Simple Investing

Investing Strategies
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My broader point which is anecdotal is that I often find companies that pop up as worthless and there by don’t warrant any reading about them. Of course I do visit the companies’ websites and get a basic idea about the business. More often than not, my criteria is met by what screeners show and I can just move on, given the small circle of competence that I have.

Also, one could gain expertise here too as one spends more time and could read between the numbers and associate the numbers to the sectoral headwinds and could envisage the future turnarounds if one has knowledge about them.

And regarding using screeners for new ideas comment, that concerns with @Investor_No_1 and not a general one. You could find ideas anywhere and everywhere like Lynch said.

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Market Cap > 50 (500 for new investors)
Anything below is difficult to invest due to low volume. Even if you enter it will be difficult to get out at opportune time.

Google promoter name with terms like “fraud”, “scam”. Google company name with same terms. Check valuepickr forum for fraud instances.
Ratios like CFO to PAT, Contingent liabilities to net worth, Debt to equity, Debt to profit, Interest Coverage, Equity dilution, Pledged percentage, Change in promoter holdings, Rising debtor days should be checked to avoid potential disaster.

In valueresearch stock selector, select 3month return and sort by maximum to minimum. Check for industry of top 15 stocks. Any repetitive industry will give idea about change in sector.
In screener, if you have premium subscription you can download screen with 3month return screen. Check for top performing industries in the download.
For long term investment with no exit plan, avoid cyclicals.

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43

Thanks @akash_das , some points that I do think over, which kind of directly or indirectly determine promoter quality etc. -

  1. Focus of Promoter - Whether they have a single business or several unrelated businesses. Quality & health of other businesses. I would prefer if I get a focused promoter with no other listed or unlisted business or other business in good shape and good industries. Exceptions - Something like Tata group which are into multiple unrelated businesses but the trust structure, individual solid management and ethics that is proven makes it an exception for me to invest.
  2. Share Pledging - Ideally 0 pledge and if at all need for pledge, it should be for benefit of the company and not of Promoters alone.
  3. Walk the talk - This is also very important. They need to abide by what they say & commit. Conservative commentary and delivery beyond expectation is good but accurate commentary and matching delivery is the persistence I would admire most.
  4. Less Surprises - neither positive nor negative: This would be something which would tell me about promoter quality and business quality as well. Less surprises on either side would mean solid processes in place, promoters walking the talk, promoters knowing their business well and promoters successful in creating a process driven organization.
  5. Nimble, Lean & Simple organization - This would be my ideal pick, as Promoters who would be able to achieve this would have least opportunity, motivation, need or requirement for complex restructuring, inter company deposits/transactions and what not. Any company moving in this direction would prove to me the right intent of the Promoters
  6. Stable, Regular & Growing dividends - I would not mind a dividend yield of 0.5% only at time of initial investment but it should be stable, regular and grow YoY. Special situations may exist but overall the direction should be of growth of dividends.
  7. Promoters looking for exit - This is a tricky situation, ideally would not want this unless the deals are quick and promoter is say like Dr. V in Thyrocare - who made quick decision and such cases work for me. The worst cases are when the decision lingers because of greed or personal ambitions of Promoters.
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44

Most recently, I am intrigued by yet another Tata company…a story of a brutal fall followed by stupendous rise!

A small, rather insignificant company, until few months back, in an equally insignificant industry (in terms of investor returns in most firms in last decade) - TTML…a company I had written off and not even bothered to look at…maybe something I need to learn…never to write off anything! Specially from the house of Tatas (or the likes)…
The brutal fall of this story started with the multiple issues in Indian telecom industry. The parting ways with its foreign partner, initial hiccup in relationship followed by re-arrival of Tata and a great gesture of saving the company, its jobs, its people, sale to Bharti Airtel of some assets sans debt…Tata spent as much as they could to save the business & jobs! They saved the name and all this while the share price kept dropping & dropping from around 37 rs to a final low of 1.85 rs in March lows…struggled to rise thereafter in various events that might have followed as I had stopped tracking until it became the part of mega restructuring of the Tatas where they intend to make this company a backbone of their new digital ecosystem, specially for MSME!!

