Author Archives: safirpicks

Happy Diwali -the first thoughts

dear friends,

what a year 2018 has been for investing. Starting with an upsurge where investing was just about buying anything and seeing it go up to the current state in October when:

a) you have more predictions on nifty levels on the downside than upside

b) your broker is stunned that you have a buy order and his first sentence is we will need the payment today as our terminals have huge pressure (this situation is better now than it was in September)

c) investors celebrate both the closure of the market at 3.30 and all holidays

d) you love stocks in your portfolio that fell the least not those that had highest potential

e) you find solace in the fact that hardly anything has been spared beyond large IT, pharma and consumer and thus as a rare first investor returns are more or less aligned to a substantial melt down

f) whatsapp groups (I am on none) only talk of negatives and social media investors turn philosophical with endless quotes of Buffett, Graham, Howard Marks.

g) there is endless fascination with nbfc fall and business models overlooking that beyond a dewan housing almost all others have fallen in line with mid and small caps where they belong

h) the same sectors that looked bad in January look like the most delightful ice cream sundaes. I remember how I was trolled in dec 2017 and January for recommending pharma and mid IT

i) there is greater belief in selling before the next seller and least conviction in buying particularly in mid and small caps

j) a leading tv channel finds more viewership in getting only technical analyst and day predictions than making any case for value investing

k) your broker instead of telling you what looks good through research of his broking house wants you to tell him how the market looks and himself has lost all sense

l) there is least interest in magazines and broking house coverage of Diwali dhamakas Patakas or picks

m) the fortune of investing is now only taken to be dollar, crude and fii activity

n) it is already assumed that elections could be rough and would impact markets

o) the most credible business leaders are not in focus while investing contrary to several notions that quality of management is one of the critical guiding factors in investing. Any promoter speaking well of his company is equally being doubted

p) At a recent investor carnival, there was more interest in trading momentum and short term than what I thought was the very purpose of the carnival with some long term investor speakers even opting out

 

if I notionally step out of this gloom debate above and try and think what positives could there be to attract investing I think I get my answers in simplicity. Most gloom is usually in prices and the same scrips that looked like revered jewels 💎 in July or earlier now look like touch me not.

i think 💭 another leading fact is all is being tainted (not painted) alike.

Yet history goes against being overtly negative. Distress times make assets cheap and smarter money pops in to make better gains. Historically currency 💴 depreciations of the magnitude of 15 percent odd have been followed with huge rallies in succeeding year as scrips become cheap not only in price terms but also currency terms.

there are many positives that are bound to play out sooner than later. Many banks have seen stability or reduction in npa, defaulters are selectively coming back to back and the recent example of Essar would in by assessment be just one example of many to follow. I personally think it is impossible that the nbfc shakeout doesn’t create very strong nbfc leaders who gain from the weaker players- the sector is critical to SME, MSME and post demonetization is a liquid for the economy. Bank head said themselves say there are no npa’ with nbfc and the function in an efficient model to break a large chunk of capital into smaller parts to cater to funding utilities that banks cannot micro manage. Even otherwise nbfc are themselves the largest customers of banks. I find it impossible to believe that aspirations of people to own 🏡 houses, 🚗 cars, motorcycles 🏍 or to buy clothes will be reduced as if the entire earning power of 🇮🇳 india will come to a stand still. Recent commentaries from many leaders indicates that the current impasse in the economy is better than demonitization and things should get back soon.

i recall in December I think it was 26th post demonization on 9th November I had visited malls instead of my annual winter break and tweeted things were looking up. I personally took the call to invest more and go against the fears. Needless to say the rewards were much to my satisfaction. What followed thereafter was a huge rally and all of demonization worries were buried. The search went from choking economy to digital economy and several companies that catered to it. PayTM was one unlisted example that excelled in this. Slowly the momentum spread like butter on a hot toast to other sectors and india was looked upon as a huge growth story. Senses and nifty targets flew in and every person in town had a success story to say in his portfolio. It was believed across social media and investor conferences that multi baggers are routine things and anything less is not worthy. No wonder excesses cropped in till they were against reset with GST. 

Again post GST and a reset in market, the debate started and I too was a believer- buy organized sector and sell others. The play caught momentum and soon was a to be taken for granted story.

Suddenly nothing is being believed. Even giants in paint 🎨 sector that have record of giving you more than market gains even if you bought them at highs every year are disbelieved. As if we won’t paint our homes, cars will come paint less or when dented will remain so, white goods will no longer be painted- I think ppl think even white is not a color 🙃

There will be no home improvement, RERA is a fantastic progression and should see the noticeable credible builders excel. I think the confidence of end users in apartments or homes will rise if defaults come down and much of this will inure to benefit companies that cater to this. I personally feel real estate prices may not rise like the past given speculation was largely led by accumulation with low initial payments and a cash led grey market.

such is the mood or sentiment that even when say a Christian Lagarde says currency wars “could” slowdown global growth and india stands apart, the same “could” is taken as “should”. Corporate America is going through one of its highest growths and I do not believe the US will end up as an isolated country with no trading partners. While the USA market may cool off given yields money is something that always flows in pursuit of opportunities. Some will go to emerging markets which have been under weight for a while, some in private equity- I see more of flipkart, paytm kind of deals happening, some in acquisitions- don’t forget in GDP india is a high growth country and much of india’s assets have become cheap just by currency and liquidity pangs. News of acquisitions has a reset mechanism for the companies in the sector concerned. One should not lose sight that Indians have lost the opportunity to own fantastic businesses like paytm, ola, flipkart and have allowed the opportunity to go to foreign ownership. Fair enough. Every asset will find some buyers.

at a personal level ask yourself do you really think you can’t make 💰 money owning stocks and see your own history. Where was the return the best? In times of investing in drawdowns. Almost everything is on sale and there’s is hardly any reported promoter selling. In fact many companies are doing capex even now and open t acquiring assets.

I will not be concluding this write up on such a sober thought process given we are entering festivities. Pl treat this as part 1 of my write up.

part 2 will follow close to Diwali.

Regards.

 

(no spell check done. Not an investor advisor. Views are personal)

 

Advertisements

Monsoon and its thoughts on investing

As I look out of the window,  a beautiful gush of rain passes. Water is literally awakening to its moment of fun as nature welcomes the joy of abundance, change, freshness with bright blushes of green.  The air turns crispy with an aura of freshness, as if Delhi had no polluted past. With this sudden change, there is that sudden desire to have a freshly brewed cup of  for aromatic spicy tea.

As the rain continues, the rain and the green effect draw constant pause. My clear window looks like a work of art inviting me to think along with it.

Its wonderful that management gurus talk of Blue oceans and Blue sky strategies. The effect is akin to that witnessed by Street kids Who innocently play along just making the most of the moment.  All of the heat and dust and air masks and pollution have been forgotten and we breathe as if another upswing has come.

Is life in the financial markets a series of dust and pain? Followed by moments of changing seasons, each with its uniqueness.

The last few months have been quite off for markets. Partly due to some average to poor to even confusing inventory, raw material impacted results (dust) as corporate india still reaches out for capex pick up, export incentives, tax reliefs, ease of liquidity and benefits beyond rural necessities  etc. And partly due to exhuberance across many mid, small caps and even some pockets of large caps and including in metal infra and cement stocks, (heat). Some of the dust was almost sure but got masked in hope theory particularly in psu banks where the write offs got more severe. Thankfully the largest psu bank is itself showing more positive now than negative.

As the storm kept up, every now and then one could see cracks, damages or wreckages. this is where history of returns and temperament truly matter. If you have made even a 2x return in market (which is what any average investor would have surely made in the last 1-2 or even 3 years) and you get knocked down 20-25 percent,  it is only expected. I would think some of this was also due to excessive liquidity sucked up on the basis of “assured returns” not neccessarily the job of fund managers but marketeers who have incentive or other commissions.  Frankly their only senses of good and bad is how a fund has delivered in the last month or two and who could promptly advise you to keep switching if the trend changed,

the fall or correction as I would call it also has its other side You. Do you have the financial capability to bear the storm knowing it will pass and that you constructed a house well with your savings and will be able to plough funds for necessary repairs or even replacements. Or is your investment so stretched that given an impact, you wouldn’t know what to repair.

I will add to the factor of dust and heat, the sudden factor of governance, flagged off by auditors including in companies audited by them for multiple years, As a proposal to the Ministry of Law and Sebi I think an auditor should not be allowed to resign and hand over till the grounds are shared with the shareholders.

just as a sneeze catches on, seems india is sneezing to several fears of governance. Some founded, most just being used as an excuse to tame down excesses.

The retain investor sits in this muddle, confused. Some have given up on buying once again and as history repeats taking the market as a gambler’s den. Yet the market sits with its own partner in history to suggest how it has created unparalleled wealth for a person who found a good company, added his positions over time with the co’s growth and sometimes even played the role of an opportunist who even once in his life heard “buy when others are needy (sell when they are greedy).

I studied in this rain, the statistics of my blog posts. My posts early this year on why market returns could be moderate had the least likes. My take on buying consumption stories due to the positives of gst or pharma were most passé. I was told when large IT was underperforming how cna mid IT do well, The guy suffers from a bias of his position. Btw any opinion in this world is biased including well being from a parent or your perfect lover. Also max money is made when consensus is against not for.

So what have we now.

we have crossed a phase of corporate scares, inventory adjustments and reached a reason not to own companies as dollar to rs has surged and fiis will sell. Or trade wars will hit india. Wait a second, fiis still own the best selling banks and did not sell. Oil surge has in the past suggested that even when oil hit 120 we came back with a bang and the mkt delivered its best returns. Auditors fear signing reports- so finally the true color and weight of promoter credibility should set in. I think cos that get thrashed for improper disclosures should get that treatment and be barred from any capital market access for some years.

meanwhile we learn from life that only the tough survive. You discover one good co from another when things like this happen. Some benefits that percolate to rural and semi rural also benefit a vast no of companies.

 

one of the nuggets culprits if mkt exhuberance is benchmarking. You are not selling surf excel to see why your neighbors shirt is brighter than yours. He current mood of outperformance centric around a few very good cos otherwise has left them in a spot where they are still great companies but at very rich valuations. The market expectations factoring in their growth are now out of sync. These possibly include some finance cos several times (even 3-5 times historic value) every one now wants to own them which is not my problem as I am not a bookkeeper or a messiah nor can ever be. The problem to me is that in this fear people have stopped believing that the market has more than 10-12 cos.

all mid caps are now bad. in fact interestingly most sme cos have outperformed the fall.

all mid cpa managements suddenly do t know what to do. A pe of 15 is now too expensive for mid cap but that of 60-70 is ok for few outperformers.

 

i would like to believe personally this is a great time to buy several companies. I wish I was setting up a fund at this stage. It’s not necc that I will make money in a month or two but I sense a lot of money is to be made in many companies that will migrate from mid to relatively large cap.

I heard a great point in an interview made by Shankar sharma recently. He said india grows at 5 percent in consumption no matter what.

I see ample room for growth for companies in two wheelers, home improvement inc roofing, tyres, speciality chemicals, food, retail, car batteries, depositories and what not. The mkt penetration is too low to write off the growth.

 

my cup of tea just got over. The rain has stopped. My thoughts inspire me to think what next.

more thoughts soon. love nature, be happy, make the most of your life. That’s your best return. Stay away from people who are negative or just argumentative but skirt facts for they just can’t accept you for ego. Love those who are even remotely kind.

As I was recouping from a fever last 3-4 days, Amit Arora, who I think is a saint in a human soul sent me a book to read. Embrace such people as they are your true friends for life,

I also wish to thank KJB Mathews who is a guy always smiling and who every reason  to only sends me organic mangoes from his plantation but also guides me how to wait for them to turn ripe. He is due to get married very shortly and I wish him the best.

a word of thank you also to Ayesha Faredi at ET Now. Ayesha is always smiling no matter where the market is hoping her viewers are all doing well.

standard caveat: I am not sebi registered nor an advisor on finance. My views (and mistakes) are personal. Just that I find few who forgive me and send me kindness and love no matter what. To them I shall always be ever so grateful. My only assurance to you is I wish for you to do financially well and it’s more than anything to bump into some of you who lovingly thank me for Twitter or just about even the smallest thing.

Ps: pl ignore typos. And see you soon

Take on me, take me on

hi and a very good Sunday morning. Started the day with a fantastic TED talk india by the eminent chef, Vikaas Khanna. In this talk, vikaas spells out his journey with lots of determination against odds that keep propping from time to time.

he makes a wonderful statement when he says:

ek beej ko dabna padta hai zameen ke neechey ek pedd ban ne ke liye

inspiring.

which brings me to the purpose of this blog. Time and again I have emphasized and shared with all of you that investing is a journey, the outcome of which can be immensely rewarding.

In January and towards end December including in the Jean post, I had expressed reservations on returns in the market for 2018. Even as a person with hopefully an open mind scouting for ideas to add or enhance in the portfolio, much of the like stocks seemed witherky fairly valued or did not leave much comfort for meaningful returns ahead. Yet I took the choice of being invested and not on cash as the approach to this is essentially a part of how you assess your horizon. To me, a knock off of 10 or even 15 pct in stocks that you own is just a breather unless there is something radically wrong in the working of the company or the sector to which it belongs.

as it turned out to be, some stocks made new highs such as Venky, some are almost stagnant like HEG, some very marginally down like tyre stocks and some perhaps in line or even slightly more with markets. Now presuppose you were in December or early January and had to take a call on what to sell or reduce. No matter what one says in hindsight no person has a clue to say I know x co will hit a new high, y will be more or less same levels, z will be down and by how much. To know this you need to know the future and not discover it. What if in your prudence you had sold off the gainer, reduced the non event stocks and kept the ones that lost out. I can assure you your portfolio would have looked worse and your confidence in decision making could have been somewhat impacted.

a great learning in life from my work, interactions as also from investing is a winner is one who believes he can win. To keep his mojo alive he sets his sight on a goal and relentlessly pursues his path. Occasionally tired and sometimes even slowed by rest, he moves on and on for his knows at the end of winning lie ovations, accolades and then new shores.

i don’t think with the recent correction in some stocks there is any concern. If in December end and January I felt the stocks were good though their expected annualized return had reduced for 2018, I stand to think now I have that narrow return plus the corrected percentage to make up a far more interesting return for 2018. If I further analyze, we are almost 9 months to the end of 2018 and the returns ahead annualized for 9 months look good to me.

the current fiascos in public sector lending are nothing new. It was rather silly in the first place to believe old habits will die fast when they were recapitalized. More sensible people today are prodding govt to consider privatising some psu banks, a move I will be supportive off. There are many ways to check undue monopoly and the state ownership of these NPA laden corporations make little sense. Besides with no owner of the banks other than govt who never involves in day to day functioning the existence of them takes away an entrepreneurial spirit. The latter is a huge catalyst in shaping economies and creating new business models and leading in disruptive innovation. One of the reasons why we see huge new businesses emerge from USA and china is this spirit of a new generation enterprenuer like Steve jobs was or mark zuckerberg is or Elon musk or jack ma are becoming.

I also see no impact other than favorable on private banks like Kotak, Indus ind, and some new generation banks tha emerged recently from the pvt stable.

while I have not added to my holdings in banks, the correction has drawn my attention to several emerging leaders in consumption, technology, manufacturing. I have not changed my stand on pharma though have not added there as barring Lupin none of the pharma stocks even fell in line with market. In fact some of them rose vs market fall.

It never disturbs me when on social media like twitter I have a few comments from people telling me market is headed to new lows. These guys claim to be investors but in effect are only coin tossers. A true investor looks for opportunities and knows the scalability of them. He may have time and lack of fresh capital against him in phases but he knows that you can lose far lesser than make. And if he knows investing is a process of transfer of wealth from the impatient and sketchy to the patient and willing he just keeps at it. In fact the biggest flaw in thinking is about this thing called market. In analogy, you can’t say the entire world is going to see problem. Some will and in that problem some will see opportunity and in a constant changing world, money will move towards he who dares and keeps moving towards his journey. As they say, pessimist neither win wars nor did a pessimist discover the secrets of the stars or sailed to uncharteted land or opened a new doorway to the human spirit.

True it’s not just about being optimistic but also realistic. Here’s where the swing towards the cos you own sets in. Since January I have interacted with few, seen results of many and even attended Ceo forum with leaders like mr Biyani, uday Kotak, mr subhash Chandra, mr Mariwala, Mr. Anand mahindra etc talk. I don’t see pessimism, I hear lots of change has happened for good in transmitting from unorganized sector to organized. I hear gst collections post March with a lot of uncertainty in processing of forms clearing and thus a move towards a new india. I hear lots of good coming from Rera. In my professional capacity I hear far more talk of technology, better productivity, embracing more IP (the biggest wealth creator) and other positives.

To sum up for now, I see a continuity of the bull run. Given the corrections, my expectations of the market return stand significantly improved. a lot of muck in india including tax evading out of shape entrepreneurs who have run to Dubai, UK or other places and defaulting companies being cleaned up is in place. The balance sheets of few cos look healthy with capex done and gst inventory issues sorted. I see the possibility of a new high for markets in 2018.

 

disclaimer: views expressed are personal. Pl treat them as only a view point. I am neither a professional nor a regd advisor. But I have no vested interest in this view as I have not recommended any stocks. My intent is to see a happy educated and self made lot of investors. Nothing satisfies more when some of them I have never met walk up to thank me or take a selfie. We are one nation of investors in the right direction towards our own empowerment. Cheers

 

Ps… no proof reading, typos are too small a part of a passionate life on a blog though they matter the most in a professional set up.

