Investing Framework

Why Selling Strategy is as Important as Buying?

Posted by | Investing Framework, Stocks | No Comments

The stock market is like a pendulum that swings from one extreme to another. While it often comes to the center, rarely does it stay there for long before moving to either of the directions. This cycle of greed and fear is what generates attractive opportunities for value investors with a long horizon of 3-5 years. However, it is crucial to identify when the cycle for our stock is approaching the other extreme so that we are able to start taking money off the table. The absence of a disciplined selling strategy can lead to large drawdowns and one can get stuck for longer with sub-optimal returns. The following few exit decisions illustrate how we emphasize this important parameter: Gujarat Ambuja Exports: The normalized operating margin for the maize segment has been …

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[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

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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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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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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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Only 2.5% of 8,000 Listed Indian Stocks Are Investable; Here’s The List

Posted by | Indian Markets, Investing Framework | 2 Comments

A lot of us have the quest to unearth those high-quality stocks which will create wealth for us, but how do we figure out which are those 15-20-25 stocks worthy of being in our portfolio from over 7,800 stocks listed on the Indian stock exchanges? Looking for the ‘right’ stocks from this vast universe is akin to looking for a needle in a haystack, you often end up wasting too much time with not so satisfactory outcome. As minority investors, it is difficult to conclude with any degree of confidence that a specific company is high-quality, which is often an abused term to just refer to a bunch of stocks which recently outperformed the markets like small-caps in 2017 or large-cap consumer stocks in 2019. But how about we turn the question on its head …

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How to Identify Fraudulent & Fragile Companies

Posted by | Investing Framework, Investing wisdom, Issues in India | No Comments

Who knew that the liquidity crunch which began in September 2018 would kick start one of the most sweeping clean-ups in Indian corporate history? Slowly, all cockroaches are coming out one after the other. Fraudulent business, over-leveraged or fragile, the sudden drying up of liquidity has now exposed them all. Stocks of these businesses have crashed as much as 70-80 percent in the last year and this fall has surely shaken investor confidence. Many new investors are learning the same old lessons. Unfortunately, many are still committing the same old mistake of averaging costs when stocks are falling heavily. Some think that these stocks have fallen 80 percent from their 52-week high, and so, how much more can they fall? They do not realize that these shares could fall another …

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Nifty at record high: Don’t get carried away; real opportunity lies in these stocks

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

My April’19 Article Written For Financial Express While Nifty is at a lifetime high, the average fall across 3,000 traded stocks is still 40-50% from their 2018 highs. Smaller the market capitalization bigger has been the bashing its stock has taken. Though there is nothing unusual about it – small companies swing wildly in both directions depending upon market sentiment; after all, they are thinly traded with low free-float (non-promoter holding, available for trade) so the rise in volumes can lead to high impact. The onlookers and investors who entered markets recently might have concluded by now that it is so safe to invest in large caps which not only did not fall much in the correction but now when markets are improving they are also participating on the up move. While purely …

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