Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Serendipity – Walmart & IKEA

leave a comment »

“When Sam Walton opened stores in rural areas, far from big cities, was he thinking it might be a strategic, disruptive innovation?

“Man, I was all set to become a big-city department store owner,” he wrote about opening his first store. He was looking at St. Louis. “That’s when Helen spoke up and laid down the law.”

His wife announced, “I’ll go with you any place you want so long as you don’t ask me to live in a big city. Ten thousand people is enough for me.” He ended up in Bentonville, Arkansas, population: 3,000, in part because “I wanted to get closer to good quail hunting, and with Oklahoma, Kansas, Arkansas, and Missouri all coming together right there it gave me easy access to four quail seasons in four states.”

The result was the leaf in the tornado.

“It turned out that the first big lesson we learned,” wrote Walton, years later, “was that there was much, much more business out there in small-town America than anybody, including me, had ever dreamed of.”

IKEA

“While we’re on retail, let’s talk about furniture.

In 1948, a 22-year-old Swede named Ingvar Kamprad, with a small mail-order business selling Christmas cards, pens, picture frames, and the like, added furniture to his list. He advertised items from local designers. His business grew enough to threaten larger Swedish furniture-store owners. They had him banned from exhibiting at the usual trade fairs (a carpet-dealer friend once smuggled him into a fair in the back of a Volvo by throwing a carpet over him).

In response, Kamprad filled a large, empty warehouse in the Swedish countryside with samples of his furniture for customers to see before they ordered off his list. That was the first IKEA showroom. An employee trying to stuff a table into his Volvo realized he could save space by removing the legs and storing them under the table. Because shipping costs were rising, they decided to try the same trick in shipping to customers. Customers went for it, and self-assembly was born. Orders grew.

Furniture-store owners retaliated by forbidding designers to work with Kamprad. He was forced to hire his own designers.

“That led to original IKEA brands and style—furniture you own but can’t pronounce: Poäng, Alvangen, Grundvattnet.

Once Kamprad began building his own furniture, the store owners banned their wood suppliers and other manufacturers from working with him. So Kamprad went to Poland and discovered high-quality suppliers—for half the price. He passed the discounts on to customers. Business, of course, grew. Years later Kamprad wrote, “Who knows whether we would have been as successful as we were if they [the Swedish furniture manufacturers] had offered us an honest fight?”

In 1965, IKEA opened its first store in Stockholm. There were so many customers that the store manager let customers go directly to the warehouse at the back of the store and take their own items. Which gave birth to self-service warehouses. All future stores were designed to allow customers to shop the warehouse.

In 2017, IKEA annual sales exceeded $44 billion. Visits to the 403 stores in 49 countries reached nearly one billion.

None of the defining elements of what became the planet’s largest furniture store began with the idea of “disrupting” an industry. They were all small, crazy ideas explored by Kamprad and his team, in a desperate bid to survive.

Excerpt From Loonshots

Written by amitdipsite

July 8, 2019 at 4:53 am

Posted in Uncategorized

Watering weeds

leave a comment »

Written by amitdipsite

July 2, 2019 at 1:53 pm

Posted in Uncategorized

Fila Korea vs Fila India

leave a comment »

Some things dont add up linearly. Fila Korea has made plenty of money, 300% up this year, but as an ex-investor in Fila India franchise, (Cravatex Ltd. ) we only read disappointing news. Same brand, different management team. Execution team matters, marketing matters. Competitive intensity and lack of scale in India combined with mediocre management = unhappy investors.

Written by amitdipsite

June 30, 2019 at 11:33 am

Posted in Uncategorized

The Business of Investor

with one comment

I wanted to write a post called “the business of investor is business” because after 11 years of public market investing success and failures (mostly failures) I have come a full circle. Slow learner. And then a Eureka moment!

First up, the phrase “The Business of Investor is Business” is not mentioned by anyone,  publicly. So, should I Trademark it? Maybe my friend Safir may help trademark it.

snip1.JPG

The cut down version, “The Business of Investor” is mentioned in less than 7 web pages out of 30 Trillion (not a mistake) web pages. Only 7 pages in Google mention the Phrase “The Business Of Investor” out of 30,000,000,000,000 and that too is out of context.

Those few pages that mention it talk about “Investor Visa”, “Investor Infomercials”, “Investor Relations”, “Investor Meetings”, “Investor Protection”, “Investor Solutions”, “Investor Reporting”. Once you have removed those negative keywords/phrases you are left with these 7 pages out of 30 trillion 

Get to the Point

As much as I dislike movies that start with the end game, then roll back to the past, I have made the same pardonable gaffe in this post. The lesson, after some poor investing decisions, is that, as an investor, my main business is to run a business, or pretending to be running a business when I buy a partial ownership of the business. But the issue is that I cannot run, I can only mildly influence with 1-2-3% ownership stake, without a board seat. Having 100% control solves that problem.

