These are not embassy clients. Embassy clients (if you read about them) are fortune 500 companies all of which are growing their presence in India and bangalore aggressively. One cannot extrapolate from TCS to Goldman/Morgan Stanley/Well’s fargo. Also, Indian IT are wrong about their public guidance as per my independent analysis and will have to eat their words.
If horses could fly then horse racing would be a very fun event to watch. What matters is the probability associated with an event. IT sector (specially fortune 500 companies) reducing leased space in india is a very very low probability event IMV (it might be easier to genetically engineer horses to grow wings and fly )
But i do not care about 8 year price trends. As i have been writing in the REIT threads, REITs are a multi decadal capital protection opportunity. Over a 20-30 years period, all real estate would appreciate at inflation rates. Add to that whatever rental yield we get (4-7%) and we manage to beat inflation.
If you are still not convinced, we can always agree to disagree. Thank you for adding your thoughts though, contra views are a key part of any investor’s investment process IMV.
Sahil
Very interesting points in the last post.
Wishing you a speedy post covid recovery…
Also I tried searching and reading about smallcase …it’s a subscription based service for various duration… So if I want a sip or one time investment…do I need to have a continuos subscription or a one time subscription will keep executing without any new additions or changes.
Please taken your time to reply
Also I have been tracking angel broking and there results have been stupendous to say the least …broking anyday is a cyclical business…how can one differentiate early that angel is not treading the same path … except the quarterly and annual results.
I mean any learnings from the industry which has caught your eye.
Best
Divyansh
Subscriptions are of various durations. The ones i took are annual. Need to be renewed every year. After i subscribe, for 1 full year i get full support of fund manager which means:
Periodic updates to the smallcase in terms of decisions to buy or sell any of the small case companies.
This is a characteristic of broking industry. No way for angel to avoid this. However, they are applying for AMC as i wrote about which is much more secular industry thereby reducing cyclicality of cashflows. The other thing is, Angel will get into distribution of MF and insurance in a big way the new app and that will also enable some secular elements to come through, specially as people start doing more SIPs. We have to listen to angel concalls to understand the vision of the management. This looks like a broking business today, but not necessarily 2-3 years down the line. We have to focus on where the puck is moving. Look at the way CEO talks about four 9s reliability. This is not how broking house CEOs speak. This is how scalable fintech CEOs speak. Key differentiator is the way management manages to stay ahead of the curve, anticipating the needs of their users and building those products proactively. ARK advisory service, smart beta and ETF based AMC are all indications that this management will do so.
I was also looking through couple of smallcases mostly momentum ones by Alok jain, What i realise was momentum works mostly when markets are in a bull run for other times these small casess will end up mimicing performance on indices. My question is how do I calculate based on the portfolio size whether mf is good for me or smallcase is?
So how did you decide while investing in negen that it will give you an alpha over a mf say ppfas
Please evaluate abhishek sir’s Q30 strategy. He has backtested it over last 12 years. The performance is robust. He has PF level as well as individual stock level exit strategies to ensure that cash call can be taken at appropriate times. http://www.quantamental.in/ http://www.quantamental.in/performance.html
I found this to be the best momentum strategy i could find. He is a very very able manager. Key is to build enough protection into the system that we can protect the capital during down years. I think abhishek sir has done that.
IMV mutual funds are very bad instruments for investment. I only put very small amounts for goal based investing (need X amount after Y years where X is small). Mutual funds chase short term performance and 1 year returns.
Been following him and his thoughts for quite some time now. Read his old tweets. Listened to many of his YT videos. His PMS is best performing one in last year i follow his public stocks and i am myself invested in some of them heavily. For me, neil’s smallcase represents a way to benchmark myself as well. If i cannot beat its performance, it might as well make sense for me to put all my money with him and stop wasting my time. If I can beat him, its good and means that I can stop investing my money with him. Without trying I’d never know.
The Quant strategy by Basu sir has 2 smallcases, Q10 and Q30. I’m not able to find more details about Q10. Is it similar to Q30 but with less investment or it is a different strategy altogether.
It would help if you can point me where I can find more details about this.
Just my speculation that it is 10 stocks chosen from some Universe. I discarded it because q30 is the mainsteam product he has. You should be able to ask the question to his vp message box and I hope he replies.
