ISSUE NO. 1 FREE UNFORTUNATELY

DONT WORRY WE JUST CHOSE A BORING COVER TOLOOK PROFESSIONAL

VALUE TORTOISELearn about investing in athletes, how the

economy works , how much CristianoRonalodo's Instagram account is worth and how old mythological stories can

make you a better investor.

Also there is a terrible finance pick up line

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AGAIN

CO

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NTS

TA

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OFI N V E S T I N G I N A T H L E T E S

WA T E R S T O C K S I N I N D I A

I N V E S T I N G L I K E

S H E R L O C K

2 I N V E S T I N G G E N I U S E S

F R E A K O N OM I C S

T A K E AW A Y S

C R I S T I A N O R O N A L D O

I N S T A G R A M V A L U A T I O N

H OW D O E S A N E C O N OM Y

WO R K

M A H A B H A R A T A A N D

I N V E S T I N G

WH A T Y O U S H O U L D K N OW

A B O U T T H E P E R A T I O ?

A R E L A T I O N S H I P

A N A L Y S I S

S U R V I V O R S H I P B I A S

People would invest in his contact similar to how they would invest in a corporate or treasury

bond. In monthly installments investors will be paid back their money with interest. It works

like a loan where the collateral is backed by a 34 million dollar contract.. An investor may get

decent returns but he or she will undertake idiosyncratic risk will undertaking this project.

The NBA has not allowed this yet but it is an interesting situation to monitor. To know more

about this check out https://dreamfanshares.com/sd8/

Fantex Holdings is an investment organization that invests in players and in return get a part of

their future earnings as cash flows. While it is running in US it will be interesting to monitor if

this takes place in sports like cricket or football.

I N VE S T I NG I N

A TH LE T E S

Spencer Dinwidie is a basketball player who plays for the Brooklyn Nets. He wants to convert his

3 year 34 million dollar contract into a tradeable financial asset.

WATER

WATER STOCKS ININDIA

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According to this webpage on Investopedia,“70% of the earth’s surface is covered inwater, but 97% of it is saltwater, which isunfit for human use. Saltwater cannot beused for consumer consumption or evenirrigation. Only 3% of the world’s waterresources remain, and from that, only about1% is readily available for humanconsumption. With this in mind we mentiona few companies that an investor can lookinto if they are interested in the waterindustry in India.

While these are 4 companies that are directly involved in the water industry,their are many other companies that may not be in the water sector but areheavily affected by water. Shrimp industryCoastal Corporation ,Waterbase , Apex Frozen , Zeal Aqua Water tanker manufacturersEicher Motors. Tata Motors. Ashok Leyland Pump manufacturersKSB Ltd. Kirl Brothers, WPIL Other CompaniesVarun Beverages – Varun Beverages is a company that engages in themanufacturing, selling, bottling and distribution of beverages of PepsiCo’sbrand in selected areas in India. While we dont recommend investing in any of the companies we definitely urge you to keep tabs on the water industry in India.

Pure Water isthe World's Firstand ForemostMedicine.

Ion Exchange Thermax

VA Tech WabagTriveni Engineering

and Industries Ltd

Water Industry Stocks

"It is a capital mistake to

theorize before one has data.

Insensibly one begins to twist

facts to suit theories, instead of

theories to suit facts. "

(Holmes; A Scandal in

Bohemia)

If I tell you that Apple is a good

stock to buy. The next day it

increases by 2%. You might go

on to think Im good at

investing. That is wrong as this

is a sample size of 1. Repetition

is key when it comes to

making conclusions from data.

"You can, for example, never

foretell what any one man will

do, but you can say with

precision what an average

number will be up to.

Individuals vary, but

percentages remain constant. "

(Holmes; The Sign of the Fear)

This is the reason why casinos

win. They cannot control the

outcome of one event but on

average they can. In investing,

diversification between assets

with low correlations is a must

for the same reason mentioned

above.

"The smallest point may be the

most essential. (Holmes; A

Study in Scarlet).. When going

through annual statements

you may be overcrowded with

words and numbers and data.

While this can get irritating the

smallest footnotes can be vital

in many cases. The devil is in

the details."

For more on Sherlock Holmes a

and investing look into the

book "A Few Lessons from

Sherlock Holmes" written by

Peter Bevelin

SHER LOCK AND

INVES T I NG

2 INVESTING GENIUSES ANDTHEIR BASIC IDEAS

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Ray Dalio Who is he - Genius, Billionaire, Playboy, Philanthropist.(one of them is probably a lie). Also he foundedBridgewater ( One of the worlds largest hedge funds) To him , income from different sources that are notrelated to each other is the "holy grail of investing" .Ofcourse doing that is not as easy as it sounds. Also he has come up with the All Weather Portfolio. Books - Long Term Debt Crisis and Principles He has a video title "How the economic machineworks". WATCH IT ASAP

