Finding Good Insurance Rates For Your Business

When you purchase insurance, you want to make sure you find the best rates for the appropriate coverage. It is a good idea to consult a local agent if you are unsure about how much coverage you need, and what are considered to be good rates.If you own a business, you are probably aware of the importance of purchasing insurance. There are several different types of insurance that help protect you against various problems and disasters that can occur.

Before purchasing insurance, it is a good idea to check with the particular state, county, and city in which you reside to be sure you are meeting any requirements that might exist for your area. This is important, as it varies from one location to another, and will be crucial should you ever need to file a claim.

One of the most important aspects of purchasing insurance is getting the best rates possible for your particular coverage. While you do want good coverage, and shouldn’t sacrifice it for uncharacteristically low rates, you also don’t want to pay more than is necessary for your insurance. There are ways to make sure you get good rates.

The first step you should take is to carefully research the coverage you will need. This means assessing your insurance needs and comparing them with the information you find that is specific to your type of business. This is especially important because different types of business will require different types of coverage. You may also need different types of policies for different companies as well, so you should research this carefully.

If you are seeking insurance rate information, contact a locally or nationally certified broker and request an industry specific quote. After all, you don’t want to purchase the wrong kind of insurance, and you won’t want more or less insurance than you actually need.

Such industry quotes can vary widely depending on the nature of the business and the type and amount of coverage you are requesting. If you are unsure about how much coverage you do need, contact a local agent. He or she can ask the right questions and will be able to give you estimates and general information. By assessing the situation further, you will then obtain more specific information that will help you in making a final decision.

If you are searching for general information, the Internet can also assist you in finding types of insurance and how they might pertain to your specific company. Before conducting any research, make sure you have a good understanding of what you need. If you are unsure, consult your insurance agent who will then help you in figuring this out. Remember, purchasing the right kind of insurance is crucial to the well being of your business on down the road.

Home Insurance – Buying Versus Renting

Whether you are buying or renting a home, it is essential that you purchase insurance. This will protect your belongings against disaster and theft.The decision to buy a new home is an important one. It is, perhaps, one of the biggest steps you will take toward making a financial investment on which you will actually see a return. Still, for various reasons, some people choose to rent. There is certainly nothing wrong with this, and both have several advantages.
When you buy a house, you are responsible for all of the up keep and repairs. When something goes wrong, you have to find someone to repair it, or take care of it yourself. When you rent, you enjoy the luxury of having this done for you, and are at the mercy of the owner who will hopefully feel it as important as you do.

When you buy a house, you are making an investment. If you own it long enough, and take good care of it, you will eventually see a return on your investment. A well cared for house will make you money should you decide to sell.

If you rent, however, you are not responsible for paying all of the interest and taxes that you are required to pay when you buy. You have a monthly rent payment that is very much like a monthly mortgage payment, but without the added expense. Insurance is also different for buyers than it is for renters.

Insurance is one of the most important investments you will ever make. Depending on your particular policy and the coverage you have chosen, it serves to protect you against various accidents, disasters, and thefts that could occur. Your plan may either be replacement or partial, but in either case, you won’t have to pay full price to repair or replace items.

Home owners insurance differs from renters insurance in several ways. First off, most home owners insurance policies cover the entire property. You can purchase additional policies to cover specific disasters such as hurricanes and earthquakes where relevant, and can purchase as much or as little coverage as you need. Home owners insurance covers both the interior and exterior of your property, along with all of the items you own as long as they are deemed insurable.

Renters insurance covers only your personal possessions. It does not cover the actual property on which you live. The owner will have already purchased policies to cover the interior and exterior of the home or apartment, so you will only be responsible for insuring your belongings. Renters insurance is also relatively cheap, so that you get good coverage at a very reasonable rate. Again, whether you receive full replacement or just partial replacement will depend on your particular policy.

Behavioural Aspects of Investing in Stocks

Let me tell you a short story : There was once a smart young guy who like all of us was a charming, intelligent and hard working fellow (please replace guy with gal – for the ladies reading this blog). Now this guy, like others knew that the stock market is the place to invest your money if you want to get a good return. So he would occasionally dabble in the stock market and would make a few bucks here and there, nothing serious though.

