Hi @harsh.beria93, one more question…
What is the reason for you to have US equity exposure 
Is it because rupee will lose its value faster than dollar🤔(eg: decade ago 1$ =50 rs, now same 1$=76rs)
Or the returns are much higher in US market or to have your portfolio diversified or any other reasons??
I don’t invest only in US market, I invest globally using Interactive brokers.
For knowing about a company, I mostly read filings from the company’s website. For quick data scan, I use tikr. I don’t use any specific filter, most of the company discovery is random in nature. I follow a few youtube channels which I have found useful for idea generation (mentioned at the end of this message)
I wrote about it previously, my expected returns from global markets is similar to Indian markets (adjusted for 3-4% INR depreciation). I like studying and investing in general, no reason to limit it to one geography. And I don’t have any problem with being diversified as long as my return expectations are met.
As of today, I added Netflix as a new position (5% position size). Following the last quarter results, stock has de-rated to valuations last seen in the 2010-15 cycle. Its a high operating leverage business which is prone to consumer trends (somewhat similar to fashion, but more resilient than typical fashion brands). Two big risks to this position are:
At their current scale, business produces enough cash to self fund its new content requirement, so there is no real bankruptcy risk. In the coming quarters, growth will be affected as they tweak their business model.
The current downturn in technology businesses has now gone on for slighly over 1 year. Generally, these kinds of downturns last for 2-3 years before everyone loses hope and throws in the towel (e.g. 2000 tech bust which lasted from early 2000 to 2003). I am finding a lot more opportunities to deploy capital as valuations are becoming more reasonable. Some of the stocks which are approaching my buy limits are Starbucks and Suzuki. In the current set of businesses I own, Disney is reaching a level where I can increase my position size. I will keep the thread updated as and when I deploy more capital.
| Companies | Weightage |
|---|---|
| AB InBev | 5.00% |
| Berkshire Hathaway | 10.00% |
| Disney | 2.00% |
| Fairfax India Holdings | 10.00% |
| Markel Corporation | 5.00% |
| Philip morris | 2.00% |
| Uber Technologies Inc | 2.00% |
| UBS ETF CH-SMI | 5.00% |
| Vanguard Emerging Markets Stock Index Fd | 10.00% |
| Dropbox Inc | 2.00% |
| Netflix Inc | 5.00% |
| Cash | 42.00% |
As of today, I have added Suzuki Motor Corporation (the Japanese one) as a new position (5% position size). Today’s price drop seems to be because of raids by German prosecutors for alleged use of devices to manipulate emission readings (link). This can be a serious risk if allegations are proven.
As a business, Suzuki is a cyclical and is currently facing business headwinds due to semi conductor crisis which is reflected in their margins (at cyclical lows). Additionally, they are trading at lower end of their valuation range. Company largely trades in the 10-20x P/E band and is currently trading at ~11x P/E. On a P/B metric, they trade b/w 1-2x P/B and current multiple is ~1x. So, I have valuation comfort + business is currently in downcycle, both are required for my cyclical investing framework.
Given my very good experience in cyclical investing in 2020 (see here), I am broadening my approach to global markets. The idea is to buy cyclicals which are trading at lower end of their valuations during a business downcycle. I then wait for a couple of years, let the business cycle turn and (hopefully) sell at a good profit. Lets see if it works out with Suzuki. Updated folio is below.
| Companies | Weightage |
|---|---|
| AB InBev | 5.00% |
| Berkshire Hathaway | 10.00% |
| Disney | 2.00% |
| Fairfax India Holdings | 10.00% |
| Markel Corporation | 5.00% |
| Philip morris | 2.00% |
| Uber Technologies Inc | 2.00% |
| UBS ETF CH-SMI | 5.00% |
| Vanguard Emerging Markets Stock Index Fd | 10.00% |
| Dropbox Inc | 2.00% |
| Netflix Inc | 5.00% |
| Suzuki Motor | 5.00% |
| Cash | 37.00% |
As of today, I added 5% position in Starbucks. This is the second time I am buying Starbucks, last time was during March 2020 (at around $60) which I subsequently sold in December 2020 (at around $100). The basic rationale for buying remains the same as I had mentioned in the first post of this thread.
Starbucks: This has been a great turnaround story post 2008. Their growth rates are close to 10% with most incremental growth coming from China. India is another market where they are growing quite fast through their partnership with Tata. They cater to the high end customer segment and have a long growth runway.
