Gurus Speak – The road ahead

With the markets delivering a fantastic performance over last 1 month, there is a lot of debate whether the markets have started a new bull market or is it a sort term dead cat bounce. Here are some very important and useful articles from Gurus:

Warren Buffett on why stocks beat gold and bonds

In the article, Warren Buffett shows using past data that bonds usually don’t deliver returns more than the inflation. Over a long term, they cause a serious loss in purchasing power to the holder of the instrument. The above chart shows the fate of $100 and how equities deliver a much superior returns compared to any other asset class.

For unproductive investments in Gold, he says that for total value of Gold in World:

…we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money…

Laurence D Fink (CEO of BlackRock) says that investors must be 100% in equities

The worlds largest money manager says:

I don’t have a view that the world is going to fall apart, so you need to take on more risk […] You need to overcome all this noise. When you look at dividend returns on equities versus bond yields, to me it’s a pretty easy decision to be heavily in equities.

Ramesh Damani also says that early signs suggest onset of bull market

You need a cocktail of three things for a bull market to take place. The first is scepticism. Actually, there is no one who believes the US, in the midst of its crisis, could go into a bull market. Second, you need leadership. And, that is with all technology stocks you name — Google, Apple, Facebook or Twitter. Technology stocks are showing unbelievable gains. Finally, you have a lot of liquidity available, already signaled by the European Central Bank and the Fed.

We also feel that the markets might have bottomed out. There are some very promising ideas available in the market and they should deliver better returns that investments in gold or bonds. Inspite of regular selling by DIIs (MFs & retail investors) the markets have been rising. The retail participation is at its lowest and the weaker hands seem to have exited.

The Sensex returns haven’t been good over last 3-4 year. The valuations are very reasonable; and if one looks 3-5 years forward, then there is a very high probability that markets would be much much higher. The sensible thing is to keep investing into good individual ideas and keep building a quality portfolio. Don’t get swayed by short term price variations.

14 thoughts on “Gurus Speak – The road ahead”

  1. I don’t think we can generalise equity is best. It depends on the period you compare and also note every asset class goes through different growth/down phase. If you had invested in Dow Jones on 31-Dec-99 at 11497 you would have got 12874 today on 13-Feb-12 which means 11.97% returns in last 12 years. Against this If you had invested in Gold on 31-Dec-99 it was $290 and has gone up to $1724 today which is 494% return :-). Similarly crude was $25.60 on 31-Dec-99 and is now $100 which also gave better returns than Dow.

    1. Agree to some extent but usually our articles are in reference to investors in India. US markets had several years of major bull runs and their markets are sort of matured now…hence lower returns in last decade. But for investors in India, things look really good for long term and it seems to be the best asset class to us.

  2. Wanted to bring your attention to DQE. Good business model and niche area. Good order book & high promoter holding with a dashing last Quarter results.

    Thanks
    NR

  3. hai ayush your respective view about avanti feeds at these leval should one start buying or the last quarter of this financial year is also going to bad, and what leval one can expact in downside and than upside as my expactation is that avanti will not go below 80-85 and than in the next 1 year will go to leval of 350, your view

    1. Hi Aditya,

      I think the second qtr was good (as the business is seasonal in nature) as against the general opinion that the results were bad and hence the stock price correction.

      I think the current market price is a good level to accumulate this stock.

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