Book Review: How to Make Money in Stocks

The Book ‘How to make money in Stocks’ is written by William J. O’Neil and is widely considered a classic in investing circles.

The author is a veteran trader and his approach towards the markets is “Been there,seen that”

He compares himself to an historian and believes that since markets are ruled by crowd psychology,many of the stock patterns in the past repeat themselves and will repeat again in the future.

The first chapter contains around 100 charts which make for interesting reading.

The second chapter explains how to read charts and how to select the right time/price to buy a particular stock.

But which stock to buy?He has a criteria called CAN SLIM which stands for:

C=Currently Big/Accelerating Sales and Earnings Per Share

A=Annual Earnings Increases with Big Growth

N=New Companies,New Products,New Earnings

S=Supply and Demand of Stock Volumes

L=Leader or Laggard

I=Institutional Sponsorship

M=Market Direction

There is a chapter on each one of these concepts which explain at length on how to apply them

The last section is on a very neglected aspect of investing-when to sell

The author is of the firm view that one should book losses quickly (not more than 8%) and let the profits run.

While all the examples are from the US, there are many investors in India who swear by the book and attribute their profits to it.

Do buy the book if interested in trading.

Book Review: The Nationalist

The Book ‘The Nationalist’ is written by well known journalist Minhaz Merchant and covers the incredible story of Larsen & Toubro and its Chairman A M Naik.

In India, there are very few companies in the private sector that can be termed as “strategic” and “critical to the national interest”

Larsen & Toubro is one of them.Its so critical when Kumar Mangalam Birla wanted to takeover the company, the PMO stepped in and ensured he backed off.

The Book is written with two narratives-one about the company and the other about AM Naik.

Larsen & Toubro was started by two Danish engineers who believed that with Independence, India would need engineering expertise for its growth.

L&T was present in all the iconic projects of India-from Tata Chemicals Mithapur plant,to Anand Milk Diary to Reliance Refinery in Jamnagar and so on..

It is is the only company in the world which can do aerospace, hydrocarbons, nuclear reactors,chemical reactors,nuclear powered submarines etc

I was astonished to learn that 80% of the gasoline processed in the US and 90% of the gasoline processed in Canada has passed through the chemical reactors built by L&T in Hazira.

I got goose bumps reading about L&T’s Hazira plant…when they bought the land,50% of the land used to get covered with sea water during high tides.

That L&T was able to transform it into one of the greatest manufacturing facilities in the world is a testimony to their engineering skills and the vision of one man-A M Naik.

A M Naik, like Dhirubhai Ambani, is one of those people who come along once in a generation.Under his leadership, the company’s revenues grew 100-fold and market cap-130 fold.

He also saved the company from takeovers and enriched the employees with his unique creation ‘L&T Employee Trust’ which ensured the ownership of the company remained with the employees.

The title of the Book ‘The Nationalist’ captures the ethos of Mr.Naik and L&T who believe they are into not just any ordinary business…but in the business of nation building.

There are lots of things to learn from Mr.Naik-his work ethics,his vision,his patriotism,his meticulousness,his people skills etc.

One anecdote which I particularly liked and brings out Mr.Naik’s personality is this:

“About 30 years ago, Naik and his colleagues were in the Powai workshop working late at night as there was a problem with the machinery.

After some time, they finally solved the problem.

Relieved, Naik and his colleagues left the workshop at 2:00 am

The next day, at exactly 8:20 am, Naik was standing outside the company’s office punch card machine and asking the workers why they were late.

They said: “We left at two in the morning !”

He replied: “Coming to work on time is your duty. Going back home after duty hours is your pleasure.”

The Book is full of such interesting anecdotes and interviews with L&T employees.

I particularly liked reading about L&T’s Kattupalli Shipyard near Chennai. Built with the help of Japanese technology, it has a 21,000 tonne shiplift-one of the largest in the world.This enables to pluck a ship out of water and put it on land where repairs can take place.

One tidbit I found ironic is that neither Larsen nor Toubro’s families own any shares in L&T.  Thanks to Mr.Naik, around 4000-5000 employees of the company are dollar millionaires due to their stock options.

One negative aspect of this book is that the author is so clearly in awe of his subject Mr. Naik that he goes overboard in praising him and does not actually critically analyze his business decisions.

Do read this book to know more about one of India’s greatest companies and its iconic Chairman

Book Review: The Wealth Wallahs

The Book ‘The Wealth Wallahs’ is written by Shreyasi Singh, former Managing Editor of Inc, India.

She does a fantastic job of covering the Wealth Management industry in India and getting perspectives -both from the client and the advisor’s perspective.

