Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Long Term Wealth Creation

with 5 comments

Oldies

As an investor intending to create wealth, my personal opinion is that its easiest to create wealth by buying cheap stocks (low PE) of companies that are growing (even if not at breakneck speed). Not that growth at reasonable price, surfing new technologies does not create wealth.

Change is the friend of society but enemy of the investor. Nice book on change and innovation I read recently (Innovator’s Dilemma http://www.amazon.com/dp/1633691780).  Author covers multiple facets of change and difference between sustaining vs disruptive technologies, although a bit dated in terms of examples (written in 1990s) but valid in terms of framework of disruptive technologies. Leading and established companies were actually the first to recognize and frequently prototype disruptive technologies but could not get a board level agreement between marketing, accounting, finance, strategy to commit to disruptive technology due to 1/100th the size of the market at the time.


Very few companies last 50 years these days. And you know that any company or business group that has been around for several hundred years (there are several of them) has NOT compounded at even 10% CAGR. Because 10% Cagr of 1 Million $ over 200 years is 190 Trillion $, where as global assets are ~85 trillion $.

You need to sit up and take note when the company has been around for a hundred years. That implies that characteristics of the industry despite innovation allow for preservation of incumbents. Interesting statement from Nitta Gelatin Japan AR 2015 http://nitta-gelatin.co.jp/english/ir_info/library/annualreport.html



In the recent ten years the company has decided to focus on branding and consumer products like Gelixer, Wellnex Collagen, and not only excel in manufacturing. Currently Nitta Gelatin is #4 in terms of global capacity of Gelatin Manufacturing.

http://wellnex-collagen.com/

http://nitta-gelatin.com/bematrix-low-endotoxin-gelatin/

http://www.gelixer.com

The company has also opened new subsidiaries in previous ten years in emerging growth markets China, Vietnam and consolidated operations in India. 

The other company that I invested in last year was United Nilgiri Tea Estates India, also a 95 year old company. 



In my opinion next few years may be boring but interesting for these companies as the new money discovers that old is indeed gold.

Love the oldies.


Models

I also love some of these models where MNC competition is not present:

Hair oil usage in India !

Use of storage water tanks in African countries and India (story over for Sintex, diworsefied), as developed world water availability is 24/7. No competition from MNCs.

Artificial hair in Africa.

Gold / Diamond Jewellery (story over for India)

Focus on business models that are country need specific.


Some handicraft wood products in China.

Upcoming models in India (Ayurveda), Natural / Organic Foods.






Written by amitdipsite

February 4, 2016 at 10:02 pm

Posted in Uncategorized

5 Responses

Subscribe to comments with RSS.

  1. City Union Bank in India is over a 100 years old

    Nishanth

    February 4, 2016 at 10:22 pm

  2. Amit.. How do u see Kerala Ayurveda? Sluggish management but industrial tailwinds will be there.. Management may awake at any moment… whats your say?

    Mads

    February 5, 2016 at 5:06 am

  3. KRBL-100 yr old story in rice.

    ankush

    February 5, 2016 at 6:13 am

  4. “As an investor intending to create wealth, my personal opinion is that its easiest to create wealth by buying cheap stocks (low PE) of companies that are growing (even if not at breakneck speed).” & ” And you know that any company or business group that has been around for several hundred years (there are several of them) has NOT compounded at even 10% CAGR.” Reading this together is it fair to say that you will be comfortable in buying companies if you are sure in your mind about longevity of any company even if growth is only 10% CAGR for next 5-10 years [Specific to Indian companies]

    Anil Kumar Tulsiram

    February 5, 2016 at 12:50 pm

  5. Its a mathematical impossibility the compound even at 10% above inflation for few centuries. So much for funds management industry if you look a big picture.🙂

    Amit Arora

    February 5, 2016 at 7:17 pm


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: