Author: Naveen

  • Four years as shareholder of Colgate-Palmolive (India) Limited

    Four years as shareholder of Colgate-Palmolive (India) Limited

    Four years ago while brushing my teeth with Colgate, I decided to invest in it. I am using Colgate for more than three decades now, so the company should survive at least few more years. And here we are four years later, Colgate is still there and so is the money that I invested in it. Are the returns great? No. Are the returns good? Still No. Are the return average? Sadly, yes. But hey, it could be worse considering the research that I did here.

    Returns and Profit

    Over these four years I invested 8 times in Colgate. The returns across these four years have largely been positive except during the COVID-19 pandemic market crash. But since last couple of months the share price has tumbled erasing a good chunk of my (unrealised) profits.

    On the other hand, 1%+ dividend yield at cost is much better than the dividends that is given by other companies.

    Profit Percent

    XIRR

    XIRR across these four years has been around 15% and I was happy with that. It was during the last 3 months that the share price price has tumbled putting my XIRR at 5%.

    NOTE: XIRR for initial months varies wildly and is not useful for any analysis. But once the investments complete minimum of 1 year, XIRR gives me a much better picture. So I calculate ‘XIRR (>1 year)’ which calculates XIRR only for the investments which have completed minimum of one year while ‘XIRR’ continues to calculate for all the investments irrespective of how much time has been completed. There are some periods where ‘XIRR’ and ‘XIRR (>1 year)’ calculate to the same amount as for that time all my investments had completed minimum of 1 year.

  • Four years as shareholder of HDFC Life Insurance

    Four years as shareholder of HDFC Life Insurance

    Four years ago I subscribed to the HDFC Life Insurance IPO. And I got lucky! I got the minimum quantity of 50 shares with HDFC Life Insurance opening up with a nice 17% gain on first day. After that I bought the share 3 more times. This is how it has performed over these four years.

    Return

    Over these four years the worth of my investment has never fallen below my invested amount. The dividend yield at cost for me has been around 0.5% with the company declaring dividends thrice over four years. They skipped the COVID-19 year like other companies.

    Profit

    The V-shape that you see between the period Jan-2020 to Jul-2020 is the COVID-19 market crash and its subsequent recovery. I do regret not being able to buy more during the crash. But the recovery was so quick that I had little to no funds to invest.

    XIRR

    NOTE: XIRR for initial months varies wildly and is not useful for any analysis. But once the investments complete minimum of 1 year, XIRR gives me a much better picture. So I calculate ‘XIRR (>1 year)’ which calculates XIRR only for the investments which have completed minimum of one year while ‘XIRR’ continues to calculate for all the investments irrespective of how much time has been completed. There are some periods where ‘XIRR’ and ‘XIRR (>1 year)’ calculate to the same amount as for that time all my investments had completed minimum of 1 year.

  • Norway Is Running Out of Gas-Guzzling Cars to Tax

    Makes me wonder, if some day electric cars rule over the Indian car market what will happen to all the tax revenue from petrol and diesel?

    When it comes to sales of electric cars, Norway is in a league of its own. In September, battery-powered electric vehicles accounted for 77.5 percent of all new cars sold. That figure makes Norway a world leader by a long way—leapfrogging over the UK, where 15 percent of new car sales were electric as of October, and the US, where that number is just 2.6 percent.

    Norway’s electric dream has been credited to a series of tax breaks and other financial carrots that mean brands like Tesla can compete on price with combustion engines. But these incentives—and their success—have created a unique predicament: Norway is running out of dirty cars to tax.

    Norway Is Running Out of Gas-Guzzling Cars to Tax
  • Why Birds Can Fly Over Mount Everest

    A wonderful article by Walter Murch on how the birds came to have super-efficient lungs.

    The answer seems to be that bar-headed geese, like all birds—hummingbirds, ostriches, pigeons—have super-efficient lungs. It makes our lungs—and the lungs of all mammals—look primitive. I’m sure when birds get together they gossip about how pathetic our lungs are!

    All mammals, including us, breathe in through the same opening that we breathe out. Can you imagine if our digestive system worked the same way? What if the food we put in our mouths, after digestion, came out the same way? It doesn’t bear thinking about! Luckily, for digestion, we have a separate in and out. And that’s what the birds have with their lungs: an in point and an out point. They also have air sacs and hollow spaces in their bones. When they breathe in, half of the good air (with oxygen) goes into these hollow spaces, and the other half goes into their lungs through the rear entrance. When they breathe out, the good air that has been stored in the hollow places now also goes into their lungs through that rear entrance, and the bad air (carbon dioxide and water vapor) is pushed out the front exit. So it doesn’t matter whether birds are breathing in or out: Good air is always going in one direction through their lungs, pushing all the bad air out ahead of it.

