BC ECONOMY
Saved by @Jacobtldr

Interpretation of Financial Statements - preliminary filters.

1. Looking for sustainable competitive advantage:

When looking for sustainable moat, you wanna see consistency - in earnings, in having low debt, in having growing earnings, low spending in capital expenditures, etc.

 The longer the company has existed, and if it sells you the same product for years (like Coca Cola), it reduces production costs and other costs (R&D, Training, marketing) slowly as the company ages.

When costs are reduced, margins and profits increase.
2. What to look for in an income statement:

Let's take a look at Apple:

i) You want to see earnings grow at a steady pace. Take a look at the net income below.
ii) Another thing that's important is a consistent and high gross margin.

As a thumb rule, Warren Buffett wants to see a gross margin of around 40% or above.

Although not quite 40%, it's around that range with respect to Apple.
Compare this to Apple's competitors.

Samsung's gross margins are around similar range, highest being 45.7% in 2018, and Huawei had a gross margin of 38.6%.
Having a high gross margin indicates the scalability of the business. The more the company sells, the greater the profitability becomes. Such a trait is what you want to see in a business you want to own.
iii) You also want to note the net margin.

Gross margin = (revenue - cost of goods sold) / revenue

Net margin = net income / revenue.

You want to see the company having higher net margin compared to their competitors.
Apple's net margin is around 22%. Samsung's net margin is around 18% and Huawei's net margin is around 8.5%.

Typically, net margin above 20% is a very strong one, indicating that we are dealing with a smoothly run business.
3) In the balance sheet:

Look at the figure - "Retained Earnings".

Using retained earnings, you can find out if a company is reinvesting its income or not. A steady growth in this number means the business is profitable, and that it's identifying good investing opportunities.
Apple doesn't fulfill the criteria regarding retained earnings. But that's because in 2013, Apple started a rigorous dividends and share repurchase program.

To measure how efficiently a company is using these retained earnings, Return on Equity (ROE) is used.
To calculate ROE, compare Net income to the Total Equity of the company.

Apple looks quite strong in this aspect. It's partly an effect of distributing a lot of their earnings to shareholders. It also signifies the sustainable competitive moat.
Compare this with Samsung (ROE:18.3%) and Huawei (ROE:25.3%), Apple shows significant strength.

4) Exceptional businesses seldom require a lot of debt to expand (except maybe banks/NBFCs). Instead, they can just use the strong cashflow from the business.
So, look for businesses with little to no long term debt. If a company can pay off with all its long term debt with less than 4 years of earnings, it signifies a good position for the company. Apple fulfills this criterion. Samsung and Huawei do too.
5) In a cashflow statement:

This is where you see the actual in's and out's of money.

Look at "Capital Expenditures" on the cashflow statement.

This is the money being spent on properties, plant, and equipment.
Look at what percentage of net income the capital expenditures are. You want it to be as low as possible, lower than 25% over a period of time is considered very good. Less than 50% is okay-ish.

Exceptions: One time payment to grow the business in some capex activity.
Look at Apple's CAPEX spendings. Compare that with their net income, and you can see that their average capex spending is less than 25% of their net income. Samsung (around 65%) and Huawei (around 45%) aren't even close.
Also, in Apple's cash flow statement, we can see the reasons why the retained earnings from the balance sheet haven't been growing from 2012. Apple has been distributing a lot of cash to its shareholders.
Apple's Augmented Payout Ratio (includes share buybacks and dividends) has been higher than 100% in some years. This basically means Apple's distributing more money than it earns.
5) When to sell?

3 instances when you could consider selling the stock.

i) You need money for a better investments. This is more so applicable in a bear market, for you to switch from something great to something exceptional.
ii) When a company loses its competitive advantage. Times change, and once monopolistic companies are constantly being disrupted. If your investment faces such a risk, cut it loose.
iii) During crazy raging bull market. Even if a company runs a fantastic business, it could be a bad investment if you have to pay insane price. At such times, at such price, you could selling a fantastic business if you already have held onto it for a long time.
At a PE of 40 or higher, you should start considering selling your stocks, even if you believe in the underlying economics of the company.

