Book Review: Microcap Magic

The Book ‘Microcap Magic‘ is written by Stephen Kann who used to run a newsletter called the Bull Market Microcap Review

As the title suggests, the Book makes a case for investing in microcap stocks i.e. stocks less than a market cap of $300 Million.

As per the author, one can allocate upto 20% of one’s portfolio to microcap stocks which should be spread across 5-10 microcap stocks.

The reason to invest in microcap stocks are two fold:

1.As the market cap is v small, institutions don’t follow it and as such these stocks are generally under-researched

2.Owing to the small market size, one can own a larger % of the company for a particular amount

The Book goes on to explain how to screen for these stocks…the screener the author uses is very basic and straight forward:

$25-250 Million Market Cap,Price,>20% revenue growth, > 0 EBITDA, < 1.0 Price/Sales, < 1.0 PE/G, < 30% institutional ownership

The Book then warns about some micro-cap investing pitfalls such as equity dilution, insider selling etc

Most of the book consisted of case studies of US based microcaps which are of little interest to the Indian reader.

One startling fact in the book is that the author’s largest personal holding is Calpian,Inc which “owns the largest,fastest growing mobile payments platform in India.” Huh ? Never heard of this company

This Book is a miss…Save your money and buy me a beer instead.

Book Review: How to Get Lucky

The Book ‘How to Get Lucky’ is written by Max Gunther whose earlier Book ‘The Zurich Axioms’ is considered an investing classic.

We Indians very well know the importance of luck in life.In our chaotic country of 1.3 Billion people, we know that many things happen due to luck-good or bad.

The author starts with the premise that it isn’t enough to be good.You’ve got to be lucky too…the world is full of good, smart and hard working people…but without luck they can’t succeed

Luck being luck…is there any way to improve one’s chances of being lucky?Is there a way to be more lucky than unlucky?Are there any methods that lucky people use that unlucky ones don’t?

The author believes he has 13 techniques that can increase one’s chances of being lucky.They are:

  1. When you win something, acknowledge the role of luck in it.Don’t attribute the success only to your smarts and hard work.Especially true for bull market investors !
  2. Build connections, relationships and networks.The more people you know, the more opportunities come your way and the “luckier” you get
  3. Take risks.No risk, no gain.People who plod along, content with security and the comfort of a daily routine, rarely get lucky.Risk is a necessary ingredient of every successful life
  4. Don’t push your luck.Take money off the table…no tree goes to the sky
  5. Cut your losses if things are not going your way.Be comfortable with saying ‘I was wrong’ and move along
  6. Follow a zig-zag path.Be flexible.Have an open mind to new opportunities
  7. Luck really does not depend on God etc.It happens randomly.Yet if you believe prayers or harmless superstitions (like wearing a fav shirt) etc can help and comfort you, you can be true to your beliefs.Sometimes these beliefs can help in improving confidence and taking decisions
  8. Consider the worst-case analysis of any opportunity/risk
  9. Avoid excessive communication.Speak only when necessary.This will free you to explain and justify actions to other people
  10. Don’t mistake random events for “lessons to be learnt”.If you can’t identify the cause and effect, then the event is pure random.For e.g identifying repeatable patterns in stock prices etc
  11. Accept an unfair Universe.Fairness is a human concept.The rest of the universe knows nothing about it.So don’t go around thinking you “deserve” good luck or “didn’t deserve the tragedy that happened”
  12. Luckier people are busier people.They have so many side hustles going on that bad luck in one activity is often compensated by good luck in another
  13. Find your “destiny partner”….someone who can change your life and the quality of your luck

All in all, I found the Book to be an enjoyable quick read.

Do buy the Book to get more lucky !

 

Book Review: The Secret War with Iran

The Book ‘The secret war with Iran’ is written by Ronen Bergman who is considered to be one of the foremost writers on Mossad and Israeli Military Intelligence.

Trump has many times threatened to scrap the US-Iran deal in May. 2018. This can have major implications for the world oil markets since Iran is one of the largest oil and gas producers in the world.

The Book covers the period from 1979-2009 after the Shah of Iran was deposed and the Islamic regime of Ayatollah Khomeini took over.

The Book covers how the Shah was overthrown, how CIA and Mossad tried to sabotage the Iranian Islamic regime, how Iran exported its Iranian revolution abroad,about Iran’s chemical and nuclear programs etc

Some of the facts mentioned in the Book make for startling reading.

For instance, it was very surprising to know that the country which set Iran on the nuclear path was America !They supplied them with nuclear reactors when Shah was still around.

During the Iraq-Iran war, Iran was losing very badly to Saddam Hussein.The country that helped Iran with arms and ammunitions was Israel ! They did so mainly for the money and also to ensure that their Islamic foes are weakened by fighting a prolonged war.

Another astonishing fact is that Iran has very large facilities of Chemicals Weapons of Mass Destruction.They were able to get the raw material,factory blueprints etc from an Israeli who did it for the money.

One aspect in the Book that I found fascinating was that Iran and North Korea use their state currency presses to make master counterfeits of the US Dollar.They have apparently distributed Billions of fake US hundred dollar bills.

