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Nice Quant based overview of [15 Largest Housing finance companies]. Goes from sector level data to company level trends in ROE and valuations !
Hereâs the Full Report on Water Sector, by Ashika Institutional Equity Reserch.
Enjoy.
Water_Sector.pdf (2.0 MB)
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Tesla launches autonomous robotaxis and humonoid robots Optimus. Massive implications.
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A Series on how parts are manufactured using CNC Machines.
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Words of Wisdom by Sir Prabhakar Kudva
Change of management.
Next generation coming which focuses on growth. Management quality comes from experience.
Doing QIP again n again is a red flag. Management is being opportunistic in this case, exploiting the market, so these stocks are bull market stocks, will only do good in this cycle and after that wonât be seen for years to come.
Key points to focus in concalls-
Whats the growth they see in medium term?
Look between the lines, about growth and market dynamics, they wonât quote real numbers but they may use different different words of English and indirectly tell you a lot.
They might directly not tell you âwe will grow by 30-50%â, but use play of words.
Look for the management who are focused on long term and have clarity of though, for eg: Bajaj Finance management always telling we want to grow by this %, keeping the credit cost between x and y percentage points. Their goal is vert very clear. In the worst case also, you can see the downside. Compare it with other mocro Finance companies who are little jumbled up with all numbers.
Novice management may outperform the likes of Bajaj Finance for 2-3 years, invest in them but donât give them the freedom to manipulate you, always remember they are mediocre. Track them closely, donât get attached and give them chances to do mistakes. Keep your selling framework intact.
What do you do when TAM of a sector expands suddenly by good amount?
In this cycle, the TAM of power sector increased drastically. We were following the concalls and each management stated that this cycle is long and going to stay. Management of multiple companies from this sector said the same thing and this helped us build conviction. Due to expansion of TAM, the growth rate is continuing. And the high base which is set for last year is crossed by the company due to the expansion of TAM.
If TAM is big and the cycle is going to play for years to come, then we can tolerate a few soft quarters.
Position sizing- I assign 3-4% equal weightage to all portfolio companies. Playing the TAM of a theme, buy buying more stocks of the same sector rather than concentrating my bet on 1 or 2 companies. Can have 3-4 stocks of a sector.
Biggest gains are made when huge sectoral move happens, IT Boom of 2000, 2007- Infrastructure and real estate. Then consumption, private banks, then pharma and api during covid, after that Railway and Defense and PSUs. And then power and energy. Pick the sectoral trends right and the gains will be made rightly.
Never keep all your eggs in one basket. Diversify in 20-25 scripts.
Plus donât do all sorts of work- QUALITY, VALUE, SME, MOMENTUM; choose any one and do it again and again.
When someone is a longterm investor, his exit strategy will be totally different. He will hold onto it 5-10 years and the delta of return will be 5-10x and the company would be grown in such a way that now it would be difficult for it to grow further 5x.
Whereas for intraday trader, he will have small loss and small profit kind of strategy.
Exit strategy totally depends upon what kind of game you are playing.
I typically ignore 1 quarter of soft results coz there can be some one off or n number of reasons for the same.
But then 2 quarters of bad results come back to back, it is an area of caution for me.
Or if played our the theme for 5-6 quarter and the TAM has now been limited plus the base is large for the preceding year then I take some profits off the table.
It does happen that after delivering 2 bad quarters, company comes up with blockbuster 3rd quarter result and the stock reached back to its ATH, covering that 20-25% drawdown in short period of time and you lose that 20-25% gain. And from thereon, the game of blockbuster quarter continoues. And you have lost 50% of the gain.
For me itâs okay, as I have 3% allocation per stock, 20% losing will have .75% drawdown on portfolio level. But if a person has 20% allocation in a particular stock, then For him the drawdown of 20% will be terrible.
Itâs hard to have any perfect selling strategy. Just you can have clarity of thoughts.
Selling should be well matched to all their other criterias.
Be it postion sizing, timeframe, risk reward expectations.
Early momentum filter always excites me. If a stock started rally in last 1 to 3 months, do study these companies. Look for the catalyst such as earnings growth, future outlook.
Using price action to filter companies to study.
Apar was the greatest winner for us. 8-10 quarters back, all their cylinders started firing together be it cables, transformers and transformer oil. All the end user industry be it railways, power and transmission started blasting. And hearing the concalls that time, management seemed super bullish. Plus the valuation was at very very sweet spot that time. It was there at 15 PE and it was growing at 30-25%, plus there was longevity of growth and the power theme was fully ignored.
And then the entire sector started doing amazing on earnings.
It was a No Brainer for us. Had been 10-13x for us.
For us we had the limit of 3%, coz we manage public money. But for an individual investor this limit is not there.
All the checklist were at sweet spot in Apar be it valuations, growth and management.
Things that can turn around-
Consumables, textiles, soke of the consumer durables.
No need of new sector doing well, maybe an old known sector may start doing well again such as chemicals, private banks etc.
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Amazing post. I remember reading Atlas Shrugged and & Fountain Head many decades ago and it left a deep impression on me. Ayan Randâs clarity of thought remains unparalleled.
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Morgan Stanley on Measuring the Moat
article_measuringthemoat.pdf (1.4 MB)
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âThe past wasnât as good as you remember. The present isnât as bad as you think. The future will be better than you anticipate.â
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This letter is worth reading because it offers valuable lessons on long-term investing, grounded in thoughtful analysis and avoiding market hype. It also provides practical insights through real examples like Medi Assist.
Q2FY25 Investor Update.pdf (436.9 KB)
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Smart moneyâs take on Generative AI and the investment opportunities in that space.
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RAGs are passĂ©, agentic workflows (cognitive architectures) is the next stage in evolutionâŠas they have the capability to solve the messy real world problems.
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Two years ago apps on top of GPT3 were derided as thin âwrappersâ but this is where moat is and most value will be created (multiple Unicorns in the last couple of years and many more to come)
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From an investment standpoint, stay clear of investing in companies that are competing in Infra (Nvidia) and foundational model (Open AI, Meta) space
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