One day our friend was relaxing at home, watching CNBC, where a smart confident looking analyst recommended the stock of a hot upcoming company (lets call the company longshot). The analyst was extremely bullish and was going ga-ga over the prospects of the company. This was a hot company in a hot sector (hot – hot !!). The company had increased its profits by 5 times in the last 3 years and was growing rapidly. The promoters were confident that sky was the limit and they would be the next infosys of their industry.

Our friend on hearing this tip was intrigued. He decided to call his friends and his broker to find out more (research !). His broker was ofcourse estactic about the company and his friend (who was a budding investor himself ) was also very positive. So having received two solid recommendations, our friend decided to invest 100000 (20% of his networth) in the company.

Fast forward 2 months : The company’s stock rose 4 times during this period. Our friend was completely delerious. He felt like a winner now. Ever since he bought this stock, he was following it closely. He would read every article on the company, every interview by the CEO. He was even participating on various stock forums where are almost everyone was more than 100% sure that the company would do very well. There were a few morons, who kept pointing to the high valuations, but then what would they know !.

The company had been reporting rising profits for the last 10 quarters and the next quarter was expected to be great. Our friend was giddy with excitement. He dreamt of the stock going up still further (everyone believed that !).

Fast forward 6 months : No one saw it coming. The company report good profits, slightly below expectations, but still good profits. The market reacted strangely to this news. The stock dropped 20% !!. Our friend was surprised. However he was re-assured by his friends and fellow investors on the stock forum that this was just a temporary reaction and the management and other analysts believed the same thing.

A few morons again pointed out that the valuation was too high, but they were abused and kicked out of the stock forum (sheesh !! what spoilsports ..our friend thought).

Fast forward 3 months : The company reported profits below forecast. They still reported a good growth, but below forecast. They however reduced the outlook for the next year as recessionary conditions had reduced the order inflow. Once this news came out the stock tanked by 50%.

Our friend was still up by 60%. However he was surprised by the sudden drop in the stock. How could the stock drop so rapidly ? He felt regret that he had not sold when the stock was at its peak. Now the stock had dropped almost 60% from that level. There was no point selling now …so he held on

Present day : The bad news kept flowing in. The stock dropped another 50% and was now below his cost. Our friend was angry with the analysts and the management who misled him. He was feeling cheated. He still visits the stock forum and is now looking for the next PRIL or L&T or infosys (or whatever you can think of)

End of story

I am currently reading a book ‘your money and your brain – the science of neuroeconomics’. It is a great book on the behavioural aspects of investing. I have not written much on emotions and behavioural aspects of investing on my blog. However I think these aspects of investing are equally if not more important than the analytical aspects.

The above story is something which a few of us have gone through or seen others go through. Some will learn the right lessons from it, whereas others will keep their head in the sand and blame others for their losses.

There are several behavioural baises in the above story which I will discuss in the rest of the post.

1. tendency to consider gain, but ignore the probability of gain

2.social proof bias

3.hindsight bais

4.commitment and consistency tendency bias

5.predicition bias

6.pattern seeking bias

Let me go through each of the above now

•Tendency to consider gain, but ignore the probability of gain : The book mentioned above discusses this bias in detail. I have know about this bais, but when I read about it in the book, it was like a light bulb going on. Humans have a tendency to over wiegh the gain, but tend to underwiegh the probability of gain. This tendency explains why people buy lotteries. The odds of winning the lottery are very low, but the likely gain is very high. An odd of 1 in 10 million cannot be ‘felt’. However a gain of 10 million is vivid. You can imagine all the stuff you can buy with it.

•This bias explains why people go for long shots in investing even if the valuation (or odds) is high. The gain appears tangible, but the low probability does not register. This is also the reason why people are looking for the next infosys or the next L&T or PRIL etc. What most people forget is that the odds of finding one is low (would you have predicted that infosys would do as well in 1993 ? the promoters could not !). This bias explains why our friend is still looking for the next longshot.

• Social proof bias : If others are recommending the stock, then I must be correct. As the above book and countless other books on the same topic have stated – Humans are social creatures and like to stay with the crowd. You don’t want to stand away from the crowd and be proven wrong. Easier to buy a hot stock and be proven wrong, than buy a beaten up stock that no one likes.This bias explains why our friend felt comfortable with the company when others were recommending it.

