Views on Life & on Equity Investing

Wonder, Wealth & Abundance

30% CAGR, 30% ROE, Debt Free, 10 PE, Monopoly or Near-Monopoly

with 20 comments

There was a lot of above stuff few years back and may yet be available again dear to every greedy and/or miser investors heart, as described in subject line.

I was in India and recently tuned into CNBC TV 18 after ~5 years for few days. I heard only one sensible thing on this channel. It came from Sanjoy Bhattacharya, “In my life, albiet short in itself, I have never seen an Auto Component Manufacturer at 80+ times earnings – BOSCH India, so there is something wrong.”

I also had joint pain and to fix that I read ~half a dozen books last month. I came to the conclusion that best of the best doctor in any corner of the earth knows much less than 0.0001% of mechanics inside the body. I knew the level of ignorance already as my wife was PhD in Microbiology but did not know the yawning chasm. Like Munger, its best to take the finest offerings of all the paradigms, nutritional science, ayurvedic science of doshas, rhythms, primal elements that circulate in body like air, fire, and deeper dimensions of body, modern allopathic diagnostics etc. For nutrition, book by Dr Joel Furhman titled “Fasting and Eating for Health” may be your best 10$ spent ever on health. Second best on nutrition, Terry Wahls – The Wahls Protocol.

I generally spend 6 – 8 hours a day related to investments, not that it always helps. Was reading how 1 Lac INR invested in SYMPHONY LTD. in 2005 India, turned into 2600 Lacs in 2015, did I even make 26 Lacs from each Lac invested when I got in 2009 ? I have nothing but eerie silence. The best investment in a short life is one that moves in your favoured direction within a year or two. Major part of the portfolio needs to be geared towards that.

I think finally I have (fingers crossed) found a company that should compound topline 25% during this decade (atleast has been for past five), bottomline even faster. If, re-rated, which is highly likely, 40-60% Cagr during the next ten years. The feeling I am getting is of extremely heady intoxication, just the same as when I bought Page Industries at 350 Rs in 2010 at 10 times earnings, and recommended to my friends/clients all the way until 4000 Rs two years back. The company is outside India, growing at 30% CAGR, debt free, roe (and all that jazz), available at 10 times earnings and is a monopoly (more than market leader). More on that later.

In India, I think the C grade and B grade has performed better than A grade over the past 18 months. Look at 52 Week High Lows, and you will know what I mean. First time ever, mid and small caps are richly valued across the board. At these levels some companies in India that I still like are Sarup Industries, Dewan Housing, Gulshan Polyols, Ambika Cotton, Kovai Medical. One of the most abominable statements blurted out by tuxedo clag gang on business channels is “For long term i.e. 5-7 years, 20% CAGR is possible”. This statement is recounted when Acrysil is 100 or 700 a year later, this is yet again repeated ad fininitum whether Gulshan is 60 Rs or 350 Rs an annum later. So, the sooner you ignore and start turning stones around yourself, the better. Gladly, value investing is a message in vain for majority.

An interesting assertion from Vivekananda was along the lines, “I would not go to school, but rather train my mind for 24 years, and in the 25th year put in information from books of all the libraries of the world”. Accordingly, a fantasy to get extremely wealthy, is to work on your mind to recall your past life, bury gold in a forest before kicking the bucket in this life, start your new life with a bounty of gold dug and hidden in previous life each time. So, in a few lifetimes you can own the planet, you know what even 7% compounding on principal of 10,000$ is for 400 years is right? More than 100% of all assets on the planet! , so please be contented with 5% compounding.

While 5% may be undercutting, I often get requested to please divulge more risky equities, that can offer higher returns. That assumes Risk is a lever to be turned on to Increase returns. Facts are quite the opposite.


Written by amitdipsite

April 18, 2015 at 3:14 am

Posted in Uncategorized

20 Responses

Subscribe to comments with RSS.

  1. Very well written.

    Often in search of higher and faster percentage returns we let go of steady compounders….