A mere 1% allocation during last year lows could have become significant figure, maybe 20% (I am not that good at numbers) by the stupendous 30X rise in an year or so…and that too from the house of Tatas!!

Markets is indeed such a wonderful place presenting such life changing opportunities every now and then, only if we can catch them one day!

There were intangible cues which I missed…the way Tatas were restructuring each & every company in their belt, the way they saved this company of its name & stature, the way they were building their digital ecosystem and the way I follow the Tata group closely…I should have made good use of this story and maybe could have done that had I not written off this company & telecom industry!!

(Just curious why Tata chose TTML as their MSME Enterprise digital backbone rather than Tata Communication which already has solid Enterprise business?, views welcome!)

Disc: Not Invested, no position. Post is only for academic & Learning purpose

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45

It is one thing to be invested for a decade with conviction, without losing patience and being rewarded, but isn’t all this with the benefit of hindsight? When it fell from 57 to 2, it was a Tata.

Excluding the promoters, shareholders are retail, no FII or DII participation despite the meteoric rise. And as it was a penny stock, there were volumes, so is this punters heaven or a real restructure that is in the making?

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Read carefully above, there were cues, although intangible…either you take it or you dont…choice is individual. Also, this is not the buy and hold kind story as is evident from the read above. Also if your style does not match with the reads, kindly ignore and move on

Restructuring can be very much real, what happens to share price finally is a guess for you to make

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It seemed like hindsight benefit to me as you said there were cues but did not invest, and there is no participation from FIIs or DIIs since the rally. Those were my views, so asked the questions thinking to have a healthy discussion. No intention of offending.

And I don’t have any particular style, not yet. So I try to read all kinds, in the hope to understand and internalize slowly and this has helped me.

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Agree, the benefit is in the hindsight, precisely thats why I remain uninvested…also it did fell brutally as I mentioned. With due respect to your views & questions, the purpose of my post was not about the business of TTML…certainly it had suffered inspite of being Tata and thats why I had written it off and was not invested…There are multiple things in this story that can go wrong but the part that intrigued me and I wrote about was the part of the story I missed…because I had written it off!! So that was my key learning that I want to take home that never ever to write off any business, specially from a Promoter which spent every penny to save the business!!

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I don’t just respect different views but I know they should exist to have a balance in the stock markets, because every stock investor is optimistic that he will not have 100% loss in a stock and that there will be someone who is willing to buy, except in the rare cases.

And if this thread were your journal just to record your thoughts for your future reference, perhaps I would not have replied. But since I have seen you seeking answers many times, I did feel like asking and there by seeking something new which could be beneficial to me.

Who knows, I could allocate 1% and TTML could be multibagger for me in the next couple of years. Isn’t this the essence and the beauty of this wonderful forum that you never know what you stumble upon?

Off late I have seen members attributing the very investment to some other member, not just an idea. I do too. I do get intrigued by a lot of companies, and act upon something which I think I could understand.

Carry on with writing about your learning.

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Last few quarters can be classified as a potential turn around. But its very difficult to bet on a stock which has fallen so much to rise 30X.

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51

Great insights @akash_das …valuereasearch stock selector is paid or anybody can access…

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Agree it’s a turnaround of fortune for being part of an esteemed group. Indeed it is very difficult to bet on a stock fallen so much and practically having no operational business until few months back…but I did not even evaluate it when it was lying low…inspite of it being from my universe of stocks from top notch promoter…this is something I would not want to repeat…had I been following it on its journey near lows and evaluated it, maybe I could have got some cues of a potential turnaround and specially of the digital ecosystem opportunity…

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It is free. Anybody can access.

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Updates: Continuous fall yet again of TTML ever since I wrote this post clearly proves that my FOMO was at peak when this stupendous rise peaked out!!