This may not always apply to all markets, all stocks. But with anything above 40PE, tread carefully and cautiously.
So, key takeaways:

- Competitive advantage and scale
- Consistently high net income, return on equity
- Requires very little debt
- Retained earnings has steady growth
- Capital expenditures should be < 25%
- Sell a company if prices are crazy, or a better opportunity comes up.
The Swedish Investor YT channel has some interesting playlists on financial statements. Check it out. These insights I gathered are from one of his videos.

https://t.co/nbKA5Bzpi6
For learning Valuation, nothing better than Aswath Damodaran's course. Find his courses here:

https://t.co/MbmUKsE968

More from Shravan Venkataraman 🎡

Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0
Shravan Venkataraman 🔥...
@theBuoyantMan
Working on some execution optimisation related backtesting. I have so far been executing with market orders only. Going towards higher lot sizes, I'd like to optimise for minimal slippage.

First off, on NSE, if you place a market order, you get filled at the best bid/ask right?

If we want to optimise this, the first non-creative idea one can think of is, slicing the order into different lot sizes, and placing a limit order for each slice at the mid point of current best bid & ask.

But this requires your latency to be the least.

Why would latency affect it?

I looked at tick historical data, and there are more than 18-20 ticks in a second (auction and quote combined).

Even if you keep 10 ticks per second, your best bid/ask can shift from the time you place to the time exchange receives the order.

So, the next best thing that people can do is place tranches of orders every 1s, 3s, 5s, 10s, 15s - in their preferred time range, and get filled at the midpoint or best-bid+1/2/3/4/5 in the depth.

What you need is liquidity.

But if you're trading breakouts, then it's highly likely that your limit orders may not get filled if the action is too fast.

So, a retry mechanism is required in such cases.

If nothing works, you convert your orders to marketable and get filled at worse slippage.
TRADING
Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0
Shravan Venkataraman 🔥...
@theBuoyantMan
You see so many people on Twitter saying

"Infosys ADR is up 5% today."

"ICICI Bank and HDFC Bank ADR ended highly positive today. Good move coming up for Banknifty."

Have you ever wondered what is ADR? You're not alone.

Time for a thread. 👇👇👇


1/ Back in the early 1900s, people were buying shares in foreign countries in the respective country's exchanges (many still do).

There are few issues with that:

- Complexity of the purchase
- Currency conversion issues
- Difficulty in transactions

and so on.

2/ JP Morgan saw this, and thought

"what if people could trade foreign companies

- in our country
- in our currency
- but without the companies having to list themselves here?"

ADR was born.

3/ ADR stands for American Depository Receipts.

It's like a share certificate, issued by a U.S depository bank (like CDSL here), but on a foreign company.

Usually one ADR unit represents one share of the foreign company.

4/ Here's how it works.

The depository bank buys the foreign company shares in the foreign exchange.

This depository bank holds the purchased shares as inventory.

It issues respective ADR for domestic trading.

The ADR is issued & traded in US Dollars.
FINANCE
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Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0
Shravan Venkataraman 🔥...
@theBuoyantMan
When you break down the lives of extremely successful people, you find that their success didn't come from an earth shattering break-through.

Rather, it came from obsessing about a simple idea, fanatically.

Time for a thread about one such idea. 👇👇👇

1/ During world war II, a eleven year old kid checks out a book from the nearest library. The book's title was "1000 ways to make 1000 dollars".

After he reads that book, he makes a statement that by the time he was 35 years old, he'd be a millionaire.


2/ By the age of 35, his net worth was roughly 7-8 million dollars. The library was Omaha public library. That kid was Warren Buffett.

How he got there is an interesting story.

As soon as he reads that book, he decides he should have 1000 dollars before he finishes school.


3/ While looking for business ideas, he goes to his friend Dan's house one day.

He watches Dan fix an old pinball machine (that he bought for $15) in two hours.

Warren asks him if he can fix more.

Dan says yes.

4/ Warren and Dan set up a company (of course no incorporation and all that legal jazz).

They call the firm "Wilson Coin Operated Company".

They go to local barbers and pitch the barbers an ingenious business plan.
CULTURE
Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0
Shravan Venkataraman 🔥...
@theBuoyantMan
**Time for a thread**

Through the last three years of experience in the entrepreneurship space, I understood why phenomenons like

- black money
- hawala
- money laundering
- tax fraud
- overclaiming of tax returns
- not reporting income

and other such scenarios exist.

1/ Running a business, especially with all the licenses and the jazz is like standing in a traffic signal.

The signal may still be red. But if vehicles have started moving, they will keep honking and hurling abuses at you for not moving and breaking the rules along with you.

2/ The corrupt system begets corruption.

The government employees seek bribe for every single thing that they are being paid to do as work.

If you don't pay them, your business will not get set up.

If you don't pay what they ask for, they will point out hundred issues.

3/ So, the base for corruption gets set up when you start your business.

You unwittingly become an accomplice to the systemic corruption.

