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Vivek Just Introduced Me to His Global Network of Like-Minded Thinkers

Jun 6, 2016

In this issue:
» Here is some good news on dividends front
» Make big gains in Small cap space
» Market roundup
00:00
Ankit Shah, Research analyst

Since we celebrated our 20th Anniversary on 22 April 2016, our entire office has been bustling with activity. And the atmosphere is still festive. The reason has been Equitymaster's Secrets - our very first in-house published book.

I see delivery vans at the entrance of our office building each day...and men offloading sacks full of hard-bound copies of Equitymaster's Secrets in our office. If you visited our office, you would see stacks of books piled around the break area. Many of my colleagues have been working relentlessly to pack and dispatch copies of the book to many of you.

We have already dispatched more than 7,000 copies of Equitymaster's Secrets across the length and breadth of India.

It is a proud moment for all of us. And a very special one for me. Because I had the privilege of compiling Equitymaster's best investing lessons and strategies into this 220-page book.

But my main purpose in writing today is to tell you something that I am really excited about...about an important meeting with Rahul and Tanushree I had some months ago.

Some excerpts from the meeting...

  • Tanushree: Ankit, we are happy with the way you have been able to deliver our stock picking approach to lay investors in a simple and practical manner. Well done! But we have even greater expectations from you now. What's the next big idea you have for your readers?

    Me: Well, to be honest, I don't have a concrete idea yet. But there's something that I have been thinking about. And it worries me.

    I am not an expert on what's happening in the world economy. But I do understand basic economics... I understand a bit about human behaviour. What I see happening in the world of man and money is startling...to say the least. As I see it, the global financial system is inexorably compromised, corrupted, and full of lies. The ordinary individual is being played by an unholy nexus of big governments, central bankers, and big corporations. What's even more startling is that the mainstream media simply do not want to talk about it.

    If history does repeat itself, then I see every sign that says that we are approaching the tipping point of a worldwide political-economic crisis. I don't mean to say the world is about to end. But we are up for a massive shake-up.

    And I want to be prepared. So if I get the opportunity, I would like to build the proverbial Noah's Ark for anyone who wants to be on the right side of history...and protect his wealth, savings, and lifestyle from these lurking financial catastrophes.

    Rahul: (Grinning) That was a nice, little speech, Ankit...

    But on a serious note, I completely agree with what you say. Vivek Kaul is already working on a project that will decode the Indian economy for the lay reader. But we don't want to stop at just the Indian macroeconomic context.

    We want to build something much bigger, and global. We want to give our readers a credible, independent, global perspective on what's happening in the world of money. We want to build a worldwide economic forum that's neither afraid, nor beholden to governments and corporations.

    It's a big challenge, but if this idea excites you, then go for it. We will connect you with Vivek and his global network of like-minded thinkers...and we will be happy to give you full charge of this project.

I was thrilled. This is exactly what I wanted to do.

It's been some months since I had this discussion with Rahul and Tanushree. I'm writing about it now because things are moving at a rapid pace. And I'm really excited.

I've had several rounds of calls with Vivek. He has introduced me to an elite global think-tank of independent thinkers, economists, and analysts.

The global network includes the likes of billionaire Bill Bonner from the US. There's Charlie Morris, Den Denning, Merryn Somerset Webb, Tim Price from London...Vern Gowdie from Melbourne...

Imagine having independent experts from practically every major financial capital in the world...and getting to know their perspective of what's happening in the world of man and money.

Since a month, Vivek has been sharing some of their insights in the Vivek Kaul's Diary. If you haven't read them yet, check these out right away...

Globalization is Under Attack by Den Denning

'That Which is Seen, and That Which is Not Seen' by Tim Price

Can a Central Bank Buy the Entire Stock Market? The BoJ is Trying... by Merryn Somerset Webb

There's more to come. Do watch this space.

2:31 Chart of the day

Here is good news for retail investors. Dividend policy, a key parameter that draws retail investors to stocks, is likely to get more transparent. The market regulator SEBI - Securities and Exchange Board of India has made framing and disclosure of dividend policy mandatory for top 500 companies (by market value). As an article in Business Standard suggests, this will not just offer transparency, but let investors assess management on commitment versus execution yardstick.

Once companies make these disclosures, investors are likely to pour over such details before investing in stocks. Or in some cases use just these details to invest in stocks. So here are some points you should keep in mind before you make use of that information.

As you can see in today's Chart of the Day, the biggest beneficiaries of the key top dividend paying companies have not been retail investors, but promoters with a lion's share of stake. Not to mention that some of these companies have lost enough market value in the last one year to set off any gains made through dividends.

While dividends can be tempting, we have always cautioned investors to not base their investment decisions on dividend announcements, but focus more on consistency, without any compromise on company fundamentals. Further, it might not be prudent to ignore non or low dividend paying companies. The latter could be the ones on a growth path and capable of compounding wealth at a better rate.

So do not use the disclosures to invest arbitrarily in dividend stocks. Instead, focus on the most solid, consistent, and fastest-growing dividend companies.

My colleague Tanushree Banerjee has recently come up with a special report - How to Pocket 10-30% Returns Without Selling Your Stock. The report offers insight into how to find such dividend multibaggers and the price that one should pay for them. Click here to join in and benefit from great dividend stocks right away...

Promoters Get the Major Chunk of the Dividend Pie


3:44

Small is beautiful - the cliche is now becoming the investing mantra for equity analysts. In fact, emerging market guru Mark Mobius is now betting on small cap companies in India and expects them to be the place to make big profits. And we totally agree.

It's not the doubling of market cap of some small cap companies last year versus the Sensex decline of 4% that gives us this confidence. We have our own experience over years in making big returns in this space. Hidden Treasure - the small cap stock recommendation service - since existence has beaten Sensex by over three times. Some of our biggest returns to the tune of 4,000% have come from gems like Page Industries that we picked years ago from this space.

While the opportunity is huge, so are the risks. A lot of companies that formed part of BSE Small Cap index few years ago have vanished. Small cap companies, unlike their large cap peers, are more volatile and non-resilient to adverse market and economic cycles. Unless you have a well-defined process in place to assess the fundamentals, risks and management quality, riding the small cap space could be bumpy and painful.

Do you think these are good times to invest in small cap stocks? What is the best way to invest in small cap stocks? Let us know your comments or share your views in the Equitymaster Club.

4:45

After opening the day on a positive note, the Indian indices registered losses and went on to trade near the dotted line in the post-noon trading session. Sectoral indices are trading on a mixed note with stocks from the consumer durables and telecom sectors bearing the maximum brunt.

The BSE Sensex is trading lower by 22 points (0.1%) and the NSE Nifty is trading lower by 6 points (0.1%). The BSE Mid Cap index is trading up by 0.1%, while the BSE Small Cap index is up by 0.3%.

4:56 Today's investing mantra

"Risk comes from not knowing what you are doing." Warren Buffett

This edition of The 5 Minute WrapUp is authored by Ankit Shah (Research Analyst).

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DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

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DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report
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Definitions of Terms Used:
  1. Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
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