Would be interesting to track this company now. This time I have not written it off…

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Hey @Investor_No_1… Visited your PF thread just in time for the ITC Post and il gladly add my 2 cents if that’s OK. One needs to extend their timeline with something like ITC over decades… And these past few years are just a small snapshot in this timeline of a company that has lasted and grown for a century and will last and grow for atleast another one. In our Indian markets its rare to get a company of this size and caliber with a core business with negative working capital, huge amounts of free cash flow, little to no debt, FD beating dividend yield and profits equivalent to the market cap of a midcap company every single year which they can use to provide dividend and grow at the same time… Basically Valuations have huge headroom to increase to the level of its peers and given a long enough time period I don’t see why it wouldn’t . As long term investors it doesn’t really matter if it rises in the short term. This blip of a few years infact is very convenient and allows an SIP to build a huge position. On a long enough timeline there could be acquisitions, restructuring, Demergers, change in management, improvement in supply chain, increase in Fmcg other contribution, policies to deter illegal cigarettes etc and none of those are priced in atm… The next 5 years may be painful regards stock price… But that’s in the eye of the beholder. 5 years allows a period to build a position with salaries at low valuations that one just cannot build in any other blue chip company. If and when triggers playout(a demerger for eg may not happen now but could very well happen in a decade when Fmcg others can self sustain) not only will one get the EPS growth but will also get the benefit of a possible PE re rating. Considering valuations of other blue chips there’s only one price driver currently ie EPS growth(which don’t get me wrong… is fantastic for long term compounding) but the chance of a derating looks higher than a re rating in most(except for frothy bull runs). In short… Its a potential generational wealth creator that will keep long term investors happy with high dividend And has the potential for fireworks over decades. Anyone hoping for short or medium term profit bookings will end up being disappointed but with 5 to 6 percent being returned every year that lends credence to patience too. Everyone says they have a long term mindset but then they stare at their portfolio in annoyance every few weeks hoping for paper profits and when they don’t get it they sell or post memes on twitter. If buying here one needs to change their mentality towards owning it and realise that one is buying it for the far off future and just building a position during the present and medium term… I am an owner of ITC and I personally hope it stays at Rs. 200 and under for the next 5 years. The way i look at it is ITC is offering me a high paying job 5 to 10+ years from now. The only qualifications for that job is I need to work hard and buy X number of shares over this decade for me and my family and ITC will give a salary via dividends and bonuses via capital appreciation there after for not only me but the generations after too :slight_smile:. Imo its the definition of simple investing :slight_smile:
Note the risks are obvious. Cigarettes are on a downtrend, taxes can come in at any time and management have made some missteps regards capital allocation and Fmcg margins are still low and with high dependance on commodities like atta etc. But yet again… A long enough timeline(insert joke about us being dead in a long enough timeline :)) and these current valuations makes these risks negligible for someone looking to invest large amounts of money since the company will NOT go to zero(I doubt it will ever go below 160) and hence is one of those rare low risk high uncertainty bets in the blue chip space which gives capital protection comfort too.

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Glad you visited and most welcome to post your views!

Excellently put! Agree, this is Simple & Effective Investing!! :slight_smile:

This is the only point I wanted to make. Agree to all merits of ITC, my though was that we think we are getting it at better valuations compared to other blue chip FMCG but that is optically cheap valuation because of various costs involved in owning ITC for the next decade until FMCG ratios improves and restructuring happens. I am ready for the wait, just like you…point I wanted to make for those investors who are ready but in denial of the price the are paying.
I would consider your case special - as you will build position for next 5 years, so you would definitely not mind paying the price of stagnation. I would also add if I see any fall or significant stagnation though!

On another note, I was comparing the returns as on today of someone who bought an ITC and say someone who bought a Titan 20 years back. I am sure both would be doing great…

For academic purpose, a 10 lakh investment in ITC back in 2002 would be 1.4 CR today, inspite of ITC stock downtrodden. Yearly dividend would be 7,70,000 - A decent 64,000 pm to live off for most middle and even upper middle class Indians!!

Now, lets see what a growth stock can do, a 10 Lakh invested in Titan at same time around 2002 would be worth a little more than 100 crores today. A mere 0.23% dividend yield of today would still give a dividend of 23,40,000 per year as on today!

Coming to same FMCG sector - 10 lakhs invested in Marico in 2002 would be 19 crores today with a dividend of 26,60,000 per year as on today!

So, this exercise makes me think again that I must not see ITC as a value stock. I must know the price I am paying for it and keep evaluating that price before commiting further capital. It will certainly provide stability to my portfolio but if you need to take the leap to a next higher level, this may not be the stock for me over long term.

I still have around 10% in ITC but thats after knowing this above fact and also need to revisit it often so that I do not remain in any illusion of value

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While I agree a 100 percent regards companies like Marico and Titan ie growth companies being better investments back in the early 2000s… At current price points and current valuations il be very surprised if ITC doesn’t outperform them over the next 20 years purely due to timing of entry and chance of reinvesting dividends… Which while many would disagree… I’d say timing of entry is one of the most important things.

Also, something which isn’t considered is the fact that one can safely bet a lot more money on itc then they could on a highly valued growth company. For eg sure there’ll be a small cap growth company that goes up 2000 percent in the next 10 years… However, how much money would one risk there vs how much would they risk in ITC. Personally I’d be comfortable betting big in ITC knowing that I can see the bottom and it isn’t very far away. So I would feel comfortable investing 10 times the money in an ITC over a risky growth company. So while the growth company would outperform the actual capital gained would be similar due to the huge capital invested in ITC(and there’s a chance you could go bust with the smaller company too). I know a lot of people who bet 10 lakhs on ITC in the early 2000s for eg but apart from someone like RJ I don’t know anyone who did the same with titan until much later. Same with Marico… Unusual billionaires by saurabh Mukherjee was a brilliant read to explain the changes happening in marico back then. Very few would have risked it when they were competing vs hul directly back then. (That being said I do bet big on small/mid caps too as seen on my thread but I could sip a much bigger amount into ITC for years at current valuations without losing any sleep… So It’s all about finding the right balance to benefit from both slow and fast growers)

Regards ITC vs HUL and its other peers… Yet again… HUL and other Fmcg companies may be better companies at present… But the timing of entry vs itc wouldn’t provide comfort. There is no way I would risk the same amount of capital as I do in ITC with HUL. I have nothing against HUL but when betting large capital I need to bet on both the business and the market perception with HUL. If HUL fell by 50 percent tmrw it would still be a great business… Just that the market has a huge headroom to de rate it and I’d rather bet on business performance than the whims of the market. If Risking the chance of no upward re rating vs risking the chance of a downward re rating I’d always choose the former and hence ITC(theres an example from Mr parikhs book on vst back in 2009 in his long term investing book… And the parallels to itc at present is eerie… with the upside of Fmcg others too). And yes… We are both on the same page. Apologies if i made it sound like we weren’t :slight_smile:

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That’s a Bingo! from the house of ITC statement :grinning:

Agree, trick is, along with ITC… to find the right growth company where you can bet as much as ITC as well with same peace of mind…

I am aware we are on same page. ITC so far serves a purpose which no other firm does in my portfolio and hence deserves a place. Forum is for healthy discussion and I really enjoy it to have with you…Cheers!!

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Interesting discussion. IMO when investors have different goals and time horizons - and they do in every asset class ; prices that look ridiculous to one person make sense to another, because the factors those investors pay attention to are different.

What often overlooked in investing is that something can be technically true but contextually nonsense and vice versa.

Happy investing

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61

Remaining invested in Technology space has been rewarding over last year or so and yet again this Q results have been on my expected lines. With entire Tech basket performing well and I see strong growth ahead as well, they seem to ease my Pharma FOMO somewhat :slight_smile: I am glad I chose Technology over Pharma/Chemicals as that is something I understand better and within my circle of competence hence I could allocate better (although still not very meaningful and the percentage I would have liked)

Key Learning - You need not be in each and every better performing sectors all the time. Control your FOMO, good companies in every sector would eventually reward!

Disc: Invested in IT stocks mentioned. Above views personal & for academic purpose. Not a buy/sell recommendation. Can be completely wrong in my assessments.

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