value investing

Why we bought Garware-Wall Ropes?

Posted by | Business Models, Investing Framework, Scuttlebutt, Stocks | One Comment

“Invest in businesses that buy commodities and sell brands” is a powerful idea for long-term investing propagated by Warren Buffet. This lends business the ability to pass on higher raw material cost without losing unit volumes and retain some benefits in times of softer raw material prices. (a.k.a. pricing power)
As per Prof. Sanjay Bakshi, an attractive hunting ground for mis-priced companies is often where Mr. Market is valuing some businesses as commodity, perhaps because they belong to sectors which are labeled “commodity” for example textiles, whereas in reality some of these might have carved out a niche for themselves enjoying a strong pricing power (think Ambika Cotton)
In 2015 we got lucky when we spotted both these elements to be present in a business called ‘Garware-Wall Ropes’, a Pune based technical textile giant.

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What makes Wonderla Holidays an amazing business?

Posted by | Business Models, Scuttlebutt, Stocks | 3 Comments

What is the idea of a full-day outing/picnic for an average Indian middle class family? Think about it, what are the entertainment options available for a family even in Metro cities on weekends or when you have some relatives visiting you from outstation?
I bet the first thing that would come to your mind would be- visiting a mall, watching a movie and then having a nice meal at the food court. That sounds good and that is precisely what everybody around seems to be doing. The only issue there could be lack of decent content which you can watch with your family.
Other than that, what else comes to your mind? Think about full-day enterntainment options for an average Indian family. Frankly not many exciting options exist that are

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Tasty Bite Eatables turning Tastier

Posted by | Business Models, Stocks | No Comments

We had invested in Tasty Bite Eatables in April 2015 when the stock price was Rs 640. In this post, we will briefly cover what attracted us to the company and how the thesis is playing out. 
Tasty Bite Eatables (TBE) is a company incorporated in 1986 and is mainly into ready-to-eat food. It was promoted by Ghai Family who also used to own franchise of Kwality Ice Cream in Western India. The company went through some interesting times in its brief history; sometimes a great idea fails because it is ahead of its time. Perhaps this was true for Tasty Bite too which questioned its very survival leading it into Board for Industrial & Financial Reconstruction (BIFR). Eventually it got acquired by Hindustan Unilever which withdrew from Indian markets as Indians weren’t ready for ‘ready-to-eat’ food

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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

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3-wave framework & its implications on growth potential

Posted by | Food for thought, Investing wisdom, Stocks | 3 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

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

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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

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