operations research

What Operations Research Is

In a nutshell, operations research (O.R.) is the discipline of applying advanced analytical methods to help make better decisions.

By using techniques such as mathematical modeling to analyze complex situations, operations research gives executives the power to make more effective decisions and build more productive systems based on:

• More complete data
• Consideration of all available options
• Careful predictions of outcomes and estimates of risk
• The latest decision tools and techniques

A uniquely powerful approach to decision making
You’ve probably seen dozens of articles and ads about solutions that claim to enhance your decision-making capabilities.

O.R. is unique. It's best of breed, employing highly developed methods practiced by specially trained professionals. It’s powerful, using advanced tools and technologies to provide analytical power that no ordinary software or spreadsheet can deliver out of the box. And it’s tailored to you, because an O.R. professional offers you the ability to define your specific challenge in ways that make the most of your data and uncover your most beneficial options.

To achieve these results, O.R. professionals draw upon the latest analytical technologies, including:

• Simulation Giving you the ability to try out approaches and test ideas for improvement
• Optimization Narrowing your choices to the very best when there are virtually innumerable feasible options and comparing them is difficult
• Probability and Statistics Helping you measure risk, mine data to find valuable connections and insights, test conclusions, and make reliable forecasts

Already at work around you
O.R. has enhanced organizations and experiences all around us. From better scheduling of airline crews to the design of waiting lines at Disney theme parks. From two-person start-ups to Fortune 500^® leaders. From global resource planning decisions to optimizing hundreds of local delivery routes. All benefit directly from O.R. Shouldn't you?

how to buy a stock

. Get a broker

People like you and me cannot just go to a stock exchange and buy and sell shares.

Only the members of the stock exchange can. These members are called brokers and they buy and sell shares on our behalf.

So, if you want to start investing in shares, you can do it only through a broker.

Every stockbroker has to be registered with the Securities and Exchange Board of India [ Images ], which is the stock market regulator.

You can either choose a broker (who is directly registered with SEBI) or a sub-broker (people licensed by brokers to work under them).

The Bombay Stock Exchange directory or the National Stock Exchange Web site will give you a list of brokers affiliated to them. Most of them entertain retail clients.

If you want an online broker, you can start by looking at the Web sites of some well-known online players: Sharekhan, Kotak Securities, ICICI Direct, 5paise and India Bulls.

• How to sell shares at the right time

2. Get a demat account

Gone are the days when shares were held as physical certificates.

Today, they are held in an electronic form in demat accounts.

Demat refers to a dematerialised account.

Let's say your portfolio of shares looks like this: 40 shares of Infosys [ Get Quote ], 25 of Wipro [ Get Quote ], 45 of HLL [ Get Quote ] and 100 of ACC.

They will show in your demat account. You don't have to possess any physical certificates showing you own these shares. They are all held electronically in your account.

Periodically, you will get a demat statement telling you what shares you have in your demat account.

How to get a demat account

To get a demat account, you will have to approach a Depository Participant.

A depository is a place where an investor's stocks are held in electronic form.

There are only two depositories in India -- the National Securities Depository Ltd and the Central Depository Services Ltd.

The depository has agents who are called Depository Participants. In India, there are over a hundred DPs.

Think of it like a bank. The head office, where all the technology rests and the details of all the accounts are held, is like the depository. The DPs are like the branches of banks that cater to individuals.

A broker, however, is not similar to a DP. A broker is a member of the stock exchange and he buys and sells shares for his clients and for himself. A DP, on the other hand, gives you an account where you can hold those shares.

To get a list of the registered DPs, visit the NSDL and CDSL Web sites.

• 5 rules when buying stocks

3. Get a PAN

The taxman demands that you get yourself a Permanent Account Number.

This is a unique 10-digit alphanumeric number (AABPS1205E, for example) that identifies and tracks an individual in the taxman's database.

Almost every money transaction demands the use of a PAN. These include:

~ When you get a job

~ When you file an income tax return

~ When you open a bank account

~ When you deposit cash of Rs 50,000 or more in a bank

~ When you open a bank fixed deposit of Rs 50,000 or more

~ When you open a post office deposit of Rs 50,000 or more

~ When you buy/ sell shares and mutual funds

~ When you buy/ sell property

~ When you buy a vehicle

~ When you take a loan: home/ personal/ other

~ When you install a telephone (or buy a cell phone)

~ When you pay in cash to hotels and restaurants against bills for an amount exceeding Rs 25,000 at a time

~ You also need to mention it in every transaction you have with the tax officials.

If you are going through a tax consultant, you need not worry. He will supply you with Form 49A (the application form for the PAN number) and give you a list of the documents he needs.

However, if you believe in doing things on your own, the process is really not that tedious.

You could visit the official Web sites of the Income Tax department or UTI Investor Services Ltd or National Securities Depository Limited.

Download Form 49A from any of these sites and follow the instructions.

You should get your PAN in the form of a laminated card within a month.

• 3 stock market mistakes to avoid

4. Check if you need a UIN

This depends on how much you plan to invest.

The Unique Identification Number is the identification an investor needs to buy and sell shares or mutual fund units.

It is part of the Security and Exchange Board of India's attempt to create a database of all Market Participants and Investors, called MAPIN.

Who needs a UIN?

An investor who is involved in a single transaction of Rs 1,00,000 or more will have to quote his/ her UIN.

If you plan to be a prominent stock market player or a mutual fund investor and expect to deal with such huge amounts in the near future, you should get a UIN.

SEBI has appointed the National Securities Depositories Ltd that, in turn, has appointed Points Of Service agents. The NSDL Web site has a list of the POS agents.

Visit the office of a POS agent. Make sure you take an appointment before you go. As part of the application process, your fingerprints will be scanned and a photograph taken.

All you have to do is fill and submit an application form (there are separate forms for corporates and individuals). You can also download the form for an individual at the NSDL Web site.

Incidentally, the UIN is totally different from a PAN. The Permanent Account Number is an identification number for filing your income tax returns.

stocknews

Stay away from hot tips

Being a low risk operator, your leitmotif in life is to avoid anything hot. Touching anything hot will not only scald you but could well burn a hole in your pocket. Rumor mills in our bourses will always provide grist to the mill, but we suggest you not to get pounded inside it. Here it would be pertinent to talk about 'momentum investing' or buying what is going up and thus, has the momentum. Simply put, it means 'join the gang'. If everybody thinks stock x is a good buy, then it has to go up because everybody will buy it. Yes, it works fine for a month or two. But the only problem is that you are likely to be one of the last people to join the herd and will not know when the momentum reverses. And then the herd becomes a stampede. So, stay away from 'hot stocks'.

Look at the management quality

Thou shall keep away from a company run by management with a track record of incessant wealth dilution or corporate mis-governance. It is all the more relevant in India as there have been numerous cases where fraudulent promoters have literally flown with cheap equity money. But how do you judge management quality? The best place of course is the annual report. A company's attitude towards minority shareholders is important. And this is not reflected in discount coupons or soft drinks at Annual General Meetings. Good indicators to consider are level of disclosures in the annual report, levels of investments in group/ associate companies, etc. However, the only exception to this commandment you can make if you have a reliable report that the management is changing for good.

Do not buy stocks of the same feather

Putting one's eggs in a single basket is naïve. So also keeping a large portfolio. This could turn unwieldy and is a sure recipe for below average returns. But how on earth would you chose stocks in a market with more than 6,000 scrips? Well, the choice will remain confined to those scrips, which are frequently traded. But then nowadays most IT and media stocks are well traded. So does that mean that one's portfolio should contain only IT and media companies? Nah… To limit risks it is important that you don't go gung-ho on some sectors as their fortunes change without taking your permission. You shall choose such scrips, which represent the broad spectrum of industries and confine your choice to those who are proven market leaders in their field of business. You buy businesses and companies. You do not buy the market or stock prices. An exception to the market leader rule can be made only if there is a big turnaround or restructuring story.

Next comes the allocation of weightage. Sectorwise weightages (how much to put in steel, how much in petrochemicals and how much in IT?) would be decided on the top down view of the sector's prospects. You should review this annually at least, unless there are major events demanding more frequent reviews. And for recent views on various sectors to aid your decision making, you can read the reports at 5paisa.com. As the Pope (Alexander Pope, I mean) had once stated that all human beings do err, it is best that you invest in stocks which give you an easy exit route.

Strong industry and company position

You are known by the company you keep. Similarly, a company is known by the industry it is in. A company's performance can be as good as the industry it is in. Look at what happened to a blue chip company like Telco in the last three years. It is the fifth largest manufacturer of commercial vehicles in the world. It is a market leader with 75% market share of the Indian commercial vehicles market. If just by looking at these figures, a fool had invested in the stock at Rs500 three years back, his capital would have eroded about 70-80%. What went wrong? The industry went into a recession. So even the best company in the sector turned in very poor performance. Hence, it is important to understand industry dynamics and industry prospects.

