Indian Markets

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.
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). product innovation; pioneered multi-blade technology and kept on launching better razors latest being a 5-blade razor 2). branding to have a dominant recall.
The demand was

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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.
IPO is a seller’s market, they

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[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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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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Indian Markets at Cross Roads

Posted by | Food for thought, Indian Markets, Investing Framework | 2 Comments

Disclaimer: We are totally into bottom-up stock-picking and are amateurs when it comes to making sense out of Macros. This post is just a small attempt to share our thought process regarding current market environment and some interesting observations Imagine a conversation between two investors regarding a hot mid-cap which has recently done pretty well. The optimist might justify buying or holding on to it saying ‘Boss look at this new CEO who seems like an intelligent fanatic, has fire-in-the-belly to make it a global giant, look at his execution quality over last three years and the earnings potential of this business given humungous size of the market opportunity’ The cautious investor however would differ by pointing out to current valuations being close to life-time high and the potential

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