The current uncertainty is around labor union issues that company is facing along with margin contraction (cyclical phenomena). Lets see how this position does. Cash comes down to 32%.
| Companies | Weightage |
|---|---|
| AB InBev | 5.00% |
| Berkshire Hathaway | 10.00% |
| Disney | 2.00% |
| Fairfax India Holdings | 10.00% |
| Markel Corporation | 5.00% |
| Philip morris | 2.00% |
| Uber Technologies Inc | 2.00% |
| UBS ETF CH-SMI | 5.00% |
| Vanguard Emerging Markets Stock Index Fd | 10.00% |
| Dropbox Inc | 2.00% |
| Netflix Inc | 5.00% |
| Suzuki Motor | 5.00% |
| Starbucks | 5.00% |
| Cash | 32.00% |
As of today, I added 2% position in InMode Ltd. Growth has been very strong and valuations have come down significantly. I do not have a very good idea of the competitive positioning of the company’s products, thats why the position size is small for now. In terms of financial metrics, there is not much to complain (except continuous promoter selling). I will keep on working more on the company and will try to create a thread once I have enough information. Hopefully, I will also be able to increase the position size.
With the current market state, I am really happy to be able to deploy surplus cash. 2022 started with a very high cash balance of 49% which has now come down to 30%. A fun fact, I had sold Alphabet in February 2021 (see link below) at $2075. With today’s fall, prices of Alphabet has come around those level. In the meantime, sales grew by 41% and EPS by 91%. Its good to see that valuations have started mattering!
| Companies | Weightage |
|---|---|
| AB InBev | 5.00% |
| Berkshire Hathaway | 10.00% |
| Disney | 2.00% |
| Fairfax India Holdings | 10.00% |
| Markel Corporation | 5.00% |
| Philip morris | 2.00% |
| Uber Technologies Inc | 2.00% |
| UBS ETF CH-SMI | 5.00% |
| Vanguard Emerging Markets Stock Index Fd | 10.00% |
| Dropbox Inc | 2.00% |
| Netflix Inc | 5.00% |
| Suzuki Motor | 5.00% |
| Starbucks | 5.00% |
| Inmode Ltd | 2.00% |
| Cash | 30.00% |
Wrt AB InBev’s Africa operations, here’s something you might find interesting. There is a listed company in Botswana called Sechaba Brewery Holdings (SBH).
SBH, founded in 1970, has 49.9% ownership stakes each in Kgalagadi Breweries and Coca-Cola Beverages Botswana (CCBB). AB InBev owns the balance 50.1% in Kgalagadi Breweries and Coca-Cola Beverages Africa owns the balance 50.1% in CCBB.
Kgalagadi’s main brands (in descending order of contribution to revenue) are Carling Black Label, Castle Lite and St Louis Lager. The premium brand, Corona, is growing at a rapid pace, with YoY growth of >200%. They also have products in flavoured alcoholic beverages- their brand Flying Fish is growing at triple digits YoY.
CCBB is into non-alcoholic drinks: soft drinks like Coca-Cola, along with water, juice, energy drinks (e.g., Monster) etc. Coca-Cola Beverages Africa’s CEO Mr. Jacques Vermeulen has said- “We see a compelling long-term growth opportunity for non-alcoholic ready-to-drink beverages in Botswana.”
As of today, I have created a 2% position in DWS Group. DWS was formed as an offshoot of Deutsche Bank and is into asset management. They give very good dividend payouts (current yield is 8%+), are growing reasonably and have a net cash balance sheet. I have observed that during every market fall, their enterprise value turns negative (no idea why). Currently, their enterprise value is slightly positive, I may increase the position size to 5% when it turns negative. Cash position reduces to 28%.
| Companies | Weightage |
|---|---|
| AB InBev | 5.00% |
| Berkshire Hathaway | 10.00% |
| Disney | 2.00% |
| Fairfax India Holdings | 10.00% |
| Markel Corporation | 5.00% |
| Philip morris | 2.00% |
| Uber Technologies Inc | 2.00% |
| UBS ETF CH-SMI | 5.00% |
| Vanguard Emerging Markets Stock Index Fd | 10.00% |
| Dropbox Inc | 2.00% |
| Netflix Inc | 5.00% |
| Suzuki Motor | 5.00% |
| Starbucks | 5.00% |
| Inmode Ltd | 2.00% |
| DWS Group GmbH & Co. KGaA (DWS) | 2.00% |
Hi Harsh,
From a hawk eye view of your International portfolio and simply looking into the monthly chart of few of them eg. AB InBev, Netflix, Berkshire, Disney etc. I noticed a major upside down ‘U’ shape in these stocks right from 2019/2020 till now 2022.