Learning from 2017 and this bull market rally (part 2)

hi,

in continuation of my intent to share learning experiences, this is part 2 of the article posted just a few days back.

this learning comes from an international giant. A market leader that has a subsidiary listed in india. The Indian subsidiary was languishing for many years. I identified the co very early and felt there was a huge disconnect of the past and the potential. My mind was skewed between a poor past performance and a forward looking “vision” that suggested an aggressive USA management that could not possibly just keep “sitting”. I went to check on availability of the goods made by this co in the market and while they were selling, I did not find “aggression” in selling. There was advertising but it seemed the products were “shadowed” by another co in the same sector. I thought to myself be that as it may, there were only 2 sizable players in a market that held huge potential.

discussions with close investor friends suggested it was a sleeping stock and not worth more. Sometimes we are plagued in thinking about things that seem too obvious but are not so for multiple reasons. One such thought was technology and smart devices are disrupting the sector to which this co belongs. Hence it will have a bleak future. Almost analogous to the current hype on electric cars as if for the next several years the automobile industry with all its vision and expansion doesn’t know it but we do. (Toyota and maruti just tied up for e vehicles batteries and thus we have it)

I refered to “are not so for multiple reasons” above. We all suffer from several syndromes. One is recency effect of seeing a part of the picture but not looking enough. Two we assume too fast. Pl recall some years back how rumors of “ganeshji” (I love him) and other gods drinking milk spread all over india and everyone made a bee line to the temples with sachets of milk. Third is we think we know more than managements and their research skills. Sometimes market rewards or portfolio gains make us think we are larger or smarter than we actually are. The forth point is we forget history has a “things return to basics”. Johnnie walker does an ad on this. Being a fashion brand consultant, I see it all the time. In clothes, in hairstyles accessories etc etc

so here we have it. Impacted by all the factors above and ignoring a larger picture. Missed the stock and was literally sitting on the sidelines deliberating too much. This brings me to another learning. Given a conviction from within (vs a hearsay) do some indulgence and buy. There is a huge latent power that guides you then to discover answers you seek. By being a non participant you have no teeth in the game and hence remain more skeptical than a discoverer.

 

i missed another 7 bagger. That too until now. The clouds are smiling above me and I am grounded only with wisdom. Well being an optimist, making the most of what I have.

 

cheers and thank you to all those who replied, tweeted or posted their comments. Learning is always sharing.

 

Soon more….

Learnings from 2017 and this bull market rally

dear friends,

I am delighted that we are at new highs. The articles written last few years and the persistence to only remain bullish including in the article “don’t be a cry baby, be a buy baby” have left a lot to smile. Money has an amazing feeling of confidence and independence but is not always loyal. The best part for me to do with stocks is not just the returns but the learnings that come with it which I factor as fee for education and building experience.

I am more than happy on several fronts.

A) for having remained fully invested (and I do mean 100 percent) in equity for the last few years. Even today the position is the same- except my expectation of reruns in 2018 are more moderate than they were last few years.

b) for having outperformed the market with lots of gratitude to God and Lady Luck and not just an appropriate skill. The conviction to be in several small and mid caps and not in large caps (barring isolated examples like hdfc bank) has made all of the difference to the returns. They say every bull market has a new leader. This market showed leadership in a segment of mid and small caps and not a sector run. More to do with cost of capital to these cos and their small bases where even one sizable order altered their financials and somewhat to do with a very large participation by retail vs fii. There is generally a perception (although not correct) that stocks that look cheap in price are cheap and will reward more and hence optically sub 1000 rs shares are better than those above. Like I said this is optical and one of my core investments is today one of the most optically priced stock but which even today is reasonably valued vs its earnings, brand value, growth, capex and replacement value. The last factor being important in a world characterized by sudden deaths or take over or obsolescence of cos and hence the need for stability in business survival and growth.

c) the third factor has come at a cost to me. I love opportunity costs. Even if I out do markets I constantly analyze my errors, mistakes, oversights etc as it leaves good trail in the mind to look at patterns and avoid similar mistakes in the future. May I add, mistakes will always be made and you can only try to improve and minimize them. This article tries to focus on some.

While one side of my thought process loves the fact that I took a positive and more than rewarding look at identifying opportunities to own and invest in several sectors and leaders in those sectors ahead of their subsequent recognition such as tires, specialized chemicals, electrodes, consumption and of late hospitality (I wrote more on Twitter towards later part of 2017 how the hotel industry is shaping up well) and finally pharma (all have already outdone market except one pharma stock, which I think is not bad), the other side of thinking takes a look at several misses-

i identified a small cap stock in packaging at a phenomenally early stage. Not only identified I bought a decent starting qty into it. Just to elaborate in several small caps you may see opportunity and an indication of improving financials but you can’t fully bet till the story actually starts playing out more consistently as management bandwidth and their ability not to get “carried away” takes time to mature. As I usually do in some cases, I discussed the idea with few of those who fall in my circle of well wishers and who have a very open mind and a great history of understanding cos. The result of the discussion was most unfavorable. I usually don’t get impacted by this as sometimes I attribute this to the lack of information about cos and precise why they are being discussed and not so obvious. But here I got carried away God knows why and sold off my position. The stock went up 26 times thereafter and was big guru in teaching me this:

“There is no right view in the market (including your own). The view is right on some assumptions only. Don’t dismiss assumptions on basis other than peculiar to that co including the lure of another idea. No one is an expert on everything and no one will ever be. Each person has a circle of his likes and thus is already biased. For ex historically a sector may have caused a loss or a wash out but today the facts may not be same. Usually history is a great teacher but new history may be created a few years later. Today there is more truth to this as business models and corporate governance standards are getting better”

Another error I made was again wine respect to a stock where I even crossed 1 pct holding in the co or nearabouts. I saw the co in a segment that was niche and where I felt the opportunity was huge. The stock languished for 2 years and did nothing. No change in results, no large orders and obviously no stock price movement. In a sense it dragged a part of the portfolio return commensurate to its weightage. I assumed 2 years of nothing was being fair in terms of a holding period and sold out. Somewhere in my mind the trap of opportunity cost being high here and nothing changing played out. As they say the decisive moment in a stock can come anytime, the stock immediately saw a turn. And the story played out in one of the highest up moves amongst stock returns last few months. This left me with a learning and a question to myself: how long will I hold a stock that looks convincing in a backdrop of a rising market. Will I hold it for 2/3/4 years even if it underperforms even if “eventually” it may not only catch up but overtake market returns by far. I don’t have an answer and my deliberation continues.

I can pacify myself and feel happy that even with such errors the p/f beat the market well but the truth within is why these errors were made and what can I learn from them. Did I need the money when I sold these stocks? No. Then why did I sell them? Is comparative return a true guiding factor of a decision even after 2 years or is there more to it in temperament and time. As part of early days, we used to read “our favour te holding period is forever” but that’s not true even for Buffett as IBM and many other examples recently showed. In a tweet, mr samir Arora re-stated this as “our favorite holding period is forever as long as we have good companies with good managements” (which fact is a discovery with time and may errors can be attributed initially). There is nothing to suggest that IBM doesn’t have an excellent management and is an outstanding co. Hence to me it appears “our favourite holding period is as long as we have returns”. Here lies the patience card- until when will you sit till you discover these returns.

My third learning has been e phenomenal difference in returns by not buying for short spurts, buying on tv flashes or selling based on them, not being part of any whatsapp group and doing your best to remain confined to your pool of thoughts. Take a thought- the stock market has so many listed companies in all segments. You need a handful and will do well if they outperform. You cannot yourself know which one of your favs will run the marathon with higher speed and end up as your best return. But you expect another pool of thoughts in other sectors or companies to display characteristics of more certainty and authority.

well I intend to write more on the learnings and am closing this post with these initial thoughts. Which I may add brings a new learning to share- penning thoughts or even articulating them say at talks is a huge huge advantage to an investor. It opens new horizons, sets the mind to explore more angles and if nothing makes you a better thinker and if God be, a better prepared investor.

 

cheers and do send your valuable feedback either here or on my Twitter handle @safiranand.

Shall update part 2 soon and try and share learnings along a wonderful journey.

 

(please excuse any typos. This is an article typed in a flow and not as a stop, read, review, edit mode).

the last sunset of 2017 will give way to the first sunrise of 2018

dearest friends,

a very happy new year eve to you. with some nostalgia, I saw the sun setting for the last time in 2017 a few minutes back. Usually I get emotional when I see somebody knowing I may not see them soon enough.

 

The sunset had the same effect. While I know the sun will rise tomorrow morning with a new sunshine and much new energy, excitement and resolutions and lots of greetings amongst family and friends, the fact that we won’t see 2017 again had some impact.

as an optimist, I don’t compare years and leave much positive to look forward to, yet, 2017 has been a remarkable year in many respect. Profession apart, 2017 for me was a year of several discoveries.

some in stocks, some in people, some in friends made within people and a completely different approach to many things. It’s truly been a new year.

2017 for investors was one of those rare years where you were rewarded by highest conviction even against results and traditional valuation norms.

I personally feel, at the risk of perhaps disappointing some, including the thermal bull within me, 2018 is likely to be a tough to moderate year for stock picking.

 

I don’t think the rally will be as broad based as it was in 2017 across most mid and small caps. Frankly I will be happy with a 12 percent or 1 percent pa rise in markets and hence the challenge of outperformance will be more than in the past based on hard work, out of box thinking  and now less on momentum.

i see blogs struggling with new ideas, Broking research reports focusing on few years ahead as a basis to justify buy decisions and a general catch up of assumed earnings in current valuations.

Let me clarify before I am assumed to be sounding negative. I am almost fully invested and am not intending to sell and sit out. However it concerns me when the toss of a coin and a guess on an outcome that turns right is taken to be skill and not luck. I think the market is now trying to catch a lot of left overs, some of which may be well deserved but not all. Just because a co in a sector has done outstandingly well, to assume that every co in the sector is headed to good times is like assuming just because one student in a class is doing well all others are assumed to be doing well too.

With such a liquidity gush, some of which will continue, I am glad I am not running a large fund that not only needs to invest but now live up to benchmarking and justify positive returns to keep new money investors not turning against. It’s easier to manage when things are languishing (as they were last few years) or general market caps of some companies were way too ripe for large moves with some catalyst be it in orders or some value unlocking or debt structuring or capex expenses coming to an end.

Today the market claims to have too many positive views. The views have some degree of complacency (mine included). Everyone wants to set up a fund, leave his job and manage his or family funds, set up advisory services and thinks that the initial draw of gold in the mine is an assistance than more sheen awaits in a greater measure.

we are also meeting distruption of business models in a bigger and unprecedented way. Such times of disruption create great opportunities and great new set of outliers. But to identify them commensurate to their valuation today is not as easy as it was in 2015/2016/2017.

the market will always have some winners. Lesser money chasing such winners meant a longer run. Today with multiple social media forms, conferences, investor meets, investor paid registration events, subscriptions etc too much money instantly chases a new or relatively newer idea. The intensity impacts the longitivity of return.

You can run a marathon at a maintained or slow speed but are more likely to get tired fast if you start off with a dash or sprint.

I use this simple example to assess my view on the market: throughout 2015/2016/2017 I have remained largely bullish (save for just 2 months of demonitisation and economic reset) with many ideas at any point to invest and a craving for more funds to be available. Even with demon, had on 27/12 tweeted that things are looking up and immediately put investing in top gear. The reason was in my dashboard I had many companies looking fab.

as of today, I don’t see so many ideas. I don’t see too obvious an idea.

I think 2018 will mark volatility as a catalyst to to find value. It will be more of prepare today for a chance by judgement errors of few. To know where there is error or the judgement is right will depend on your own preparedness.

