumes doesn't shrink because of it. Inflation can also put pressure on interest rates which can make it harder for companies to excess loans or make pre existing loans more expensive to pay off and this makes for investor more harder to find stock that are going to compound our money over time. So what kind of business should we buy ?

Here Mr Buffet suggests "A business which has ability to increase prices rather easily (even when product demand is flat and capacity is not fully utilized) without fear of significant loss of either market share or unit volume. A business should have ability to accommodate large dollar volume increases in business (often produced more by inflation than by real growth) with minor additional investment of capital."

Take an example of a software company that is providing service to XYZ company. Software company increases its annual subscription charge due to inflation. can XYZ company switch to the cheaper alternative. No, as going to other software or platform requires its employee to train them and training again comes with a lot of time constraints budget, and more extra cost. So this software company can survive inflation as it can keep on increasing the price of its annual subscription. So look for a company that can raise prices without consequences.

So I would like to end my examples by one of the buffet speech where he explains what should be the protection against inflation.

"Inflation is an invisible tax that only one man in a million really understands and it attacks the people that have had faith in currency the government issued. The best protection and the best investment against inflation are to improve your own earning power and your talents. Very few people maximize their talents and if you would increase your talent they can not tax it while you are doing it. They can't take it away from you. So if you become so useful in your activities, your profession like doctor lawyer or whatever it may be that is the best protection against inflation."

Thanks for reading. For regular updates about the Indian stock market follow me on Instagram at @paisaconsultant.

Strategy for short term Investing analysed

 Hello Everyone, 

I came across this strategy of Mr. Nitin Bhatia video. I found this strategy very impressive. By keeping all these parameters, I have come across two stocks. so let's start analyzing these stocks.

Trade 10

Hello Everyone

ICICI Bank

30 July 2020

Below is my breakout trade for today.

Strong support at 354.84, when it breakout enter the trade with confirmation.

Trade 9: Breakout

Hello Everyone

21 July 2020

Today my trade was on Larsen and Toubro stock. It gave me 5 points of profit. I came across this chart in the market hour because of this stock shares my portfolio. In the last trading session, 932 was a resistance where supply came. So as soon as this resistance was broken in a 5-minute chart I took entry in the trade. Later on, in this stock 932 became support. This support will act very crucial in my next trading session. 932 to 940 is crucial range in the next trading session. 

Trade 8: Trend of the day

Hello Everyone,

Below is the chart of NTPC on the date of 20th July 2020. I have always believed in trading the trend on the 20MA line. This chart is of 5-minute candlestick.

Book notes: Secret of Pivot boss by Franklin Ochoa , Chapter 5

Today we will have a brief discussion about CPR. My reference is from the book of Mr. Franklin Ochoa.

In engineering words, CPR is the center of gravity of the last trading session and its mass is directly proportional to its width. Below Fig 1 represent the calculation of CPR lines. 

TC, Pivot and BC constitues a CPR.

Tip 3: Price action trading

I have started learning the concept of price action trading. I have been very fascinated by this concept. thanks to all the videos available on youtube. Especially pivot call youtube channel. For live update join me on Telegram .

Trade 7: Trend of the day

My objective is now to first show all the trend trades. I am going to try to show every day a trend trade, which can help you to grow your money with less risk. To get instant updates on live trending trades during the market hour subscribe to me on Telegram .

Trade 7

Hello everyone

Date:14th July 2020

Today I took the trade on ICICI sell call. I was able to take this decision as it was following this pattern from the last 2 days. 

Book notes: Secret of Pivot boss by Franklin Ochoa , Chapter 2

In this article, we will understand the formation of the candles which helps us to understand "start of reversal pattern".

Tip 2

I have always tried to find answers for traders who are interested in earning in stock trading. My way of earning is simple, read as many books as you can, and use those strategies in daily trading. This is one strategy shared in the book "How to make money in intraday trading by Ashwani Gujral" Its the concept of CPR. 

I have also taken the help of video shared by Gomathi Shankar on youtube. He has also given the CPR script which we can use in the Tradingview website.

My understanding of his concepts are, 

"if opening first three 5 minute candles are above R1 or below S1 it will immediately tend to reverse and get attracted to that day CPR"

"If opening first three 5 minute candles are between CPR-R1 it will try to break previous day high but fails and it will immediately tend to reverse and get attracted to the day CPR levels."

"If opening first three 5-minute candles are between CPR-S1 it will try to break previous day low but fails and it will immediately tend to reverse and get attracted to that day CPR levels."

My idea to understand the concept is to explore a lot of examples. This is what I am going to do in this blog. Now I am going to share some example which I feel support the above statements.