The Hindu Business Line : Sunshine, moonlight

Sun and moon. These were the two categories that Dhirubhai Ambani is said to have used for classifying people. “The moon does not shine on its own, but reflects the light from the sun,” explains N. Chokkan in ‘Dhirubhai Ambani: A business legend’, translated from Tamil by R. Krishnan ( www.nhm.in ). The ‘moon boys,’ according to the elder Ambani were ‘the heirs of industrialists who were leading a cushy life.’ They could not afford to be so forever, he’d argue. “Sooner than later they would have to learn the ropes of business.”

Which is what Mukesh and Anil had to, when their father transferred major management responsibilities to them before they were even 30 years old. “While Mukesh took up the responsibility of supervising existing projects and implementing new projects of the company, Anil took charge of public relations, mobilising resources, marketing and advertising,” recounts Chokkan. “Backed by Dhirubhai’s advice, they devoted their time to the business. Much to the chagrin of Ambani’s adversaries, Reliance marched ahead with vigour…”

A chronicle of interest.

Power your research

Equity research is fundamental to the investment process as it helps in identifying attractive businesses, says ‘Equity Research and Valuation’ from Dun & Bradstreet ( www.tatamcgrawhill.com ). For starters, ‘equity research’ entails analysis of both quantitative and qualitative information. “Quantitative information including financial aspects start with financial statements such as profit and loss statements, balance sheet, cash flow statements, schedules to accounts, etc. Qualitative information involves gaining an insight on business and industry dynamics.”

One of the major challenges to equity research is the availability of information. Managements may not be eager and forthright in sharing information with the investing community. Don’t be surprised, therefore, when faced with great opacity!

The book has informative chapters on economic analysis, industry study, company research, and DCF (discounted cash flow) valuation models.

Beginners’ guide.
Spot tomorrow’s wins

How to find and invest in the stars of tomorrow – ‘the fastest-growing, most innovative companies in the world’? Michael Moe, the founder and CEO of ThinkEquity Partners offers the answer in ‘Finding the Next Starbucks’ ( www.landmarkonthenet.com ). “In sports, gambling, investing, and life, there is little value in knowing what happened yesterday,” says Moe. He quotes Warren Buffett, thus: “If history books were the key to riches, the Forbes 400 would consist of librarians.”

Tomorrow’s winners may not be evident in Wall Street research, observes Moe. “Mainly, Wall Street is focused on reporting on companies everybody already knows about.” Nearly 85 per cent of bulge bracket research is on companies above the $1 billion market cap, though 73 per cent of Nasdaq companies have market caps below $1 billion.

So, start looking at the under followed companies on four dimensions that Moe prescribes, viz people, product, potential, and predictability. “The four Ps are key ingredients for the secret sauce of investing in the stars of tomorrow.”
Essential read.
Boring not to stretch

Stretching never stops, says John C. Maxwell in ‘Be All You Can Be’ ( www.jaicobooks.com). “Most people stretch a little and rest a lot,” he rues. “Pretty soon they have a vacation mentality, a retirement mind-set.”

When you stop stretching, you become boring, says Maxwell. But why do people stop stretching? Because they have “surrounded themselves with people who are both bored and boring. Stay around people who are vitally alive if you want your own blood to continue to flow.”

Another reason for the stoppage of stretching is non-challenging work. “For many people, work is nothing more than an assembly line, and so it becomes automatic. That’s why we always need new goals, new visions, or new dreams.”

Taking shortcuts can also put an end to stretching. “Shortcuts not only require less effort, but they’re less effective,” the author cautions.
But why stretch? Like rubber bands, our personalities, talents, and gifts are not effective unless we’re stretched, argues Maxwell. “Success is due to our stretching to the challenges of life. Failure comes when we shrink from them.”
Inspiring messages.

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