I don’t see a secular investor return in 2018. I see a more sophisticated investor in 2018 with a more moderated return expectation. The good news is you must have made a reasonably good corpus last few years so even if that compounds at a more moderate rate in 2018 you will in absolute terms do well.

to me 2018 is a year to get wiser. To be more selective. Thinking, fast and slow at work at its best. The highest return may not be made either by the guy fully invested nor by the guy sitting wholly or partly in cash. It will be made by out of box thinking and more tapered expectations.

To me a 20 pct move in 2018 will give room for a celebration.

With all my wishes for lots of good luck and happiness.

Cheers

(my standard caveat: article written in one go. I don’t proof read what comes from the heart. Typos show genuineness of my flow. Feedback always welcome).

My talk at Investor Carnival

Hi,

a good morning to all of you. With the onset of winters there is that initial chill in the air. Reminiscent of markets too where some chill is catching up with investors view of possible returns.

while I am no expert to assess mkt moves and always remain skeptical of what relevance market has in a universe of portfolio specific returns, I was happy to recently make a presentation at the investor carnival.

i chose the topic of simplicity and what I learn from daily life on investing. I felt it best symbolizes human behavior which as per me is the largest edge In a market characterized by excess news inflow. Temperament inflows are not uniform, a clear example of this lies in volatility and interpretation of several events. The latest being the tax cut passed in USA. And much debate on Gujarat elections. Much of this overlooks the continued move of business from unorganized to organized sector, an excellent migration in play.

For those of you who are regular readers of this blog or my Twitter handle, post demonitisation and gst, my view has been to focus largely on organized sector. Most of this includes consumption in any form including by Roti, Kapda and makaan. (Food, clothing and housing)

my presentation focused on why we overlook simplicity and are fascinated by complexity in stock selection, decision making and in providing mkt views.

i also focused on the need to know yourself first as no two set of investors are same and can have same results except by chance which will be outlived with a longer time frame. Stock markets reward diff styles and hence one must attune within to get the best.

 

i used analogies from movies, cricket, football, baseball, ramayan, Bhagwat Gita, Bible, advertisements, driving to work and hence car and traffic, music and songs etc to show case Behavorial science as an essential element all integrated with simplicity, positivity and self knowledge.

much as I would have liked to, I cannot share the presentation as for that I need several legal clearances.

I do hope however to repeat the same in a knowledge session soon.

meanwhile lots of results have set in. The results are decent and I see some industry captains of repute talk of a pick up in GDP in 3rd and 4th quarter. I also see renewed fii interest (nov inflow was very healthy). Credit Suisse recently increased the weightage an expectation from mid and small caps who have truly been stars of this bull market. As we head out of the initial headwinds of gst and demonitisation and towards a more developing rural market, my outlook remains positive.

Many business models are being viewed as expensive based in pe but ignoring the disruption in place that can catapult to a look up in earnings.

I shall soon enough post further thoughts but nevertheless took this as an opportunity to share some initial thoughts.

Wishing you all a good festive seasons and lots to cheer and share.

 

warm regards.

It’s a new day, it’s a new world and I’m only human

Dear friends,

i congratulate all of you who have remained invested till date to see the markets at a new high. You have sailed past china, USA, Brexit, Trump, demonetization, RBI, fii selling, oil prices and xyz reports on market lows that were likely to make it here.

You deserve this high.

For you its business (investing) as usual. For others it’s a new day (of highs or moves), a new world (of momentum) but you are still the same- (rational) human.

 

what is your primary learning amongst all this? I can’t say. Mine is- market is about temperament, belief and usually going against the tide and holding your sails well.

 

In a beautiful quote I came across as I read: when you take a belief that’s different from the world, many will laugh at you or ridicule your faith as they think you are a loner, different or sometimes write you off as arrogant. They cannot accept your not bending to consensus on markets or stocks or fear or whatever.

You can in turn stay glued and laugh at them for if they think you are different, you think they are all the same. This point gathers more weight when one sees that markets over time reward few at the cost of many.

 

While it’s true that in market rallies many make money (a lot of which is eventually lost), serious money is made by those who go against the tide but have time and temperament to keep moving on.

 

Here lies the difference between a shorter joy of claiming x y z % return and the satisfaction of knowing you made a big difference to your portfolio (and perhaps your life and savings).

The former is about a few percentage points of profit usually eroded or spent and done with while the latter is about counting how many times over. In the later there is a good chance that dividends alone become sizable and give you the joys of indulgence.

 

i will share an analogy with you. Consider market bottoms to the base of a mountain. (By the way there is nothing as a “known bottom” but somewhere around you may have sound reasons to believe the downside (risk to reward) is not too bad, even more so if you have investable capital and time as your friends)

At the bottom of a mountain many stand with you. They look at a mountain and debate day in and out (particularly in whatsapp groups and  media including social media) how difficult it is to climb the mountain.

Sometimes they debate so much that it casts a spell on them and they even forget that even a small step and another and another they could try.

 

In that crowd you get lost. The voices echo as if they came from heavens. There is consensus in the belief that notwithstanding the madness of crowds the crowds must be right.

The opportunity is there in front of your own eyes but the fact that you are in the company of masses makes you believe if they all say it’s rough and not worth it and gretarnkife is yet to be discovered below the mountain it must be. Your identity remains buried in the crowd.

a few however decide to walk towards the mountain. They deploy energy and develop a temperament to climb. Tough as it may seem every step is viewed as progress. They leave behind the masses knowing if they can manage their stamina (temperament) and not misuse their tools (capital) one day they may find a reward.

In the climb up, the voices of the masses are lost. They actually look for signals. Of avalanches, of day light, of snow and rain and on such days prepare harder. But keep moving.

 

finalky one day they reach the mountain tops. And stand usually proud to hoist a flag or symbol to reward their process. At that time no matter how far the ground below is, these few are spotted at the top of the mountain. They may not see people at the base but people at the base see them.

 

suddenly everyone thinks climbing is possible. Everyone wants to be at the top. Roads (reports) are made, short cuts (tips) are found, horses and other ways to expedite the climb are put to use and a lot many make a dash for the top. The top is photographed, socially shared and suddenly is euphoric. Tickets are issued for going to the top of the mountain and per person cost (returns) are compromised. One day there is a stampede and many lose their climb (money). They vow never to climb again and the mountain is again deserted for the first lot to re do the process. And life goes on.

