Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Lindy Effect of Unilever Nepal

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The Lindy effect is a concept that the future life expectancy of some non-perishable things like a technology or an idea is proportional to their current age, so that every additional period of survival implies a longer remaining life expectancy.Where the Lindy effect applies, mortality rate decreases with time. In contrast, living creatures and mechanical things follow a bathtub curve where, after “childhood”, the mortality rate increases with time. Because life expectancy is probabilistically derived, a thing may become extinct before its “expected” survival. In other words, one needs to gauge both the age and “health” of the thing to determine continued survival.

If a book has been in print for forty years, I can expect it to be in print for another forty years. But, and that is the main difference, if it survives another decade, then it will be expected to be in print another fifty years. This, simply, as a rule, tells you why things that have been around for a long time are not “aging” like persons, but “aging” in reverse. Every year that passes without extinction doubles the additional life expectancy. This is an indicator of some robustness. The robustness of an item is proportional to its life! 

 

 

I wrote about Unilever Nepal at

https://lifeandequities.wordpress.com/2017/08/31/of-monopolies-and-yields/

https://lifeandequities.wordpress.com/2015/08/25/why-india-is-still-expensive-sensex-25000-just-20-down-from-peak/

https://lifeandequities.wordpress.com/2013/12/24/20-year-investment-as-envisaged-in-2013/

Its recent result further re-inforces this effect, while Indian FMCG companies are under pressure from the corporate Baba segment (Ravi Shankar/MSG/Ramdev), this company is going from strength to strength.

FIRST: IT OPERATES ON INFINITE ROE, negative capital. Cash equivalent (115+45) is more than equity (118).

ROE

 

TWO: It pay 100% dividend payout without ROYALTY to Unilever.

THREE: It has monopolistic profit margin, win-win proposition for the country, ethical profile (in the eyes of beholder even if the products are useless), and great growth. This time growth was exceptional because of one-off hit in the previous same quarter, previous year.

Have you seen 25% PAT margin of Unilever or P&G or Gillette anywhere in the world ?

growth_unl_nepal

 

 

Source: https://en.wikipedia.org/wiki/Lindy_effect, sharesansar.com

Disclosure: Have vested interest in the companies mentioned. 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

November 21, 2017 at 7:16 pm

Posted in Uncategorized

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