Malhar's Investing Thoughts

Hello Malhar,

I live in Bangalore, let me know, if I can be of any help in your research.

Regards
Amit Singh Pal

@Malhar_Manek Hi Malhar. I have couple of queries pertaining to above stocks:

Talbros Engg:
How is this company better than Tabros Automotive. What is the revenue potential and scope of margin expansion, came to know that a new plant is getting operational in FY 24. There is no mention on potential business or growth in MD&A in 2022 AR, no investor ppt. On the contrary, Talbros Auto has clearly declared the new orders, potential of doubling turnover over a period of next 4 years. Your insights on this?

Loyal Equipments:
Nothing mentioned in MD&A regarding future potential. less info available in public as compared to Anup. In this scenario, how do you gauge the future potential in these kind of microcaps. Unless we have a strong conviction, allocation in individual stocks cannot be significant.

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Agreed there is very little clarity anywhere for Talbros engineering . Margins have expanded for the last year. There is just a line in the annual report saying they will focus on exports for growth. New plant will start in fy24 according to AR

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Hey @Malhar_Manek

Completely agree with you on finding insights in pages of history. As a 22 year old I only have experience of 4 years in the market but reading the great investor and businesses has improved me as a businessman (Like one of Buffet’s famous quips).

I’m starting my research on Lakshmi Electricals and would love to do it with you. Let’s pool efforts and research?

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Lakshmi Electrical control system AGM meeting details:

  1. Orderbook: As the company has very short delivery cycle and hard to predict for the long term basis and its as per customer requirements.
  2. Customer Acquisiton: Company is looking to add customers in electrical, plastics, ev chargers and smart meters.
  3. plastic segment opportunity- products consists of industrial and medical plastics and focusing on adding customers on yearly basis.
  4. EV and smart meters Opportunity : GOI is promoting the state discoms to implement smart meters and currently company is working into ac and dc chargers for 3w and 4w, single and three -phase energy meters.
  5. Capex - Estimates would be on business requirements on time-to-time.
  6. Margins - Its low due to raw material availabilty and customer demand and raw materials prices haven’t been recovered fully.
  7. promotors holding - Currently the promoter holdings is low but it would increase its holding as and when appropriate.
  8. Growth- Prof. have been hired already for the growth and company is working towards it.
  9. Roadmap - It wants to be a active player in electrical segment and looking to scale up new products.
  10. Revenue segments - textile, cnc, compressor industry.
  11. Automation of plants- Its under process and it would be starting in H2 of FY24.
  12. Products - assemble control panels for required for textile machinery and cnc machinery, manufacture industrial plastcs, use steel cabinets which products electrical components for panel assembly and polymer for industrial plastics.
  13. Company has done technology absorption for smart meters for which details can be seen in the annual report.
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Temporal Alignment in Investing

In meeting well over 200 investors and fund managers over the past couple of years, I have recognised something that separates the best from the rest: alignment. Alignment of interests, and alignment of time horizons. This post is on the latter.

Suppose a find has a long-term investment philosophy, e.g., an average holding period of 8 years. While raising funds, it is tempting to accept limited partners with shorter time horizons, in a quest to grow assets under management (and thus, fees). But doing so can wreck all sorts of havoc: furious clients begin calling after a quarter of negative returns or underperformance, not recognising the managing partner’s much longer outlook.

The very best fund managers I know turn down — refuse to accept — potential clients, when they sense misalignment. They focus instead on attracting aligned capital.

Say no to misaligned capital. One rupee of aligned capital is worth hundred rupees of misaligned capital.

— Mr Utpal Sheth (source)

Doing this is difficult in the short run, since it entails willingly forgoing fees. But in the long term, it imbues the fund with what my mentor calls temporal leverage: the ability to survive in order to thrive.

Consider Nicholas Sleep and Qais Zakaria, who co-ran the Nomad Investment Partnership and returned ~20% CAGR over 20 years.

They also took delight in turning away investors who seemed unsuitable or irritating, regardless of how rich they were. Zakaria chuckles at the memory of a comically awful meeting with a team that managed billions for heirs to the food-packaging company Tetra Pak. These financial advisers demanded access to Nomad’s proprietary stock research as a condition for investing their clients’ money in the fund. Zakaria says the atmosphere grew “frostier and frostier,” with Sleep crossing his arms and legs in a sign of mounting annoyance. After fifteen minutes, Sleep and Zakaria showed their visitors the door.

Richer, Wiser, Happier by William Green

How Nick Sleep Achieved a 20.8% Annual Return For 15 Years | DataDrivenInvestor

Mr Nicholas Sleep

Beyond investment management, I can think of 2 parallels of how misaligned time horizons cause problems:

  1. Asset-liability mismatch (ALM) in banks and NBFCs. Nearly every banking and NBFC failure (apart from outright fraud) involves ALM: borrowing short term and lending long term. In theory, the lender can roll over their borrowings repeatedly. When the goings are good, this works perfectly well…that is, until the tide turns.
  2. Companies that want to build for the long term are almost always punished by public markets (in the short term). Investing for tomorrow’s profit pools entails forgoing profits today: something not appreciated by most analysts and hedge funds, who prefer higher earnings next quarter. It is crucial to have shareholder-management fit, which is why Mr Sridhar Vembu — one of my favourite thinkers — makes it clear that Zoho has no plans to list anytime soon: they are building for the long haul.
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One of the study projects I’m doing is what influences which sectors and themes drive a bull market. Recently, defence, railways, EVs, engineering/manufacturing and PSUs have been the leaders.

In the 2010-2018 cycle it was NBFCs and high RoCE asset-light consumer companies.

The 2003-08 cycle was led by real estate, infrastructure, metals etc.

I am trying to understand: what factors drive this?

Some of my hypotheses include:

  1. Capital cycle of that sector
  2. Government policy push
  3. Starting/initial valuations

Thoughts invited.

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