    How did birds get such great lungs? They inherited them from dinosaurs. Birds are dinosaurs! When I was growing up in the 1940s, there was a category in biology called Aves, which meant birds. But scientists have now folded Aves into a category called Dinosauria, and those dinosauria, like pigeons and seagulls and geese, are flying all around us today. If you want to know what a dinosaur probably tasted like, eat some chicken!

    Why Birds Can Fly Over Mount Everest
  • What to do with your portfolio when stock market crashes?

    I don’t know. But the folks at Marcellus know. They call it ‘Post-facto rebalancing’.

    …we stay fully invested at all times and rebalance our portfolio in two ways to benefit from a stock market crash. Firstly, after a crash, we rebalance the portfolio to increase our allocation to companies that have undergone high drawdowns (we finance this investment by shaving off our allocations to companies that have NOT undergone high drawdowns). Secondly, after the share prices of our portfolio companies have recovered, we again consider rebalancing the portfolio to sell some allocation in companies that have seen a sharper recovery than the rest of the portfolio. Such rebalancing is also carried out if share price dislocations happen without a broader stock market crash.

    How Portfolio Rebalancing Tools Enhance Investors’ Returns

    They even have an real life example and discuss on the pros and cons later in the newsletter.

  • Four years as shareholder of ITC

    Four years as shareholder of ITC

    ITC—in my humble opinion—is probably the most polarized stock in India. On one hand, you have the die hard fans who are waiting for its resurrection some day to prove them right. On the other hand, there are the detractors who don’t miss a single opportunity to poke fun at it. And some of those jokes are actually good. Don’t believe me, just Google ‘ITC meme’ and get ready for laughs.

    When I invested in ITC I didn’t know it was butt of jokes—pun intended—on the internet. I put some money in it and forgot. Then I received my first dividend. And I started day dreaming about living off with ITC’s dividend in my retirement. But sanity prevailed and here I am still holding ITC, waiting for its resurrection but not hoping to live off its dividend.

    Return

    The returns are—well—nothing to talk about. Apart from few spikes here and there, the returns have largely been flat.

    Profit (rather the absence of it)

    In case of ITC my profits and losses have always made sure they are never too far from 0%. They will go till 10% or –10%, but never too far.

    XIRR

    With such dismal returns over past four years you may ask why am I still holding ITC? Well I ask the same question to 250+ mutual funds (as on Sep 2021) holding ITC.

    NOTE: XIRR for initial months varies wildly and is not useful for any analysis. But once the investments complete minimum of 1 year, XIRR gives me a much better picture. So I calculate ‘XIRR (>1 year)’ which calculates XIRR only for the investments which have completed minimum of one year while ‘XIRR’ continues to calculate for all the investments irrespective of how much time has been completed. There are some periods where ‘XIRR’ and ‘XIRR (>1 year)’ calculate to the same amount as for that time all my investments had completed minimum of 1 year.

  • Three years as shareholder of Havells

    Three years as shareholder of Havells

    Three years ago I started investing in Havells. During the first two years the gains were pretty average. But during last one year the stock has zoomed and so has my returns.

    Return

    I invested only four times in Havells and was planning to invest more, but at the current price I maybe overpaying.

    Profit

    At the current price levels, my amount invested in Havells has more than doubled. While the amount invested wasn’t significant but the profit percent surely is.

    XIRR

    The current XIRR of 45%—which is certainly impressive—is not sustainable in the long run. But with the good run that this stock is having I am hoping for fat returns of 20% over long term.

    NOTE: XIRR for initial months varies wildly and is not useful for any analysis. But once the investments complete minimum of 1 year, XIRR gives me a much better picture. So I calculate ‘XIRR (>1 year)’ which calculates XIRR only for the investments which have completed minimum of one year while ‘XIRR’ continues to calculate for all the investments irrespective of how much time has been completed. There are some periods where ‘XIRR’ and ‘XIRR (>1 year)’ calculate to the same amount as for that time all my investments had completed minimum of 1 year.

  • Financial independence

    I have been reading quite a few articles about achieving financial independence at age of 30, 35, 40 and 45. But all of them sound unrealistic to a middle class person like me.

    M. Pattabiraman from freefincal asks the question ‘Are we seeking work-life balance in the name of early retirement?’ and hits nail right on the head. With our already stressful lives and lack of work-life balance, we are actually seeking an escape route. At least I am.

    Seeking early financial independence comes loaded with sacrifices. We will need to invest each month anywhere from 2-3 times our monthly expenses. This means less splurging on devices, holidays, entertainment etc. Is this sacrifice worth it when you are young? Particularly if you do not have a clear plan of what to do after FIRE. I am not suggesting one way or another here. Only pointing out that the importance of such questions.

    Can we address work-stress and poor work-life balance with a change in outlook instead of FIRE? Can we work on our time management to find some leisure time each week? Can we convert “aimless time pass” to learning new things? Can we learn to develop a sense of detachment from the office? Will doing this regularly reduce our frustration? There is a good chance it might.

