Stock bites

08/12/2023

Google Gemini!!

07/12/2023

Q4 updates!

Dear investors,
We published our first research report at smart Equity , hope you got chance to go over it and benefit from it: https://smartequity.substack.com/p/smartequity-research-report-oct-2023
A note here that from now on, in Quarterly updates, we won’t discuss much about rock bottom DCF valuation and fundamentals of the business as that would be mostly covered in smartEquity research reports.
Q4 brought some amazing opportunities to invest. As mentioned in Q3 update, we sold off TGT at 35% profit because we needed funds to invest in better opportunities. Well since Target’s price point fell way below our valuation, we opened a small position in TGT again at price point of $106. We continued to add on our UPS position as it fell to $135 to lower our average cost basis to $145 which is way below our revised minimum valuation. Institutional investors also pounced on this wide moat business offering 4%+ dividend at such an attractive valuation that the price came back up to $156 at the time of writing. We also increased our 3M holdings as price fell to $85 to bring our average cost basis to $90 (trading at $102 at the time of writing). These were long term holdings which we will maintain to get a sustained growth in principal amount while earning 4-6% dividends in TGT,UPS and 3M.
One another great opportunity presented itself which is more of a growth play than 'sustained slow growth with high dividend'. We opened a new position in Broadcom (AVGO) at $798 as its price fell below our rock bottom valuation of $800 (valuation assuming VMware acquisition successfully happens). We have been analyzing Broadcom since a long time now and being #1 in wireless components space with over 20% market share in WiFi and Bluetooth chips , #1 in Opto-electronics and #1 in Networking components, we couldn’t resist it’s tempting valuation at $798. Obviously the valuation is based on assumptions like Apple continue to use Broadcom’s FBAR filters in its iphones, Cisco modems continue to use Broadcom’s components, etc. , with value drivers being software and networking solutions needed for AI and ML workloads and possibly increased demand of hardware components in Automotive and Datacenter business due to AI.
There have been slight changes in our operating strategy:
1) We decided to sell all our S&P500 bucket holdings (VOO) for the first time in the last five years. The reason was two folds, our cumulative five-year record showed that we beat S&P500 returns by a significant margin and secondly, we wanted to invest some of it in AVGO and park rest of it in one-month Tbills to be used later for future opportunities.
2) As our dividend income from our portfolio has become significantly big, we decided not to reinvest it immediately in the stocks we hold for the time being. Here we are disturbing the compounding for a while because of the attractive Tbill interest rates and because of a myriad of opportunities that came recently which required more capital.
I hope these quarterly updates are able to help you out in asset allocation and the real time research report that was published in smartEquity was able to help you grab UPS at $135, TGT at $105 and MMM at $86! Until next time, happy investing!
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Disclaimer: We are not licensed investment advisors. The information on this page is for educational purposes only and should not be construed as investment advice. We are not recommending any particular investment, and we do not guarantee any investment returns. You should do your own research before making any investment decisions. This includes considering your own financial situation and risk tolerance. You should also consult with a licensed investment advisor before making any investment decisions. We are not liable for any losses that you may incur as a result of following my investment advice. You are solely responsible for your own investment decisions. By accessing this page, you agree to these terms and conditions.
I/we have a long position in the shares mentioned in the published rankings and research reports either through stock ownership, options, or other derivatives. I/we write the articles and it expresses my/our own opinions. I/we am/are not receiving any compensation for it . I/we have no business relationship with any company whose stock is mentioned in this article.

Dear Investors, Before we begin our first research report with rankings, we would like to introduce the following terms that will be used throughout the report: Rockbottom DCF analysis: Based on a very conservative projection of future cash flows and taking into account some probability of failure,....

23/10/2023

Excited to launch https://smartequity.substack.com/ . Stay tuned and plz subscribe , the website will have a lot of interesting stuff!

We publish research reports on our top stock picks, with Quick wealth multiplier (QWM) rankings and High dividend earner (HDE) rankings for a smart portfolio. Click to read Smart Equity Research, a Substack publication. Launched 3 days ago.

