Friday, September 26, 2014

Biggest Market Cap

Size of opportunity remains the easiest way to discover a potential corporation that can offer multifold returns.

Technology remains fascinating frontier but scattered with landmines of bankruptcies for capitalists. 

I wrote in 2012 ( that a consumer Robotics company in future would be the largest market cap. Any such company for now remains elusive. Since then, on 13th of December 2013 Google snapped up Boston Dynamics, the creator of Big Dog.

ASIMO from Honda remains promising

IRobot has done reasonably on the bourses, however it is an easily imitable innovation

The old and decrepit part of human civilization remains the largest leaders. That says something about mind of humans too on an evolutionary ladder. XOM, Shell, CNPC, BP, Saudi Aramco remain the biggest companies in the world in terms of revenues. Old has not yet given way to the new.

 A legion of Nobel Laureates or otherwise have not and cannot understand a single and simplest particle of matter. The whole fabric of reality made up of same stuff remains equally elusive to understanding. There are a few things that we can understand, such as strength of alloy or bridge for aerodynamics for a plane or carrying heavy vehicles respectively. The exact ratio of  what we actually understand remains from 0.0000000000001% to 99.999999% depending on how foolish you are. I lean and bet my understanding is more towards scale with lots of Zeros rather than Nines.

To me this means, we are less smart that we think. Microsoft and Yahoo rejected to buy Google for couple of million dollars in 1998 when two of its young founders were doing the rounds in Silicon Valley. Since then company's market cap has grown 20,000 times. (400 Billion USD)
Role of unknown / chance / luck / karma or any other theory is greater than we deem it to be.

Frugal Innovation

Uncertain of returns for capitalists but "Jugaad" or stop gap fix / Frugal Innovation richly deserves much funding to solve the problems of lagging humanity, with ingenuity on budget.

Folks like Manu Prakash Sharma, inventor of Foldscope, and other innovators at Gates Foundation truly deserve a Nobel Prize.
Rounding Off Financially

Old economy continues to accomplish wonders for investors in the 21st century. Bricks, Paint, Food, Drinks continues to make a lot of financial wealth for capitalists.

I have mentioned at least half a dozen times, the opportunity to invest with Crown Berger Paints Kenya since 2012-2013. Revenues are growing at 18% but profits at 25% and share price at 65% (104% in 2012, 78% in 2013 and 65% in 2014), needs a lot of PE re-rating from here for another five years.

The year went by was equally spectacular, expecting an encore in the next three years or maybe a slightly subdued 40% cagr. Crown is a leader but not monopoly

Will post a couple more monopoly investments in Africa shortly over next few months that typically check all boxes on Phil Fischer and Munger checklists.

Disclosure: Invested. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.

Saturday, September 20, 2014

Poddar Developers - India - Micro Cap

I admonished to keep at less than 1% for large portfolio (20 INR Crore+) and < 2% portfolio weight for small portfolio ( < 1 crore INR)  for this micro cap.

There is some information received through grapevine and other market channels, which to be fair should be in the market to keep symmetry, even though it means short term stupidity.

- The company results are always chequered with profits booked only on actual sale and project completion
- It appears that there will not be sale of buildings and houses over the next couple of months as multiple projects are mid way construction, March 2015 could be a better quarter
- I wished the company to continue in low cost housing < 25 Lacs INR apartment and scale out to other states, but the company is acquiring land for mid income housing in Maharashtra - 60 Lac - 1 Crore INR range of apartments

So expanding out the low income model in other states is also looking unlikely in short term. Becoming a stronger regional player is a bigger focus than becoming a low cost housing specialist pan India in the short term

- I also wished the company to get into NBFC space in low cost housing as Gruh and Repco, given that Dipak Poddar is one of co-founders of Bajaj Finance (first cousin of Rahul Bajaj), co-promoter of Bajaj Auto, and also the promoter of Poddar Developers Ltd

The company has long term plans to get into it but NBFC business is looking unlikely in short term as company has hands full with housing projects.

 - One the positive side company has taken in well the Corporate Governance message and expects to improve it in subsequent year.
- We have also learnt that in real estate sector, company provides highest levels of transparency to purchasers/end users of apartment by publishing prices on the website. This is unmatched.

 Couple more links:

“We don’t sell more than one flat for a single buyer. We have a 75:25 mix of actual homebuyers and investors,” said Rohit Poddar.

"Poddar Developers launches Rs 825 crore project in Shahapur"

"Poddar Developers eyes Rs 500-cr revenues by FY'17

I had spotted Atul Auto 20 Rs and invested for myself and partnership in 2012 @ 35 Rs and @45Rs  respectively, based on advance from customers (CMP 377 Rs). I see similar strength in Poddar Housing product.

"Besides, we will fund the expansion through internal accruals. We are not keen on raising funds through debt or equity, mainly because of high interest rate and higher cost of valuation."