•Hindsight bais – This is the tendency to believe that you always knew the outcome after it has occurred. The book explains this bias very well. You will find a lot of pundits saying that the stock was bound to drop (or rise) after it has done so. What they don’t tell you is that they did not have this insight before the event happened. One of the key reasons for writing an investment thesis and publishing on this blog is to avoid this bais. I am no different than others and could easily fool myself that I always knew what was bound to happen.

•Commitment and consistency bias : Once you make a commitment (especially public), you have tendency to be consistent with it. No one likes a person who changes his mind and is not ‘faithful’. Our friend bought the stock, committed to it and hence could not bring himself to selling it when the fundamentals turned bad. I personally try to avoid this bias by publicly not committing to buying or selling a stock on the blog. I prefer to publish the analysis and leave it to the readers to take their decision

•Predicition bias – The book explains this bias in a lot of detail. Humans have a bias to predict events. If you toss coins in front them, there is an automatic tendency to predict the next toss even if they know it is random. There is a deep biological basis behind it (too lengthy for me to go into). All of us suffer from it and it seems to be a sub-conscious tendency. This bias explains why people are continously tryind predict price movements in the stock market even though they are random. This bias also explains the attraction for technical analysis.

•Pattern seeking bias – This bais also has a biological basis and closely linked to the previous bais. All humans try to find patterns, even in random data. It is an inbuilt tendency and an automatic one. The book (your money and your brain) goes into detail and explains it fairly well. This bias explains why people on seeing 4 quarter of rising earnings or 3 weeks of rising prices seem to find a pattern in it and predict that the next quarter or price will be higher than the previous one. Our friend with others was suffering from the same bias and assumed blindly that the earnings and the stock price will continue to rise.

There are several other such biases which I will cover in future posts. I personally think all of us suffer from these biases (less or more) and the difference between a successful and average investor is that the successful ones are able to reduce or compensate for these baises.

These biases are not weakness. These tendencies come from the human evolution and served us well in the past and continue to do so. If some one yelled fire and everyone started running away from it, would it be smart to be a contrarian to run towards it ? The worst that can happen if you follow the crowd (social proof) is that everyone will look foolish if there was no fire. But if everyone is correct and you go against the crowd, you may pay with your life.

These biases however work against us in the financial markets. They cannot be compensated easily. I have been reading on them (see this article by charlie munger on it) for the last few years and know several times that I am operating under their influence, but can still not avoid acting otherwise. The bigger problem is when you don’t even know that you are operating under their influence and they are hurting you.

Now if believe you are above all these influences and it is others who suffer from them, then you are suffering from another bias – where almost all individuals think that they are better than the average. The book gives example of several experiments which were done to demonstarte this bias. Most investors, drivers etc feel that their skills are superior than the average (even if the evidence is to the contrary).

Baby Steps for a newbie Stocks Investor

Trent Hamm, in TheSimple Dollar says that once a person has their debt under control, the next thing that they should want to do with their money is figure out ways to maximize it, and most of the time the potential gains of the stock market look like a great place to put money.

But how? For the average person, the diversity of options for investing in stocks are overwhelming. Should I buy a mutual fund? Should I buy individual stocks? How do I even get started when I’ve figured out what I want to do? What are my investing goals? How do I even describe those goals? I used to feel overwhelmed by such questions until I sat down and did the research, but I discovered that for the beginning investor, there’s really only a handful of simple steps that you need to follow to make smart investment choices. If you’re at the point where your debt is under control, your savings account is getting quite fat, and you’re looking for better options, here’s how you get started.

1. Figure out your goals.

When you first start thinking about this, it seems nebulous. It’s often hard to tangibly state what your goals are, especially if you’re young and single. However, you often find that they day you get married, it feels like a flood of goals hit you at once – buying a house, having a child, and so on.

Here’s what to do to get started. Take out a sheet of paper and list every financial goal you have in your life right now. What are you saving for? What would you like to be saving for? Things that might wind up on this list are retirement, your children’s education, a house down payment, complete debt freedom, a car, “walk away from your job” money, money to start a business, and so on. Some of those will be important to you, some won’t, and you may have some that aren’t even listed there.

