Views on Life & on Equity Investing

Wonder, Wealth & Abundance

ABDP UK – Dream investment

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What a dream type of investment this was for a buy and hold investor – ABDP UK Ltd.

I earlier wrote about it here: https://lifeandequities.wordpress.com/2018/04/13/abdp-uk-ltd/

https://www.abdynamics.com/

Since the IPO in 2013 the company has been a 13+ bagger since placing its share on AIM market at 86 cents per share.

i.e. 68% CAGR since the IPO.

They were always punching above weight and had blue chip clients to start with. I had bought it for the Fund and investors sometime in September-October 2017 at ~5 GBP at 22 times earnings and 5 times revenues and sold recently at ~10 GBP.

ABDP

What the company does ?

It makes driver-less testing cars and motorcycles software and hardware.

Who uses it?

All automotive companies in the world

Why I bought it?

Two reasons:

1/ Because I read a statement in its corporate presentation “Our products are routinely used by 20 out of 20 top automotive companies globally”.

One qualitative statement is all you need sometimes than a boat load of scuttlebutt! I knew that everybody’s uncle is investing in driverless car for R&D.

2/ Company was expanding factory to meet more demand

Other reasons:

3/ I love companies that are Global and not dependent on single geography

4/ Niche company with the primary sin of being a small cap. The best kind of sin. I don’t yet, have the problem of investing 100s of millions of dollars.

Why I sold?

I get uncomfortable when a company trades at 10 times revenues and 50 times earnings if the juice of efficiency and operating leverage has been extracted and the secular growth is not above 30%.

The company could still be a long run winner and have respectable growth of 20-25% in revenues ahead but I don’t think it will be easy to replicate the past performance in stock price now that it trades at 50 times earnings. Something very spectacular would have to happen to grow at even 30% CAGR in share price let alone 68% that it did in the past.

I think its time for individual and small institutions to quit and let the big Funds who are satisfied with 10% CAGR invest in it.

6 out 10 such investments is all one needs. Damn, I will be satisfied with 5 out of 10.

 

Disclosure: Vested interest in positions discussed. Views are personal notions and do not represent any organisation or company. Investment in stock market can (and many a times do) result in loss of principal capital.

http://www.elevendimension-funds.com

 

Written by amitdipsite

June 23, 2018 at 9:57 pm

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Reverse arthritis

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Written by amitdipsite

June 16, 2018 at 3:59 am

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My bluster on investment

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Written by amitdipsite

June 12, 2018 at 5:29 am

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Myanmar – New Frontier

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Though the new Myanmar Companies Law is less than three months away from being officially enforced, interest to list on the Yangon Stock Exchange (YSX) has not picked up as substantially as expected, said U Thet Tun Oo, senior executive manager of the YSX. 
The Myanmar Companies Law, which was enacted December 6, 2017, will come into force on August 1 2018. According to that law, foreign investors will be permitted to take stakes of up to 35 percent in Myanmar companies, including in firms listed on the YSX. 
More here: https://www.mmtimes.com/news/listing-interest-lackluster-despite-upcoming-law.html

Written by amitdipsite

June 12, 2018 at 12:16 am

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Moderately decent books

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https://www.goodreads.com/book/show/905.The_Inner_Game_of_Tennis

https://www.goodreads.com/book/show/18753256-the-art-of-mental-training—a-guide-to-performance-excellence

There are couple of useful lessons in the above books for people who are prone to lose temper, control mental climate, are fearful of losing, involved in competition, intense activities etc.

Written by amitdipsite

June 11, 2018 at 10:36 pm

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Where the opportunity is

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I do not give a $hit whether the management of the business that I am owning is publicity seeking, needing media attention, promoting their shares, brothel visiting, married 5 times, had sex change operations and are LGBT. Ditto for my friends and fellow colleagues. In management and business of microcaps where I invest the thing I care about is:

A/ Genuine and NOT fraud numbers reported to exchanges.

B/ Business momentum stronger than the competition.

C/ Disinterest in issuing more shares and dilution.

D/ Skin in the game.

E/ Hard work being put in by management to grow the business.

It would be nice if the management was readymade imported from heaven though but you don’t get to choose.

I have been researching all the nano caps in India and I have only found two companies that may fail on one of the above counts. That is where the opportunity is in India and a lot of NBFCs at this time imo.

https://lifeandequities.wordpress.com/2018/05/31/mid-cap-🧢-to-nano-cap/

Akme Star Housing and SecUR are two of my nano cap holdings that are not as strict about equity dilution as I would like them to be and they will, as per my guess be potentially willing to issue more shares in the medium term.

With MRSS I found that the employee expense did not grow linearly as per revenues as most of the work is outsourced.

Tejnaksh is fairly priced.

Written by amitdipsite

June 11, 2018 at 8:13 pm

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Boring business, dazzling performance

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I wrote about the Supply Network (ASX:SNL) four months back, which I held in only few accounts because of low growth of 10%-12% here: https://lifeandequities.wordpress.com/2018/02/10/when-bad-operating-metrics-are-a-good-thing/

The weakness of the company is the strength of its business model. The weakness is the vast variety of trucks operating in ANZ and the business is to sell after market parts, consequently the company has to hold on to a large number of spare parts. Inventories are more than the companies entire equity + reserves. ROE is smashing 25%.

The company differentiates by holding high quality components and keeps the parts readily available locally, rather than ordering just in time, this investment in the parts/inventories are the bane of the competition. Quarter million dollar truck earning several thousand dollars a day, in need of a 1000$ part is unlikely to compromise on quality or an extra day of wait.

The industry for spare parts is multi billion AUD in Australia/NZ, SNL has only a fragment of this share, ~100 million AUD revenues but focuses only on quality parts for all models of trucks/buses. Somehow this combination of centralised procurement and decentralised management and decision making and all the variety of parts imported from 100s of locations available readily locally on site has worked out for SNL. Hard to find a more boring, humdrum and invisible business than this. The chart says, otherwise, 20X in 10 years.

http://www.supplynetwork.com.au/

snl

Written by amitdipsite

June 11, 2018 at 10:26 am

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