Charlie Munger Who is he - BFFS with Warren Buffett. Alsovice chairman of Berkshire Hathaway. He knows a thing or two about investing. If  he were a tennis player he would be likeNovak Djokovic.  Minimizing unforcederrors. As he himself says "It is remarkablehow much long term advantage people likeus have gotten by trying to beconsistently not stupid, instead of trying tobe very intelligent. Book - poor charlie's almanack

INVESTING LESSONS FROM ZNMD

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ZNMD is a popular Hindi movie that was released in 2011. While it was primarily a romanticcomedy /drama/  it has quite a few lessons hidden in it for investors. Here are some of them . 1.. Markets can overreact. Natasha - "Laila tumhari dost hein" Kabir - "Woh hamari diving instuctor hein" 2. You cant plan for everything Kabir did not plan to propose to Natasha,. Arjun did not plan to meet Laila. Investing too is not ascience. You cannot plan for everything All you can do is have faith . In your investing journey youare bound to encounter positive and negative black swans. 3. How important is money?The movie talks about how money is not the most important thing in the world. While that is truewe must remember that the movie is set in Spain. It is a bachelor pad where investors fly all aroundSpain for a luxurious trip. Money management and investing may be crucial if you wish to enjoylavish trips around the world.

HEY GIRL, DID YOUKNOW THAT THEMARGINAL UTILITYOF SPENDING TIME

WITH ME WILL

NEVER DIMINISH

Monthly pick up line

This is going to be a quick discussion of the

book Freakonomics which is written by Steven

Lewitt and Stephen Dubner. It is a great read for

anyone interested in psychology, economics,

finance, business or just the hidden meaning

behind our actions. We took away 4 principles

from the book and want to share them here.

Incentives don’t always work the way they are

supposed to The example we like, which is

mentioned in the book, is if you get paid for

donating blood then more people would

donate blood. While in theory that sounds right,

but it did not work as donating blood is

altruistic and adding a monetary benefit in

some ways cheapens the deal. People donate

blood due to the goodness of their heart and so

when they do so they feel good about

themselves. Adding a monetary benefit removes

that feeling and makes it look like a transaction

and hence in many cases leads to people

donating less blood.  Of course, if the monetary

benefit is too much then there may be some

issues where people start donating blood

illegally and so often just adding a monetary

benefit cannot work as an

Just because two things happen simultaneously

doesn’t mean that one causes the other.

Correlation does not imply causation. This is

actually really easy to understand but often

ignored, and so a simple example would be if

you attended 5 football games and your team

won all those games, then you might think

you’re the lucky charm. That simply is not true.

Humans are not good at making decisions and

accessing risk.The example used is the book is

that kids below 10 have a higher chance of

drowning in a residential pool, than by being

shot. Of course, we never look at pools the same

way we look at guns. Another example is there

are more chances of dying while driving a car,

than traveling on a plane and yet we are more

scared of the latter. One of the reasons behind

that is that we are scared of the things we

cannot control and as we cannot control a plane

we are more uncertain about it compared to a

car. Information asymmetry exists in the world

we live in.

FREAKONOM ICS

TAKEAWAY

Cristiano Ronaldo is known to almost everyone

as one of the best footballers to ever play. He is

also a marketing machine. That inevitably

makes him an Instagram influencer. With more

than 180 million followers  Ronaldo is bound to

make a ton of money simply from his Instagram

account. This brings up the question of how

much Cristiano Ronaldo’s Instagram account is

worth. Fortunately, any asset with future cash

flows can be valued and that is exactly what we

venture into.

How much does Ronaldo earn from Instagram?

While there is no official source many unofficial

sources state that Ronaldo earns close to a

Million US Dollars per post. The exact amount is

$975000 according to this article on BBC.

How much will these earnings grow?

Making an educated guess with the hope of

being conservative, we are going to assume that

Ronaldo’s earnings from Instagram will not

grow in the future. He is 34 years old and at the

twilight of his career. While he is still a

phenomenal player, he cannot play forever. As

he stops playing eventually his sponsorship will

also reduce. Furthermore, Ronaldo has his own

brand, which is not included in sponsored

posts.We make the assumption that for the next

5 years, Ronaldo will maintain the same

earnings. After those 5 years, his earnings from

Instagram will reduce by 8% annually for the

next 10 years.

us a value of close to 312 Million Dollars .

At what percentage will you discount his

earnings (Cost of Capital)?A

s Instagram account is not equity, we cannot go

into deep details into calculating the cost of

equity. With companies, we often notice that the

cost of equity ranges from 8% – 15%. To keep

things simple, we use 12% as the flat discounting

rate for this valuation.

HOW MUCH I S

CR I S T I ANO

RONALDO ’ S

INS TAGRAM

ACCOUNT WORTH ?

What will the terminal value of his Instagram account be?

