Let’s continue the Investment Journey series.
Time to introduce the thinking patterns of a trio of very successful young Turks at VP - Dhwanil Desai, Omprakash, and Kiran Dhanwada.
I have always admired the clarity in Dhwanil’s thinking and his ability to go against conventional wisdom.
[We have been urging him to experiment a bit more outside his Comfort Zone]
Well put @Donald. Clarity of thought is something which is evident in each of Dhwanil’s post and it can be seen from the presentation as well which can be understood by newbies without much difficulty…
Dhwanil,
You had mentioned in the presentation, the purchase of Schraeder Duncan by OCCL as deliberate capital misallocation. But considering that deal size was only Rs.14 cr when the company was doing PAT of approx Rs 31 cr in Mar’12 and the core business still being an oligopoly, decent fundamentals with profit visibility over near long term, don’t you think one should wait to see if company indulges in a similar misallocation in future.
Further it was it was not like a Tata Steel-Corus deal where the target company was very big and added lot of stress on the balance sheet. Also Schrader Duncan already had plans to prune their debt by partly disposing their land bank. Though I agree it is not an ideal/strategic buy, it is not a deal which had any wrong intent or affected the fundamentals of OCCL in long term in major way.
Would like to hear your opinion/thought if I had missed any important point.
Thanks Dhwani for sharing the presentation.
i really liked the term
Margin of safety does not only come from valuation but also from predictability of growth, business model and business franchise
This is one area ( in addition to many other areas ) where i find myself weak.
I think what most newbies like me can learn from @desaidhwanil , @OM_1417 and @dkirand is the amount of hard work they put in for investing. They have graduated to the next level only after putting in lot of hard work. Whether it is reading the ARs, doing scuttlebutt, talking to industry specialists, reading investment books etc - they do everything. And we should keep in mind that none of them are full time investors.
Yes, that’s an important distinction to make. Thanks Ankit.for bringing that into focus.
Their passion & dedication has meant that a full-time job doesn’t come in the way of passionate investment learning. That’s as inspirational as it gets for newbies. If I remember the count right, 9 out of Top 20 contributors were having full-time jobs !!
@eparsha I agree to your point that the “materiality” of the deal can surely be debated. I have had several such conversation with many OCCL investor including Ayush. My personal view point is that even though materiality of such deal may not be high, it does reflect on the “mindset” of the company where the decisions are made with respect to the best interest to the “owner” without due respect to the interest of the minority shareholders.
@manishinlucknow Yes, that was a steep learning for me as well. The credit goes to Prof. Bakshi’s post on the topic which nudged me to think in that direction.
@ankitgupta Yes, I am not a full time investor and have still to improve a lot on scuttlebutt part! And for sure, aspire to be full time investor at some point of time…
The best thing I have seen in dhwanil is to see him evolve from a pure value investor into an investor who goes after high quality businesses. There are lots of value investors who get stuck in this step.
It has always been enlightening to interact with dhwanil who has a clear independent thought process. What comes across from the presentation is the methodical mindset he has.
Just curious to know, where is the time? - Full time job, associated commute, may be spending some more time at work place due to work demand, time to be given to family, may be doing school project of kid etc etc How do you manage? How many hours a week you typically spend toward stocks and investments?
Thank You Dhwanil & Donald for providing such a wonderful
information. As you rightly said “Margin of safety does not only
come from valuation but also from predictability of growth, business
model and business franchise”. Can any one suggest how to do it. Any
pointers will be helpful.
There is no single or easy answer to your question. I can only share my experience. I used to steal time from my routine to ensure that I get at least couple of hours a day on average (which, if not sufficient, is adequate) on working day and some more time on weekends. For example while I lived in Navi Mumbai and used to commute to Dadar (by train around 45 minutes), Instead of travelling by train (where one hardly gets place to stand), I preferred to travel by bus which used to take around half an hour more than train commute. So, I had to start half an hour early and reach home half an hour late. But then, I get clear 2 hours which I used to work on the “investing part”, my secondary profession. Similarly, Since, I had 5 days a week, I generally devoted 5-6 hours to Investing on Saturday and the rest of the weekend was all family time. To be honest, it was not easy and took some time for the family to accept it. However, once they realized that this was my passion and I was eventually aiming to make my “secondary” profession the primary one, and I was working towards it, they supported me whole heartedly.
I know many of VPers like Ankit, Kiran and many more who devote sufficient time to this, despite their full time job (and demanding they are at times!) and come out with some excellent scutllebutt and analysis. So, it boils down to where there is a will there will be a way!
Having said that, being full time also means that one has to accept some limitations such as one may not be able to travel at will for management interactions and/or AGM due to leave constraints or work load/priorities. One may also have to be selective in “short-listing” ideas to dig them deeper as compared to full time Investors who may have more time at their disposal and hence can experiment more and be digging deeper more number of ideas.
In my opinion, You don’t have to go any further, just look at the Page thread! Time and again, many of the VPers have clearly articulated Why there exist margin of safety in page even at very high multiples! People elaborated same factors predictability, brand and distribution and business model. Despite that, I saw it going up from 4,000 to 15000 in short time, and watching in complete wilderness, not having a clue! For me, BQ template prepared by Donald, is an excellent tool, to decipher that for some great businesses, there exist a margin of safety even after paying fair price. I strongly recommend you to use it for slotting each of your investment and you may be able to connect the dots.
I continue to be impressed by Dhwanil. I do not or have not met him personally , but read his blog and posts on VP.
His crisp thinking is followed by his ability to put his thoughts accurately in writing .
Pharma was a bit different for me , yet based on his initial assessment on Ipca labs, i did a BQ template all of which helped me overcome by gears of investing in Pharma co.
Based on what i understand , he is a true value investor. There is always enough MOS in his investments. Some of the arguments he puts up for an investments are downright logical/based on common sense.
) where i find myself weak.