08/09/2023

Q3 update!
Hello fellow investors. With unemployment rising and the numbers coming at 18-month high mark of 3.8%, we are expecting fed to release the gas pedal a bit on the interest rates. Rising unemployment rate is a sad news but it simply suggests cooling of inflation. We saw in June 2022, inflation shot up to over 9% because of Russian invasion led rising fuel prices, tight supply chains and lifting of covid lockdown causing people to splurge their accumulated wealth. This year the number came down to under 4% because of cheaper oil prices, air fares and rising unemployment rate indicating further slowing down of the economy. With more people being unemployed and lower job vacancies, we will see reduced purchasing power and lower wages and fed is less likely to increase interest rates at the pace at which they were doing this year and last year.
Meanwhile we continue to invest in the various types of opportunities that are showing up. For the first time in the last five years, we have more ideas than the capital to invest. Because of that we decided to sell all of NVDA (bought at less than $125 and sold at $320) netting over 200% and TGT position which we held for over three years, netting over 35% profit, and allocated that capital to a wide moat and higher profitable business UPS at $161-$164 entry window. With UPS recent earnings call and gloomy guidance by the management of -5% revenue decline this year, we updated our DCF analysis and arrived at $163 rock-bottom intrinsic value of UPS (Assuming -5% growth next year, 3.5% growth year 2-5 and converging to 2.1% by year 10. Operating margin year 1-5 is 12.5% converging to 13% by year 10). Due to array of bad news, be it losing some business to competitors because of fears of labor strike in UPS, be it PFAS and earplug related lawsuits of MMM, we are seeing how these isolated events can cause market to oversell great businesses like UPS, MMM, etc., thereby creating value investment opportunities. We opened a new position in MMM at $95-$104 range as our rock-bottom DCF analysis came out to be $95 (assuming just 0.64% growth in EPS every year for next 10 years)! We were monitoring and analyzing MMM since last year and because of the high valuation and greater risk in the innovation industry b’cos of potential lawsuits we discouraged investors to buy it in 120-150 range. Now when it has come down below $100 mark it’s very hard to skip this opportunity now that PFAS and veterans’ earplug lawsuits are gaining some clarity/settlement.
As far as old holdings are concerned, we continue to reinvest dividends in LNC, Citi and other businesses that we own thereby continually increasing our ownership in them for free and getting over 5% dividend! Our LNC stake is ~30% up in just six months and is offering 8% dividend. We continue to own high growth businesses like Google, Microsoft, Apple and Amazon at such a good price that they are all 80-120% up from our entry point. There are few other high growth businesses which we are eyeing and thoroughly analyzing, and once the right moment comes, we will grab those opportunities and will keep you updated!
Until next time, happy investing 😊

Disclaimer: We are not licensed investment advisors. The information on this page is for educational purposes only and should not be construed as investment advice. We are not recommending any particular investment, and we do not guarantee any investment returns. You should do your own research before making any investment decisions. This includes considering your own financial situation and risk tolerance. You should also consult with a licensed investment advisor before making any investment decisions. We are not liable for any losses that you may incur as a result of following my investment advice. You are solely responsible for your own investment decisions. By accessing this page, you agree to these terms and conditions.

I/we have a long position in the shares mentioned in the published rankings and research reports either through stock ownership, options, or other derivatives. I/we write the articles and it expresses my/our own opinions. I/we am/are not receiving any compensation for it . I/we have no business relationship with any company whose stock is mentioned in this article.

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11/07/2023

Q2 update.
We opened a significant position in UPS this Q2 at $169-$175 range. We also invested in ATVI at $78 for a potential arbitrage deal considering Microsoft will acquire ATVI, and luckily the deal went through netting us a 20% profit in a short period! We continue to park our leftover funds in 4week Tbills and continue to get over 5.3% yield which would be exempt from any State taxes.
Till next time, happy investing!