When you want to end any valuation, you have to estimate the terminal value. One can do so by

assuming that every business will run till perpetuity and value the business at perpetuity. This

though, is not possible as Ronaldo is only human.We could estimate his earnings till he turns 80

or 100 but that will be a lot of assumptions for a very long period of time. The biggest one being

the fact that Instagram will still exist.To make things simple, we decided to use a Price to

Earnings ratio. Ronaldo’s page will be declining after 15 years and his growth too will be

negative. This will lead to a very low PE ratio. We make an assumption and use 5 as the PE

.Conclusion

Running a DCF, we estimate the future earnings of Ronaldo’s Instagram account and discount

them back to the present at 12%. That gives

HOW MUCH I S CR I S T I ANO

RONALDO ’ S I N S TAGRAM

ACCOUNT WORTH ?

FOR DAILY

INTERESTING

FINANCIAL

CONTENT

FOLLOW

@VALUETORTOISE

ON INSTAGRAM

HOW DOES AN

ECONOMY WORK ?

To get a better idea of

this watch the video

"How an economic

machine works" by Ray

Dalio

MAHABHARAT

AND I NVES T I NG ?

Apart from being an epic with incredible attention to detail the Mahabharata is filed with

investing lessons.. Here are some of them.

Over diversification may not always give better returns. You probably already know where this is going. It eventually was five Pandavas and

LordKrishna versus 100 Kauravas. As you may know, already Pandavas were victorious. Now we

I do not mean that diversification is a bad thing. We are a huge believer in uncorrelated

diversification. However we are simply making the point that diversification to the point that it

becomes difficult to handle is not worth the trouble.

You can’t have everything. Draupadi in her previous life had asked Lord Shiva for a boon. She had asked for a husband

who should be righteous, brave, accomplished, handsome and intelligent. Shiva said that it

would not be possible to find a man with all these qualities and hence she would have to

settle for five different husbands. Yudhistra was the righteous one and Bheem was brave.

Arjun was an accomplished archer. Nakul was handsome and Sahdev was said to be

intelligent.In his book, One up Wall Street Peter Lynch classifies stocks into six types. Slow

Growers, Stalwarts, fast growers, turnarounds, asset plays and the cyclical stocks.

Unfortunately, the only way you can have all of them is by investing in six different stocks. You

cannot expect a single stock to have all these qualities.

Always have an exit plan.This was mentioned by Mr. Pabrai in his book, "Dhandho Investor". Abhimanyu, the son of

Arjun & Subhadra had entered the Chakravyu(battle formation) in the war to help the

Pandavas .The background of this story is quite interesting. In the Pandavas, only Arjun knew

how to enter and exit a Chakravyu. Long before the war, Arjun was narrating to Subhadra how

to break the Chakravyu. At this time Subhadra was pregnant with Abhimanyu. Unfortunately,

Arjun could only completely half his story and hence could not tell Subhadra how to exit the

Chakravyu. He only told her how to enter it.Nearly sixteen years later Abhimanyu to help his

comrades entered the Chakravyu but did not have the knowledge on how to exit it.

Unfortunately, this led to his demise.This tragic story highlights the importance of having an

exit strategy and again having complete knowledge about something before venturing into it.

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The simplicity of the PE ratio though can also be its downfall. People often

blindly compare the PE ratios of 2 companies from different sectors. Even

comparing the PE ratio of 2 firms from the same sector is not a wise decision.

While ratios are meant to be compared, there are a few more factors which

need to be considered before a person judges a company just by its PE

ratio.Companies with high PE ratios are said to be expensive but are expected

to grow in the future.Companies with low PE ratios are said to be cheaper but

may also undervalued. They may also be slightly riskier.Usually, value investors

look for low PE, companies, but not always. A company can have a high PE ratio

and still be undervalued.

Ratios are merely useful for pricing and true valuation or intrinsic valuation

cannot be carried out using ratios. However one can adjust the

dividend discount model slightly to get a formula for an intirnic PE ratio.

WHAT YOU SHOULD KNOW ABOUT THE PERATIO?

A RE LAT IONSH I P

ANALYS I S

Inspired by BCG analysis of romance

SURVIVORSHIPBIAS

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One very commonbias in investing.

Survivorship bias or survival bias can be defined as the “logical error of focusing on  the

people or things that made it past some selection process and overlooking those that did not,

typically because of their lack of visibility.”

For example, if you were surveying people who survived a plane crash and they claimed that

they were praying while the plane was crashing, you might go on to write an article on how

praying can be beneficial during a plane crash.

That seems reasonably until you realized that you did not interview the people who died.

(cause duh) Similarly in investing, one may fall for survivor-ship bias if one calculates the

performance results of a group of investments using only the survivors at the end of the

period and excluding those that no longer exist

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VALUE TORTOISEHope you enjoyed reading it.

If yes, follow us on Instagram as we

post daily. (@valuetortoise)

We also run the website

www.valuetortoise.com

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