Rudra’s PF and Information attic

Prdnt_investor · December 16, 2023, 5:57am

Good practical lessons from Charlie Munger as highlighted by Dherendra Kumar of Value Research in this article

In times of market volatility…: He famously said, “The big money is not in the buying and selling but in the waiting.” An investor following this principle would likely remain calm during market volatility, avoiding impulsive decisions. They would focus on the long-term value of their investments rather than reacting to short-term market fluctuations.

Evaluating investment opportunities: Munger advocates for thorough understanding, saying, “I never allow myself to have an opinion on anything that I don’t know the other side’s argument better than they do.” An investor guided by this principle would thoroughly research and understand potential investments, including their risks, benefits, and, most importantly, the viewpoints of sceptics.

During market bubbles or fads: Reflecting his contempt for following the crowd, Munger said, “Remember that reputation and integrity are your most valuable assets — and can be lost in a heartbeat.” Investors influenced by Munger would avoid getting swept up in market manias or speculative bubbles. They would focus on investments with solid fundamentals and intrinsic value rather than chasing high-risk, high-reward trends.

In managing portfolio risk: The most appropriate quote is the one I started with. “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid instead of trying to be very intelligent.” Such an investor would prefer a portfolio of high-quality, understandable investments over a complex or overly diversified portfolio. They would focus on avoiding significant mistakes rather than seeking extraordinary returns.

While dealing with investment losses: Munger is known for his resilience and long-term perspective. He advises, “All I want to know is where I’m going to die, so I’ll never go there.” This metaphor suggests that investors should learn from their mistakes and avoid repeating them rather than dwelling on the losses.

Continuous learning: Munger places a high value on constant learning, as indicated by his quote, “I am a biography nut myself. And I think when you’re trying to teach the great concepts that work, it helps to tie them to the lives and personalities of the people who developed them. I think that’s an underutilised teaching device.” An investor influenced by Munger would, therefore, be committed to ongoing education, learning from the successes and failures of others, and continually refining their investment approach

Admitting mistakes: Arguably, the most important one, “I like people admitting they were complete stupid horses’ asses. I know I’ll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn.”

Prdnt_investor · December 17, 2023, 4:00am

Amazing session from Sanjeev Sanyal, member of the Economic Advisory Council (EAC) on Process Reforms which helped reduce rent seeking at the State and Central Govt level and bring in high efficiencies in regulatory processes. Kudos to such brilliant officers for their leadership & reform mindset.

Prdnt_investor · December 17, 2023, 1:34pm

Investing Accelerator Summit (IAS)

2022 Session - Performance over last 1 year. Some great picks

2023 Session - 17th Dec 2023

Pointers from some key presentations
[Courtesy Twitter Handle: @bhaavander (https://twitter.com/bhaavander)]

1. Senco Gold: Play on organization play in the jewelry industry. Headed by 4th gen entrepreneur Sukumar Sen. Trend tailwind in this sector for all players. COCO, COFO and FOFO stores are 3 models. The company mainly operates in COCO stores. Eastern geography player expanding there. So brand building in that region. LGV can also be an opportunity for them. Aspirational customer base as their average revenue from one is low…so beneficiary of LGV where low-cost sales are big. Same-store sales growth is also increasing where expenses don’t increase so margins can increase.

2. HFCL: Gov pressure to grow indigenous tech development in Telecom and Defence sector. Big company known for optical fibre cable but also moving into telecom and defence. HFCL is working with a lot of big names to develop RnD partnership with Wipro etc. Rerating is a big opportunity in long term when revenue from Defence becomes substantial. Dependent on gov dealings so projected timeline needs to be taken with a pinch of salt. Opp. size is big. Rerating can also due to happen in Telecom segment. Product is already tested and implemented in standardized geographies like US so high chances of acceptance and growth here. PLI scheme beneficiary. Anti China sentiment will also benefit the co.

3. Greenply : Plywood has the largest share in the wood panel sector. Type of duopoly in the sector just Greenply and Century ply in organised sector. Organized players going to continue to increase mkt share. Antifragile- not just survive but thrive in chaos. marketing becomes imp as the sector is also customer facing so brand takes time as well as effort, so that also adds to the expense. MDF is low gross business but once capex comes online, the margins come back to optimum levels. Everything is a function of place and time!

4. All E Technologies: Product engg partner with Microsoft, winning MS partnership awards for 6 times in last 15 years. OpenAI azure service access to them due to partnership. Already deployed some solutions. With marquee clients like MMT, later increasing to other travel services like yatra due to their work with MMT. Product pf from Edtech, manufacturing and customer exp solution, Banking etc. Thesis- moat may not be in the product but with the channel partnership. Co-sells with Microsoft.
Picking One- Capabilities VS Scale. needs to focus on one then go for another. Promoter is focused which is vital for a small company

5. DCM Shiram: For Rayon compared to sister company, SRF is not interesting in growing this segment but DCM has been constantly improving.They are good at partnering with the leaders when starting a new business.

6. 3B Blackbio DX: Now a microcap Kilpest renamed 3B Blackbio DX Ltd. Evolution of company in last 50 years from agrochem to covid tests to molecular diagnosis company. Recently merger was subsidiary approved with the subsidiary and renamed. The story continues after the merger. Various applications of molecular diagnostics but oncological diagnosis is the most popular and focus of the co. understanding the whole market - 25B $ industry. Indian mkt post covid growing at 7% .
Players- Roche and Abbot foreign major players. 3B is a major player in oncology reagents biz.
National competitions- Tata md, Molbio , Mylab are established players and some startups are also coming on. The mkt is growing and growth drivers like awareness, medical tourism, portability are in place. Special situation playing out, with clear minded promoters with a lot of growth triggers even inorganic opp to grow present. will be interesting to see them walk the talk. no listed player to compare but looking at valuations, long runway to grow yet. Very low PE P/S compared to healthcare cos.

7. Sukhjit Starch is the next co. the company produces sugar and starch derivates
4 units spread across. Corn is the raw material so its good to be closer to decrease logistics cost.
Co also focused on constant capex. Now back to capex after facing some issue. Captive power plant to be setup in their other location to increase margins. Competitors Rocket and Guj Ambuja Exp.
Consumption of starch is low compared to foreign countries but increasing. Promoters have skin in the game with second generation also focused on the business. They are also buying regularly in open mkt. It has been out of favor for sometime. But with capex coming back margins can expand. margins are cyclical

8. LG Balakrishnan bros are majorly focused on motorcycles, and most Indian motorbike cos are their clients. Big Capex coming online with automation to increase efficiency. Available at cheap valuation! Some major concerns - family tiff with son so succession issue. Requirement of chain in EVs But the selling by son is over now and promoter is going to take holding back. Chains are time tested tech, in motorcycles chains are still used. and high speed EVs might still need bikes.

9. Aarti Pharma : India becoming the pharmacy of the world, and the API acive pharm. ingredients is v imp. Aarti pharma is one company from the Aarti well established group great experience in the industry. Aarti pharma is focused on CDMO. Aarti pharma supplies to North America etc. They have higher margins due to specialized APIs. Large chunk comes from Xanthene. Sole non Chinese manufacturer of Xanthene derivates. Capex factory coming online in Atali, Gujarat. Focusing also on backward and forward integration so not to be China dependent.
Risks like raw material cost fluctuations due to global issues present.
Fundamentally- Forward multiple <20PE
scope of rerating.

10. Roto Pumps: Go with the flow! Simple VS Complex pumps Huge opportunity for complex pumps in India if the infrastructure industrialization is going to happen. Roto Pump is the only listed company.
Spare parts and servicability is very imp in this sector as its complex and only highly skilled or maker company can do. Room to grow Domestic mkt 1300Cr whereas Global mkt is 300000 Cr ! Small, Niche Company! Good technocrats promoter with 60% holding.

11. Radiant Cash Management: Entire presentation shared MissioN SMILE

SKMohite · December 18, 2023, 7:17am

Please explain the rational behind Maruti Suzuki

Prdnt_investor · January 4, 2024, 3:56am

Good note from Banyan Tree on HDFC Bank. Given the relative underperformance of the past 5 years, controlled long-term NPAs, investment in branch expansion and employees, and better hold on subsidiaries HDFC Bank is poised for a reversion to mean and go back to 18-20% growth mark over the next decade.

However, it is our assessment that with PSU banks still forming 66% of total deposits and 64% of CASA deposits, there is still room for private banks (including HDFC Bank) to increase their market share over time.