Then, take that list and rank them by importance to you (or to you and your spouse). Don’t worry about what society says, but I will say that younger people tend to undervalue the importance of retirement. Other than that, it’s really about what’s important in your own life – not in what society thinks or what someone else sees as being important in life.

I tend to argue in favor of focusing on the top two to four goals. This way, an average person can actually reasonably accomplish those top goals in a reasonable timeframe. Figure out that time frame for those top goals. How much time is it before you reach that goal?

This doesn’t mean that your goals are set in stone. Everyone’s life changes over time and your goals may in fact change. The point is that your investment decisions are led by your goals, so before you even start investing, you should have a good grasp on what your goals are.

In my own life, I have several goals: retirement (targeted for age 60), my children’s college education (targeted for about seventeen years down the road), a new minivan (targeted for 1-2 years from now), and a new house in the countryside (targeted for about twelve years from now). Each of these have a different investment strategy, which we’ll get to in a minute.

2. Know your risk tolerance.

One major piece of the puzzle that people don’t address before they start investing is their risk tolerance. Often, they overestimate their risk tolerance, then find themselves in an investment situation that leaves them feeling very nervous about their financial position.

Spend some time thinking about this. Would you not worry if you woke up and found out that you had lost 5% of your investment if you knew in the long run it would build up in value? How about 20%? If you had $10,000 in stocks, and then over a very bearish month, $2,000 of that vanished, how would you honestly react? Would you take your money out?

The reason this is important is that it is extremely dangerous to be invested in something that exceeds your risk tolerance. If you find yourself waking up in the middle of the night nervous about where your money is, you’re likely to make an emotional move, like taking your money out when it’s about to rebound.

As a general rule of thumb, if you feel nervous about losing money at all, you probably shouldn’t be invested in stocks. Keep it in cash, in either your bank account or in certificates of deposit. Don’t feel weird – my best friend is in this camp.

On the other hand, most people have some degree of risk tolerance, though, and if you find that losing 10% or so won’t make you scared and ready to pull out, then you should dip your toes into stock investment. We’ll get to the specifics later.

3. For short term goals (less than two years or so), keep the money in cash.

That means store it in a savings account or perhaps buy a short term certificate of deposit at a bank – whichever option gets you the best interest rate and enables you to have cash in hand on the day you need it.

Why? Keeping it in cash means that it won’t be exposed to the up and down nature of the stock market. Quite often, over short term periods like two years, it’s quite possible that not only will you not turn a profit, but you might actually lose a piece of your invested money.

4. For medium term goals (two to ten years), diversify at your comfort level.

If your investment window is more than two years, the odds that you’ll come out ahead on the stock market start to get better, but it still comes with some risk. The stock market is never a guarantee, and past performance is never a guarantee of future returns.

Another factor to consider: how much is your life relying on this money? It makes sense to be more conservative with retirement money than with, say, money you’re saving for a new car. That’s because a downturn in your retirement can force you to work for years longer, while a downturn in your car savings just means you might have to continue to drive an older car for a year longer. The more vital that money is to your life plans, the more conservative you should be with it. If you’re not sure, be more conservative than less – keep plenty in the savings account and just dabble in the stocks.

5. For long term goals (ten years or more), stocks are a pretty good place to put your money.

Over the history of the stock market, almost every period longer than ten years has seen a profitable return in a broad stock investment. Even better, during many ten year stretches, the returns are quite impressive. Because of that (even though past performance isn’t a guarantee of future returns), it generally makes sense to put long term money heavily in the stock market.

6. The best place for first-time stock investors to put their money is in a low-cost index fund.

There are several reasons for this.

First, an index fund allows you to be invested in a lot of stocks at the same time. That way, you’re not affected by the ups and downs of a single company just as you are getting your toes wet in stocks.

Second, a low cost fund means that the investing house isn’t eating much of your money. That way, the gains go into your pocket, not in the pocket of your investing house.