    Ansh

    April 18, 2015 at 7:49 am

  2. hi,

    Thanks for sharing your such valuable thoughts.
    I have no words to express how glad I am & how much I am enjoying while reading your previous posts.

    Want to know if only “B.Com(Hons) Gold Medalist – Delhi University, MBA.” people can have such clarity in thoughts towards Mr Market, If that is the case I wish I also had opted for the same courses.

    But since I took Arts & took a job early in my life, I seek your advice on how can I be a value investor & understand things in a better way. If you can mention some books & other resources so that people like me & myself in particular can learn sensible investing.🙂

    Thanks,

    Sunny Malhotra

    sunny malhotra

    April 18, 2015 at 1:09 pm

  3. Hello Sir,
    Could you throw some light on the valuation of this stock?
    Wanted to ask one thing about “Dewan Housing”, It is available at @10x earnings and appears cheap, however when I look at ROE 15.53, it doesn't appear more appealing. Also in the same range better yet we have GIC housing finance, which is as of now available @ 12x earnings with slightly higher ROE approximately 16.5. One more thing about GIC I feel better is that the market cap of the company is 1/4 th to Dewan Housing. GIC Housing’s sales and profit have grown at a CAGR of 19% and 21% respectively over the past five years. Considering all this I find GIC Housing better but since you have considered Dewan on the list, may I know a bit about your valuations, I might be missing something.

    sarvdeep malhan

    April 18, 2015 at 7:10 pm

  4. Hi Amit,
    I had bought repco home finance and gruh finance but both are not moving instead are coming down maybe due to higher valuations and less growth as you have mentioned above you like dewan housing as its not highly priced, I wanted to switchover from gruh and repco to sudarshan chemicals and repro India, kindly share your thoughts,
    Thanks and regards,
    Shailesh

    hrithik

    April 19, 2015 at 7:52 pm

  5. Hey Ansh

    Thanks, good to know you liked some part of it

    Amit Arora

    April 20, 2015 at 3:56 am

  6. Dear Sunny

    Thanks for your kind remarks. Nobody came with prior knowledge from their mothers womb. Anything can be learnt if willpower and inclination.

    Some resources:

    http://www.valuepickr.com/forum/must-have-investing-basics-books/857879181

    http://www.sanjaybakshi.net/bfbv/

    All the best

    Amit Arora

    April 20, 2015 at 3:59 am

  7. Repco and Gruh are portfolio stocks that should be held for years. I would buy these on declines and never sell them till well into my old age! As India's population grows young people will need to buy houses to live and these companies will benefit from selling home loans. They are expensive, but the present price is nothing from what will come in the future.

    Disclosure: holding Repco in my core portfolio and adding more on declines.

    Shiv Kumar

    April 20, 2015 at 5:40 am

  8. Well said Amit! It reminds me of the tortoise & rabbit. Patience is a virtue and it is easily said than applied to when it comes to ” long term ” investments.

    Juzer

    April 20, 2015 at 6:27 am

  9. Amit – this is good article. This is very much like ekta kapoor's serials. We'll wait for next tweet to find out what's the company name and most importantly, what about if company only listed in abroad exchanges. question remains how can Indian resident invests in that ?

    Prag Patel

    April 20, 2015 at 6:58 am

  10. Hi Amit,

    Are you looking at RS Software & Rain Industries as well. RS Software looks statistically cheap. You've liked it in the past as well.

    Pabrai's picked up a stake in Rain. Would you like to own a leveraged business like Rain or will you pass because of the depressed valuations?

    Best,
    Sam

    Sameer Gogri

    April 21, 2015 at 6:08 am

  11. Mr Amit 1 .1 cr and issued capital is 0.9 no dilution of equity np pledge no preference capital and no wArrants and the general reserve at 60 cr the numbers look attractive or am I missing something regards KUMARESH

    MrRavikum

    April 26, 2015 at 5:51 am

  12. Hello KUMARESH

    What is this company ?

