Hello everyone,
(Note that this could be a long post, slightly different than the usual posts on this group, but I hope to keep the reader engaged through till the end).
Some background and introduction - I am a CA and based out of Pune. I picked up interest in stocks and investing after the heroic fall last Mar 20 due to Covid 19 when I was running helter skelter much like any other poor investor not having control of his emotions. However, something changed and I have already picked up books by Ben Grahahm, Gautam Baid, Morgan Housel with many more iconic books lined up.
To pursue something I have found a lot of interest in, I recently joined VP (couple of months ago) and the community is very interesting with a lot of people who have good / sound investing experience and with people from all walks of life. Some of the investing results of the pinned companies from 2010-2012 are stunning and a testament to the quality of the group. Quite excited to be a part of the group!
Having gone through multiple forums, one thing that I noticed was that all the companies covered here is that all are from India and that is 100% expected in line with the general purpose of the community (and mine as well, I didn’t expect anything different)!
While there is absolutely NO doubt in India’s growth story and the possible stock picks available in the market, we are living in an unprecedented time where every investor has the golden opportunity of investing globally (literally). People are under a misconception that investing globally means getting exposure only to “US” stocks etc. However, that is false. Using Interactive Brokers (or Kotak Securities now who have tied up with IBKR), one can invest globally on almost ALL the major exchanges. As I write, I currently have direct stock holdings in companies based out of US, Canada, Australia and (soon to add) China.
Since the idea of this community is research and trying to generate alpha or buying the “next big thing” years in advance, there is NO doubt that global investing opportunities offer nothing less (in fact more, WAY more). The idea of sharing my perspective is to re-emphasize (or to educate the non-aware person) of such possibilities. There are themes playing out in the world that will dominate the future like never before viz: AI, Blockchain, Robotics, EV - Battery Technology, EV - Hydrogen Fuel Cells, Power - Grid Storage, Solar etc etc. and investors like us have the opportunity to invest in such companies.
We have the possibility of spotting the next Amazon, FB, Tesla, Spotify, Sales Force, Square etc of the world. US specifically offers an extremely crazy range of options to invest in. Even if we were to accumulate the “circle of competence” of ALL the members of this group, we may not be able to cover the length and breadth of the possibilities and listed companies.
I would like to lay out that I am an ardent follower of Shark Tank and , my journey to even become an investor was deeply influenced by it. Of course being young and inexperienced, neither do I have the capital nor do I have the experience to invest privately via VCs / Angel Investing etc. [though that is a long term goal (inshallah)]. So public markets was the next best option and that’s what got me very interested in this space, specifically so, Global Markets!
The above background is important to shed light on my mindset and psychology of investing in the global markets. Being very interested in VC type early stage investing, I am totally open to the idea of investing in high-risk-high-reward investments (well aware that there is an extremely high chance of the investments going to zero).
After having read for the majority of Jan -Mar 21 (research reports, annual reports, investor presentations, authentic articles etc.), I am currently betting heavily on Lithium (white metal) (EV Battery related), Battery Technology (medium to high risk), 5G (low risk) and Psychedelic Investing (biotech for mental health disruption - super high risk). While each topic or all of them might deserve a detailed special post of its own, I would like to spend few minutes trying to share my observations on Battery Tech.
Battery Tech - This is absolutely inevitable in the multi-decadal theme that has started to play out. With a simple assumption that cost of car between EV and Internal Combustion Engines (ICE) will be at par soon (3-4 years), value will only be created in Batteries. The math is simple because batteries are estimated to be roughly around 50% of the cost of EVs!!! This is where investors can make money! There is an entire supply chain for battery and I am currently placing a bet on the LITHIUM space. I will soon add positions to the other supply chain constituents of Battery Tech as well.
IMO, Lithium could be for EVs what Oil is for ICE (keeping Hydrogen aside as that is likely to play from late 2020 or early 2030s onwards IMO). Having done some reading, research and trying to put pieces together around various chemistries, there is ONE common metal, LITHIUM. I will not go into much deeper topics / companies etc where I am betting as I first want to get a feel from the community on how they perceive this post.
