Category: Excerpts

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Dan Bunting’s 5 Rules to Buy Stocks

Dan Bunting was a stock market veteran.His 5 Rules to Buy Stocks are:

1. Look for companies where the insiders are buying lots of stock

2. Look for companies generating a lot of cash, as that is almost always the start of sustained outperformance.

3. Look for companies which have monopolies, or near monopolies, and those which manage to take out their main competitors.

4. Remember you are buying businesses, not just stocks. So pay close attention to the quality of the business, and especially the quality of the management. They make an enormous difference. Over time, Dan would say, “class shows.”

5. Look for companies in the consumer sectors — in particular, companies which have earned the trust of consumers, and which have very strong brand names. “As a rule, the closer you are to the consumer, the more money you will make,” he said. “The ultimate guarantee of profit is to possess the trust of the consumer.

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Time to strip

Source:Manoj Nagpal

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Warren Buffett the Trader

An analysis of Berkshire Hathaway’s quarterly SEC Form 13F filings during 1980-2006 (2,140 quarter-stock observations) reveals that:

  • Berkshire Hathaway tends to invest in large firms with low book-to-market ratios and large accounting accruals, while avoiding firms with high asset growth and poor past returns.
  • Holdings are concentrated and tilted toward banking, business services, insurance and publishing. The number of stocks held ranges from 5 to 95. The average numbers of stocks held during the 1980s, 1990s and 2000s are 22, 12 and 33, respectively.
  • The median holding period is one year, with approximately 20% (30%) of stocks held for more than two years (less than six months).
  • Over the 1980-2006  sample period, Berkshire Hathaway’s annualized abnormal return from stock holdings (adjusted for market, size, book-to-market and momentum factors) is 7.2%. These returns are substantially independent of those for well-known pricing anomalies, suggesting that Warren Buffett has unique insights regarding future returns.
  • A value-weighted (equal-weighted) portfolio that mimics Berkshire Hathaway’s holdings, reformed quarterly based on company filings, generates an annualized abnormal return of 6% (6.6%) over the entire sample period.
  • When Berkshire Hathaway announces an increase in a stock position, the average market-adjusted return for the stock is 0.7% to 0.9% over the next five days and two weeks, respectively. The immediate price reaction therefore tends to be very incomplete.
  • Net stock sales by insiders (officers, directors, and major stockholders) of companies in which Berkshire Hathaway has a position tend to decrease when Berkshire Hathaway increases its positions, indicating shared private information-

from CXO Advisory

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Alok Industries:The Stock From Hell

Alok Industries Limited has informed the Exchange that ”We request the Exchnage to refer Company’s earlier letter by which Company had intimated the Exchange about the Board Meeting scheduled on November 9, 2015 to consider Un-audited Provisional Financial Results of the company for the quarter ended September 30, 2015.In this connection, Company regret to inform the Exchange that due to some glitches in the IT system, Company are unable to retrieve our financial/ accounting data properly and coupled with excessive absenteeism of key management people on account of festival season, Company is compelled to postpone the aforesaid meeting.Company shall fix up the next date of the meeting once the technical problem in the IT system is resolved”

-filed on National Stock Exchange website

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ICICI sells stake in ICICI Pru Life to Temasek,Premji

(Disclosure:I am market making in the shares of ICICI Pru Life)

ICICI Bank (ICBK.NS), India’s biggest private sector lender by assets, said on Monday it agreed to sell a 6 percent stake in its life insurance joint venture in two separate deals to billionaire Azim Premji and Singapore state investor Temasek.

The stake sales will value ICICI Prudential Life Insurance Co Ltd at 325 billion rupees ($4.9 billion), the bank said in a statement. That would mean the deals would be worth a combined 19.5 billion rupees.

Premji Invest and its affiliates will buy 4 percent of the company, India’s biggest private sector life insurer, while a unit of Temasek will pick up a 2 percent stake, ICICI Bank said.

After the deals, ICICI Bank will own about 68 percent in the life insurance business and its joint venture partner Prudential Plc (PRU.L) will hold 26 percent, the bank said.-from Reuters