 

while I have shared this analogy to explain a social truth of investing and behavorial science, I am not necessarily advocating the market is at a peak.  in fact it doesn’t interest me to know this market peak.

the question to ask would be is there excess in the system that the infrastructure (current stock price) can’t handle. Or is infrastructure right now in the built stage which means it may be likely that many more will climb the mountain for a while till infrastructure (valuations) look stretched.

Then again. Different mountains (stocks or sectors) have different climate. One rule may not apply to the other. Some may remain dormant and tall for years, some may have avalanches and some volcanoes. The question to be really asked  in context to market highs or pursuit of highs is what are you standing tall on? What are your tools (back up plans).

Now to talk more in your market lingo, to me it appears that choices to invest are still there but are drying up. Investing is becoming tougher if one wants risk to reward that are favorable. Markets are getting researched well for new ideas and ideas re getting lapped up very fast. Am I selling? Not yet. Am I buying? Well yes but my search is getting tough. Will I buy? Yes if I find irrational reactions to stocks caused by market votings. Will I sell- or switch? I actually did with some.

It gives me peace and a greater sense of confidence in a long journey. I need the stamina he temperament and the belief to keep going.

in the larger scheme of things, I see no room for regrets and negatives. I am pleased with my decision to exit micro finance just as I am delighted to have switched the funds to housing, nbfc, private banks and select mid cap stocks that went for a toss in December.  I don’t count a stock bounce to where we sold it or somewhere along the lines as a lost opportunity. I find solace in owning what is today at new highs particularly if the story is more secular than cyclical or improving.

Dont forget…..your returns are never evaluated by the movement of a stock or sector. They count as a portfolio movement.

Some sectors I continue to like and own include housing, Nbfc, pvt banks, tyres, speciality chemicals and textiles. With a bit of nibbling in pharma. Hardly any significant changes in holdings except for mfi.

My best learning continues to be the select few I find as friends in the journey. This post is dedicated to them as they pass positive energies, share lessons and learnings, reinforce discipline and make each sunshine an awaited moment in my journey to investing. my gratitude to them.

 

 

Win the war,ignore the rattle

Dear friends,

I write this note in the midst of lurking uncertainty on the outcome of USA elections, the growing nervousness in Indian markets and a continuous sell off by FIIs.

i write this at a time when a no of my fellow investors have turned uncertain and nervous and most Broking houses have stopped recommending buying to clients. One of the recent highly subscribed housing IPO’s faces a probability of a muted listing and there has been a huge unwinding of future contacts per market data. Call and put writings are at a high and volatility index is suggesting a nervous time.

I am also writing concious of the fact that I am not  a financial consultant or advisor and not geared with so much global information as may bless some who do this as a full time job and spend hours in assessing truckloads of data.

The writing suffers the risk of reflecting personal thoughts that as of today are untested including at the risk of my own money at what is perceived as “risk”.

The article is a frank expression of a few thoughts that touch my assumed rationale and must be measured by all of you on your own thesis of it, be it an agreement, disagreement or indifference.

All I know, is that God lives above. Or in our hearts and beliefs. There is no God In the markets. You may be blessed by luck or belief and in a way God but you are as human as anyone.

It is thus a matter of truth and certainly that it remains beyond any human capability to repeatedly and accurately predict the direction of the markets in the short term. This logic applies even to qualified funds, advisors, well read investors, chartists, mutual fund investors or even veterans. This is comforting as it leaves my views on the market in the company of like minded people with no clue.

 

It is however equally interesting that markets over a period of time move away from voting (literally) and weigh value and growth.

sometimes we can do ourselves a lot of good by asking ourselves when there is uncertainty as reflected in market price of stocks or volatility or behavior, if we think what is happening is reasonable or emotional. Thinking rationally itself is a huge positive as irrespective of the outcome it demonstrates a correct process rather than a spur of the moment reaction.

I cannot say whether a rational thinking would make you buy or sell stocks or who will be right or wrong in the next few days but to me it appears:

1) the markets are assuming too much Clinton or Trump. They say if Clinton wins markets will rally (which is good) while if it’s Trump they will fall which they have been doing including for 8 consecutive days in USA as I write this note. A look at history of USA elections suggest USA markets usually don’t move much in the short term  (up or down 2-3 pct) including the pre election and post result impact. Markets are far more mature in USA and to think the extent of reaction has been beyond historical, suggests to me that then event of a “perceived” disssapointment  of  Trump win is priced in. Insurances by selling or buying or selling calls and puts which were always meant to be instruments of hedge seem to have found their takers last few days.

2) I don’t think Trump has even once suggested he is anti india. His campaign has been against china and perhaps some parts of the world and if it is assumed he acts on this, I feel the trade between USA and these countries has some probability of shifting to india.

3) oil has tumbled sharply last few days. Oil is a major influencer on the Indian economy and balance of payments and leaves the govt richer with lesser deficiet. At a time when govt spending on infrastructure, digitizations and e-governance are rising. Countries movement from emerging to developed are partly a result of infrastructure spending and the path looks up. It is easy to get disillusioned with road blocks, traffic snarls or pollution but  transition is not overnight but a directional move.

4) the govt has committed to a uniform tax called GST that amongst other things aims to ease doing business. It cannot be overlooked that the steps taken including on tax rate notifications are a progress. It is always easy at the first stage to criticize things for lack of clarity or ambiguity but as true about most things. Things settle with experience and I think it’s a great steps for corporates that some uniformity and certainty will be setting in soon.

5) there has already been an announcement by the govt of a desire to reduce tax rates to upto 25 pct. the govt has about 3 years to take some action before elections and if the govt bites the bullet or part of it, the likelihood of a tax reduction is fairly high in the coming budget. Let’s not overlook the budget too has been advanced this year and is expected to be presented with a merged railway budget. The advancement should invoke some market expectation and rally, on a time factor that is not too far from where we are today.