How did you compare other smallcases offered by other FM like Alok Jain. I know comparing strategies is not possible but given the humdrum about weekend investing smallcases, how did you decide q30 was a better pick?
This is actually a simple answer. I know abhishek sir (through his work not personally), have tracked his progress on VP over 10 years, have seen his track record and trust him.to.manage it better. Also he has rigorously back tested a quant strategy. What else can one do? How much more rigorous can one get ?
46% cagr over 12 years. If we can even get 2/3rd of that over next 12 I would be happy and satisfied customer.
I have been thinking deeply about how to decide what stock to sell out of, when i want to add a new PF stock. I realized the only way is to to do the grungy work of building out some sort of a model for what returns I expect stock to give in next K years, and comparing all PF stocks based on that metric. This would require me to estimate 2 critical components for each PF stock, exit valuations, and fundamentals (earnings for non lenders and book value for lenders) growth. That, along with current valuations would lead me to estimate future CAGR and thus estimate which stock to sell. I do not like doing this exercise because there are just opinions. Well informed ones, but still opinions nonetheless. There is no way i can objectively justify why my exit multiple would be 7 for a stock and not 6. However, i still expect this exercise to be useful since I would only be using the numbers to make relative decisions between the stocks (which one to exit), not absolute ones. I still intend to apply my own judgement on top of this filtering criterion, this is not a quant procedure.
Instrument
Percent of PF
Timewise visibility
Valuations
Est Topline Growth
Est Profit Growth
Future CAGR Expectations
Future
Current
Bear
Bull
Avg
Bear
Bull
Bear
Bull
Avg
Bear
Bull
Avg
IDFCFIRSTB
0.134
4
2.2
2.5
4
3.25
0.2
0.25
0.2
0.25
0.225
0.2389
0.4515
0.3505
NEULANDLAB
0.124
4
3
4
6
5
0.15
0.15
0.15
0.2
0.175
0.2357
0.427
0.335
VAIBHAVGBL
0.115
4
6
4
8
6
0.17
0.22
0.25
0.4
0.325
0.1295
0.5043
0.325
RACLGEAR
0.095
4
1.46
2
3
2.5
0.15
0.22
0.17
0.3
0.235
0.2657
0.5564
0.4127
MASTEK
0.089
4
2.75
3
5
4
0.15
0.2
0.17
0.25
0.21
0.1957
0.4515
0.3288
SEQUENT
0.068
4
5
4
7
5.5
0.15
0.17
0.2
0.23
0.215
0.1348
0.3379
0.2442
LAURUSLABS
0.067
4
5.4
4
7
5.5
0.2
0.25
0.25
0.3
0.275
0.1596
0.3871
0.2808
SAREGAMA
0.059
4
7.5
5
15
10
0.2
0.26
0.24
0.32
0.28
0.1204
0.5697
0.3754
AXTEL
0.048
4
3.7
3
7
5
0.15
0.15
0.2
0.25
0.225
0.1387
0.466
0.3207
DYNPRO
0.047
4
2.9
2
4
3
0.14
0.2
0.17
0.25
0.21
0.0662
0.3546
0.2202
NCC
0.045
4
0.65
0.4
1.1
0.75
0.1
25
0.1
0.3
0.2
-0.0258
0.4827
0.2437
POKARNA
0.042
4
2.68
2
4
3
0.15
25
0.2
0.3
0.25
0.1153
0.4368
0.2857
ANGELBRKG
0.037
4
4
3
6
4.5
0.2
30
0.25
0.35
0.3
0.1632
0.494
0.3388
ARMANFIN
0.022
4
2.5
3
5
4
0.2
30
0.2
0.32
0.26
0.2559
0.5697
0.4171
PIXTRANS
0
4
1.8
2.5
5
3.75
0.12
20
0.15
0.3
0.225
0.2484
0.6782
0.4717
I have taken a bear and bull case for 3 parameters: exit valuations, topline growth and bottomline growth. I have estimated future CAGR based on 3 metrics: bear, bull and average where exit valuations and bottomline growth are average of bear and bull case. Based on that above table was computed. Based on my calculations, I have decided to exit NCC. Some human judgement has to be applied on top of the numbers. Even Dynemic, sequent and laurus are giving low growth. However, I am more sure of the growth in sequent and laurus than most companies so doesn’t make sense to sell those. NCC with the infra cycle revival would be most difficult to predict. As one can see from the table, I have decided to replace NCC with pix transmissions (update: Pix transmissions - low profile microcap company - #118 by sahil_vi). Investment thesis is here.
