October 20, 2017
2

How we caught & dropped a 5-bagger – Story of AGL

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

Ceramic Tiles is one space which we have been tracking for many years now. In the past, we have misjudged the potential of branded players and missed some multi-baggers like Kajaria Ceramics and Somany. (blog post from 2013)
During 2015, we studied a company called ‘Asian Granito’. With Rs 850 Cr. in annual sales AGL is the 4th largest in India’s Rs 24,000 Cr. ceramic tile industry. It was available at Rs 160 a share and a market cap of Rs 360 Cr. i.e. 0.45 times sales vs. 2-3x for Kajaria and Somany. Despite throwaway valuations, we gave it a pass owing to some concerns on the business and management quality.

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October 18, 2017
4

Gillette’s Eroding Moat & Key Lessons

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

Back in 2013, I had written a post on Gillette discussing the likely challenges it is going to face in growing its business. A business with such headwinds trading at 80 times earnings should have gone only one way- down. That’s a different thing the stock has actually more than doubled given the exuberance in markets. Nevertheless, it has significantly underperformed the broader markets.

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For a long time, Gillette was touted as the perfect example of a moated business, well reflected in its 70%+ market share, 60-70% gross margins and extraordinary Return on Capital Employed. This was all being protected by sustained investments in 1).

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October 16, 2017
1

Why we prefer ‘First-Generation Owner-Operator with Skin-in-the-game’?

Posted by | Investing Framework | No Comments

We often say while talking about our investment philosophy that we prefer companies which are led by ‘First generation, owner-operator with skin-in-the-game’. Why do we have such a preference?
A company is called to be owner-operated when it is led by the promoter(s) who own the majority stake in the company.
It is said to be first generation owner-operated if it is led by the founding promoter(s). Think Relaxo Footwear or Wonderla Holidays.
Over time the leadership could be passed on to the next generation though it will continue to be termed as owner-operated. Think Garware-Wall Ropes which is currently led by 3rd generation or Amrutanjan Healthcare led by 4th generation.
The baton could also be passed on to a professional management team; qualified and experienced managers who would now

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October 14, 2017
2

Should you invest in IPOs?

Posted by | Food for thought, Indian Markets, Investing Framework, Investing wisdom, Investment Gurus, IPO | No Comments

There are two kinds of Initial Public Offering (IPO) –
1). Fresh Issue where new shares are issued and money raised goes to the company which can be used for growth or retire debt and
2). Offer for Sale where existing investors (promoters and private equity) sell their shares and money goes to them rather than the company.
Unlike earlier times when most IPOs were a fresh issue in order to raise growth capital, now most issues these days are Offer for Sale. During rapid growth phase companies go to private equity firms for capital and after achieving reasonable scale comes up with an IPO at rich valuations, leaving hardly anything on the table for new investors, to offer an exit to private equity.

Festive Offer:  35%

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September 28, 2017
1

[Memo] A Note from CEO – View on Current Markets & Portfolio Strategy

Posted by | Investing Framework, Memo | No Comments

Following is a copy of memo shared with Stalwart’s clients during August 2017 –
Markets were rallying one way up since the start of 2017 and many began to believe there’s really nothing that can stop this rally amidst so much liquidity and no alternate opportunity for deployment.
Then happened the least expected regulation twist during the month of August which should have ideally effected just those 331 alleged “Shell” companies in whose stocks trading got suspended with immediate effect, but when it comes to markets the ‘cause and effect’ is complex and often goes beyond the obvious and even minor developments could spread into deadly contagion.
 
Some of our stocks too have corrected, however, these are merely mark-to-market changes as long as we have confidence in the underlying thesis.

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September 15, 2017
2

[Memo] Penny-wise & pound-foolish – how brokers dupe investors?