Disclaimer: We are not licensed investment advisors. The information on this page is for educational purposes only and should not be construed as investment advice. We are not recommending any particular investment, and we do not guarantee any investment returns. You should do your own research before making any investment decisions. This includes considering your own financial situation and risk tolerance. You should also consult with a licensed investment advisor before making any investment decisions. We are not liable for any losses that you may incur as a result of following my investment advice. You are solely responsible for your own investment decisions. By accessing this page, you agree to these terms and conditions.

I/we have a long position in the shares mentioned in the published rankings and research reports either through stock ownership, options, or other derivatives. I/we write the articles and it expresses my/our own opinions. I/we am/are not receiving any compensation for it . I/we have no business relationship with any company whose stock is mentioned in this article.

14/06/2023

Time for thanksgiving!
I am grateful for the trust that someone placed in me by letting me manage their hard-earned money. I was able to almost double their account in the last three years (22.31% annual returns) with a consistent 4% dividend yield in their portfolio, compared to the 1.58% dividend yield earned in S&P 500 ETFs. The portfolio also beat S&P 500 returns, although by a small margin. However, it is important to note that 95% of top analysts are unable to beat S&P 500 returns. I would like to thank the person for trusting me with their money and for using "The Buffett way" to manage their portfolio. The greatest part about these portfolios is that they have grown in principal amount a lot and will continue to grow in an exponential way thanks to dividends being reinvested.

As for those who are wondering why I don't start a holding company like Berkshire Hathaway, I can say that it is something that I am considering for the future. As we grow bigger, we will be able to afford the legal and other fees associated with starting a holding company. In the meantime, we continue to help family and friends by managing their portfolios at no cost, spreading knowledge about various businesses' valuations and helping them achieve their financial goals.

As Warren Buffett once said, "The more you learn about business, the less you worry about the stock market."

05/06/2023

Apple vision Pro AR headset! We think our holdings in Apple can get a significant boost in the long run.

12/05/2023

Q2 2023 update and bank fiasco!
Equity investments and sales- In the last two quarters our portfolio grew significantly, thanks to the value investments we did in the recent opportunities that market presented and thanks to the dividends reinvesting themselves to own even bigger part of those businesses at no cost!
As mentioned in the February’23 article, we increased our investments in Google significantly and expanded our buy zone to $69-$92 window. This happened as the DCF analysis and 10k review of Alphabet gave a minimum valuation of $85 for the business. We also talked about opening a position in LNC , a veteran in insurance and annuities business. In the last quarter we added onto our LNC portfolio almost five times the initial investment so far ( check comments section of Feb’23 post), which also includes the hefty (8%) reinvested dividend paid quarterly by LNC. We will continue adding onto the position if the price further drops because in the last 10Q report of LNC, total stockholder’s equity ( including unrealized losses in bond portfolio) already improved from $4.1B to $6.7B ( 64% increase), giving the tangible book value of $36!
We increased our stake in Citigroup as well which is supported further by its 5% dividends reinvested back. We sold our position in PARA at $19 price (netting 20% profit) considering a series of weak earnings and company trying to increase its goodwill in the balance sheet and trying to sell its fixed assets to maintain some positive earnings.
Cash parked in TBills- In the last week or so, we have increased the amount of our investments in 3 week treasury bills which were yielding 5.6%! The interest payment on these will only be subject to federal tax and not state tax which makes the deal even more sweeter as compared to high yield CDs out there. This is where we have decided to park our cash and will continue to do so until a great opportunity comes in stock market or fed reduces the rates whichever comes early.
Bank runs- As we all witnessed Silicon Valley bank, First republic bank and others experiencing major deposit outflows, we were surprised with SIVB’s balance sheet where it showed out of $110Billion portfolio, a whopping $90billion was invested in MBS when interest rates were at super low level pre pandemic (that is 81% of their portfolio invested in derivates to get some extra yield than average yields) . The bank was simply not prepared for rising interest rate scenario and with average customer deposit exceeding way more than the insured limit , the bank run was like self-fulfilled prophecy. FRC bank run followed thereafter and was foreseen by us once we saw that the balance sheet is reflecting lack of liquidity at all ends with losses hidden under the “Held to maturity” assets. Most of these banks did a grave mistake of taking in unsecured deposits in large numbers and investing mostly all of them in bonds when interest rates were the lowest. These fixed value investments are considered decent investment when interest rates are super high (because the bonds are selling at huge discount) and not when the rates are down.
Parting statement- As we move ahead in these tough economic times , we will continue to get impressive returns in our portfolio for our investors, be it 8% dividend in LNC with average entry point of $24 or be it 5% dividends of Citigroup with entry point of $42 or be it netting 105% profits in Meta investment and 20% profit in PARA investment in a short timeframe , or be it getting 5.6% yield for our cash parked in short term Tbills, we will continue to grab the amazing opportunities that come our way! Till next time, happy investing 😊

