Month: June 2015

Buying house Vs Equity Investments

A while back when I wrote don’t buy a house and invest your EMI in markets, I concluded that only 1 person in 50 would actually do it

I was surprised to find through comments that Nishanth is one of the those guys, I requested Nishanth to share his experience , This post is view from Nishanth for all of us to believe it’s possible to get your goals through equity investing

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Over to Nishanth [My tit-bits in Red]

On your investment philosophy, key influences & investing Journey

My investing journey, started at the age of 23[early start], when I started my IT career in 2004. Right from the very first salary I received, I explored various investing options and stumbled upon equity mutual funds. Through a series of articles in Value Research and other websites, I understood the basics of mutual funds and decided to invest in them. I picked 3 of the best funds out then – Reliance Vision, Franklin Indian Prima, and HDFC Equity. I didn’t have the faintest idea regarding asset allocation or diversification at that time; however I had read about the power of compounding. [Keep this with you]

I opened a … Read the rest

Annual Review – Ajanta Pharma

Firstly pharmaceutical is a space which I have started learning recently (2 years) and therefore it’s obvious that some of inferences that I will make in below review could be wrong

Secondly , Ajanta pharma as a business kept coming to my radar for last 3-4 years but I kept ignoring it due to my limited knowledge in pharma space, its only last year when I did earnings power box analysis and found that this company is in wealth maximising quadrant 2 then I became owner

Ajanta Pharma is a speciality pharmaceutical company engaged in development, manufacture and marketing of quality finished dosages in domestic and international markets.

For someone new a key snapshot to understand company, Keep it handy

Ajanta-1

The company has clear strategy is each of the above markets

  • India, Asia, Africa – Would drive incremental growth (which has been decent for past decade)
  • LATAM & USA – Would drive exponential growth if the management gets its strategy right

Normally, all of us take part in several activities in our day-to-day life and many of the patients (especially older order cheap levitra age men) were not able to take the semi liquid version of Kamagra pill helped millions … Read the rest

Investing in turnaround situations

For many value investors investing in turnaround situations is a simple ‘No’, they go buy what Warren buffet wrote few years ago

 

Both our operating and investment experience cause us to conclude that “turnarounds” seldom turn, and that the same energies and talent are much better employed in a good business purchased at a fair price than in a poor business purchased at a bargain price

We have written in past reports about the disappointments that usually result from purchase and operation of “turnaround” businesses. Literally hundreds of turnaround possibilities in dozens of industries have been described to us over the years and, either as participants or as observers, we have tracked performance against expectations. Our conclusion is that, with few exceptions, when a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact

 From WB Shareholder Letters

Investing in business with poor economics is going to lead to poor investing returns, there is no doubt about that but many a times a business makes few bad decisions (mindless expansion by taking on debt) or due to a key external situation (change in … Read the rest

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Understanding Pricing Power

What is pricing power ?

A simple question from Prof Sanjay Bakshi on Twitter got a gamut of responses from his legion of followers, Don’t miss the entire discussion here

I have tried to penned down my understanding in form of few questions hope they help you next time when you are evaluating a business

When you think of Pricing Power

What’s obvious ?

When a company has following attributes

  1. Easily pass on increases in costs to customers without having volume declines
  2. Strong brands and customer loyalty allowing company to charge premium price over competitors
    1. Pricing power is when you can sell $120 phones(manufacturing cost) to people at $650 just because you are Apple
    2. Making/marketing a product that is so loved by customers that they find ‘value’ even at increased prices
  3. The ability to increase the prices of your product without losing market share to competition
  4. Ability to price ahead of inflation
  5. When elasticity of demand of your product is not price sensitive

What’s not so obvious ?

  1. Pricing power isn’t just about increasing prices of your OUTPUT .It’s also about lowering prices of your INPUTS
  2. Pricing power is not just about RAISING prices. It includes power to CUT prices,

… Read the rest

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Annual Review – GRUH Finance

If you’re not getting better, you’re getting worse

With above motto today we are starting a new category of posts “Annual report Reviews”

An annual review is a perfect exercise as

  1. most companies produce a look back report (called annual report) with details once in a year
  2. it gives enough gap for business to progress on stated objective thus helping investor to observe business’s Moat (whether it is expanding or contracting)
  3. it helps us answer many of our question we get while are reviewing quarterly results – e.g. where is business putting capex, it the product portfolio or customer mix is changing
  4. Finally I bet if your write these reviews for 5 business for 5 continuous years than you will expand your understanding of business and the key metrics that drive the business

And what better company than GRUH finance limited to start this exercise

Some companies produce outstanding annual reports and GRUH is definitely part of that tribe.

To get a good grasp of GRUH’s business read this post and come back

Let’s start

First the core numbers,

Disbursements still remains a small percentage of total number of household in India and average ticket size has gone down

GRUH

… Read the rest

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