MoneyControl Column

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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Listed MNCs in India: a good catch, but an opportunity slowly fading

Posted by | Indian Markets, Investing Framework, MoneyControl Column, Stocks | No Comments

My March’19 Column Written For Moneycontrol A basic tenet of long-term investing is to look for high quality listed businesses. This essentially implies 1) they earn returns above the cost of capital (reflected by return on capital employed), and 2) generate strong free cash i.e. they don’t require a lot of capital (fixed assets and/or working capital) to grow revenues and profitability. Those retained earnings can then be utilised either to acquire other companies in the same line of business or diversify. Alternatively, excess capital could be returned to shareholders via dividends or buyback. But have you ever wondered why would a promoter of such a business list his company as it involves diluting a significant chunk of his ownership to minority investors? For instance, why is a business like …

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