Disclaimer: We are not licensed investment advisors. The information on this page is for educational purposes only and should not be construed as investment advice. We are not recommending any particular investment, and we do not guarantee any investment returns. You should do your own research before making any investment decisions. This includes considering your own financial situation and risk tolerance. You should also consult with a licensed investment advisor before making any investment decisions. We are not liable for any losses that you may incur as a result of following my investment advice. You are solely responsible for your own investment decisions. By accessing this page, you agree to these terms and conditions.

I/we have a long position in the shares mentioned in the published rankings and research reports either through stock ownership, options, or other derivatives. I/we write the articles and it expresses my/our own opinions. I/we am/are not receiving any compensation for it . I/we have no business relationship with any company whose stock is mentioned in this article.

25/02/2023

Snowball Your Wealth: Embracing the Winter Investment Opportunity

Hi fellow investors. I hope the weather outside doesn't freeze you from buying attractive equities in amazing businesses! After our recent exit from Meta investment ( check comment section of Meta investment article we published on Nov 15,2022) where our average entry point was $95 and exit at $190 , we have put the capital to even better use for long term investment goal!

With the recent inflation data coming in hot showing that it will take some time for inflation to slow down, the market keeps on producing great opportunities. But at "The Buffet Way" we try to thoroughly analyze all the opportunities out there and invest with the sole principle in mind " Is the principal amount safe with our investment and whether it has potential to grow in future? And if the business pays some consistent dividend , it's even better.".

Well recently, two such opportunities stood out in front of us : one is LNC ( Lincoln National Corp) and other is GOOGL (Alphabet Inc). First of all, we have already opened a significant position in Google three years back at price range of $69-$85 as the evaluation that time suggested a rockbottom DCF analysis of $78 per stock ( meaning with conservative growth numbers and operating margins the stock is at least worth $78) . With recent financial data and updated rock bottom DCF analysis, its worth $85 valuation. So we have started adding onto our previous position and bought more equity in $88-$92 range recently.

Regarding our second investment , we opened a new position in LNC at price range of $30-31 as it is a great business which is operating in Life insurance, annuities, group insurance space for about 115 years and whose recent investment portfolio decreased from $144Billion to $130Billion and that led to a write down of Stockholder's Equity by a whopping $14Billion which led to market overselling LNC. You might ask as to why that $14Billion unrealized loss is reflecting in the Stockholders equity statement of the company? Well the answer is in the new GAAP reporting rules that need the businesses to include the unrealized losses in the income statement which is preposterous to say the very least and even Warren Buffett has criticized the new law very openly in 2017. The reason being that with fixed maturity bonds portfolio , no insurance company wants to sell their holdings prematurely and with increased interest rates, the bonds price are bound to go down for a time being. Reporting that "unrealized" loss just understates the true earnings and hence true Stockholder's Equity . With market cap of just $5.43Billion, understating the Stockholders Equity by $14B and market reacting so harshly, it presents us a great opportunity to buy LNC dip whose DCF valuation showed $40 per stock. Even their 5% dividend payment is safe considering they are earning $5 billion as dividend income from their investments ($131 billion portfolio) and to shareholders only $310 million is getting distributed that is just 6% of their dividend earnings.

