Fluff Matters

By Ramesh Akkineni
from an article in Outlook Business
As an angel investor now, Suresh looks for businesses that can grow “seven or eight times within four years through capital infusion”.
The ‘Fluff’ Factor
His belief is that when a company in a happening sector grows in multiples, a buzz gets created about the company. That buzz, in turn, creates excess valuation in the company’s stock—or “market fluff”, as he likes to term it. “The market, in its own wisdom, gives it the fluff factor. Everybody then wants a piece of it, leading to short supply. That gives it the extra oomph to achieve my 12-15 times returns,” explains Chennai-based Suresh, now Chairman and CEO of Kalpathi Investments, a private equity (PE) fund with a corpus of Rs 400 crore.

Popular posts from this blog

The Need for a Media Regulator/Media Archive/Registry

By Ramesh Akkineni
The Recent Events in Andhra show how easy it is for a News channel to destabilize the society. I think News channels are like financial derivatives which should be controlled and regulated.There should be a national media registry/archives which record every popular channel continuously.This will be similar to a 'black box' that an airplane keeps. It will ensure accountability and check the channels which 'manufacture' the news. The investment needed to start a channel has come down to about 10 crores and enable many people to start their own channel.The amount of havoc that a channel can do is immensely greater. With a 10 crore investment I can influence policy, cause 100s of crores damage to my rivals, destabilize society etc. This shows that news channels are in the category of 'fire arms' or a 'driving license' where the user can cause significant damage to others by improper use. If a society has to be stable, we must reduce the points of failure. I
Read more

Niederhoffering The Curriculum

By Ramesh Akkineni
Charlie Munger says in a lecture - There was a wonderful example of gaming a human system in the career of Victor Niederhoffer in the Economics Department of Harvard. Victor Niederhoffer was the son of a police lieutenant, and he needed to get A’s at Harvard. But he didn’t want to do any serious work at Harvard, because what he really liked doing was one, playing world-class checkers; two, gambling in high-stakes card games, of which he was very good, all hours of the day and night; three, being the squash champion of the United States, which he was for years; and four, being about as good an amateur part-time tennis player as a part-time tennis player could be. This did not leave much time for getting A’s at Harvard so he went into the Economics Department. You’d think he would have chosen French poetry. But remember, this was a guy who could play championship checkers. He thought he was up to outsmarting the Harvard Economics Department. And he was. He noticed that the
Read more

Squanderville and Thriftville

By Ramesh Akkineni
Warren Buffett tells this fable to show why saving and investing for future is important A perpetuation of this transfer will lead to major trouble. To understand why, take a wildly fanciful trip with me to two isolated, side-by-side islands of equal size, Squanderville and Thriftville. Land is the only capital asset on these islands, and their communities are primitive, needing only food and producing only food. Working eight hours a day, in fact, each inhabitant can produce enough food to sustain himself or herself. And for a long time that's how things go along. On each island everybody works the prescribed eight hours a day, which means that each society is self-sufficient. Eventually, though, the industrious citizens of Thriftville decide to do some serious saving and investing, and they start to work 16 hours a day. In this mode they continue to live off the food they produce in eight hours of work but begin exporting an equal amount to their one and only trading outle
Read more