Value-Stock-Plus

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India’s Diverse Sectors

A Presentation by Professor Sanjay Bakshi at IIM Lucknow on March 17, 2010

Confessions of a Value Investor- A Few Lessons in Behavioral Finance

Source: Barrons

A hard look at how Lehman masked the horrors of its balance sheet. Words of wisdom from Seth Klarman.

HOCUS-POCUS. THAT, IT EMERGES, SANK LEHMAN

Brothers and damn near the entire financial system, to say nothing of the economy as a whole. So charged a court-appointed examiner named Anton Valukas, may his tribe increase, in a 2,200-page bombshell of a report made public on Thursday by U.S. Bankruptcy Judge James Peck.

Lehman, in case you were too busy dumping stocks at the time to notice, went belly-up in September 2008, and in one fell swan dive earned the unenviable distinction of being the biggest bankruptcy in our republic’s long and glorious history. It took Mr. Valukas, of the New York law firm Jenner & Block, 14 months and $38 million to perform the autopsy, and it has proved time and money very well spent.

Let us confess right up front that we haven’t read the entire 2,200 pages of the tome. But we have perused juicy excerpts and plumbed the accounts of sources we’ve found reliable to get a pretty good picture of why Lehman went belly-up and who the likely villains were. It’s an ugly picture and leads inexorably to the conclusion that if what some of the principals did so sneakily to hide the firm’s dangerously wretched financial condition in the long months preceding its collapse isn’t illegal, it should be.

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From Value Investing Insight

In this excerpt from his annual letter, investing great Seth Klarman describes 20 lessons from the financial crisis which, he says, “were either never learned or else were immediately forgotten by most market participants.”

One might have expected that the near-death experience of most investors in 2008 would generate valuable lessons for the future. We all know about the “depression mentality” of our parents and grandparents who lived through the Great Depression. Memories of tough times colored their behavior for more than a generation, leading to limited risk taking and a sustainable base for healthy growth. Yet one year after the 2008 collapse, investors have returned to shockingly speculative behavior. One state investment board recently adopted a plan to leverage its portfolio – specifically its government and high-grade bond holdings – in an amount that could grow to 20% of its assets over the next three years. No one who was paying attention in 2008 would possibly think this is a good idea.

Below, we highlight the lessons that we believe could and should have been learned from the turmoil of 2008. Some of them are unique to the 2008 melt- down; others, which could have been drawn from general market observation over the past several decades, were certainly reinforced last year. Shockingly, virtually all of these lessons were either never learned or else were immediately forgotten by most market participants.

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The so-called lost decade has not shaken legendary investor Peter Lynch’s belief that the stock market will continue to offer the best returns.

The dismal returns of the past ten years have made them known as the lost decade on the US stock market, raising the question whether investment in stocks has lost its luster. Who better to answer that question than the person considered one of the best mutual fund managers in US history, Peter Lynch?

Lynch, 66, the legendary manager of the Fidelity Magellan fund, took over the running of the fund in 1977, and from then until he left the post in 1990, he managed to beat the S&P 500 Index in 11 years out of 13. Under his management, the fund yielded an exceptional annual return of 29.2%, almost double the average for the index of 15.8%. The greatness of Lynch’s achievement can be seen from the fact that even today, 20 years after he stopped managing the fund, his books “One Up on Wall Street,” “Beating the Street,” and “Learn to Earn,” are still best sellers among investors.

Today, Lynch is a research consultant at Fidelity Investments. He devotes the rest of his time to philanthropy, through a fund that he manages that awards scholarships to children from low-income families who study in Catholic schools in Boston, where he lives.

In an exclusive interview with “Globes”, Lynch gives his view of the recent crisis and its consequences for the markets, and has no hesitation is sounding optimistic about the next hundred years for the stock market.

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by Warren Buffett

February 4, 2010

Source: The Onion

I’m not really the kind of person to get caught up in the latest trends or fashions or anything like that. But some days, if I get out of work early and have a little time to kill before dinner, I’ll go do some window-shopping in the downtown Omaha area. Usually I just stick to browsing, but occasionally I’ll see a shirt I like, and if I try it on and it looks good, I’ll say, “What the heck,” and go ahead and buy it.

Because why not, right?

If you think about it, we’re only talking $50 or $60 tops here. I’ve had a steady income for years now, and I’m at the point in my life where I just refuse to feel guilty about treating myself to a decent shirt every once in a while. See, because it’s not even about the money. It’s about feeling good. So if I come across a nice blue button-down or a really sharp Tommy Hilfiger polo, I just think, “Warren, in the span of a lifetime are you really going to miss the $40 you spent on a shirt you might wear for upwards of 10 years?” Of course not.

Look, I’m old enough to understand that it’s okay to spend a little cash on something that makes you happy. To tell the truth, I wish I’d learned that lesson years ago.

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