Please note that none of whatever I have posted is investment advice. This is purely to document my own thinking and share methodology with forum. Forum members must have their own buy and sell decisions based on their own individual research or suggestions of their financial advisor. All estimates are wrong. Some are useful. I hope mine prove to be useful to my portfolio.
Also attaching the excel in case someone wants to play with it. What to Replace_.xlsx (17.7 KB)
You should know that there are some stocks that find a place in Negen PMS and not in smallcase that’s why the returns of the PMS are better. Some times by the time the stock is updated in smallcase it’s already moved quite a bit.You could write to Neil and clarify. He replies
I am not invested in the smallcase for alpha. Primarily interested in 3 things:
Stream of research ideas.
Benchmarking myself.
Learning more.
If i were interested in alpha i would have deployed a much larger corpus into it. it is only ~3% of net worth. Also, it is very difficult for me, someone that is only paying Neil 11k INR a year to influence their smallcase updation procedures. IMO the amount of energy and time it would take and probability of success do not allow for a favorable ROI.
I certainly want the alpha, just don’t think of It as the primary objective. even if there is no alpha, it kind of works in my favor since I get to outperform the PMS.
I was reading more about Abhishek sir’s strategy. Can you pls help me clarify a couple of questions
The website states that the small case is balanced monthly. Does that mean that if there is another blackswan event just after a rebalance then also the next rebalance will happen after a month? I know there will be trailing stop losses to come out in cash but just wanted to know what happens lets say in 30 stock pf 26 of them hit their SL?
I was checking the backtested strategy by Abhishek sir and it has produced some phenomenal return even in bear markets? when the strategy is giving 46% cagr why would someone run a parallel pf like you are doing?( I by no means am challenging your returns, but I wanted to know the viewpoints on whether backtesting is a form of window dressing or can someone will less time on his hands trust the strategy with let’s say > 10% of net worth)
I do not know. Frankly all these questions are best asked to abhishek sir. I don’t want to presume and give wrong answers.
No window dressing. 46% cagr is past returns. Nobody knows what future holds. It could be 20 30 or 40. Or 60. I am here to participate and find out what that numbers would end up being. Stock markets much like history does not repeat but it often rhymes. Lets see what happens.
Why I run pf: because I love equity research and it isn’t a black box. I know why I own what I know. With sir’s strategy it is a black box which is not as intellectually satisfying an outcome. At the same time I think style diversification is important one has to derisk against one’ s own self .
Sorry I am not qualified to give investment advice. What I can tell you is that I have roughly 6% of net worth in the strategy and it would go down substantially unless I put more money over the next year (annual savings to net worth ratio is quite high). So in terms of risk for me this is negligible risk.
#saregama had an amazing Q4 concall. My key takeaways also summarize my investment thesis. See if this helps:
Music licensing industry growing at 11-12%. Saregama growing at 21%. Guidance to grow at 22-25%. In b/w lines: growth guidance revised up, purchase of 20-25% of all new music in india. Business is total cash cow.
Carvaan is not just a profitable product they sell at 25% GPM, they want to make it into a platform for audio streaming: podcasts, new songs, and thus generate recurring revenue through ads and subscription.
In b/w lines: reminds me of Google home. The focus should not be in the product But rather strategy of using the product to capture mindspace of the user. Also, enables B2C interactions with customers enabling data analytics. Only music content company in india which also has B2C
Movies biz to grow 15-20% for 3-4 years. Can make 100 films a year some years from now.
In b/w lines: film is also content IP. monetization will continue forever. When saregama makes a film for Netflix, saregama still owns it. Netflix will only show it for 3-7 years. This second monetization would be very high margin directly flowing to bottomline. Lot of future Operating leverage in the future. In all 3 businesses. Even caravaan (specially 2.0) which some might consider a gruesome business is actually not.
PS: I am being lazy and copy pasting my concall summary i has posted on twitter:
if you want more details i’ll have to take some time, think then get back to you.
1st and 2nd point ok while the 3rd one is very risky business.
While in long run they will be able to recover the cost but
In short run 3-4 flop films of >100cr Budget can hamper or degrade the overall performance.
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