Posted by | Indian Markets, Memo | No Comments

Following is a copy of recent memo shared with Stalwart’s clients -
It is unfortunate that despite such strict regulations and risk management by SEBI and Exchanges, in a recent case a Delhi-based broker could pledge his clients’ securities worth Rs 55 Cr., borrow money, divert funds for trading/personal use and eventually default. The investors are now at risk of losing a part or all of their portfolio.
A broker can do that because sometimes clients agree to transfer their securities to broker’s pool account, whereas in many cases it could also be done fraudulently without letting clients know about it.
Why do investors allow the broker to transfer their DP holding to broker’s pool account? Brokers lure clients by offering interest on securities as high as 7-10% if they agree to

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June 23, 2017
2

Am I Ready?

Posted by | Food for thought, Investing wisdom | No Comments

There is clearly a wild rush towards equity, some are doing this out of FOMO (Fear Of Missing Out), whereas some are left with no other choice given relative unattractiveness of hitherto popular asset classes of Bank Deposits, Real Estate and Gold. The magnitude of this irrational exuberance can be gauged by reading chats in  some whatsapp groups, comments on investing blogs or discussion forums like MMB (one such snapshot shared at the end of this short post).
Stalwart Advisors doesn’t have a sales team (& hence no sales target or incentive to mis-sell). Rather we have transparently put all the information on our website and let investors decide for themselves. If prospects contact us over email or telephone, we also ask lot of questions to gauge whether they are ready or not, and accordingly counsel them.
Yet, there

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May 16, 2017
3

Why we bought Garware-Wall Ropes?

Posted by | Business Models, Investing Framework, Scuttlebutt, Stocks | One Comment

“Invest in businesses that buy commodities and sell brands” is a powerful idea for long-term investing propagated by Warren Buffet. This lends business the ability to pass on higher raw material cost without losing unit volumes and retain some benefits in times of softer raw material prices. (a.k.a. pricing power)
As per Prof. Sanjay Bakshi, an attractive hunting ground for mis-priced companies is often where Mr. Market is valuing some businesses as commodity, perhaps because they belong to sectors which are labeled “commodity” for example textiles, whereas in reality some of these might have carved out a niche for themselves enjoying a strong pricing power (think Ambika Cotton)
In 2015 we got lucky when we spotted both these elements to be present in a business called ‘Garware-Wall Ropes’, a Pune based technical textile giant.

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May 02, 2017
4

Is Real Estate Turning Around?

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

If past history was all that is needed to play the game of money, the richest people would be librarians. — Warren Buffet

What happens to a sector after a prolonged slowdown? – Mean Reversion?
What happens to a sector when Government channelizes its resources behind it? – Grows Fast?
What happens to a sector when there is a huge pent-up demand? – Tailwind?
And what happens when all three coincide?
Government seems to be seriously working towards achieving its stated goal of ‘Housing For All’ by 2022 which would require 20 mn new houses. Credit Linked Subsidy Scheme (CLSS) is a material development in that direction. Under this scheme, interest subsidy of 4 per cent on housing loans up to Rs 9 lakh for those who have

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February 28, 2017
12

[Video] Individual Investor’s Real Edge – TIA 28th Jan 2017

Posted by | Investing Framework, Investing wisdom, Investment Gurus, Investor Meetup | No Comments

Presentation made by Jatin Khemani, Founder & CEO, Stalwart Advisors at Bullet Proof Investing Seminar organised by Tamil Nadu Investors Association on 28th January 2017 at ITC Fortune, Chennai.
Notes on Presentation:
00:00    Introduction
00:38    Are large caps safe and easy to decipher?
07:35    How did Warren Buffet and other veterans start investing?
12:20    Why prefer smaller companies?
13:45    What goes into making of a 100-Bagger?
15:20    Case Study – Hero Honda – A 100-bagger for Ramdeo ji
16:25    Industries with High Potential
17:57    Case Study – Titan – A 100-bagger for Rakesh ji
19:58    Structural Theme: Unorganised to Organised
21:40    Sources of Information
23:00    How many companies in India do quarterly conference calls?
27:00    Scuttlebutt & Common

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