HDFC Bank has been upfronting investments in its business, in order to prepare for the next leg of growth. It is not too far-fetched to think that HDFC Bank can at some point, become as large as SBI, and it seems to be preparing for that with its branch expansion.

With the merger, HDFC Bank also becomes the ultimate parent to all the subsidiaries of HDFC Limited i.e. life insurance, general insurance, and asset management etc. From being a group company to ultimate parent, the relationship with them will improve with better focus and engagement. Perhaps this will result in higher growth and profitability in the subsidiaries and lead to better value for HDFC Bank as well.

Due to its underperformance over the last several years, HDFC Bank now trades at the bottom end of our valuation band. This is particularly so, as we are at the end of December and now rolling over our valuation bands to the next year. As per consensus analyst estimates, HDFC Bank is expected to report 18-20% over the next 2-3 years, in line with its 10-year history. In a market where it is very hard to find an attractive business trading at a reasonable price, HDFC Bank looks like a mouth- watering opportunity to us. We use such words sparingly (have used it only once before in our newsletters over the last 18 odd years) and we remain confident that HDFC Bank will deliver good returns to shareholders over the foreseeable future.

Prdnt_investor · January 4, 2024, 4:00am

There is always amazing wisdom in each Manish Chokhani interview. Flame has provided a nice list of resources from his presentations and interviews.

Presentations

An investor manual | FLAME Investment Lab With The Masters - June 2023

India Half Glass Empty or Half Glass Full

Global Macro

Technology Disruption Manish Chokhani

Investment Outlook: Its all in Your Mind

LarryWink · January 4, 2024, 4:51am

Hello Prudo,

Kudos on the HDFC Bank info! Your posts have been very informative.

rankamoksh · January 4, 2024, 3:59pm

I think as a bank it is operating efficiently but market values a bank more on its digital investments as for a bank to grow if it has good IT it can grow without requiting high fixed costs which go into opening new branches and that is why fintechs and digital first banks will get high valuations as they can grow with little capex.

Prdnt_investor · January 7, 2024, 4:48am

Amazing India focused session from Manish Chokhani

India as the best Capital Market opportunity for the next 2 decades and comparison with Global economies

Samit Vartak on the investment framework and market outlook

Prdnt_investor · January 10, 2024, 2:18pm

Good note from Solidarity PMS on some of their stock picks not working and laying out their rationale and reasons for conviction. #goodread

More than the note, loved this beautiful poem cited in the end.

The Valuable Time of Maturity (Mário de Andrade)

"I counted my years and discovered that I have less time to live going forward than I have lived until now.

I have more past than future.
I feel like the boy who received a bowl of candies.
The first ones, he ate ungracious,
but when he realized there were only a few left,
he began to taste them deeply.

I do not have time to deal with mediocrity.
I do not want to be in meetings where parade inflamed egos.

I am bothered by the envious, who seek to discredit the most able, to usurp their places, coveting their seats, talent, achievements and luck.

I do not have time for endless conversations, useless to discuss about the lives of others who are not part of mine.

I do not have time to manage sensitivities of people who despite their chronological age, are immature.

I cannot stand the result that generates from those struggling for power.

People do not discuss content, only the labels.
My time has become scarce to discuss labels,
I want the essence, my soul is in a hurry…Not many candies in the bowl.

I want to live close to human people, very human, who laugh of their own stumbles,
and away from those turned smug and overconfident with their triumphs,
away from those filled with self-importance,
Who do not run away from their responsibilities
Who defends human dignity.
And who only want to walk on the side of truth and honesty.
The essential is what makes life worthwhile.

I want to surround myself with people, who knows how to touch the hearts of people.
People to whom the hard knocks of life, taught them to grow with softness in their soul.

Yes …. I am in a hurry … to live with intensity, that only maturity can bring.
I intend not to waste any part of the goodies I have left.
I’m sure they will be more exquisite, that most of which so far I’ve eaten.

My goal is to arrive to the end satisfied and in peace with my loved ones and my conscience.
I hope that your goal is the same, because either way you will get there too"

Prdnt_investor · January 21, 2024, 7:43am

A great session from Shyam Sekhar on learning from the past cycles and over his 33 years of Investing in Indian Equities (1990-2023)

Key lessons from past 3 decades

Key patterns to avoid during bull market

Key themes to look into:

Grow yourself ahead of the portfolio

Prdnt_investor · January 21, 2024, 7:52am

Portfolio Benchmarking to discover your true opportunity cost.

