Sanjay Bakshi – LUCKY IDIOT

I am really grateful to Riddhi for helping me with editing work.

WB Letter 1964

Mr. Buffett had made an investment into the “Texas National Petroleum” where the announcement was made of sell out of oil and gas producing business to Union Oil of California.

WB 1964 01

This kind of situation has a protected downside and we can generate a decent annualized return. Buffett had made a decent annualized return on this workout.

WB 1964 02

We can make a decent return from such situations in India also. Here are some examples which are taken from Prof. Sanjay Bakshi’s note. (http://ppfas.com/media/articles/sanjay-bakshi/special-situations.pdf)

WB 1964 03

Mr. Buffett had sold off Dempster mill and he mentioned that “Our business is making excellent purchases — not making extraordinary sales.” This shows that Buffett has emphasized on the buying decision and if we think wisely then it’s only the buying decision that is in our control; so we should focus on buying a business at proper value hence reducing the additional efforts of selling.

WB Letter 1965

Mr. Buffett demonstrated an outstanding performance in Down Jones and other few investment management companies over a period of time.

WB 1965 01

WB 1965 02

Up to 1964, Mr. Buffett had categorized his investment operations into 3 categories (i.e. General, Workouts, and Controls) but from the year 1965, Mr.Buffett expanded his categories of investment operations into 4 (i.e. General -Private Owner Basis, Generals -Relatively Undervalued, Workouts and Controls).

Workouts and Controls remain unchanged from the previous series.

Warren Buffett’s Letters 1957 – 2012

On 17th January 2016, I got an opportunity to address one group of investors. I am so thankful to all my friends who provided me such an opportunity.

Investor Philosophy – Pat Dorsey

This presentation (Click here Pat Dorsey) based on what I learned from Pat Dorsey and about his philosophy.

Company A earns High profit / High Return on Capital that attracts many players to the same industry; which resulted in a higher level of competitions. Higher competitions affect to the margins of the company A and continuously increasing competition affects to the earnings of the company A. and if company A doesn’t have any Competitive Advantage then the business of company A can be in problem.

So the question is what is the competitive advantage?

Now, let me explain with a simple example that how USP helps.

Above all are benefits of having a strong USP of Rajinikanth. Now, compare these benefits to the business class.

So before understanding, what is the competitive advantage? I explain what can not be a competitive advantage?

If a company cannot able to raise the price of the products/services then we should understand that there is an absence of competitive advantage. (Eg.: – ITC Ltd. – Budget imposes the duty on cigarette but company easily able to pass those costs to the customers and that’s the reason for the survival of the company in adverse situations.)

We can easily able to recall brands. Meggie is becoming synonyms for noodles, Fevicol becomes synonyms for adhesive, and Colgate is becoming synonyms for toothpaste.

Also, the company which has the ability to change consumer behavior that Amazon has done (From traditional bookstore to online bookstore).

Patents & Licenses can be useful for protecting the interest of business (not considering strong moats because after the expiry of patents other companies also can able to register it and licenses can fall in the compliance risk).

Any psychological barrier or any cost associated with a switch from using current product/service to other product/service.

S10

As the addition of new users make the network more and more strong and replicating such model becomes very difficult.

S11

Low-cost producer compares to other players in the same industry.

S12

Wide and strong moat resulted in the long-term Return on Capital generation and if absent of moat not able to provide long-term Return on Capital to the business.

S13

S14

S15

Bad managers destroy business for own enjoyment and ambitions.

S16

Now, what to select and what to avoid is up to us. If we able to select good business with the good manager then wealth creation become more effective. That is like the good horse with the good jockey that can able to win a race.

For more details, Kindly check — Part 1 , Part 2

Inspired by — Pat Dorsey Moats

Disclaimer: This is not a recommendation to Buy-Sell-Hold. And I am not a SEBI registered analyst.

I am really grateful to – Mr. Neeraj Marathe Sir, Prof. Sanjay Bakshi Sir, and Mr. Vishal Khandelwal Sir.