    Regards

    Amit Arora

    April 26, 2015 at 5:55 am

  13. Sorry I typed its is associated alchols & breweries ltd 30% Rev gr and 40% profit growth on 3 yr and fy 15 300 cr ebita at 35 cr np at 15 cr promoter holding 58% recently open market purchase net block at 97 cr debt reduced to 56 cr they are the major suppliers of grain disterlerry spirit to vodka manufactures like Smirnoff absolute grey goose bottlers for glen Drummond promoter Prassana Kumar Kedia has a good name in MP the factory is 40 km from Indore recently renovated increased capacity MP pollution board and central excise wen site confirming the banker is confirming it is good ac they have country liquor sales and imfl brands the web site under construction the operating cash flow expected to be positive this year the trade reciavable and inventory days resonable the loans and advance is high but common in the sector is it good as it seems or iam missing something regards kumaresh

    MrRavikum

    April 26, 2015 at 8:48 am

  14. I have given the full details it is ASSOCIATED ALCHOLOL & breweries ltd they have grown at 30% on revenue and 40% on profit in 3 yrs CAGR the ROE and ROIC this year should be 15 and 20 the Rev at 300 cr opm at 12% np at 14 cr and the debt reduced to 56 cr and net block at 98 cr the operating cash flow can turn positive in fy 15 and dividend policy is not good transparency level is also less interesting is they are the leading suppliers of grain disitelled spirit to major vodka manufactures and bottlers of scoth whisky glen Drummond and haig the promoter is Prassana Kumar Kedia has a good name in Indore and no negative like other liquor baron the MP pollution control board web site and central excise website confirms the enchanted capacity to 80 kpld

    MrRavikum

    April 27, 2015 at 1:06 am

  15. Amit will you please have a look at the above mentioned and give your valuable comment regards

    MrRavikum

    April 28, 2015 at 12:49 am

  16. Mr Amit have u had achance to look at associated alcholols & breweries please give your feed back

    MrRavikum

    April 29, 2015 at 2:03 am

  17. Dear Amit, I find an amazing company just started to unlock their real value. Please look at this– “Shaily Engineering Plastic” (Scrip Code – 501423). They are mainly concentrated in manufacturing of Technical Plastic Products.

    Please see their Client List

    Consumer: Ikea ▫ Unilever ▫ P&G ▫ MWV-Calmar
    Medical : Sanofi ▫ Clearspec ▫ MWV ▫ Sun Pharma ▫ Wockhardt ▫ GE healthcare ▫ Lupin ▫ Dr. Reddys ▫ Zydus Cadila
    Appliances: GE ▫ Electrolux ▫ MABE
    Switch Gears: Siemens ▫ Schneider ▫ ABB ▫ L&T ▫ Lucy
    Automotive : GE Lighting ▫ Honeywell ▫ Amvian ▫ FAG ▫ Turbo Energy –
    Engineering : Emerson ▫ KPT ▫ Phoenix Mecano ▫ IHC ▫ Photoquip

    Some Interesting Facts Noticed

    Promoter holding 52% – Corporate & other biggies – 45% – Hardly 3% shares with retailers.
    Total Number of share holders are 460 on 31 March 2015 Report (It was 230 on 31 Dec 2014) Recently started to release some shares to public
    Last month Ace Investor Ashish Kacholia bought 12% stake in the Company
    Topline is growing Continuously.

    Hope you will go through the details

    thanveer

    April 30, 2015 at 9:47 am

  18. Hi Amit,

    What are your views about Eldeco Housing and industries.

    Shashi

    May 10, 2015 at 7:59 am

  19. With half yearly results out for associated alcohols just have a look the past growth 30% cagr is good present results show sustained growth sector is growing promoter holding is good debt reduced to 40cr roe and roce above 15% roa above 12% current ratio above 1 cash flows improved negative side employees cost management remuneration high website not open

    MrRavikum

    November 20, 2015 at 2:12 am

  20. sir under this criteria i found 4 companies pls guide ashok alco,rs software, vinyl chem, shri hari. pls guide .

    anand maheshwari

    February 19, 2016 at 10:34 am


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: