What's wrong with various stock investment forums?

There are lots of stock investment forums on internet and their owners work very hard in operating and maintaining them. Most of them are investment professionals and have long stints in stock markets. Some of them have even turned activists, often taking business managements to their tasks. But something is missing with these stock investment forums.

What's "value" for value investor?

A "Value Investor" in its conservative sense relies only on numbers in absolute terms. For him the underlying value has utmost importance. Now, this underlying value might derive from unlocked assets, cash or maybe future growth. For a value investor, everything needs to be optimum: the buying price, growth and future cash flows. He come to a value based upon these suppositions. From the outside, you might feel that a value investor is only relying on the present value in the business. But this isn't so. His present value takes into consideration the future cash flows. The "Discounted Cash Flow" model is based upon this supposition of which a value investor is a die-hard fan. But here is the pitfall too.

What is Margin of Safety?

Yesterday, I read Seth Klarman's book "Margin of Safety". I approached that book to answer some of my questions. But, rather, it increased my doubts on numerous accounts. Seth Klarman tries to dig deep into the concept of "Value Investing" and then through Margin of Safety, tries to discuss on value investment approaches. Primarily, it was all about "Discounted Cash Flow " model. The only shortcoming which I felt was that Seth Klarman didn't talk anything about business models. He didn't say anything about "Why a certain business model must be favoured?". Though he talked about the importance of cash flows, but he ignored discussing about the choice of businesses.

How long to stay invested in a stock?

Yesterday night, I was speaking with a very respected friend, elder and we discussed about investments & businesses. We started talking about strategy and then he revealed that he was invested in two stocks. I definitely endorsed his strategy, since I, myself am invested in a single business and am enjoying the benefits of that greatly. We started talking about his picks and then I realized that both of his stocks were pretty richly valued in terms of PE. I, then suggested, him to move to a stock which was equally good & of high quality but quoting at undervalued prices. Later, I realized that this was worth writing an article.

What is an ideal business?

What's a business meant to be? Surely, its not for emotional gratification. Its meant to earn you money more than what you invested in raising the business over a period. You expect returns. 

You can't alone run a business. You need co-operative efforts of employees for which they get paid. So, employees are a great asset for the business, but not at the cost of returns from the business. So, definitely, business isn't welfare. Any incompetency & any expensive labour needs to be sorted out.

Business is also run by machines and machines need buildings and buildings are erected upon lands. These all comprise "fixed assets". Their expense come up firsthand while initiating an enterprise. The amount paid for the "fixed assets" must be conducive enough for the profitability of the business. Lets us take the example of land. If the land cost is so prohibitive, then it can affect the expansion of the business which relies upon setting up manufacturing units for itself. Second is the case of machines/technology.

Example for Cash Conversion Cycle

We'll be again using Hawkins Cookers Annual Report for the understanding of Cash Conversion Cycle practically, the link for which is provided below.
http://equitysection.proboards.com/index....hread=5&post=9

As we know Cash Conversion Cycle has three components - Days Inventory Outstanding, Days Sales Outstanding and Days Payable Outstanding.

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EQUITY SECTION An Indian Stock Investment Forum - News Reel

Update on Educomp Solutions Income Tax raid.

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Cash Conversion Cycle

One important tool to help us better understand the dynamics of Working Capital is Cash Conversion Cycle (CCC).

Cash Conversion Cycle (CCC) tells us about the time duration in which -

1. the inventory is consumed & processed into finished products and sold to customers,

2. the sales proceeds from the products is brought in from the customers or Sundry Debtors, and

3. the money is paid to the suppliers or Current Liabilities are paid.

Overall, Cash Conversion Cycle tells us how quickly money generated by the business or Net Profits is brought into the company after paying all its dues and liabilities. The shorter the cycle, the better it is. It also indicates as to how efficiently the working capital is being managed, meaning, whether the company is able to get longer credit periods from its suppliers and is able to quickly draw in money from its customers.

Cash Conversion Cycle has three components - Days Inventory Outstanding, Days Sales Outstanding and Days Payable Outstanding.

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Understanding Working Capital

Net Current Assets and Working Capital are one and the same thing. We know that Working Capital is the difference of Current Assets and Current Liabilities. Current Assets include Inventories, Sundry Debtors, Cash & Bank Balances and Loans & Advances. Current Liabilities include Liabilities and Provisions.

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EQUITY SECTION An Indian Stock Investment Forum - Balance Sheet, Profit & Loss, Cash Flow Statement

EQUITY SECTION An Indian Stock Investment Forum - Balance Sheet, Profit & Loss, Cash Flow Statement