I can consider this to be a nice long-term holding but don’t understand the logic behind multi-year holding with bear scenario.
Keen to know your insights.
Hi!
I guess one reason would be a couple of these are more recent buys. If you go through the thread, you will see that I reduced my allocations to tech significantly last year (sold out alphabet, reduced position size in Disney). With the recent price drop, I have started adding back the positions as some of them are reasonably valued (bought Dropbox, Netflix, Inmode).
Ab InBev: Since my first buying in 2020, I haven’t made much money on this. However, over my holding period balance sheet has improved significantly with a large amount of debt being paid back. I actually increased my position size here because now their debt looks more serviceable and their core business is very strong. Lets see if market sees it that way.
Berkshire: This was bought a few years back in 2019-20, at that time its stock price chart looked like a upside down “U”. Since then, stock price has done reasonably well and I plan to add more once its P/B reaches around 1.2x.
I hope this clarifies my thought process.
Cheers
Harsh!
As of today, I have increased my position size in Disney from 2% to 5%.
I first bought Disney shares in March 2020 at around $90. With the rapid rise in Nasdaq companies in 2021, share price of a company as large as Disney more than doubled and I was able to sell some shares at around $202 and reduced position size to 2%.
Since then, prices have gone down by more than 50% and are now below pre-covid levels. This is while company’s core business has revived and company has been successful in pivoting their business model towards OTT, gaining market share from the likes of Netflix. Lets see how future pans out. Cash is reduced to 25%.
| Companies | Weightage |
|---|---|
| AB InBev | 5.00% |
| Berkshire Hathaway | 10.00% |
| Disney | 5.00% |
| Fairfax India Holdings | 10.00% |
| Markel Corporation | 5.00% |
| Philip morris | 2.00% |
| Uber Technologies Inc | 2.00% |
| UBS ETF CH-SMI | 5.00% |
| Vanguard Emerging Markets Stock Index Fd | 10.00% |
| Dropbox Inc | 2.00% |
| Netflix Inc | 5.00% |
| Suzuki Motor | 5.00% |
| Starbucks | 5.00% |
| Inmode Ltd | 2.00% |
| DWS Group GmbH & Co. KGaA (DWS) | 2.00% |
As of today, I initiated 5% position in Google. In past 5-years, this is the third time I am buying Google, at a price lower than when I lost sold it (around $104 in Feb 2021, see link below).
Its amazing how powerful forces of mean reversion are, and how ignoring them can lead to subpar results. The EV/sales chart of Google suggests that they bottom out around 4x EV/sales. I last sold around 7x EV/sales.
Thoughts on Nasdaq collapse: It seems that we are in the last leg of the Nasdaq collapse, when share prices of good cos with free cashflows are getting hit.
In every market collapse, the first leg of downturn starts from junk cos, as was the case with ARKK ETF peaking out in Feb 2021. The collapse then trickles down to reasonable cos with slightly shaky business models (likes of Dropbox, Uber). The final leg is when the blue chips (or so called generals in folk literature) start getting hit (likes of Google, Microsoft, etc.).
My portfolio positioning has largely followed this trajectory. I was fully out of tech stocks (except a 2% position in Disney) by March 2021. I then started buying slightly shaky business models like Uber in October 2021 (which was a bit early), Dropbox in Feb 2022, Netflix after its huge 60% intraday fall in April 2022 and subsequently bought InMode, more of Disney and now Google.
It seems that I have come the full circle, from having large positions in tech stocks, then getting completely out and then reentering the ones I like. In all this time, companies have grown sales, started focusing on free cashflows and are now behaving like mature adults (like they should!). Its been a delightful journey maintaining my thought journal on this thread.
Coming back to Google, I will look to increase my position size to 10% if price reaches $75-80. Updated portfolio is below and cash reduces to 20%.
| Companies | Weightage |
|---|---|
| AB InBev | 5.00% |
| Berkshire Hathaway | 10.00% |
| Disney | 5.00% |
| Fairfax India Holdings | 10.00% |
| Markel Corporation | 5.00% |
| Philip morris | 2.00% |
| Uber Technologies Inc | 2.00% |
| UBS ETF CH-SMI | 5.00% |
| Vanguard Emerging Markets Stock Index Fd | 10.00% |
| Dropbox Inc | 2.00% |
| Netflix Inc | 5.00% |
| Suzuki Motor | 5.00% |
| Starbucks | 5.00% |
| Inmode Ltd | 2.00% |
| DWS Group GmbH & Co. KGaA (DWS) | 2.00% |
| 5.00% |
I strongly think you should read Trupanion shareholder letters. Very well written. Almost comparable to Berkshire or Markel or Constellation letters, read it to understand what I mean.