Third, an index fund will introduce you to the ups and downs of stock investing. While they’re nowhere near as volatile as individual stocks, they are volatile. Many index funds can go up or down 3% on a single day. In other words, it’s a great way to find out where your risk tolerance really is without a deep risk of losing a lot of your money.

Personally, I only invest in index funds, for reasons I’ve specified in the past.

How can I get started with these? The best way is to get an account with a large investment house and transfer your money in online – the interface is often like online banking. I personally use Vanguard (Benchmark, for Indians) when I invest (though I’m currently focused on eliminating debts), as Vanguard offers a wide array of low-cost index funds.

Once you’ve started, set up an automatic investment plan so that you put in a certain amount each week or each month. Not only does this make it incredibly easy to keep up with your savings, it essentially automatically follows the investment strategy known as dollar cost averaging (which reduces investment risk).

Just sit on that for a while. Watch it. See whether you’re comfortable with the ups and downs of it. Learn more over time, and then you’ll figure out on your own where to go next. Maybe you’ll find that the volatility is too much for you and you’ll move the money to savings. Maybe you’ll want to diversify and buy an international index fund. Maybe you’ll have no problem at all with the volatility and dip your toes into individual stocks. It’s up to you.

Remember, though, that today is always the best day to get started.

Find growth in little known stocks market

M’lawd, I plead guilty to the charge that I remain incorrigibly penny stock-chasing even after successive market meltdowns where they have decimated in value.

M’lawd, I plead guilty to the charge that I still prospect unheard of companies and unheard of promoters manufacturing unheard of products touting unheard of numbers who often disappear – ‘laapataa!’ – when the boom goes bust.

M’lawd, I plead guilty to the charge of appraising a number of companies headquartered in the cow-belt that don’t write the Queen’s English in their annual reports and then stop sending reports after they have collected their money.

M’lawd, I plead guilty on all these counts and in front of all those people who are wont to look at my dubious record and say ‘Sudharta hi nahin!’.

Kalpana Industries (Rs 80): M’lawd, I must confess that there is a fair case against me on this count. The charge: it’s nothing more than a low-P/E stock (P/E of 6 based on annualised first quarter results), so big deal.

My defence: net profit more than doubled in Q1 FY08 compared to the corresponding quarter and this trend is likely to continue.

The charge: low spread business, EBITDA (earnings before interest, tax and depreciation) margin no higher than 7 per cent. My defence: Sharply rising volumes (86 per cent in Q1 over previous corresponding quarter) likely to sustain; margins steady in a volatile raw material environment.

The charge: relatively low profile plastic compound products. My defence: Used critically in transmission power cables to counter hooking and enhance quality; robust sectoral growth foreseen. The charge: untried Kolkata management.

My defence: Only manufacturer of select products in India and one of only three in Asia. The charge: low interest cover of 3.67 in Q1 FY08. My defence: expansions out of accruals and debt will lead to profit surge.

Modern Dairies (Rs 110): M’lawd, please give me a patient ear on this. The charge: it’s a doodh ka dhanda anyway and so what’s left to be discovered?

The defence: M’lawd, it’s not a milk business as much as it is a value-added milk products (nutritional ingredients) business; the company is engaged in city milk supply, skimmed milk powder, butter and table butter, casein and whey protein concentrates.

The charge: limited upside in a business as rudimentary as milk or even milk products.

The defence: the company processed 12 crore kg of milk in FY07, which is expected to rise to 25 crore kg in FY09; the proportion of nutritional ingredients (another name for value-added variants) is expected to increase from Rs 15 crore in FY07 to Rs 225 crore in the current year so that’s a different complexion from a commodity business.

The charge: sharp surge in profits in Q1 FY08 – EBITDA was only a shade lower than what had been achieved in the previous full year – appears to be too good to be authentic.

The defence: This reflects the twin impact of an international increase in casein prices following a gradual decline in subsidies in Europe as well as casein capacity going on stream in February 2007. The charge: Interest cover of less than 3 in Q1 FY08.

The defence: the first quarter is usually the weakest; as raw material (milk) prices decline, production increases, new production lines and cogen plant (funded out of debt) go on stream, this will correct. The charge: the management does not appear credible.

The defence: the customer profile does – Mother Dairy (Delhi), GlaxoSmithKline Consumer, Britannia, Hindustan Unilever, Domino’s and Pizza Hut.

