Investing wisdom

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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What really goes behind Stock Research?

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

My post on ‘What Really Goes Behind Stock Research?’ where I talk about Initial Research Vs Maintenance Research & returns per unit of stress, dwelling further upon an old post by Prof. Sanjay Bakshi, written for Safal Niveshak’s Outside the Box newsletter: Click here to read the post: https://www.safalniveshak.com/low-stress-stock-research/    

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Gillette’s Eroding Moat & Key Lessons

Posted by | Indian Markets, Investing Framework, Investing wisdom, Stocks | 2 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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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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[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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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 …

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Significance of Management Quality in Long Term Investing

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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. …

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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 …

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