Disc- no holdings in Trupanion as of now
A very thoughtful post as always. Your focus on mean reversion plays has opened my eyes to them, thanks for that!
Thoughts on Nasdaq collapse: It seems that we are in the last leg of the Nasdaq collapse, when share prices of good cos with free cashflows are getting hit.
In every market collapse, the first leg of downturn starts from junk cos, as was the case with ARKK ETF peaking out in Feb 2021. The collapse then trickles down to reasonable cos with slightly shaky business models (likes of Dropbox, Uber). The final leg is when the blue chips (or so called generals in folk literature) start getting hit (likes of Google, Microsoft, etc.).
Going by past NASDAQ crashes in 2000 and 2008, this leg seems to have some ways to go before it bottoms. This maybe the start of the last leg (Where the generals start getting shot), but we may be some ways away from the end of the last leg?
Of course standard disclaimers regarding history not repeating itself applies here.
They barely make 20-30% gross margins, if one really wants scorching sales growth isnt InMode an easier bet? There is an actual profitable business model there with proven ROCE and one is paying very reasonable multiples.
Honestly, I dont know. My strategy has been to buy into pain and sell into optimism. Bottom is only known in hindsight. In this tech collapse, from my own buy price,Netflix is up 50%, InMode 70%, and Dropbox, Uber and Disney are flat. There’s clearly a lot of stock specific action and I want to capitalize on that, rather than trying to find lows and highs of a broad index. Obviously, all my gains can easily evaporate, but nobody knows these things!
As of today, I initiated a 2% position in VF Corp. They own very renowned brands like North Face, Vans, Timberland, Dickies and Supreme. I am a big fan of their North face brand which produces very durable sports accessories.
This is a 100+ year old company with a history of profitable growth and growing dividends. They return most of their free cashflows via dividends or buybacks (see below).
With current recession fears, stock has gone down a lot and is trading at 2012-13 levels. However, their core brands are very strong. In last few years, they have grown via inorganic expansion, with the last one being a $2bn acquisition of Supreme brand in 2020. Most of their manufacturing is outsourced to China, as a result of which most of the balance sheet is working capital + intangibles.
Receivables are generally set-off against payables, and company funds inventory from their own book (3-4 month of working capital). Given their strong positioning, working capital has been well managed over years.
In terms of valuations, the only time they traded at lower multiples (on EV/sales) in the last 15 years was during 2008-09 crisis.
However, since 2008-09, their gross margins have improved significantly. So I do not think that current valuations are very demanding.
I will scale up position if valuations go down to 2008-09 levels. If this position doesn’t work out, I will blame @rajanprabu as he brought up this idea. If it works out, I will take the credit 
Updated portfolio is below and cash reduces to 18%.
| Companies | Weightage |
|---|---|
| AB InBev | 5.00% |
| Berkshire Hathaway | 10.00% |
| Disney | 5.00% |
| Fairfax India Holdings | 10.00% |
| Markel Corporation | 5.00% |
| Philip morris | 2.00% |
| Uber Technologies Inc | 2.00% |
| UBS ETF CH-SMI | 5.00% |
| Vanguard Emerging Markets Stock Index Fd | 10.00% |
| Dropbox Inc | 2.00% |
| Netflix Inc | 5.00% |
| Suzuki Motor | 5.00% |
| Starbucks | 5.00% |
| Inmode Ltd | 2.00% |
| DWS Group GmbH & Co. KGaA (DWS) | 2.00% |
| 5.00% | |
| VF Corp | 2.00% |
| Cash | 18.00% |
I am value averaging in MON100- NASDAQ100 ETF. Buying into weakness and selling into stregth. Dont know bottom or top , neither trying to guess.
However I made 5-6% gains from buy price and i sold the excess ( Premium over the invested). If last leg of nasdaq fall happens, then will plough back the cash back into the ETF. Plus will pump additional cash.
From current level of NASDAQ-11400, how low do you expect it can fall- as per previous crashes. Need not predict exact bottom. This would help to plan staggered cash deployment plan ready.
Harsh… please let us know the platform you use for trading in these International stocks as I am not able to find many in the IndMoney app…
Personally I use ‘Vested’ and it has been working well so far.