Positive cash flows

You shall invest only in companies that are expected to have a positive cash flow in the next 3 to 5 years. In other words, the companies that will have 'operating' cash flows higher than their requirements for capital expenditure and investments, only merit a look. The important phrase is of course 'operating cash flows'. Operating cash flow is the profit after taxes (net profit) plus depreciation (a non-cash expense). It represents the money left with the company after meeting all its regular expenses and therefore belongs to the shareholders -i.e. you.

But you have every right to ask why is cash flow so important when the company may be making bumper profits? Isn't that sufficient? No, we Fool's would say. Again take a simple example. Company A produces product X for total cost of production of Rs90. It sells it for Rs100 cash down payment (no credit sales). Company B produces the same product for Rs90 and sells it for Rs110 on credit of 6 months. Obviously Company B is more profitable. But if this cycle goes on a time will come very soon when Company B will run out of cash and will not be able to produce its products. Or for sometime it will borrow money at high rates of interest and ensure that its cost of production becomes Rs100. Either way you can now guess who the winner would be in the long term. No prizes for getting this right - yes, it is Company A. The point is that cash flow to a company is like the heart to a body - a perfectly healthy body can come to naught if the heart is weak. So it is with companies.

1. Gujarat Ambuja Ltd
This stock absolutely transcends time, unless we decide to go back to the caves. Impeccable management, strong earnings potential, omni-present demand for cement and a company which is miles ahead of other laggards (mind you, not competitors) in the industry. 5p could not get into the Kaun Banega.. sitcom. Therefore we decided that buying into GACL was easier. After all, we do not want our grandchildren to ask us - Kyon nahin bana karodpati?

2. HDFC Bank Ltd
A true blue 5p solid steady stock - Starting on a clean slate, low base and terrific management, this stock will lick the erstwhile masters (read SBI) in its own back-yard. Moreover, no frills, no nakhra, no fuss and an absolute chocolate mousse. No unnecessary tension of asset quality, manpower and technology. The Rock of Gibraltar of the 5p solid steady portfolio.

3. Hindustan Lever Ltd
HLL will flourish as long as humans inhabit the planet. Ok, alright, if not the planet, at least India. Top of the mind brands sold through a penetrative distribution network fueled by tons of cash and a thoroughbred management. Ooh! Don't we love this all-pervasive company? In fact, a lot of aspects of our life do hinge on this FMCG major. So we said, why not make HLL a part of our low risk - money making - rock steady 5p portfolio too? Another sheet anchor for the portfolio.

4. Hero Honda Ltd
This is one automobile company, which has remained on the top of charts of every mutual fund worth its NAV. With consumer preference having shifted to the motorcycle segment, it has just the right kind of models to lure the old and the young with a mix of power, style and fuel-efficiency. And what's more, the company has enough cash to take care of capex needs and is well on its way to become debt free by next year.

5. Infosys Technologies Ltd
It would be blasphemy if any portfolio overlooks this stock. What do you talk about ITL? - fantastic management, focussed vision, Industry leader, excellent manpower …or maybe we should just call it the proxy for the Indian Software Industry. Its potential for growth combined with little downside risk, makes ITL one of the sheet anchors of the 5p steady stock portfolio.

infor

Welcome to Online MBA where we can help you prepare for a better and more exciting career in business. Now you can obtain your degree at your own pace and schedule without putting your career ambitions on hold. An online MBA will help you compete in today’s highly competitive and fast-changing job market. We have the answers to all your questions about MBA applications, programs, careers, and more. Read through our blog to find helpful advice for students as well as up-to-date business news. No matter what your interest or career field is, we help help you find a high-quality MBA program to meet your needs and achieve your goals.

Earning your MBA is a fantastic idea during these economic times. You are suddenly more attractive to all employers and the degree is quite popular for those who want to advance their careers. The question is whether it is worth dropping out of your current job and studying for 2 years for the degree. However the good news is that you don’t have to. With an online MBA program you have the convenience of studying when it works best for your schedule, after your work and family matters, you can attend virtual courses and earn credits to obtain your MBA. In recent times, an individual with an MBA earned an average of $104,000 as a CFO and those with a bachelor’s degree earned less than $90,000, that is a significant difference and worth your time. Other studies reveal that workers with MBAs earn upwards of 150% more over a lifetime than those with simply a bachelor’s.