The objective of portfolio benchmarking is to compare with an investment mandate that invests in a similar set of companies and with a similar set of objectives. Hence instead of benchmarking against the Nifty or NSE500 which is the common practice, an ideal option is to compare with the leading PMS’ with consistent long-term compounding, who match your investment style and gestation. Your true opportunity cost lies there as you are unlikely to simply pick a Nifty index fund/ETF if not investing on your own.

As discussed on another thread, I use an average returns index from the 3 funds

SageOne Small Cap
SEBI | Portfolio Manager Monthly Report
PMS: Sageone Investment Managers LLP
@aveekmitra’s Aveksat Equity
Aveksat Financial Advisory
@ayushmit’s Mittal Analytics
SEBI | Portfolio Manager Monthly Report
PMS: Mittal Analytics Private Limited

Since many have requested sources to track these, I am providing the links here as well.

Prdnt_investor · January 27, 2024, 6:08pm

Excellent Interview of Banking Veteran K V Kamath who now heads Jio Financial at 77. Three things will determine the #rightToWin for Financial sector in the next decade (a) Convenience for customers (b) better use of technology and (c) seamless execution

Prdnt_investor · January 28, 2024, 8:51am

Great session from Madhu Kela. Past experience can indeed be an hindrance at times stopping your participation in emerging trends and themes as your preconceived notion of the past stops you, as was the case for many who missed the PSU rally. PSU basket overall had an almost 4x rise in aggregate Market cap from 13L to 50L Cr.

Importance of connecting a stock idea to a mega theme. And only bet in stocks which have some fitment with the mega theme so that it has enough tailwinds and not sectoral headwinds to battle.

Next #MegaThemes

(1) Carbon Neutrality- Anything and everything that can make this happen. Even ancillary plays like transmission players who can help in transmission of greener energy sources

(2) AI and Cybersecurity- Another evolving theme, with the advent of Quantum Computing all our existing cyber security will be rendered useless. So this space certainly will have lots of actions and new players. Currently Madhu is betting on a few unlisted names.

Also from this recent tweet : Luxury Consumption

Some key learning:

NPV of Relationships: this is the key to success and happiness. Biggest investment that one ever makes is in nurturing trusting relationships. Who stands with you in your drakest time is your true friend: “Chota aadmi hi kaam aata hai.”

⁠Business Plans and making 100X investments: “Jo excel pe dekh sakte hain woh 100X nahin ho sakta.”

Portfolio Management: Never sell when exceptional companies land in your portfolio.

Value Creation: Scarcity creates multiplied value.

Investing Genius is to identify when a lot of people are fools in the market.

Group identified Luxury Consuption and Climate Tech as the two mega opportunities.

Why be satisfied with 2X wealth multiplication when there is a sea full of 100X opportunity.

Prdnt_investor · February 19, 2024, 3:22am

#TIA2020 Investor Conference Stock Picks and Notes

Source: @srianalytics on X

Source: @akshat96jain on X
Good detailed notes on each pick from the session.
Attached PDF copy 20-20 Ideas Summit 2024.pdf (179.1 KB)

Tracking the historic stock selection from #TIA conferences. Good reckoner
Source : @Bullish2023 on X

Source: @jagansna on X
Here’s the return profile from last year’s picks

Detailed notes on the 2024 session

Source: @LearningEleven on X
Crisp Summary of Key Ideas

Prdnt_investor · February 27, 2024, 3:14am

Investing needs hard work…

The Twitter (X) post that triggered this thought for the author
https://twitter.com/karpathy/status/1756380066580455557?t=dVOhcLnjOBS9BD8RmQmB7A&s=19

Article by Dhirendra Kumar (Value research)

Prdnt_investor · February 27, 2024, 3:36am

Excellent article on the divergence of bull markets and ongoing rally in the US and India

The US is a historic anomaly. It’s all about one big sector — tech — and within that sector, the Magnificent Seven. In the last year, the Magnificent Seven are up 80%, and account for more than half of all US stock market gains. Meanwhile, the median stock, out of the 4,700 traded in the US, is down. It’s a tale of unusually concentrated returns, further inflamed by the mania for artificial intelligence, which is seen as a boon mainly for the biggest companies.