Other themes I mentioned - 5G is no brainer multi-century (hyperbole or may be?) theme that has started however, I have not been able to identify many companies in this space that are small / medium which aren’t already FAANG levels as my intention is to find the next big thing (50-100x returns) vs (4-5x returns) on FANNG types (for these, I have allocated my portfolio in India where I safe similar return generation capacity at lower tax benefit). Currently, I have only one position in the 5G space (Skyworks Solutions Inc - 5G semi-conductor company for mobiles (and future IOT) which is a - major supplier to Apple iPhones and has a high margin of safety if high with strong FCF / cash balances and strong return rations. I want to add others and I am always on the lookout to add more.
I am also evaluating exciting spaces of Telemedicine (Teladoc), Insurance (Lemonade Inc), ECom (Etsy), Cloud (Sales Force etc) and many other disruptive business in the US (many established and proven, many not).
Portfolio Allocation
My Global portfolio is currently divided into Value Investing portfolio (or I hope they are so, I’m new!) and the other (what I like to call) Venture Investing portfolio. I have currently allocated around 10% of my total Equity portfolio to Global Investing, but with more study and research I may / will go up to 25% over time. Within that 10%, my current mix for Value vs Venture is around around 20:80 and that may continue in the future as my goal is to generate multibagger returns. I am confident that the well researched, well thought out bets can achieve this goal in spite of having to attract 20% LTCG (with indexation) on such gains vs 10% LTCG in India. As mentioned above, I don’t have any interest in investing in FAANG, I’d rather invest in HDFC Bank India.
Disclosures and Notes:
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The purpose of this post is to add Global flavor to Community and to spread awareness / share my path with the group and seek feedback. What I also hope is to engage the deep interest of few fellow enthusiasts interested in this Venture Investing space with whom I can bounce of ideas and discuss and grow together. Anyone interested, please drop me an email on swarang.tanksali@gmail.com
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Note that I am VERY well aware of the risks I am taking and that the Venture portfolio could go to zero. To mitigate such risk, I am diversifying. Generally, I am an extremely prudent person in life but I am taking calculated, well thought / researched bets that I hope will pay off in the long run. I might be wrong, but I am very excited to take this journey, however it ends (or continues!)
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Note that this approach is NOT for everyone. Due to my financial environment and responsibilities (no loans, stable job, no wife and no kids as yet etc.), I can afford to play such high stakes. For those cannot, it is best to stay away. Or rather get Global exposure via MFs investing Globally or Global ETFs. There are some absolutely solid future-tech ETFs (Global X, Ark Innovation etc.) that are available in the US and can be an easy route to invest in vs having to do the heavy lifting of researching etc.
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Note that Global Investing is something that is ideal only for fairly larger ticket sizes (this is subjective) but at least what I follow is to transfer amounts >= 1KUSD (or 75K equivalent). This is because the costs involved in transfers i.e. bank charges (I transfer via ICICI for 1,000 INR per transfer), brokerages, FX conversion can be quite high) and someone wanting to invest 10K just cannot easily beat these costs. 1K transfer fees on 10K transfer is straight away 10% costs on transfer an will need to generate 11% just to make up cost!
To conclude, for someone who has a risk taking appetite, keen interested in future / future technologies of the world, someone passionate about it, there are countless number of such possibilities out there. As much as I love my country and wish it becomes the 3rd biggest economy in the next 5-10 years, I cannot admit but say that there are opportunities outside that our country (at least public capital markets) simply cannot offer in the next decade. And that is why I choose to diversify Globally.
I hope to have engaged the readers and achieve some of the objectives that I set out at the onset. I haven’t gone in details of many of the themes as I first want to evaluate / seek feedback from this post first.
Until next time. Onwards and upwards. To generating wealth and achieving financial independence! All the best!
Thank you and cheers !
Regards,
Swarang Tanksali