Overall, the winter investment opportunity we've discussed has great potential for growing your wealth. By doing your own research and taking calculated risks, you can take advantage of this opportunity to reach your financial goals. Until next time, Happy investing :)

Disclaimer: We are not licensed investment advisors. The information on this page is for educational purposes only and should not be construed as investment advice. We are not recommending any particular investment, and we do not guarantee any investment returns. You should do your own research before making any investment decisions. This includes considering your own financial situation and risk tolerance. You should also consult with a licensed investment advisor before making any investment decisions. We are not liable for any losses that you may incur as a result of following my investment advice. You are solely responsible for your own investment decisions. By accessing this page, you agree to these terms and conditions.

I/we have a long position in the shares mentioned in the published rankings and research reports either through stock ownership, options, or other derivatives. I/we write the articles and it expresses my/our own opinions. I/we am/are not receiving any compensation for it . I/we have no business relationship with any company whose stock is mentioned in this article.

16/12/2022

Christmas has come early! Live update.
Hi fellow investors. This is a quick live update of what we are investing in right now! With so many opportunities market has presented with us lately, we thoroughly analyzed them and picked the best ones and decided to finally open new positions in following businesses: INTC at $26.5 and PARA at $17.24. Our rock bottom DCF analysis ( the minimum the business is worth) showed Intel at $25 ( even with an assumption of -1% annual growth for next 5 years!) and Paramount at $16 ( assuming earnings will grow annually at 3.5% for next 5 years) , so our entry point looks decent. As the price dips more we will obviously keep adding to the positions. Till next time, happy investing!

Disclaimer: We are not licensed investment advisors. The information on this page is for educational purposes only and should not be construed as investment advice. We are not recommending any particular investment, and we do not guarantee any investment returns. You should do your own research before making any investment decisions. This includes considering your own financial situation and risk tolerance. You should also consult with a licensed investment advisor before making any investment decisions. We are not liable for any losses that you may incur as a result of following my investment advice. You are solely responsible for your own investment decisions. By accessing this page, you agree to these terms and conditions.

I/we have a long position in the shares mentioned in the published rankings and research reports either through stock ownership, options, or other derivatives. I/we write the articles and it expresses my/our own opinions. I/we am/are not receiving any compensation for it . I/we have no business relationship with any company whose stock is mentioned in this article.

27/11/2022

Work doesn’t stop😀 Reviewing 10K of Paramount global at Silverado Resort Napa Valley, Ca

16/11/2022

Q4 update and META DCF valuation!
Hi fellow investors. It's been a decent quarter and we have added more positions of Citigroup in the $40-$42 price range. We also started finally investing in META in the last quarter and opened small position in the price range of $92-$102. I have posted a youtube video (https://www.youtube.com/watch?v=R-_RZ_J66Mc) where I have briefly reviewed 10-K of META , drawn out a DCF analysis of the free cash flow to the company and came up with a valuation of 92$ per META stock assuming further reduction in revenue followed by 3% annual increase in revenue from year 2-5 and then converging to a risk free rate of 2.5%. At the time of analysis META was trading at 96$. I hope you like the video and please don't forget to subscribe to my YT channel (https://www.youtube.com/)! Attaching here some screenshots from META's dcf analysis.
Until next time, happy investing!

Disclaimer: We are not licensed investment advisors. The information on this page is for educational purposes only and should not be construed as investment advice. We are not recommending any particular investment, and we do not guarantee any investment returns. You should do your own research before making any investment decisions. This includes considering your own financial situation and risk tolerance. You should also consult with a licensed investment advisor before making any investment decisions. We are not liable for any losses that you may incur as a result of following my investment advice. You are solely responsible for your own investment decisions. By accessing this page, you agree to these terms and conditions.

I/we have a long position in the shares mentioned in the published rankings and research reports either through stock ownership, options, or other derivatives. I/we write the articles and it expresses my/our own opinions. I/we am/are not receiving any compensation for it . I/we have no business relationship with any company whose stock is mentioned in this article.

30/10/2022

WHEN TO SELL STOCKS!