6) the world liquidity stands at a record high. Interest rates and alternate sources of investment at a record low. In an excellent data point shared on Twitter by Vala Afshar, Chief digital Evangelist of @salesforce one of the most progressive cloud companies, he shares the Economic history of the world in 1 minute. There is a meaningful depiction of how wealth originated from india and shifted west and is now shifting back to india. This is evident in several forms in the country.

7) I saw a wonderful interview by Mr.Raamdeo Agarwal of Motilal Oswal who talks of how a person with a 1 lac salary may save 10,000 rs for discretionary expenses net of taxes and his lifestyle needs. Hence 10 percent. But when the same person moves up the salary ladder to say 2 lacs, the basic expenses don’t rise in same proportion and he is left with 1.10 lacs of discretionary spending. Thus he moves up 10 times with funds he will use to consume more cars, bikes, travel, amusement, food and beverages etc which are a huge catalyst for a country like india.

8) the assumption of a tough india stand by a newly elected USA President ignore that most of the best performing stocks in india are in the first place a bet on india consumption not USA consumption. This includes banks,  housing finance, nbfc, plastics, paints, chemicals, wealth management and asset management cos, branded textiles, a large part of tractors, auto ancillaries, Hospitals and medical services, diagnostics to name a few. Even in a dire situation FII’s can tame india investing but can’t ignore it and some of these companies offer a huge growth opportunity. In some cases, it is rare to find such companies and their growth rates and many gems in india are now fairly well owned by promoters many of whom are even resorting to buy backs now.

9) we are close to an year end. The year has not given any meaningful return to most foreign institution investors, who are either on cash and will need to bottom fish to keep their nav intact or use cash before exploring their client pools for additional new year funds.

i can keep adding more and more factors but I’m not selling you india. To me it appears that brokers are confused, tv chartist have switched loyalties in just 4-5 days and funds are too obsessed with daily benchmarking.

I find more reasons to selective keep investing and exploring the fascination that lies ahead. I term this reaction as a bout to nervousness and see the next one as one of grit and determination. The bull market has been a hated one with less making more and I feel the trend could continue.

without making any prediction that may wonder into the sphere of gambling, I see a good possibility of fortune favoring the brave. A battle is a shorter horizon. You need to plan to win the war. The rattles are to distract babies and to make noise. The focus is to generate compounding.

I remain fully invested .

Happy investing and much good luck.

(do share your feedback. My advise is a personal view and not of a Regd consultant. Stock investing is risky and one should use surplus funds that can be set aside for longer term. Due apologies for any typos. in a war you look at the opportunity ahead not the color of your shoes 😀)

cheers.

 

 

 

A curious incident of a tweep somewhere close to middle of the night

hey friends,

While in a good mood after enjoying a great rain this evening, I logged on to Twitter. Usual reading on companies, their results courtesy a few good men was something I was glued to. This Was followed with the usual catching up on news and some publications or features such as HBR.

Then suddenly comes a tweep/ Twitter account holder from no where. Just to argue a small mundane point on the origin of a quote Ninad made to Safal Niveshak. (Guys do read on vishal and his fantastic work).

the evening rolls on and suddenly this tweep starts posting things like I claim to stocks post their movement. Beware of such posts etc.

When I ask him to furnish even one detail, he failed to do so and instead tried to beat the drums without a tune. When I asked him why are he was making attempts to falsely suggest that I tweet on stocks after they move on, he divulged (more as a blunder I thought as a lawyer) that I had blocked someone who should be allowed to come and comment on the issue of stocks.

Suddenly it struck me the guy was nothing but a sponsored negative tweep trying to avenge for a guy who was blocked and was now obviously feeling left out. Hence was propagating negatives. While I could have simply ignored this further and the above incident  has no bearing on the lovely rain and evening,  it alerted to write its interpretation as a part of behavioral science.

every day in our lives, we come across views-good and bad on stocks we own or disown.

The good views are accepted as taken (we are humans) while the bad ones have several angles.  (some angles are so crazy I should refer them to ITC for their mad angles ads) 😂

Some views thus come from intellectuals and well wishers who have concerns on companies, sectors, news, results etc. To voice a view AGAINST  your stock  they display a POSITIVE  approach in so far as they bring to table a set of facts that may have escaped your notice or an interpretation that may elude you or a out of the box perspective that could guides you. Such arguments or deliberation are factual and have a neutral perspective of being specific to a stock or sector. Welcome them anytime.

another set of views come from those who suffer digestion problems and have too much gas around them. Instead of going from colony to colony to eradicate mosquitos and other pests, they come uninvited to merely say xyz stock is not good, xyz investor knows nothing, xyz is not possible. When asked why they like to pitch their tones louder not realizing that heavy metal is music and not an argument.

Thus whenever someone takes a view on you or your stock, just be calm enough to think of that person as a cartoon with a squeaky voice. Or as a character sent by Gabbar Singh in the film Sholay on a horse who frustrated by any facts will try as a goon to convince the invested world he is he main villain, but one who In reality is sponsored by

a) jealousy

b) inferiority complex

c) told to poke you as instead of being productive in life he couldn’t even find a pokemon

d) someone who wants you to lose so the game gets even rather than win the game.

we live in a world of mass noise and getting signals is critical. The best signals in life are hard facts. Thus don’t concentrate on whimsical talks, rumors or breaking news unconfirmed by managements or tips or doomsdayer stories from those who missed living life. Concentrate on motives, facts and who,pits his money where his mouth lies.

it takes a minute to block such a person on Twitter. Such blocking is your first victory. In life you don’t need to block people out. You need to be surrounded by the right ones. He right ones are not those who anchor or echo your views.mthey include many who argue with you (just as your boss/gf/wife and sometimes parents). But with a source of light and not an empty drum.

victory is not always in conquering the guy on the other side. Sometimes it is in ensuring you don’t get poisoned by someone seemingly near. This helps manifold in continuity of good decision making.

remember a man is known by the company he keeps. Literally in life and in investing.

cheers.

%d bloggers like this: