[Investor Memo] Wise to Optimise Expectations & Review Asset Allocation

Posted by | Indian Markets, Investing Framework | No Comments

In April 2022, we published an important subscriber memo titled ‘Wise to Optimise Expectations & Review Asset Allocation’ While the two pillars of the bull market: Liquidity & Growth are slowing, Export is the bright spot. Following are some edited excerpts from the same. After crashing in March 2020, markets have been on steroids ever since, which implies the ongoing bull market is now two years old. The last six months though have been tepid for markets, but thanks to some outliers in our portfolio like Usha Martin & Gujarat Ambuja among others, the portfolio has continued to show outperformance even during this tepid phase. Extra-ordinary periods like this are generally followed by some pullback or a decent time correction (sideways market). Accordingly, instead of extrapolating this into the future …

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[Video] Webinar with Vivek Bajaj – Investing Framework & Case Studies

Posted by | Industries, Investing Framework, Stocks | No Comments

In this session, Stalwart’s CIO, Jatin Khemani discusses: Stalwart’s Investing Framework – 20:20 & Special Situations Drivers of Long-term Returns – Volume Growth Industry Life Cycle List of Promising Industries Deep-Dive into Security Services | SIS Ltd. Portfolio Allocation Strategy Learnings & Mistakes Advice to New Investors Free sign up to access Guest Dashboard: https://investor.stalwartvalue.com/users/sign_up

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Tenets of Commodity Investing – Framework, Experience & Learnings

Posted by | Indian Markets, Industries, Investing Framework, Stocks | No Comments

In this post regarding investing in commodity businesses, I cover the following: Natural vs Processed Commodities, 10-pointer framework/takeaways based on our experience, How our stock-picking has evolved and current commodity positions in the portfolio.  We broadly divide the commodity universe into two categories – first is Natural Commodities (/Resources); these are nature’s gift to mankind. All one needs to do is just extract these and sell to the customers. Some examples of natural commodities include minerals like iron ore, coal, oil & gas, limestone, agricultural produce like tea leaves, green coffee, cotton, wood etc. Iron ore mining companies like NMDC or Sandur Manganese typically own their mines or have them on long-term lease. To dig out the iron ore, they hire mining operators and pay them on output basis (per …

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Introducing Anti-‘ES’G smallcase by Stalwart Advisors

Posted by | Investing Framework | No Comments

Excesses at one end often create opportunities at the other, which can be leveraged by pragmatic investors. Environmental, Social & Corporate Governance (ESG) theme has gained tremendous momentum over the last few years with billions of dollars flowing out of companies that score low on some arbitrary parameters, to the companies that score high. In simple terms, it is a framework to rate businesses on how good are they for the environment, society and whether they have sound governance. On paper, this is certainly a desirable concept, but in practice it is extremely subjective with rating frameworks as well as corporates, trying to manipulate the system to suit their beliefs and situations. Investors are made to believe they can make excess returns while morally feeling good about it. The money …

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APL Apollo – A 5-Bagger in 2.5 Years

Posted by | Business Models, Stocks | No Comments

We bought APL Apollo at Rs 1,269 a share, in Oct 2018, and recently exited at a price of Rs 1,258 a share, however after the stock split of 5 for 1. At an unadjusted price of Rs 6,300, the stock has been a 5-bagger for us in 2.5 years. It’s been a great ride and we love the extra-ordinary execution by the management team in an otherwise slow-growing commoditized industry. We had hoped annual volumes to move closer to 2mn from 1.1mn, EBTIDA per ton to move from Rs 3,000 to over Rs 4,000, and net profit to move from 150 Cr towards Rs 400 Cr. Luckily the thesis played out perfectly and the market cap moved from Rs 3,000 Cr to over Rs 15,000 Cr. What’s heartening is …

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An Update on Gujarat Ambuja Exports Ltd.

Posted by | Industries, Investing Framework, Stocks | No Comments

A couple of years ago I had the opportunity to present on Gujarat Ambuja Exports Ltd. at Tamil Nadu Investors Association’s 20:20 conference held in Chennai. I had under half an hour to explain the entire business model, investment thesis along with upside triggers, management assessment, valuation, the risk & concerns, among other pertinent factors. The video is there on Stalwart Advisors’ Youtube channel, the link is shared at the end of the post. This post is a brief update on how (or not) the thesis is playing out. But before I jump to that, let us do a quick recap of what the company does. The key segment contributing to the majority of sales and bulk of the profitability is their ‘Maize Processing’ segment, under which the company buys …

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Is Real Estate the next Pharma?

Posted by | Business Models, Indian Markets, Industries, Scuttlebutt | One Comment

A few years ago I had made a thematic presentation ‘India’s Consolidation Wave’ at Flame Investment Lab, Pune. The basic idea was to demonstrate using actual data from multiple industries that how some of the better-run companies were consistently growing faster than the industry and hence winning market share from their smaller/weaker/inefficient counterparts. At that time, I highlighted some of the key enablers supporting this trend – brand, distribution, and economies of scale. Later when Demonetization happened in 2016 and GST got rolled out in 2017, the ‘Unorganized to Organized’ became a hot theme and many investors expected unorganized (smaller firms) to shut overnight while organized guys (listed companies) to grow multi-fold. Naturally, these investors and analysts were bound to get disappointed. While I also mentioned GST, in my presentation, as an …

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Memo: Let’s Brace for P&L Accidents But Not Overestimate Impact on Intrinsic Values

Posted by | Indian Markets, Investing wisdom, Stocks | No Comments

(Following is a copy of Memo shared with subscribers of SA’s Model Portfolio) Starting this earning season i.e. of Q4FY20 (& beyond), we would hear a lot of exceptional items in the form of loss of revenue and profits due to lockdown, increased operating expenses, changes in the way businesses operate, etc. For some businesses like Wonderla Holidays, the impact of lockdown is extreme – All its parks are closed and revenue will be zero until they reopen, while a significant cost base is fixed in nature (salaries & maintenance) so the company will report losses for this period. On the other extreme, there are a few businesses in our portfolio from agro-chem/pharma sectors for whom it is literally life as usual. In reality, most of the businesses will lie somewhere in the …

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Financial & Mental Preparedness For What Lies Ahead

Posted by | Food for thought, Indian Markets, Memo | One Comment

The global economy has locked down and experiencing unprecedented uncertainty & volatility. Accordingly, it is ideal for everyone to ensure we are mentally and financially prepared to face what lies ahead over the next few months. Feel like exiting equity? Some of us could be thinking it feels like the end-of-the-world so better to cash out whatever is left. Pick up any book on the history of markets, read the experiences of veterans and invariably every crash feels the same, however, humankind has its own way of making a come back and we always do. Think about it this way, if things indeed go that bad, what purpose would this money serve anyways? However, if things get back to normal, we could witness the mother of all bull markets like the world saw …

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10 reasons why long-term investors shun real estate stocks, and why its time to do the opposite

Posted by | Business Models, Indian Markets, Industries, Investing Framework, MoneyControl Column | No Comments

Whether it is real estate as physical assets or as stocks, there has been a lull for many years now. Will the two always move in tandem? Can real estate stocks do well even without real estate assets picking up? Before that, let’s understand why the real estate business and stocks are so out of favor: It is an extremely asset-heavy business with significant upfront investments needed for buying land and for project development, necessitating the use of borrowed money or settling for a lower return on equity. Further, each project has a long gestation period of 7-10 years. To make economic sense, the project size has to be meaningful, in which case even one or two projects going wrong on location/timing/pricing can push the company behind by a few …

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