Recently there is this repeated question that has been asked to me by my friends regarding when to sell the securities or there has been some discussions regarding some remorse after selling some stocks. So I thought to write a short article sharing what's our strategy and principles behind selling a stock that we hold.
To begin with I would like to state that our favourite holding period of any stock is "forever"!
We would never want to part away with our partnership in the great business if we have bought it a fair or discounted price, unless obviously when investment mistake has been made by insufficient analysis or projection. Other than that these are the only times we decide to sell the stocks :
1) When economic characteristics of business change* in a big way or we get really discouraged with the management.
2) When something obviously better shows up where we sell too overpriced businesses for fairly priced terrific businesses buying opportunity.
3) When we need money to buy more businesses which we understand and which are underpriced.
4) When single holding becomes too big ( exceed 40% of our portfolio).
*for example world has changed in terms of demand of the product or change in preference and business is no more competitive.

The above principles have served us well in the past and we hope that it serves you as well! Until next time, Happy investing!

Disclaimer: We are not licensed investment advisors. The information on this page is for educational purposes only and should not be construed as investment advice. We are not recommending any particular investment, and we do not guarantee any investment returns. You should do your own research before making any investment decisions. This includes considering your own financial situation and risk tolerance. You should also consult with a licensed investment advisor before making any investment decisions. We are not liable for any losses that you may incur as a result of following my investment advice. You are solely responsible for your own investment decisions. By accessing this page, you agree to these terms and conditions.

I/we have a long position in the shares mentioned in the published rankings and research reports either through stock ownership, options, or other derivatives. I/we write the articles and it expresses my/our own opinions. I/we am/are not receiving any compensation for it . I/we have no business relationship with any company whose stock is mentioned in this article.

25/08/2022

STOCKS vs BONDS
Why common stocks are better than bonds in long term investment? As father of value investing Ben Graham puts it, if we consider a benchmark of common stocks (S&P500) , its very common for the top companies to grow their earnings at a rate 3% or more every year. Average dividend of a large bucket of such companies would give 1.5% dividend return. Inflationary growth in such companies would be 2.5% YoY. So a shareholder would at the very least get 3% ( earnings growth ) + 1.5% ( dividends) + 2.5% ( inflationary growth) = 7% returns in his common stock portfolio annually. Now if there is any bond which can give such reliable returns over the long run , then bonds would be more interesting a investment than stocks. Unfortunately there is none.
Even if interest rates that you can earn on bonds, increases, the bond prices start falling down as the low interest rate bonds' demand reduces , so the investor has to sell his bonds at lower prices . Also long term bonds have higher interest rates attached to it, however the longer the duration of the bond, the larger the potential price fluctuation and bond investment gets more risky. As Ben Graham puts it : "That is why bond investor has been confronted by an increasingly serious dilemma: shall he choose complete stability of principle value, but with varying and usually low ( short term) interest rate? Or shall he choose a fixed interest income, with considerable variations ( usually downward) in his principle value?" Now one instance which can make the bond returns impressive is if its selling at a great discount ( to par value). By simple math the returns will seem greater, however such bonds are selling at discount because their coupon rate is lower than current yields as we mentioned earlier. So the interest rates on those are very low .
Its worth noting that opposite of the above argument for stocks will also hold true i.e. if a stock is selling at a very high multiple of its book value , then also simple math will suggest that investor's returns will get dwarfed. So overpaying for a business is also a bad investment philosophy. A simple example , a company with book value of 100$ makes 10% in earnings, out of which (say) 50% (5$) is paid out to shareholders and rest is retained earnings, thereby causing the book value to increase to 105$. Now if the investor bought a piece of that business when market price was 100$ then he also made 10% returns ( 5$ in dividend and additional 5$ when retained earnings is reflected in price increase of the stock to 105$). But if investor bought the stock when market price is 150$ (1.5x book value), then he will still get 5$ dividend + 7.5$ ( 5% of 150$) price appreciation returns = 12.5$ returns which is just 8.33% returns.
Summary: If you don't overpay for a business than the long term investment becomes less risky than even the long term govt bonds, with better returns.