The Book covers the Lebanon-Israeli conflict in detail and explains the rise and rise of Hezbollah.The incidents mentioned in the book relating to spies,assassinations,hit jobs,tortures, hostage swapping,air strikes etc make for riveting reading.

There is one India reference in the Book…a Pakistani nuclear scientist applying for political asylum in the US stated that Pakistan intended to launch a peremptory nuclear strike against India.

Do buy this Book to know more about Iran,Israel and the bloody conflicts of the Middle East.

Book Review: Stalin-Waiting for Hitler

The Book ‘Stalin-Waiting for Hitler’ is written by Stephen Kotkin who is a Professor of History at Princeton.

This Book is the second of a multi-volume series on Stalin and covers the period between 1929-1941.The review of the first book can be found here

The Book takes off from 1929 and covers some of the most turbulent periods of Russian history right up to Hitler’s invasion of Russia in 1941.

The Book brings into stark relief the indomitable will, cunning and hyper suspicious paranoia of Stalin.

Stalin was determined to make the Soviet Union a powerful and advanced nation, irrespective of the cost either in human lives or money.

With that goal in mind, he pushed many policies which resulted in the deaths of millions.

One policy of his was collective farming..here farmers/peasants had to give up their individual plots to the state. The state would then use mechanization,modern techniques etc to drive more efficient farming in these collective plots and drive up productivity. As the peasants revolted, Stalin had the dissenters shot and sent to the Gulag (slave camps). Famine resulted in the Soviet Union resulting in widespread hunger,deprivation and even cannibalism.

What is interesting is what Stalin did with the grain he collected. He exported it to Germany and other Western states in return for machinery,technology , blueprints for factories etc. His primary focus was on the armaments industry. It’s incredible to think now but nearly all of technology and machine tools for the Soviet Union’s tanks, naval carriers, aircrafts etc were supplied by Germany,USA etc  in exchange for grain,oil,manganese,phosphates and other commodities.

The Book also covers one of the darkest chapters in Russian history-Stalin’s purge from 1936-38. In this “Red Terror”, hundred of thousands of innocent people were shot and executed under various pretexts of being spies,rightists,Trotskyites, “wreckers”, “kulaks” etc. This resulted in the deaths of 90% of the Red Army’s officers, most of its managers, top party functionaries,intelligence officers,writers, musicians  etc

The Book then leads on the Second World War and the various games various countries played to protect their own self interests.I found the material on the Finland-Soviet Union War of 1939-1940 (Winter War) particularly fascinating.

Some takeaways from the Book which I found interesting and relevant to us in India in the current context:

  • Stalin emphasised on having your own armaments industry capable of producing guns,tanks,aircraft etc. India cannot be a power of any sort if it does not have a strong domestic armaments industry.
  • Demography matters.Stalin moved entire populations from one part of Soviet Union to the other as he feared they will betray the country if invaded to its enemies based on common ethnicity/religion etc (For e.g, he moved the ethnic Soviet Poles from Ukraine to Kazakhstan and ethnic Soviet Koreans away from Soviet Far East)
  • No country, be it capitalist or communist, wants to give an inch of land to its neighbours. This was true in 1930s and it is true now.So wars can happen even for small and insignificant pieces of territory
  • For any country to be successful, it is very important to have a top class intelligence agency.Stalin used to know what was happening in Hitler’s Chancellery better than most German officers
  • Leaders of great powers can take decisions which can impact,destroy and end lives thousands of miles away .Even current conflicts like Syria, Iraq, Libya etc are testimony to that. As such,one should keep an eye on geo-political developments…they are more important than you think.

I would strongly recommend this Book only if you are interested in Stalin or World War II or a very serious history buff.Not meant for everyone.

 

Book Review: Stalin-Volume I – Paradoxes of Power

The Book ‘Stalin-Paradoxes of Power’ is written by Stephen Kotkin who is a Professor of History at Princeton.

This Book is the first of a multi-volume series on Stalin and covers the period between 1878-1928.

Why Stalin?

Its slightly more than 100 years since the Russian revolution took place and most Indians don’t know or don’t care about it.

Yet, this revolution changed the world for next 70 odd years and impacted the lives of Billions of people.

Stalin, more than anyone else, bent the arc of history and would literally hold the power of life and death over billions of people.To my mind, he is one of the most fascinating characters from history (the other one is Mao !)

The author is considered to be one of the greatest historians alive and the book is truly a master class  of how history ought to be written-explaining context,motives,people,events etc

The Book goes into very deep minutiae and is exhaustive with thousands of notes which for a history buff like me is pure gold.

The scale of events in this period cover World War  I, the Russian revolution, the Russian Civil Wars, the Russia-Japan war, the Russia-Poland war etc.It’ shocking how many people died due to war, riots , anti-Jewish pogroms, diseases, famines,mass executions etc

This also brings home to me how lucky we are currently to be living in a free and a peaceful (for most parts) India.

Also, it is so important to understand that politics matters, even for investors who don’t want anything to do with politics.

If Buffett was born in Russia instead of US in 1930, he probably would have died of hunger or hanged from the nearest lamp pole for being a “capitalist dog” or “petit bourgeoisie” or a “class enemy” !

I would strongly recommend this Book only if you are interested in Stalin or the Russian Revolution or a very serious history buff.Not meant for everyone.