If you don't bribe, your business won't get off the ground and you can't make money.

So, you are cornered to have to pay a bribe.

4/ Now, your business gets off the ground. But you have to get loan to set it up.

You go to MSME. They get you the loan. They also provide subsidy relief.

The catch: The officer asks you to pay 10-15% of subsidy as "formality" to ministers and the chain of command.
BLACK MONEY
Shravan Venkataraman \U0001f525\U0001f680\U0001f4b0
Shravan Venkataraman 🔥...
@theBuoyantMan
Are you planning on handing over your money to an algo trading platform?

Maybe you want to subscribe to a strategy or two and make insane returns.

Here's why you shouldn't do it, and save your money instead.

1/ Maybe you want to have a strategy development company deploy such algorithms on your account with respective brokers.

Or the service itself has strategies that you just subscribe to and authorize your trading account with, and it will automatically trade your money.

2/ When it comes to @Tradetron1 there are a slew of issues.

Let's keep aside the lack of transparency and the total regulatory non-compliance for a moment.

First off, with most of the strategies, the backtests are BOGUS.

3/ Any systematic trader with even a little bit of experience will look at the strategies and tell you which ones are baloney.

Most of them are.

Don't take my word for it. Do your own due diligence.

And, those backtests aren't even for 10+ yrs. Some were done only for months.

4/ Secondly, SEBI has put rules in place on parameters like

- minimum net worth of the company
- qualifications of the fund manager
- minimum number of clients
- minimum amount to start with

and so on, for qualifying people who want to manage other people's money.
TRADING

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Sam Parker \U0001f1fa\U0001f1f2
Sam Parker 🇺🇲...
@SamParkerSenate
1. "ThE gReAt rEplAcEMeNt iS A cOnSpiRaCy tHEorY" https://t.co/BXdtcNxrVf


2. "ThE gReAt rEplAcEMeNt iS A cOnSpiRaCy tHEorY"


3. "ThE gReAt rEplAcEMeNt iS A cOnSpiRaCy tHEorY"


4. "ThE gReAt rEplAcEMeNt iS A cOnSpiRaCy tHEorY"


5. "ThE gReAt rEplAcEMeNt iS A cOnSpiRaCy tHEorY"
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:Billy-Don :I-AM
:Billy-Don :I-AM
@ValiantThor12
1) 💜 THE EVENT 2020 - THE 1221 MULTIDIMENSIONAL STARGATE 💜
PLEIADIAN LIGHT FORCES TRANSMISSIONS - 12182020
CHANNELED BY MICHAEL LOVE
A SPECIAL MESSAGE TO THE STARSEEDS OF NEW EARTH, FOR IMMEDIATE PLANETARY BROADCAST…
PRELUDE:
THE FOLLOWING INFORMATION IS DERIVED FROM DIRECT,

2) DECODED ETHERIC TRANSMISSIONS FROM BENEVOLENT LIGHT FORCES DOCKED IN EARTH’S SOLAR SYSTEM AND SOME OF THE DATA COMES DIRECTLY FROM CERTAIN INSIDE EARTH ALLIANCE MEMBERS KNOWN AS THE WHITE HATS, AND THE GREAT WHITE BROTHERHOOD STRATEGICALLY PLACED IN KEY POSITIONS OF POWER BY

3) THE GALACTICS ON THE SURFACE OF PLANET EARTH!
THE DATA HEREIN IS RECEIVED AND TRANSMITTED FROM THE 5D LEVEL! THIS MESSAGE IS INTENDED ONLY FOR THE STARSEEDS OF EARTH!
GREAT ONES,
WE HAVE SPOKEN OF THE EVENT 2020 THIS ENTIRE EARTH YEAR AS ALL PLEIADIAN AND EARTH ALLIANCE INTEL

4) SHOWS INDEED THAT A MAJOR COSMIC EVENT IS GOING TO OCCUR IN ONLY 3 EARTH DAYS FROM NOW!
ON DECEMBER 21, 2020, A MAGNIFICENT CELESTIAL STARGATE WILL OPEN IN THE HEAVENS WHICH MARKS THE DAWN OF THE NEW GOLDEN AGE OF AQUARIUS AND THE 1ST DAY OF THE SATYUGA OF CENTRAL SUNLIGHT!