In the Indian context, a HNI (High Networth Individual) is one who has $1 Million of investable assets (excluding primary residence) and a VHNI (Very High Networth Individual) is one who has $5 Million in investable assets.

The Wealth Management industry is meant to handle the money/wealth of such clients.

The Book narrates the story of the Wealth Management industry via the lens of IIFL Wealth, which is now the largest wealth management firm in India.

Started in 2008, IIFL Wealth did a tremendous job of riding the wealth creation wave in India. India’s wealth has increased by $2.284 Trillion (Rs.15,24,227 Crores) between 2000 and 2015, making it one of the fastest growing places to make serious money.

70% of the clientele of IIFL Wealth are first generation entrepreneurs-think senior corporate personnel (CXOs etc), A list Celebrities (Bollywood,Sports etc),Startup Founders,PE investee firms etc

I found it wonderful how IIFL Wealth was created by three professionals who demanded ownership along with the normal salary/bonuses etc.

Its great to see working class professionals start companies,create jobs,provide world class products & services and have skin in the game.

The Book contains chapters on the perspectives of the wealthy towards money, how to spend it,how to raise children, on philanthropy etc which I found interesting.

What I found amusing was the attitude of the clients towards their wealth managers.

Most seemed to regard their wealth managers as product pushers for the sake of earning commissions.

As such, they had a relationship with two or more wealth firms.They did not trust their own wealth firm enough to go with their advise blindly. Every product they were pitched to was given to a competing firm for their inputs/critiques !

Also, the clients seem to have a low opinion of their own wealth managers.This is because entrepreneurs/business builders consider the process of creating wealth to be superior as opposed to “managing it”

Do read this Book to understand how the wealth industry operates.

Book Review: Option B

The Book “Option B” is written by Sheryl Sandberg,COO of Facebook and Adam Grant, Professor at Wharton.

In 2015, Sheryl’s husband Dave Goldberg died suddenly of a heart attack.He was only 48 years old.He left behind a grieving family including two young children.

The book is born out of this grief where the authors write on how to face adversity and overcome trauma.

Trauma comes in many forms-death of close one, diagnosing of a critical illness like cancer etc,accidents,sexual assaults etc.

Sometimes the trauma can even be financial in nature-loss of a job, loss of savings due to fraud (NSEL etc),failure in business or even a stock market collapse (2008 etc)

The Book , through examples and anecdotes, offers very good advise on how to cope with these situations.

The most important advise is how 3Ps can stunt recovery:

Personalisation- The belief we are at fault

Pervasiveness- The belief that an event will affect all areas of our life

Permanence- The belief that the aftershocks of the event will last forever

Another important takeaway is the super importance of a loving family,close friends and financial security. If you have these three in place, you can recover faster and better .

There is a chapter on building resilience in kids so that they can overcome obstacles big and small.

One can do so by helping children develop 4 core beliefs:

1. They have some control over their lifes

2.They can learn from failure

3.They matter as human beings

4.They have real strengths to rely on and share

Another important takeaway is the importance of  hope/desire

In India, we have a saying “Jaan Hai Toh Jahan Hai”

Was surprised to know that in Chile, they have two sayings

“If there’s life, there’s hope” and the reverse “If there’s hope, there’s life”

Do buy this book to learn about overcoming obstacles and building resilience

Book Review: The Drunkard’s Walk

The Book ‘The Drunkard’s Walk-How randomness rules our lives’ is written by Leonard Mlodinow.

Uncertainty, randomness, chance or luck is an essential part of our lives.

Yet we understand very little of it. Of course, in India, we attribute good luck or bad outcomes to karma or “God’s wish.”

The book tries to explain randomness using mathematics,probability and statistics.

Written in a humorous way, the Book explains with numerous instances how these basic tools can help us understand randomness.

One example which strikes me is the example of a Frenchwoman called Jeanne Calment

When she was 90 years of age, she made what is possibly the first reverse mortgage deal.

She stuck a deal with a 47 year old lawyer that in return for a small monthly payment, he will get her apartment on her death with no further payments.

The lawyer thought this was a great deal.The average life expectancy in France was 80 years and obviously, this lady had overstayed her welcome on Planet Earth by 10 years.

He took the offer, not realizing that the relevant issue was not whether she should die in minus 10 years but that here life expectancy,given that she had already made it to ninety, was about six more years.

The lawyer kept making the payments and waited for Jeanne to die.

The result was not what he expected.

Jeanne passed away at the age of 122.The lawyer had died long before that !

If the lawyer had known Baye’s theory, he would not have taken up this deal.

Do buy the book if interested in probabilities, randomness and luck.