    I am not trying to say aiming for early financial independence is wrong. Just pointing out that is the not solution for our work frustrations if we do not know what to after. Extreme steps are not always necessary in life. A judicious mix of regular investing (an amount = monthly expenses), leisure, health, fitness can help us lead fulfilling lives.

    Are we seeking work-life balance in the name of early retirement?

    He ends with a pragmatic suggestion to achieve financial independence which will work for 95% of the folks. Worthy of putting on a refrigerator magnet and reading it every single day.

    Maybe I am over the hill, but this route to financial independence is a lot more appealing: Put your head down and work; smartly invest as much as possible; do not let the work get to you; do not deprive yourself of reasonable wants; stay fit and balance work, family and personal needs. Maybe one day, when you look up and take stock, you will become financially independent.

    Are we seeking work-life balance in the name of early retirement?

  • Five years as shareholder of Asian Paints

    Five years as shareholder of Asian Paints

    Five years ago I started my investment journey in Asian Paints. And then I stopped after four months! For the next three years I did not invest in Asian Paints as I was trying to ‘diversify’. At least that’s what I think I was doing. Looking back at those three years and current share price of Asian Paints, it seems like a lost opportunity. And that too a big one. Along with HDFC Bank and Pidilite Industries, Asian Paints has high allocation in my portfolio and I invested heavily in it during COVID pandemic market crash.

    Return

    Profit

    XIRR

    Asian Paints has consistently maintained a positive XIRR, even during the COVID pandemic market crash. And because of market rally after that, my XIRR currently stands at more than 30%. Keeping my fingers crossed that this trend continues.

    NOTE: XIRR for initial months varies wildly and is not useful for any analysis. But once the investments complete minimum of 1 year, XIRR gives me a much better picture. So I calculate ‘XIRR (>1 year)’ which calculates XIRR only for the investments which have completed minimum of one year while ‘XIRR’ continues to calculate for all the investments irrespective of how much time has been completed. There are some periods where ‘XIRR’ and ‘XIRR (>1 year)’ calculate to the same amount as for that time all my investments had completed minimum of 1 year.

  • Thermocline of Truth

    This article was written in 2008. We are in 2021 now. And this article is still relevant.

    A thermocline is a distinct temperature barrier between a surface layer of warmer water and the colder, deeper water underneath. It can exist in both lakes and oceans. A thermocline can prevent dissolved oxygen from getting to the lower layer and vital nutrients from getting to the upper layer.

    In many large or even medium-sized IT projects, there exists a thermocline of truth, a line drawn across the organizational chart that represents a barrier to accurate information regarding the project’s progress. Those below this level tend to know how well the project is actually going; those above it tend to have a more optimistic (if unrealistic) view.

    Several major (and mutually reinforcing) factors tend to create this thermocline. First, the IT software development profession largely lacks — or fails to put into place — automated, objective and repeatable metrics that can measure progress and predict project completion with any reasonable degree of accuracy. Instead, we tend to rely on seat-of-the-pants (or, less politely, out-of-one’s-butt) estimations by IT engineers or managers that a given subsystem or application is “80% done”. This, in turn, leads to the old saw that the first 90% of a software project takes 90% of the time, and the last 10% of a software projects takes the other 90% of the time. I’ll discuss the metrics issue at greater length in another chapter; suffice it to say that the actual state of completion of a major system is often truly unknown until an effort is made to put it into a production environment.

    Second, IT engineers by nature tend to be optimists, as reflected in the common acronym SMOP: “simple matter of programming.” Even when an IT engineer doesn’t have a given subsystem completed, he tends to carry with him the notion that he whip everything into shape with a few extra late nights and weekends of effort, even though he may actually face weeks (or more) of work. (NOTE: my use of male pronouns is deliberate; it is almost always male IT engineers who have this unreasonable optimism. Female IT engineers in my experience are generally far more conservative and realistic, almost to a fault, which is why I prefer them. I just wish they weren’t so hard to find.)

    Third, managers (including IT managers) like to look good and usually don’t like to give bad news, because their continued promotion depends upon things going well under their management. So even when they have problems to report, they tend to understate the problem, figuring they can somehow shuffle the work among their direct reports so as to get things back on track.

    Fourth, upper management tends to reward good news and punish bad news, regardless of the actual truth content. Honesty in reporting problems or lack of progress is seldom rewarded; usually it is discouraged, subtly or at times quite bluntly. Often, said managers believe that true executive behavior comprises brow-beating and threatening lower managers in order to “motivate” them to solve whatever problems they might have.

    As the project delivery deadline draws near, the thermocline of truth starts moving up the levels of management because it is becoming harder and harder to deny or hide just where the project stands. Even with that, the thermocline may not reach the top level of management until weeks or even just days before the project is scheduled to ship or go into production. This leads to the classic pattern of having a major schedule slip — or even outright project failure — happen just before the ship/production date.

    The Wetware Crisis: the Thermocline of Truth