Rohit Ferro-Tech (Rs 39): M’lawd, historical performance is loaded against me on this but your honour, please consider the potential.

The charge: High carbon ferro chrome bullishness is inevitably all eyewash; price rises have always been temporary and the relative absence of listed proxies makes investing difficult.

The defence: ferro chrome is a stainless steel proxy, stainless steel is an affluence proxy and affluence (especially in Asia) is for the long-term. Besides, ferro chrome will only gradually become the flavour after performance improvements are sustained.

The charge: chrome ore is inflationary; sellers may renege on supplies. The defence: increase in end product prices has been sharper and the company has a back-to-back sourcing arrangement with Orissa Mining Corporation.

The charge: the equity is too large at Rs 34.46 crore. The defence: this equity supports one of the largest merchant ferro chrome capacities in India today. The charge: riding quarter on quarter interest outflow means that accruals are now working their magic.

The defence: The company is expanding faster than ever out of debt and accruals; 15,000 tonne a year will be added by November 2007. The charge: the business is power-intensive in a rising power cost environment. The defence: the company’s back-to-back power arrangements in Bengal and Orissa are all priced well below Rs 2 a unit.

The charge: high carbon ferro chrome prices could decline. The defence: The company’s production is expected to rise from 51,000 tonne in FY07 to 115,000 tonne in FY08 to 180,000 tonne in FY09, neutralising (at worst) the price declines.

Whirlpool (Rs 38): M’lawd, I am being condemned for merely suggesting that a consumer appliance company may perhaps be investment grade.

The charge: The business is highly competitive. The defence: Whirlpool is a visible global brand. The charge: The business is low margin while inputs (steel for one) have been inflationary.

The defence: The company’s EBITDA margin strengthened from 5.6 per cent in Q1 FY07 to 5.74 per cent in Q1 FY08; besides, interest outflow has declined in quantum by Rs 8 lakh(!) across the Q1 of the two years even as sales increased Rs 124 crore; interest cover strengthened from 6.73 to 8.73; the company’s receivables cycle of nine days is possibly the lowest across the global Whirlpool family; the company is enriching its product mix with a view to enhance profitability further.

The charge: erratic earnings profile. The defence: The income profile is largely influenced by refrigerators with marked seasonality. More than 20 per cent growth in Q1 FY08 over Q1 FY07 is confidence-enhancing.

So m’lawd, I would request you to consider this detailed evidence and take a lenient view of my crime so that I may reform to pick comprehensively-researched stocks, shun the contrarian, mouth popular theories and seek refuge in P/Es in excess of 20. Your honour, I deserve a chance!
M’lawd, I plead guilty to the charge that I remain incorrigibly penny stock-chasing even after successive market meltdowns where they have decimated in value.

M’lawd, I plead guilty to the charge that I still prospect unheard of companies and unheard of promoters manufacturing unheard of products touting unheard of numbers who often disappear – ‘laapataa!’ – when the boom goes bust.

M’lawd, I plead guilty to the charge of appraising a number of companies headquartered in the cow-belt that don’t write the Queen’s English in their annual reports and then stop sending reports after they have collected their money.

M’lawd, I plead guilty on all these counts and in front of all those people who are wont to look at my dubious record and say ‘Sudharta hi nahin!’.

Kalpana Industries (Rs 80): M’lawd, I must confess that there is a fair case against me on this count. The charge: it’s nothing more than a low-P/E stock (P/E of 6 based on annualised first quarter results), so big deal.

My defence: net profit more than doubled in Q1 FY08 compared to the corresponding quarter and this trend is likely to continue.

The charge: low spread business, EBITDA (earnings before interest, tax and depreciation) margin no higher than 7 per cent. My defence: Sharply rising volumes (86 per cent in Q1 over previous corresponding quarter) likely to sustain; margins steady in a volatile raw material environment.

The charge: relatively low profile plastic compound products. My defence: Used critically in transmission power cables to counter hooking and enhance quality; robust sectoral growth foreseen. The charge: untried Kolkata management.

