Friday, July 12, 2013

Does Project Management triangle require revision?

The world of project management is familiar with the famous triangle of change. The triangle says that any side can change provided the other two sides balance the effect. The triangle commonly known as Scope Schedule Budget triangle has been the basis of project management for many gurus and experts in the field.
Picture taken from projectmanagementguru.com
I however feel that the triangle needs a revision now. The triangle talks about the scope, cost, schedule and their effects on the quality, but it does not take in to account the morale, enthusiasm and the involvement of project employees or stakeholders. It has been shown via various surveys that a project with constantly changing scope, schedule or budget leads to low employee / stakeholders' morale or dedication and a low participating employee / stakeholder morale or dedication is much more likely to face failure even if the scope, cost and schedule are balanced.
I propose to encircle the triangle in a circle which I like to call the stakeholder morale limit (SML). This is the locus of all the points which define the employee /stakeholders' threshold of coping up or adjusting with regularly changing scope, schedule or budget for a project. All extensions/adjustments to the sides of the triangle are allowed only if the triangle still fits inside the circle. Any extensions outside the circle boundary are unacceptable as it takes the project to a low employee morale or dedication zone which would adversely effect the project outcome.
                                       


I welcome an open discussion on this if anyone is interested. Looking forward to exchanging a constructive argument on this.

Thursday, July 11, 2013

Suzlon Analysis Dec 2012

Many folks asked me to do an evaluation for Suzlon in Dec 2012. I predicted the price to be 27.44 in a few months when the market price was only 18. Some termed it as a gutsy call given 52%expected rise in price, but the price did go up to 26.9 as predicted. Snapshot of my Suzlon Analysis Dec 2012 showing prediction for prices in Jan, Feb 2013 is shown here.
I am sharing this information for those who still want to invest in the company because my latest calculations (not shown here) predict an upward trend again in a few months.
Disclaimer- Although I used CAPM (which we all know is not error free), I did take into account a lot of  systematic risk factors, macro economic factors and future possibilities in this calculation. I have studied and followed the company for more than 3 years now.


Monday, July 8, 2013

Trading portfolio v/s a man with a dime!!

Trading portfolio v/s a man with a dime!!

Go to any stock broker or anyone familiar with the financial markets and he/she will advice you to maintain a trading portfolio covering different sectors of the economy.
Having nothing else to do this evening, I planned to see how this strategy shapes out and calculated the returns of a sample uniformely distributed portfolio over
a) A long term investment- 3.5 year time          b) A short term investment- 1 month time

and something POPPED up, which grabbed my attention!!

Long term investment- If an investor invested INR 10,000 in this portfolio on Jan 1, 2009 with uniform distribution across shares, as expected, this long term investment in portfolio would give him higher returns than traditional sources such as a Fixed deposit etc. and he would have earned INR 9919.93 more than what FD would have given him. This was a no brainer!!










Short-term investment-If the same investor invested INR 10,000 in this portfolio on June 10, 2013 with uniform distribution across shares, this short term investment in portfolio would give him returns much worse than traditional sources such as a Fixed deposit etc. and he would loose INR 372 . This again is kind of expected given bearish market trend and volatility.

The brain teaser started when I tried to find the investment required so that investing in this portfolio for short term would be more profitable than the Fixed Deposit and I was stumped to see that there was no answer to this. No matter how much anyone would have invested in such a portfolio over this past one month, he/she would have only lost money.

Section for finance nerds (Alas! you too need to read this to get the pun in the title)-
Now, I know people with advance finance degrees and experts from the world of MBA would argue about  this portfolio validation, consideration of beta while forming a portfolio, validation of historical data in future models and hundreds of other technical issues but your (99%, if not all) arguments would be based on Capital asset pricing model, which itself has numerous flaws.
With every assumption you make in your model, you reduce the probability of your model actually working in the real world and often the most trusted finance gurus have models with working probability <50% due to these underlying assumptions (which of course never come out of the dungeons of secrecy!!). Hmm... in that case, why not just toss a dime and buy a stock!! (50% working probability).
so, need a COIN ANYONE!! 
Strategy image taken from hotel-innavoder.com