5) IN THE MORNING HOURS OF THE WINTER SOLSTICE, THE LONG-AWAITED NEW ERA OF LIGHT WILL FINALLY DAWN AND THE NEW 5D EARTH WILL BE BORN!
THE COSMIC GATES WILL BE FULLY OPENED ON 12/21/20 ALLOWING POWERFUL STREAMS OF COSMIC LIGHT TO ENTER EARTH'S ATMOSPHERE, UPGRADING ALL SENTIENT
ECONOMY
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Nick Hanauer
Nick Hanauer
@NickHanauer
Long rant: So earlier today, I got into a spat over the $15 minimum wage with @JamesSurowiecki and @noamscheiber. Because this disagreement over whether there is a mechanical relationship between raising wages and less jobs is incredibly consequential, I wanted to say more.
ECONOMY
Ndegwa Power
Ndegwa Power
@ndegwapower
Thread: Why Kenya and other countries are introducing Digital Taxes? Why now?

Now,the current tax laws & international tax framework (which dates back to the 1920s) was designed at a time when businesses were largely brick-and-mortar (physical stores).Then, it was unimagineable for a biz to operate in another country without some form of physical presence

Thus, in most countries, for a business to be pay corporate tax it has to have some form of nexus there (e.g. Kenya). Either it's registered here, or it's managed from here or it has what we call a permanent establishment (also implies some form of physical presence)

Fast forward to today, there are numerous companies that are able to operate in multiple countries without having any physical presence in those countries. Consider social media platforms or streaming services, with a device, connection & subscription you can access their service

...and they don't have to have any physical office or employees etc in Kenya for them to deliver the service to you. I mentioned above that to be subject to corporate tax here, a company would have to have some form of nexus here in Kenya, these companies, don't.
ECONOMY
Brian Wesbury
Brian Wesbury
@wesbury
Inflation Is Coming!

Some say: Inflation didn’t rise after 2008-2015 Fed QE, so it won’t rise this time. Here are the problems with that argument.

1) From 2008-2015 regulators hammered the banks, so while the Fed’s balance sheet expanded, M2 did not accelerate.

2) In 2020, we used the banks to push out money, the opposite of the first round of QE. PPP loans were financed through banks and unemployment checks were direct-deposited.
3) The M2 measure of money is up more than 25% in the past 12 months.

4) That alone, 25%+ M2 growth, is enough, but we are compounding the problems.
5) Regulating fossil fuel production drives energy prices up.
6) Ag, industrial & transportation are energy intensive, and many claim they are bad for the environment. Result: higher prices.

7) Federal government borrowing and deficit spending encourages more Fed money printing, and artificially lifts demand.
8) Higher tax rates, rising minimum wage, and big government crowd out the private sector; reducing supply.
9) Demand up; Supply down! Inflation is coming.
ECONOMY

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Yantrodharaka Anjaneya Temple, Hampi, Karnataka.

This temple dedicated to pawanputra Hanuman, near the banks of Tungabhadra river was built by dwaita philosopher and rajguru of the Vijayanagar empire, Sri Vyasaraja around +500 years ago.


:It is only in this temple that Hanuman appears in a prayer position. In this image, Bhagwan Hanuman’s crown has been formed by his tail.12 monkeys have been carved around this amulet.


:They represent the 12 days Sri Vyasaraja prayed to Hanuman ji. Each monkey holds the tail of the monkey in front of him but is facing backward. Seed syllables have also been carved around the amulet.


:It is believed that Sri Vyasaraja used to draw a picture of lord Hanuman here on the rocks before offering prayers using charcoal and the sketch disappeared after prayers.This incidence happened for 12 days in a row until he pleaded to bhagwan to appear in front of him.


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\u0936\u094d\u0930\u0940\u092e\u093e\u0932\u0940 \u0939\u093f\u0924\u0947\u0936 \u0905\u0935\u0938\u094d\u0925\u0940
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Bhu Varaha Swamy temple is a Hindu temple, located at Srimushnam, in the South Indian state of Tamil Nadu. Constructed in the Dravidian style of architecture...


the temple is dedicated to Varaha (Bhu Varaha Swamy), the boar-avatar of the god Vishnu and his consort Lakshmi as Ambujavalli Thayar.

The temple had contributions from Medieval Cholas of the 10th century with later expansions by Thanjavur Nayak king Achuthappa Nayak.


A granite wall surrounds the temple, enclosing all the shrines and the temple tanks. There is a seven-tieredrajagopuram, the temple’s gateway tower.

Six daily rituals and three yearly festivals are held at the temple, of which the Chariot festival....


celebrated during the Tamil month of Vaikasi (April–May), being the most prominent. The festival also symbolises Hindu-Muslim unity in the region – the flag of the chariot is provided by Muslims; they take offerings from the temple and present to Allah in the mosques.


Source & Pic credit : Anusri
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