2016 March

March 23, 2016
16

3-wave framework & its implications on growth potential

Posted by | Food for thought, Investing wisdom, Stocks | 4 Comments

In the long run if there is one key variable that determines the return we make on any stock, it is the earnings growth of that company. Earnings can grow through growth in sales, sales-mix change and profit margin expansion. However, it is the first variable; sales, that is most important in the long run as the other two for practical reasons cannot improve forever. So to determine sales growth potential for a prospective investment, it is crucial to understand the drivers of sales growth and the tailwinds of the industry, if any. This post is an attempt to put a framework to understand how categories move; a category is a sub-segment within an industry; for example electric two-wheeler is a category within the larger personal mobility industry. One can …

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March 06, 2016
10

Significance of Management Quality in Long Term Investing

Posted by | Investing wisdom, Stocks | No Comments

What would you do if I give you the following information about a listed B2C company: The brands of the company are jointly owned with promoter’s private entity. The most premium brand owned by this company which brings a third of the revenue and bulk of the profitability, is under litigation, filed by company’s closest competitor and market leader, which claims that it registered it first. The founding brother-duo are getting old (now in late 60’s) and its time for their next generation to take-over, we have no clue how competent they are and how well they gel with each other. No matter how amazing the prospects of this company seem to be, would you be able to bet big on this opportunity? Take a while before you read further. …

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