- Remains a developing story and likely to stay sideways for next 6-9 months. A product that customer pays for in advance is typically a Bajaj Auto scooter in monopolistic India of 1970s.

Disclosure: Invested. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.

Law of diminishing marginal utility in India | Go Nigeria

Most of the portfolios in India have returned 3x in the past two-three years, lulling us into a feeling as invincible as supermen.

It has become increasingly hard to find value stocks in India. One has to compromise on few important characteristics that are hallmark of a good investment. For me a good investment is one as good as first or second home buying decision. Overpay for 10% grower stock with survivorship traits (super abundance of names like Blue Dart etc.), or compromise on corporate governance, or perpetually live in hope with micro caps.

For the first time in life after 2009, I feel I am awfully short of money and super abundant with ideas to invest. An investment bank just gave us the opportunity to invest in 15 countries in Africa. There are at least 10 super strong heavy-duty companies in Nigeria alone. A couple of monopolies got listed in Africa including one in Kenya in the past one month.

I mean "blink" is the word. You blink once and you have spotted in investment in Africa with one days of effort in each country vs finding needle in a haystack in other countries including New Zealand and India.

Some companies offer compelling long term propositions in Nigeria without steep multiples such as:

GlaxoSmithKline NIGERIA

Be gluttonus with these opportunities that are unlikely to cause indigestion. As always it is legal and allowed for anyone to invest in Nigeria if you are part of human race.

More detailed writeup on some of these opportunities sometime later.

Good to have a problem of plenty, not complaining.

Wednesday, September 10, 2014

Two Microcaps - India - 2014

Poddar Developers

Amongst a few microcaps that I was invested in, I acquired two in the past 1 month in my personal account, but could not buy enough of either opportunity and would it be advisable to keep below 2% of small portfolio and 1% of large portfolio. 

 - Orient Beverages @ 24 INR 
- Poddar Developers (PD) @ 200 INR, still want to accumulate.

 Spent over a week researching PD. Poddar Developers has a phenomenal MD, Rohit Poddar and business model who has been heaped praise even by HDFC Chairman Deepak Parekh who says, "Unfortunately Deepak Poddar has only one son, Rohit". "We support them and have viewed their title deeds, their legal documents".

Management looks quite clean but real-estate sector in India involves crummy deals and palm greasing not only to local mafias but also to the biggest bandit  of India, Govt. of India, not only by small real estate developer but all and sundry including Tatas.

Rahejas, Lodhas, DLF, Unitech will not be able to crack low housing or at-least have not yet been able to so far. 10 Lac INR apartment for DLF is like producing an Atul Auto scooter for a company that make Porsche. Only Tata appears to be serious about affordable housing/low income housing. Market potential is 500 times the market cap of affordable housing industry, the sector that is driving GRUH and REPCO loan books. 

 HDFC Chairman - Deepak Parekh, who never visits real estate developers and applauds them publicly, is paying tribute to Poddar Developers and Rohit Poddar in this video.

Jam with Sam - Rohit Poddar 

Orient Beverages  

B/S looks okay with rental income. Company sells market leader Bisleri (36% market share in India) in West Bengal and is venturing into soft drinks. Has strong links with Parle. Did not expect price to go to 100-150  bucks, but in this cuckoo market everything is possible.

As usual feel free to go nutty as a fruitcake or mad as a hatter with your research. Market definitely seems to have gone given the price movement.

Disclosure: Invested. Views are personal notions and do not represent any organisation or company. I am not an investment adviser. Investment in stock market can (and many a times do) result in loss of principal capital.

Thursday, September 4, 2014

Fund Structure and Options

I get several emails asking directly or indirectly information on setting up a fund structure. As I am unable to answer all of them due to my schedule, I am providing a few links, which will require further consultation with your Legal Advisor and Accountant.

This article dated 2011 covers some options for only investing in India. Not all but most of the information is quite correct in this article.

Which covers:

Limited Liability Company
Advisory Service
Private Limited Company
Mutual Fund
PMS (SEBI approved Portfolio Management Service)
A Mauritius Company
A Trust + VC Fund

SEBI has recently formulated Alternative Investment Fund (AIF) regulations which require 1 Crores INR investment per client for creation of Venture Capital or Hedge Funds.

As an Individual, for investing overseas one could invest with Kotak Securities for investing in 24 odd stock exchanges around the world (majority of them are developed countries, not where the puck is going to be! ).

Since the time of article SEBI’s PMS scheme’s fund requirements per client have now been raised to from 5 Lacs per client to 25 Lacs INR per client.

There are several other options such as Offshore Trusts, International Business Company in Seychelles, British Virgin Islands, Cayman Islands, RAK-UAE, Panama etc.

I am still working with my Legal Counsel and Accountants for a structure for Eleven Dimensions Global Fund that will be registered overseas and not in India.. Focus of the Fund will be investing in emerging markets especially in powerful franchises. Some paperwork remains to be done over next couple of weeks.

Eleven Dimensions Global Fund website is functional with some more information for prospective investors.