Is VLS Finance really a deep value stock?

Posted by | Food for thought, Stocks | No Comments

VLS Finance is a Delhi-based listed company which holds big chunks in some other listed companies like Relaxo Footwear, Ambika Cotton, Accelya Kale and many others, having a combined market value of Rs 950+ Cr. (as on 18th April 2016) The market cap of VLS Finance, on the other hand is just Rs 150 Cr. which implies one is getting a dollar for 15 cents – a mouth-watering deal for any ‘Value Investor’? Before we jump to any conclusion regarding the merit of this investment opportunity, let us have a look at how has the situation been historically and how has VLS’ marketcap moved with respect to the change in market value of its investments. VLS doesn’t seem to have any major operational business of its own and primarily act only as an investment vehicle for its promoter, so …

Read More

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 …

Read More

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. …

Read More

Obsession with P/e Multiple

Posted by | Food for thought, Investing wisdom | 14 Comments

Maruti says we are a country obsessed with mileage; see its famous NASA ad ‘Kitna Deti Hai’ Indians are known to be very smart consumers; always looking for value-for-money offerings. Fortunately or unfortunately, that should make us very good ‘Value Investors’ as defined by Ben Graham. However, how do we know if a stock is a bargain or not? By default P/e ratio has become that barometer on which majority is trying to answer this critical question. You mention a stock and the first question would be ‘Boss iska P/e kitna hai?’ (How much is its P/e?) P/e which is price-to-earnings ratio is the most commonly used valuation ratio to make sense of how expensive or cheap a stock is. The reason for its popularity is its simplicity; P/e of …

Read More

Decoding Business Model of Meru Cabs

Posted by | Business Models, Food for thought, Scuttlebutt | 10 Comments

Since a long time, I have been a loyal customer of Meru Cabs whether I am in Dehi, Mumbai or Bangalore. Being a value investor and somebody who strongly practices scuttlebutt, I generally find it hard to resist interacting with the driver. In fact most of these guys turn out to be pretty interesting and knowledgeable. Over these years, I generally found that barring the usual small complaints every employee has, Meru drivers have largely been happy with the company on all crucial parameters like getting consistent bookings, monthly earnings and overall experience. I was in Mumbai recently when I booked a Meru from Thane to the airport using their android mobile application. (If you haven’t tried the app yet, please have a look. It is amazing as it shows you cabs around you …

Read More

NESCO: What an Exhibition!

Posted by | Stocks | 6 Comments

I first looked at Nesco around 18 months ago when it was ~700 and had love at first sight. They have an annuity business(rentals); the company owns and runs Bombay Exhibition Center, Commercial towers built on adjacent land and some pretty valuable surplus land around it (overall ~70 acres) in Goregaon, Mumbai. If one does the math, the market value of these assets put together is north of INR 4,000 Cr. The underlying business itself is fantastic with a sustainable moat. To understand the business quality and potential, all one needs to read is Prof. Sanjay Bakshi’s note on NESCO. In the recent rally the stock has run up to 1100. What should you do now? Should you hold? or if one doesn’t have a position yet, can one enter now? I …

Read More

FY14 updates and new ideas

Posted by | Stocks | One Comment

Thanks to a great and powerful mandate to Modi sarkar – markets are making newer highs and sentiment has turned bullish after a very long time. All our top picks have been multi-baggers and they continue to do well. Here is an update on how FY14 panned out for them along with what future might hold- Relaxo Footwear – The company posted 20% sales growth in FY14 with significant margin expansion that led to profits going up 46% to 65 Cr. It shared its first investor presentation in Q4 see here. This has been a classic case of having identified an emerging moat at reasonable valuations run by an ethical and competent management. Over the last 12 months, the stock has seen a decent re-rating and a bridging gap in valuations compared with leader Bata. They …

Read More

Micro Irrigation in India – A Macro View

Posted by | Issues in India, Stocks | 3 Comments

I was speaking to a fellow value investor when he mentioned how frustrating it is to look at the shrinking universe of value stocks with which I couldn’t agree more. Most of the good small & mid caps have doubled and trebled over last 3-4 months. Its a great thing to see your portfolio go up in value everyday but the issue starts when you don’t find new value stocks, or good entry point for own portfolio stocks, for deploying your incremental funds. As I look at the stocks in our portfolio and coverage universe, there are a very few which haven’t moved in past 6 months. One such stock is EPC Irrigation, a micro-irrigation company owned by Mahindra’s. Its into similar business like Jain Irrigation. The following link will take …

Read More

DFM Foods_Crax going pan India

Posted by | Stocks | 7 Comments

It is hard to find somebody in north India who hasn’t had Crax as a kid; many even have it today after growing up just like I do Crax brand is owned by a listed company called DFM Foods Limited. DFM stands for Delhi Flour Mills which was their original business and later got demerged into a private company of the promoter group. Without getting into too much detail; I’ll give an overview of the company and then straight come to the point. DFM now owns three brands: Crax (corn rings) being the flagship brand accounts for 76% of the topline,  Natkhat (wheat puffs) 5%, Krunchoids  which is the latest addition 5% and remaining from Namkeens. Three decades old Crax corn rings are available at Rs 5 SKU (95% of …

Read More