jim rogers investment guru

7/29/2019 JIM Rogers Investment Guru

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Investment Style: Jim Rogers


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Jim Rogers Contrarian Value

Investing Approach

Rogers has a knack for spotting a long-term trendlong before the masses.

The top down approach:- Start by determining whether a country has turned a

corner economically. If it has, confirm that the currency is convertible.

Because one should to be able to sell if there is achange in opinion.

If all systems are going well, he usually buys two orthree of the largest companies there.

Being more of a top down player he was moreinterested in the macro set up of things rather thanworry about quarter on quarter fluctuations.


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Jim Rogers criteria to look for before

investing in a company The best short candidates are stocks where Institutions

own more than 3 quarter of the shares.

Never try and make money from insider because it isalmost impossible to do so on a consistent basis.

Buy stocks of companies that are so undervalued that

even if nothing positive happens the maximum you canlose is on the opportunity cost of capital.

The micro numbers that he loved working on were: Capital Expenditure as a percentage of depreciation, gross plant

and net plant The ratio is highest when the company is at thetop of a cycle and vice versa. Compare this with a cash flow

analysis. At times of high capital expenditure plans the free cashflow diminishes and equity valuations take a hit.

Look at ratio of sales to receivables, debt to equity. A very highprofit margin with lower inventories and increasing capitalexpenditure is another indication to go short on a company.

Growth stocks are classic cases of shorting opportunities.


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Criteria used for short listing

Companies 75% of companys equity be held by their promoters

and promoter groups

P/E Ratio less than 10

PEG Ratio less than 1

Higher Profit Margin

Accordingly following 7 companies were finallyshortlisted: Engineers India Ltd. JSW Energy Ltd. Muthoot Finance Ltd. NHPC Ltd. Schneider Electric Infrastructure Ltd. State Bank of Mysore State Bank of Travancore


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Efficient Frontier

12.00%

12.50%

13.00%

13.50%

14.00%

14.50%

15.00%

15.50%

16.00%

16.50%

17.00%

17.50%

18.00%

18.50%

19.00%

3.000% 3.250% 3.500% 3.750% 4.000% 4.250% 4.500% 4.750% 5.000%

Target MeanReturn (%)

Standard Deviation (%)

Efficient Frontier

Portfolio


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Equity Research Report of Muthoot

Finance Ltd.

Emotional attachment of Indianconsumer to their gold makesgold loan popular

MF is the largest gold financingcompany in India:

20% market share Highest ROE: ~42%

Applied for Banking Licensewith RBI- to leverage uponexisting strong network of

branches Applied to SEBI for 5th issue of

NCDs worth Rs. 300 Cr- Rs.1400 Cr raised till date, payingregular interest and 40%

dividend in last fiscal year Recommendation: Buy


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Financials and Valuation


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Expected Value of Cash Flows


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Observed TrendsYear PAT (Cr)2008 63.602009 97.722010 227.57

2011 494.182012 892.02

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00

1000.00

2008 2009 2010 2011 2012

PAT (Cr)

PAT (Cr)


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Observed TrendsYear ROE (%)2008 34.062009 33.92010 48.08

2011 51.512012 41.88

0

10

20

30

40

50

60

2008 2009 2010 2011 2012

ROE(%)

ROE(%)


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Concerns Fluctuating Gold Prices:

If the gold prices fall drastically as it did in the initial

quarter of year 2013 the probability of borrowers

defaulting rises, thus adding to the Non Performing

Asset base of companies such as MF Regulatory Changes:

Recent regulatory changes by RBI have had a

negative impact on the stocks of these companies.

e.g. Recent reduction of the Loan to Value (LTV) from75-90% margin to 60%, now if bank LTV margins

remain same, there would be a shift in gold loans

market from NBFCs to banks


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Thank You!

jim rogers investment guru

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