India’s bull market is, by contrast, a broad-based classic. Gains are much more evenly distributed across sectors, and no sector accounted for even a quarter of total returns over the past year. While large cap stocks are gaining in the country, medium and small caps have gained even more; the median stock is up more than 40 per cent.

Foreign portfolio investors now own less than 40 per cent of the stocks that are available for public trading, down from 60 per cent a decade ago.

Over the past two decades, the number of publicly listed companies in India multiplied by a factor of nearly five to 2,800, even as it was falling by a quarter to 4,700 in the US, where oligopolies began to exert a stronger grip on most industries, not just tech.

Remarkably, 180 companies in India have tripled in value this decade and now have a market capitalisation of $1bn or more. That is more than in any other country, including the US.

Most bull markets see excesses build up over time; in India, they are visible in subsets of the growing retail investor class. In 2023, Indians purchased more than 85bn options, or nearly eight times the volume in the US, and on average held those contracts for less than half an hour. Amid the frenzy, regulators ordered trading platforms to open with a warning that 90 per cent of retail investors are losing money on these trades.

Prdnt_investor · February 28, 2024, 2:43am

Invoking Sixth Sense and its role in Business & Investing

The sixth sense is generally defined as a keen intuition or perception that enables one to grasp the true nature of a situation beyond the ordinary five senses. It is often associated with a deep understanding or insight that goes beyond what is immediately apparent.

The concept of the sixth sense is not rooted in a specific discipline but rather in a combination of psychology, philosophy, and spirituality. It is a power of perception beyond the five senses; Intuition. It is an inner sense of guidance that can help you navigate your way through life, to better relationships, health, well-being, and success. It is a cumulative power of all your other senses - sight, sound, taste, touch, smell - that culminates in a stronger sense of inner knowing.

Humans have two brains—the familiar cranial brain and a “second brain” in the gut. Scientists recognize the web of neurons lining the gastrointestinal tract as an independent brain, and a new field of medicine—neuro-gastroenterology—has been created to study it. This enteric brain perceives, thinks, learns, decides, acts, and remembers all on its own. The cranial brain sets us apart from the world, the thinking in the belly joins us to it. Having been taught to mistrust our bodies, to mistrust our intuition, to mistrust any information that is not analytical, we are now cut off from the feminine core of our intelligence—the belly brain.

The sixth sense remains a fascinating and somewhat elusive concept, blending elements of intuition, instinct, and perception. Warren Buffet, in an interview in 1999, said that investors need to fend for themselves and rely on their knowledge and Intuition when searching for promising businesses to invest in. Naval Ravikant, tech veteran: “It takes time to develop your gut, but once it’s developed, don’t listen to anything else.” All investment managers with experience have benefited during their careers from the use of the sixth sense. Even the U.S. Navy has invested millions of dollars in helping sailors and Marines refine their sixth sense because intuition can supersede intellect in high-stakes situations like the battlefield

In conclusion, the sixth sense serves as a compass guiding us through the complexities of life, offering insights beyond the realm of logic and reason.

Prdnt_investor · March 4, 2024, 5:53am

A short history of Financial Bubbles

The Tulip Mania (1636)

The Mississippi Bubble (1720)

The South Sea Bubble (1720)

The roaring 20s bubble (1929)

The Nifty Fifty Bubble (1972)
http://csinvesting.org/wp-content/uploads/2015/11/valuing-growth-stocks-revisiting-the-nifty-fifty.pdf

The Gold Bubble (1980)

Japan Land Bubble (1989)

The Dot Com Bubble (2000)

The Saudi Arabia Bubble (2006)

The Chinese Stock Bubble (2007)

The Aftermath of a bubble : Investors left holding dud investments in great companies. Cisco after 24 years of the Dot Com Bubble Link

Cisco Systems, which made things like modems and computer servers, was the biggest company in the world in March 2000. It seemed obvious that they had won this new internet game. Loads of investors swore by it as the key to their stock market winnings. When the dot com bubble crashed, the stock fell 80+%. Twenty four years later, despite still being a good company making good products, the stock still hasn’t recovered back to its old high.

Nickp · March 4, 2024, 9:37am

In Table 1, does velocity signify CAGR and valuation is peak PE multiple? What do the arrows in yield column represent? Interesting to find that the initial investors would have made money even at the end of many of these infamous bubbles.