My defence: Only manufacturer of select products in India and one of only three in Asia. The charge: low interest cover of 3.67 in Q1 FY08. My defence: expansions out of accruals and debt will lead to profit surge.

Modern Dairies (Rs 110): M’lawd, please give me a patient ear on this. The charge: it’s a doodh ka dhanda anyway and so what’s left to be discovered?

The defence: M’lawd, it’s not a milk business as much as it is a value-added milk products (nutritional ingredients) business; the company is engaged in city milk supply, skimmed milk powder, butter and table butter, casein and whey protein concentrates.

The charge: limited upside in a business as rudimentary as milk or even milk products.

The defence: the company processed 12 crore kg of milk in FY07, which is expected to rise to 25 crore kg in FY09; the proportion of nutritional ingredients (another name for value-added variants) is expected to increase from Rs 15 crore in FY07 to Rs 225 crore in the current year so that’s a different complexion from a commodity business.

The charge: sharp surge in profits in Q1 FY08 – EBITDA was only a shade lower than what had been achieved in the previous full year – appears to be too good to be authentic.

The defence: This reflects the twin impact of an international increase in casein prices following a gradual decline in subsidies in Europe as well as casein capacity going on stream in February 2007. The charge: Interest cover of less than 3 in Q1 FY08.

The defence: the first quarter is usually the weakest; as raw material (milk) prices decline, production increases, new production lines and cogen plant (funded out of debt) go on stream, this will correct. The charge: the management does not appear credible.

The defence: the customer profile does – Mother Dairy (Delhi), GlaxoSmithKline Consumer, Britannia, Hindustan Unilever, Domino’s and Pizza Hut.

Rohit Ferro-Tech (Rs 39): M’lawd, historical performance is loaded against me on this but your honour, please consider the potential.

The charge: High carbon ferro chrome bullishness is inevitably all eyewash; price rises have always been temporary and the relative absence of listed proxies makes investing difficult.

The defence: ferro chrome is a stainless steel proxy, stainless steel is an affluence proxy and affluence (especially in Asia) is for the long-term. Besides, ferro chrome will only gradually become the flavour after performance improvements are sustained.

The charge: chrome ore is inflationary; sellers may renege on supplies. The defence: increase in end product prices has been sharper and the company has a back-to-back sourcing arrangement with Orissa Mining Corporation.

The charge: the equity is too large at Rs 34.46 crore. The defence: this equity supports one of the largest merchant ferro chrome capacities in India today. The charge: riding quarter on quarter interest outflow means that accruals are now working their magic.

The defence: The company is expanding faster than ever out of debt and accruals; 15,000 tonne a year will be added by November 2007. The charge: the business is power-intensive in a rising power cost environment. The defence: the company’s back-to-back power arrangements in Bengal and Orissa are all priced well below Rs 2 a unit.

The charge: high carbon ferro chrome prices could decline. The defence: The company’s production is expected to rise from 51,000 tonne in FY07 to 115,000 tonne in FY08 to 180,000 tonne in FY09, neutralising (at worst) the price declines.

Whirlpool (Rs 38): M’lawd, I am being condemned for merely suggesting that a consumer appliance company may perhaps be investment grade.

The charge: The business is highly competitive. The defence: Whirlpool is a visible global brand. The charge: The business is low margin while inputs (steel for one) have been inflationary.

The defence: The company’s EBITDA margin strengthened from 5.6 per cent in Q1 FY07 to 5.74 per cent in Q1 FY08; besides, interest outflow has declined in quantum by Rs 8 lakh(!) across the Q1 of the two years even as sales increased Rs 124 crore; interest cover strengthened from 6.73 to 8.73; the company’s receivables cycle of nine days is possibly the lowest across the global Whirlpool family; the company is enriching its product mix with a view to enhance profitability further.

The charge: erratic earnings profile. The defence: The income profile is largely influenced by refrigerators with marked seasonality. More than 20 per cent growth in Q1 FY08 over Q1 FY07 is confidence-enhancing.

So m’lawd, I would request you to consider this detailed evidence and take a lenient view of my crime so that I may reform to pick comprehensively-researched stocks, shun the contrarian, mouth popular theories and seek refuge in P/Es in excess of 20. Your honour, I deserve a chance!

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