The reason why most of us are poor investors is because we are armchair paper investors, never had the experience of running and failing with real businesses, whereas the person who who made value investing popular, WB, was a businessman, who later by chance became a passive investor, like most of us.

Private Market anomaly

You often read that private markets have less anomalies in price/value than public markets. That much is quite correct. Because there are less than 100 listed companies to have done 22% Growth in Sales/Revenues, PAT and having 22% ROE over the 5 year rolling period. out of a Universe of over 60,000 companies.

But in small private markets of less than 5 million dollars, a whole bunch of companies  in Western markets including New Zealand, Australia and the US are available at single digit earning giving you between 15-20% ROI. That is to say, you can today snap up a 1 – 1.2 million $ company, say selling spares part of air conditioners, or building fences around houses for over 15-20 years, earning 250,000$ per annum net after taxes. How likely are you to find that in a stock market ? Like I said less than 100 out of 60,000 chance or 1 out of 600.

What is the Reason and What is the Catch

The reason is quite simple, these awesome 20% ROE businesses have earning power but no assets. Banks don’t lend without physical security, security of earnings stream is not enticing / safe enough for the banks. Not many people have the wherewithal to provide 1 million dollar cash and run the operation, hence the single digits PE multiple in this market.

The catch is that the owner is retiring / moving on to another businesses in these cases and you need to step in / bring in a staff/manager to run the operation. Setting up hands off operation is an issue for passive investors, hence the reason why we are poor investors. But with the control you get, you can jam 10 of these businesses together to make an even more efficient operation and know the ins-outs of every business nuance is incomparable compared to owning 1% of a bigger business, in a world where 80% public companies deceive investors.

Thus, the realization dawned on me that the business of investor is business and not solely holding certificates of paper/demat blips on screen after ratio analysis of accounting statements. The best we do is thought experiments, scuttlebutt which have their own limitations but are unfortunately null and void ab-initio with fraud / untrustworthy management. Hence, the realization that the real investment success is guaranteed where you run the operation after reading masters’s books.

There are public market anomalies and opportunities when behavioral aspects and madness of the crowds plays out. Just saying, that private market, at the lower end of the spectrum has better opportunities for those investors who are willing do put in more legwork and invest close to a million dollars. The 100% control and ability to scale being the prime positives besides single digit PE multiple.

Rest of the non stock related Stuff

Well we have two forces operating in this physical manifestation, negative/positive, heat/cold which are relative, inside us we have emotions of like/dislike or love/hatred, ignorance/knowledge. The main thing is that if you have *everything* then you can only feel charitable/affectionate/giving towards others, if you are in bliss you will find others lovable. What I am more than certain is that the forces operating inside us have nothing to do with the four forces of nature that are widely accepted for over hundred years. This I am more than certain, that many people experience and know this to be true, that there are more than four forces, people, who do not have an education either. But sadly, modern science believes in only four forces, Strong Nuclear, Weak Nuclear, ElectroMagnetism and Gravity. Its being speculated that there is a fifth force https://www.washingtonpost.com/news/speaking-of-science/wp/2016/08/18/scientists-think-theyve-found-a-fifth-force-of-nature-what-the-heck-are-the-other-four

It actually doesn’t take more than an iota of common sense to know that when I feel like/dislike its not magnetism of magnets on my fridge, its some other force. So, the upside is that you are connected, lightly or strongly, to the Immeasurable Amplitude of power with your Brain acting as a step down voltage transformer through forces operating inside you that you can eventually control but are oblivious of. Thankfully, you have a lot going on inside you and you are constantly changing outwardly or mentally or in your thought body.

I don’t live in a cave and deal with all types of people, athiests, agnostics, those who believe in eternal heaven and only one life, all sorts. I have to downplay my interest in these things or they might think I am a crackpot but I have no issues acknowledging in even in any corporate setting that I am not an Athiest. One interesting thing a person remarked recently was, “Oh that is good, it just takes the stress away”. That is interesting because I did not realise that one could be stressful without the expectation of living beyond this material life, I had been swimming in water all my life and did not even realize what the scarcity of water is. So, its interesting to know another side benefit of believing, but believing in a theory is dangerous without progression to experience, its also lazy. Believing that we are all equal in potential may not be such a dangerous belief. In short, only if serious, we should give internal experiment a chance for sometime, rather than completely discounting it or worse labeling it as impossible/non existent. Then the blind men deciphering an amorphous elephant, us, begin to form pieces of the puzzle, that we actually are. Its awesome and amazing.

 

Four forces described below.

 

 

http://www.elevendimension-funds.com/

Please do your own due diligence and consult your investment adviser.  I am SEBI Registered Investment Adviser: INA100012914 and have no position in any stocks mentioned.

 

Written by amitdipsite

June 2, 2019 at 6:32 am

Posted in Uncategorized

Found it ! Not quite

with one comment

I tend to find a company after 500 tries pretty much like anyone else, and thought I had found a winner.

Having equity in the only mall in the city, or monument / equivalent of Eiffel Tower listed on the SX (Stock Exchange) is as good as it gets in terms of open democratic monopoly. I found this company because of the ‘wierd name’, some days I look for stock making highs, other days for high ROE, cheap stocks and like wise. I skipped past a few sophisticated sounding names like ‘Nucletron Electronic’ on the DAX and tried to look at funny sounding (to English speaker) one  ‘Zoologischer Garten Berlin’. Everything is through the roof for this company.

Very very high entry barrier, 10 times earnings, pretty good growth, stock showing no signs deceleration. It runs a Zoo in Berlin, Germany and as you can imagine there isn’t 100 acres lying spare in the middle of any large city. Even if somone had the money, they will not be able to procure animals, this is not building a Disneyland, Rides and theme park but quite hard yards and procuring animal species, dedicated staff, global experts, and a reputation required for decades. Berlin Zoo is the most (or 2nd most) popular Zoo in Europe selling for 30 million Euros/Market Cap. Net profit is circa 3-4 Million Euros.

Its quite hard to get into this business for a businessman/entrepreneur and to arrange for sea lions, hippos, giraffes, gorillas, lions, rhinos, okapis, orangutans, zebras, capybaras, kangaroos and mongooses. The stock looks attractive.

berlin_zoo

After all this excitement, I start going through investor relation files and read this one.

https://www.zoo-berlin.de/fileadmin/downloads/pdf/zoo/unternehmen/Einladung_zur_Hauptversammlung_2019.pdf

Using Google Translation a paragraph reads as follows:

 

charitable

What? Selflessly Charitable? No dividend distribution? Well that’s like a pot bellied pandit in the temple getting all fat and happy with the donations from public, but the shareholder is left holding a paper/title of the property. There is no fun in that. I am not sure why people are buying this stock, maybe the value of the land is 10X the market cap of this company. But it sounds, smells, walk and talks like a Frozen corporation.

Disclaimer:

http://www.elevendimension-funds.com/

Please do your own due diligence and consult your investment adviser.  I am SEBI Registered Investment Adviser: INA100012914 and have no position in this stock.

Written by amitdipsite

May 22, 2019 at 7:42 pm

Posted in Uncategorized

Red Notice

with 2 comments

If you are a frontier investor, you must read this book, Red Notice by Bill Browder, and promise that you will not invest in Russia. It is a thriller investment memoir and eye opener at so many levels, opens the riddle called Russia.

https://www.goodreads.com/book/show/22609522-red-notice

While corruption is a fact of life in most of the frontier markets, but nowhere as pronounced and inter-twined with capital markets as Russia because the man running the country, Putin, is personally involved in clipping the ticket from every oligarch. I find it credible that Putin’s personal net worth is 200 Billion USD or more today.

Bill tweets at https://twitter.com/Billbrowder

Makes you want to thank God that you are not born in a communist regime. It makes scams like Satyam, Enron, Worldcom look like walk in the park and a dinner in Hilton.

Written by amitdipsite

February 9, 2019 at 5:22 am

Posted in Uncategorized

No backflips for this undertaker

leave a comment »

Munger said the only person happily back-flipping (making money by definition) if there were to be a plague in the society, would be an undertaker, whilst everyone else bewails.

Back in 2013 I wrote about a funeral company in Australia, Invocare, which was/is a market leader in Australia and New Zealand with 35% market share of private cemeteries. After Peter Lynch’s book One Up On Wall St. the funeral stocks were re-rated after 1990s. Understandably, this business is more steady than FMCG or Utilities. These are extremely cash flow positive, depressing (no many like entering this business), and near monopolies like local quarry (heavy transport cost of rock, making the local one only commercially viable alternative). People from 10 sq. km, radius visit one closest to their home.

Back in 2013, it was trading at 26 times earnings, and has traded roughly around that.

https://lifeandequities.wordpress.com/2013/03/17/hot-companies-from-cool-places/

I read another update from this company recently making me chuckle. It complains over the effective flu medication, reduced death rate in 2018 as a cause of one-off downtrend in revenues. No doubt, people will catch up with dying few months later. The company is now available at 13-14 times earnings.

Stock Performance

INVOCARE

 

Stock exchange update

INVOCARE2

 

Written by amitdipsite

February 3, 2019 at 9:00 am

Posted in Uncategorized