The Small Cap Index is down 35% from the Top & is at similar levels that was seen 12 years ago in 2007. A lot of Smart money is looking at this space carefully, but let me remind you what Mr. Vijay Kedia had to say about it, “90% of Stocks in India are Bhangaar Cap”. There are 100’s of Strategies that work in Small Cap Investing & the below blog is just to show what we at Stallion Look for while investing in a Small cap Company.


“A Business starts with solving a massive problem of its Customers & Sustains if he can solve it in a way that the competitors cannot solve the same way.”


Do you know any business that has ever scaled up without customers not loving the product? The First Question  we ask whether the customer really loves the product the company sells, for example Dmart Increased Profits from 5 Crores in FY2009 to 920 Crores in FY2019 because customers really loved the prices at which Dmart sold its products & it sustained growth because competition couldnt sell it at that price.


The Second Most Important thing is the Business Model – We at Stallion Asset believe an Investor will make money only, if the entrepreneur understands the balance between the 3 rules of the gameI call them the Three ‘S’


Rule Number 1 – Speed

Rule Number 2 – Scalability

Rule Number 3 – Sustainability


Typically if your speed is very fast, you will face problem in Sustainability in 9 out of 10 times. If your speed is fast but your business is not scalable, you have a problem again. An Entrepreneur has to take a Call on Speed, Increase Market Size (scale) & Sustainability in all times.When I run my Advisory business at Stallion, I have a 4th thing to think about which is “Cyclicality”. Even if you have speed & your scaling well the markets can go through tough 1-2 years & it can screw the sustainability.


There is no business which can scale if the customer doesn’t like the product/Service, Entrepreneurs need to focus on consistently solving the problems of their customer & Increasing his wallet share.  If you look at 25 Largest gainers in the US Markets in last 10 years, majority have come due to a New Product, solving a new Problem of its customer via technology or Biotech innovation. For Example – You can Blitzscale & Burn Money only when you know that you will create so much value for the customer that he would keep giving you recurring revenue. Amazon spends 8000 Rupees for an Acquisition of a Customer but makes only 75 Rupees per transaction on a customer in India but amazon knows that for next 10-20-30 years you will keep buying it from Amazon.


The Third Most Important thing is the Promoter – Don’t start your research via PE Multiple, Believe me in Small Caps the only ‘P’ that matters is the Promoter.  The three most important things to look our for in a Promoter is Capital Allocation, ability to Solve Customer Problem & Integrity.


You need an Entrepreneur who understands what market Leadership means, Believe me Its worth whatever the cost it takes to become a Market Leader. In a consumer facing business the only way to become a Market Leader is to really be customer focused.  You Need an Entrepreneur who understands the Value of Market Leadership & Allocates capital Accordingly. What we are taught in school is that good capital Allocation is  Reinvesting capital at 20-25% ROIC, for us at Stallion GREAT capital allocation is not just reinvesting at 20-25% ROIC but also Creating market leadership or Monopolies while growing fast.


For Example – Ritesh of Oyo is an amazing example who has Blitzscaled into Market Leadership with 4.5 Lakh Room already & Adding 50,000+ Rooms a month in an Industry where nobody has ever made High ROCE. His business model is fantastic & Probably for next 10-20 years there would absolutely be no competition for Oyo! (A Great Platform with Network Effects)


Integrity – Most Indian Entrepreneurs are Jugaadu, can you really trust this guy with his ethics especially in a bear market where Twitter Gurus calls everyone chor if the stock goes down 30%+.


Conclusion – You need some luck in SmallCap Investing but the bet in a smallcap is on the person running the Show, his understanding of business, The Customer Problems he is solving & his ability to scale up !


Stallion Asset is a Equity Advisory Company, Plans Start 4999

“Yes bank is the cheapest private bank & we find great Value in it” Said Every Research Report 6 months back. Why has suddenly Yes Bank gone from being a Value Stock to a Deep Value Stock, Even Axis & ICICI Bank faced NPA Problem & probably worse than this one in 2016 but both these banks are hitting New Life Highs, Can Yes Bank do the Same?


Well let me start this blog by saying that we at Stallion Strongly believe in a 8-10x leveraged Entity like a Bank, the bet is always on the Banker. After Banks were forced to reveal their real book from 2014, Yes Bank stood out as a ‘too good to be true case’. In FY2018 SBI Bank Reported NPA’s of 19.91% on Large Corporates Book Whereas about 24.44% NPA’s on Mid corporate book. Between FY2017 & FY2018 Axis Bank Reported a 28000 Crores Increase in Gross NPA’s mostly from its 1.5 Lakh Crore Corporate book i.e. Broadly indicating 19% of its Corporate book was under Stress. The Story was Similar for ICICI bank in FY2018 with Gross NPA’s of approximately 20% on its Corporate book.


While Other Corporate Banks were suffering Yes bank increased its advances from 55 Thousand Crores in FY2014 to 2 Lakh Crores+ in FY2018 (Thats a Sixer), not only that the NPA’s of Yes Bank for FY2018 was 1.3% & you might be thinking how is that even possible, probably Yes bank didnt have exposure to corporates, well that wasn’t the case infact 70-75% of total advances (Loans given out) of Yes bank were to Large & Mid Corporate.


Now we all know what has happen after that in FY2019, RBI asked Rana Kapoor to step down & he appointed Ranveet Gill as CEO. Just Incase you didnt know this but Rana kapoor is said to be one of the smartest bankers on Mint Street who recovered all his money from defaulters like Kingfisher & Deccan chronicle. Now coming to the New CEO, Ranveet Gill, he was working in Deutsche bank where ofcourse just like any other MNC bank in India majority of revenues comes from Fees business like custody & Forex.


Yes Bank Today- So what exactly is the Problem – Well a Bank is funded by 10-15% Equity & rest 85% is depositor’s money but when a loss comes, its the equity that gets Eroded. Yes Bank in FY2019 has a Equity of 27,000 Crores (116/Share),whereas it has given advances (loans) of 2.4 Lakh Crores & the Market Cap today is 26500 Crores.


These are the Top 3 Things That you need to know.


1) How Much is Stressed Book? – Well Ranveet Gill who seems decent  in the concall said that about 10,000 Crores is stressed asset in their book, assuming they write it off today (8000 Crores will be written off as they have already provided for 2000 Crores)+ Net NPA of 4500 Crores that they have not provided for, the Adjusted Book Value of Yes Bank would become 27000 Crores (Orginal Equity) – 8000 Crores- 4500 Crores = 14500 Crores of Adjusted Equity, At Adjusted Equity of 14500 Crores the Bank is still cheap at 1.82x Adjusted Price to Book. The Question is can we believe that there is no more stress except the 8000 Crores what Ranveet Gill said in the Concall, Well investors would remember what happened in Axis, SBI & ICICI from 2014 to 2016 where every quarter they would increase the WatchList slowly, We have absolutely no Idea whats there in the books, but we know out of the 2.4 Lakh Crores of Total Book it has 1.74 Lakh Crores is Corporate book. Remember i made a point that in 2014 the Total Corporate book of Yes bank was 55 thousand Crores, the good thing which has happened is that Yes Bank Grew its book 4x After 2014 & new NPA Created after that have been a lot lesser (Except ILFS, DHFL, ADAG & Essel ofcourse)


2) Franshisee Value = Lets say Even if 8000 Crores is written off, The pre Provision profit of Yes bank was 8100 Crores in FY2019, they can easily take this knock & move ahead, Axis had 16000 Crores of Pre Provision profits in Fy2016 & they easily took a 28000 Crore Provision & its still at New highs. Those who remember Buffett bought 40% of his portfolio in American express in 1963 when the company had lend to Allied Crude Vegetable Oil which was a massive fraud as it faked its Sandalwood Oil Inventory, Buffett knew that American express is a Great Franchisee & this is a One off event and he invested 40% of his partnership in American Express & made a fortune. Now i understand Axis & ICICI were great franshisee with 2.5 Crores Customers & 5 Crores Customers respectively but is Yes Bank as good?. Well Ranveet Gill in this concall revealed that only 30% of Yes bank’s 1100 Retail branches are Profitable but he targets that 80% of its branches would be profitable by 2023.


3) Capital Raise – I am sure that Capital Raise is not going to be a very big deal if they can come transparent & probably would be the turning point if any for this company. Axis Bank raised 1.6 Billion$ from Bain capital in 2017 & that gave confidence that NPA are disclosed & worse is behind. Yes Bank has taken board approval to raise 1.2 Billion$ & i am sure no large investor would give yes bank 25% of its today’s MarketCap without looking at its book. This would probably be the most important News to watchout for in Yes bank.


Conclusion – Stallion Asset has no position in Yes bank whatsoever, this blog was written for your better understanding of whats happening in Yes bank & not for buy or Sell recommendations. The bet on a Leveraged Entity is always a bet on the Banker not on these fancy P/B Ratio’s because nobody really understands whats inside those books. Rana Kapoor couldn’t convince the street that he has a clean book infact there were consistent divergence for not recognizing NPA’s in FY2016 & FY2017 but for its FY2018 Yes bank had got a clean chit from RBI.  If 8000 Crores is the only Provision left to be made & Ranveet gill is speaking the Truth then this is a bargain but ofcourse the way to recovery is going to be a challenging ride.


Disclosure – Stallion Asset is a SEBI Registered Advisory Company & This is just for Education purpose. This is definitely not a recommendation of either buying or selling the stock.


We at Stallion Asset strongly believe that there are 3 Ways to Learn Investing

1) Study of history of last 50 years (Experience of Market Cycles)

2) Study of what Stocks have created wealth (Factors that make money)

3) Study of People who have created Wealth and How (Qualitative factors that make money)”


This blog is about the Second factor i.e. Stocks that have created wealth in the Long term.  The biggest problem in being a long term Investor is that most business’ get worse with size & growth rates fall down hence its really difficult to hold stocks for the long term.  Smart investors use this opportunity to shift out from low growth stocks to higher growth stocks to get their expected returns.


The Idea of long term Investments is buy business’ that get better with size not worse.  


Jeremy Siegel in his book “Stocks for the long run” did a study of the 20 biggest winners from 1957 to 2012 (55 Years) and  the results were surprising. Out of 20 Biggest winners, 12 were consumer companies,  4 were Healthcare companies.



In the Same book, the weights of Consumer, Financials, Health Care & Information Technology was 10% in 1957 of total S&P 500 Market Cap, whereas by end of 2012 the weight of these four sectors rose to 57% of Total S&P market cap.  Of course this can happen as more business’ of this sector got included in S&P 500 but remember S&P 500 includes the most successful 500 Companies in America.


Surprisingly the World’s most Popular Long Term investor Warren Buffet in December 2018 disclosure had 45% Weight in Financial, 23% in Technology, 18% in Consumer Staples i.e. 86% of Portfolio in these 3 sectors.


We Went back 10 years in 2008 end (This is when Financial crisis was at Peak) and we found the story to be similar. Buffet had 45% in Consumer Staples,22% weight in Financials(even after a massive fall of 50-70% in financial stocks) & 6% in Healthcare.


Why are smart long term Investors backing Financial Services, Consumer, HealthCare & Information technology Companies, History also tells the same thing these kind of companies do well but why?


The Reason is Simple, they get better with Size. A construction company doesn’t get better with size infact a small economic slowdown can trigger massive volatility in Earnings, A steel company has no correlation with size as the price is going to be exactly the same weather you produce 10 Million tonnes or 1 million tones, Similarily an Airline companies as it gets bigger will have to get into less profitable routes as that’s the only way to grow.


Long term Investments need to get better with Size not worse!


Financial Services – Given an option to Open an Account with HDFC Bank or a New bank with 100 Branches where would you open your account? The answer is simple a bigger bank who has more ATM’s, more Branches & More products. If you are a Shark in a Ocean like HDFC Bank you simply sell more to the same customer.  HDFC bank Serves 8000 Customer per branch & in a company like India where credit + Saving + Protection will be growing at 15% YOY for next 10-15 years. HDFC Bank just keeps getting better with size as it introduces new products & Scale them in no times like insurance & wealth products.


Consumer companies – You may produce a better product than Fair & Lovely for fairness but how would you distribute it to lakhs of Retailers? The game of Consumer Staples is distribution, the bigger you get you can keep selling old products as well as keep introducing new products to the same channel. Lately i have started learning start up Investing and have spend sometime with both start up companies as well as old consumer legends. The game the Big Consumer companies play is simple – The second a Consumer company like Marico see’s one product of a smaller competitor reaching 25-30 Crore of sales which typically means that the product is solving a problem & is loved by the consumer, they come out with similar product & use distribution network to sell it to millions via their distribution network. Here again being Large works in your favour & not against you. You just have to see which products are doing good, replicate it & Distribute it.


Pharmaceutical – Most IT & Pharmaceutical companies in India are B2B outsourcing kind of business model whereas typically companies with large R&D Expense and massive marketing network have done fabulous compounding in the past like Abbott has done a 14% CAGR from 1957 to 2012 as it became bigger it could invest more into R&D which other smaller players couldn’t. Even if the Smaller players got a patent they had to partner with a larger player for distribution. The Business model of Larger companies kept getting better with size.


Consumer Technology companies like Google, Facebook, You tube, Amazon are all winners take all game. The bigger you get, its next to impossible for a smaller player to solve the same problem. You go to instagram, because your friends are on instagram. The Moat here is a large network effect. Content marketers use youtube because the audience is on youtube & the audience is on youtube because majority of content is on youtube. The Bigger these business model’s get the better is it for me. They become better with size.


Conclusion – Are you holding business’ that are getting better with Size or Worse?


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Disclosure – Stallion Asset is a Equity Advisory company & this blog is for educational purpose only.


For last 6 months I have spent considerable amount of Time in Understanding the Scaling up of a Business, what does it take for business’ to scale up in India because thats where the largest money is made!  


It has been very hard for most Small Business’ to become big in India & the reason for this is because as soon as you start making 20-40 Crores a Year competition comes in very strongly & tries to disrupt you in every possible way.


Out of 100 business who are Nano Caps with 1-5 Crores of Profits (20-50 Crores Market Cap) , 20% of Business reach the Small Cap Stage of 20-40 Crores of Profits (300-500 Crore Market Cap) if tailwinds are strong though only 5% of those 20% make it to 100 Crores of sustainable Profits.


Once a Company reaches the 100 Crore Profit & is the leader in the niche, it becomes really difficult for Competitors to beat them as they now have Distributor network, good 2/3Rd level management team. The Journey from 100-500 Crores is where the PE Ratio’s typically get re-rated the most, the company gains market share from other unorganized Players & a Multibagger is created. Typically Growth slows after the company crosses the 500 Cr Profit Benchmark as it’s now a leader already & can’t grow more than the Market.


I have divided companies in 4 Parts explaining what can get a Scale up or continuation of Growth.


1)Distribution with New Products – West Bridge Capital Understood the game of Distribution very well in 2014 by betting large on companies with large distribution network like Kajaria, La Opala, Hatsun etc. If you have 10,000 Distributors you can keep selling new products in the same distribution channel for higher Growth.


For Example Havells started with Wires which are typically sold in electric stores & then expanded into switches, then Light bulbs & then appliances like Fans, Heaters. They were selling new products to the same distribution channel & increasing their wallet share in the store. Lately they have bought over Lloyds AC & have entered the Consumer electric market which is typically sold in Croma’s & Vijay sales of the world. They have got the distribution channel of Lloyds who has 16% market share in A/C, only 2nd to Voltas with 23% Market share. Understanding the evolution of Havells, I am absolutely convinced that A/C is just the Start, you would soon find them in absolutely everything like refrigerators, washing machine etc. The Game is distribution, Companies with long distribution relationships are a moat though a Company with Great Distribution with a Brand Name is the strongest Moat.



Lately in my understanding of the Tile Industry, I understood that Tiles companies are just distribution business model & brand name doesn’t work much. For example Once a Tile is put in your bathroom how would someone know if it’s a Unorganized Morbi based Player tile or Kajaria’s tile. Except in the Super Premium Category, the business is just about distribution.



2)Parent Support – The Likes of Bajaj Finance wouldn’t have been able to reach where they are today without the support of Bajaj Auto. Bajaj Finance started with giving loans on two wheeler’s for the Bajaj Auto customers, understood the lending business well & then Scale up into other segments like Consumer etc.


Same is the Case with LTTS & LTI who were primarily in-house L&T technology teams, acquired knowledge & understanding of both Engineering R&D Technologies (LTTS) & Application technology (LTI) from L&T’s in-house functions & are now scaling up.


SBI Life is again a similar case where the 50-60% of the distribution of their Insurance happens due to the amazing branch network of SBI bank. SBI Life is by far the fastest growing Insurance Company in India.


Mahindra Logistics came out with an IPO lately with 3PL Logistics systems but here again 60% of the Business comes from Carrying the tractors & cars of Mahindra itself. It has acquired the know-how of the business & now providing their services to third Party.


Muthoot Capital is again has been able grow very fast in 2 wheeler Financing in last few years to due the branch network of its parent Muthoot Fincorp (3600 Branches).


Parent Support helps business scale up really fast in the Initial days due to a networking support while during this phase they invest considerable amount of Money on people & technology which again helps them scale up a lot faster.



3)Change in Business Model- There are a lot of business models where an incumbent player can’t change its model whereas the New Player can change the way business is done as he has no baggage. Brokerage Industry is a good example of this model whereas Incumbent players couldn’t change the brokerage rates from 10 to 30 Paise per transaction as they had institutional clients whereas companies like Zerodha offered 20 rupees per Transaction flat & got the Retail market share. This year Zerodha made more profits than Edelweiss Capital Market Division & that of Motilal Oswal.


The same is the case with Wealth management business (Primarily Selling Mutual Funds) where even though banks had an upper hand of client relationships, companies like IIFL Wealth (2 Billion$ valuation) & Edelweiss were allowed to gain market share. If money is kept in savings account the bank would have to give its clients just 3-4% Interest on the deposits whereas it could lend at 10% via housing loans (very less risk) & make a cool 6-7% Spread per year. Now if Banks become aggressive & start selling mutual funds, they would get only 1% as fees from the Mutual Fund Company but lose out on the cheap savings account balance. It makes absolutely no sense for banks to sell Mutual funds for 1% Commission but to keep money in CASA & make a cool 6-7% spread.


The Banks had no option but to lose market share to Wealth management companies like IIFL wealth & edelweiss. Even Kotak bank who was very aggressive in wealth management till 2011 starting giving away market share as they understood the CASA game.



4)Technology- Of course, the Primary differentiation between a leader & not a leader in any business model in 2023 will be adoption of technology. PayTM has acquired 20 Crores Clients in last 30 month via Digital means whereas ICICI & HDFC both took 30 years to acquire 4 crore clients. Technology platforms like Amazon, Google, Uber have already shown the way to solve large problems. A business cannot theoretically scale up without High ROCE or High capital inflows (Cash Investments).


A Large reason why Bandhan has 1 Crore Clients is because of invention of tablets & Mobile Internet, they are one of the biggest gainers from Mobile Internet. Micro lending will the one of the biggest beneficiaries of Technology as democratization of credit gains momentum. Bajaj Finance added 40 Lakh Clients in just last 1 quarter and has 3 crore clients today.


OYO was created in last 4 years & has a Market cap of 35,000 Crores just because of the Consumer mobile Internet in an Industry like Hotel where nobody has ever been able to make money.. We Believe technology is one place where large scale up in business can happen in 2019.



DISCLOSURE: The following blog is an extract from our January 2019 monthly newsletter written by Mr Jeswani, CFA , CMT. The stocks mentioned are not a recommendation in any way and should be used for informational purposes only.

We at Stallion strongly believe that there are 3 ways to learn about Stock Market.
1) Study the history of last 50 years (Experience of Market Cycles)
2) Study the Stocks that have created wealth (Factors that make money)
3) Study the People who have created Wealth and How (Qualitative factors that make money)”


The Problem of Determining valuation for most companies in India is that the Growth Rate is well above the Equity cost of Capital hence absolute Valuation techniques like DCF cannot theoretically work well.


What has happened in the Globe will happen in India and we Indians have an advantage of learning how wealth was created in other developed countries. We strongly believe that High PE Ratio alone can’t justify that a stock is Undervalued or overvalued, it’s the opportunity size and Market Position of the company which will determine the Valuation. We at Stallion Asset use valuations of Global Giants to compare it with Indian Companies and see where they stand against the global leaders. We found some amazing data points in our study of terminal value.


Page Industry V/S Hanes (Hanes) – Ofcourse this needs no Introduction, what a class compounder this Page (Jockey) has been. Page has Increased sales from 250Crores in 2009 to 2500crores in 2018 (30% Compounder) and in the Year 2018 it made a profit of 346 Crores. The Company trades at a Market cap of 30000 Crores or 4.2 Billion Dollars (That’s a Whooping 86 PE FY2018). Hanes the Global Market Leader of Inner Garments is present in 80% of USA Households has Sales of 46,800 Crores and a Normalized Profit of 4300 Crores this year. Interestingly the Profit of Hanes is 1.8x the Sales of Page Industry though Hanes get a Market cap of 5.6 Billion $ v/s 4.2 Billion$ for Page Industry.


Whirlpool of India V/S Whirlpool Corporation – Whirlpool of India is an amazing company and in Last 9 years it has Increased its Sales from 1700 crores to 4832 Crores (12% Compounder) , whereas it made a profit of 344 Crores in FY2018. The Company trades at a Market cap of 18000 Crores ($2.5 Billion). Whirlpool Corporation (Global) has 16% Global Market share of Appliances and does a Sales of 21 Billion$ (1.5 Lakh Crores) and made a Normalized Profit of 800 Million $ (5,760 Crores) this year. Interestingly Whirlpool Corporation (Global) who does 15x More Sales & Normalized Profit than whirlpool of India, trades at Valuation of 7.2 Billion $ and Whirlpool India Trades at a Valuation of $2.5 Billion. Whirlpool of India hold 20% Appliance Market share in India whereas Whirlpool Global Business holds 16% Market share of Appliances in the World.


Retail in India V/S Retail Globally – Globally Grocery Retail has Created a lot of wealth. With Walmart & Costco in USA, Carrefour in France, Woolsworth in Australia, Seven Eleven in Southeast Asia, Tesco In United Kingdom whereas in India the Total Market cap of Grocery Retail is $13 Billion for Dmart, $4 Billion for Future Retail, $0.4 Billion for Spencers, 0.6 Billion$ for Aditya Birla More (PE Deal) i.e. India’s Total FMCG Retailers have a market cap of less of $20 Billion Dollars whereas in USA Alone WalMart & Costco Combined have a Market cap of $370 Billion, Woolsworth an Australian retailer with 31% Market share of FMCG retail in Australia has a Market cap of $29 Billion which is more than the Entire Indian FMCG Retailers though Australia has a population of 2.5 Crore people which is at similar level to Mumbai metropolitan region.


Conclusion – This is no secret that the Valuation of a Company is determined by the Sustainable Growth Rate (opportunity Size), Long term ROCE (Capital Allocation) & Cost of Equity Capital (Interest rate). There are some Business models which are proven to create wealth globally and High PE Ratio Alone doesn’t make them bad. In India businesses like Page Industries are highly valued compared to their respective  global giants because of the opportunity size but the question every investor needs to ask himself is that how much this growth has already been priced in by the Market. 


Disclosure – This is not a Buy or a Sell Recommendation, we have just done a study on Terminal Valuation. We Strongly Recommend you to use it for education purpose only. Stallion Asset is a SEBI Registered Equity Advisory Company. (INH000002582). The data has been taken by various datasets we at Stallion Asset use.

HDFC AMC is coming out with an IPO at an Market cap of 23000 Crores whereas Profits in FY2018 was 722 Crores i.e. at a PE of 32. The Question is are you better off investing in a HDFC Mutual fund units or the company selling mutual Funds?


We at Stallion Asset study business models of Great Wealth Creators Globally and our findings are that the greatest business models are the one’s which depend on Brand Equity, i.e. no working capital or Fixed asset investment required to grow the business. Think about this deeply, this phenomena works in 2 Industries primarily i.e. Consumers and Financial Services.  Hindustan Unilever the Leader of Consumer companies in India had Total Fixed Asset of 1500 Crores in 2008 and Made a cumulative Profit of 42000 Crores in last 10 years with no new capital employed, infact in FY2018 they made a Profit of 5500 Crores and this pool is growing.   The Story is Similar with Proctor and Gamble, Nestle, Coke etc. In the Financial Services Industry,  Credit Rating agencies are a proven business model for last 100 years and are great freecash flow machines.


Business model –  Mutual Funds are a Similar Business Model where there is no new Fixed Cost Requirement or working capital employed if you are managing 10,000 Crore or 50,000 Crores. HDFC AMC had 60 Crores of Fixed Assets in 2008, today in 2018 after depreciation it has 32 Crores of Fixed Asset on its book, though the profits of Company has Increased 6x from 117 Crores in 2008 to 722 Crores in 2018.


Lets Understand HDFC AMC a little better, ofcourse you now know that it made 722 Crores of Profit in FY2018, but do you know how much money was Invested to make this money? – The Total Net worth of the Company is 2150 Crores in FY2018 though 1950 Crores is Invested in Cash Equivalents, i.e. the total money invested in the Business is just 200 Crores. The Company made a Profit of 650 Crores i.e. 320% Core ROCE (722 Crores is Total Profit and 72 Crores is post tax Interest Income). This is just too kickass, a machine of free cash flow.


The Business Primarily Depends on Three things primarily 1) Performance of the Fund 2) Distribution Reach 3) Trust factor.


Performance –> Now let me be honest with you, most mutual fund managers have the same stocks and mutual fund managers in India are not given performance fees, the incentive structure is such that they are not paid to be the best performing ones, they are paid for being Bullish all the time and getting New AUM.


Trust – This is a Game Changer, most mutual fund investors put their money in brands they are familar with as it is their life savings. The top 5 mutual fund companies have one thing in common, they all belong to big corporate houses like ICICI, SBI, HDFC, Reliance etc. These people won’t shift to Stallion Asset for 3-4% excess returns, Stallion would have to perform a lot better and spend a lot of time to break their moat.


The Profit Pool (Opportunity Size)– The Total Profit of top 5 Mutual Funds in India who have a 57% Market shares is 2500 Crores in FY2018.  Think about this for 2 mins, the Total Profit Pool of top 5 Asset Management companies in India is just 350 Million USD. James Simons of Renaissance Capital (Midsized Hedge fund in USA) alone made 1.7 Billion$ of Profit this year, that is 4x the total Profit Pool of top 5 Indian Asset Management Companies. We at Stallion Asset Believe that the Profit pool would go up 5-7x in next 10 years and HDFC AMC is the Shark in the Ocean.


How Would Growth Come – Growth would come due to 3 important factors

A) Existing Investors Increase Allocation via SIP, Lump Sum payments

B) New Investors coming in the Market

C) Stock Market Rising.

We at Stallion believe all 3 factors would play very well and AMC Companies are expected to Growth 6-7x in next 10 years.


Risks – When i first started reading the about HDFC AMC, my first question was what happens to the revenues of the company when the Market Falls – I was Surprised to see that Between 2008 and 2013, the profits of HDFC AMC rose 3x from 117 Crores to 318 Crores while asset under Management grew from 63000 Crores to 98000 Crores i.e. Growth of 50%, this happened because distributor fees took a knock after SEBI changed laws for Mutual Fund commissions in 2008 (This was a one time). We believe that since there wouldn’t be any change in law again hence the Revenues would be secular in the Long term though there would be some cyclical behavior in the short term.



Conclusion – HDFC AMC at 32 PE with 40%+ ROE for last 15 years and expected growth rate of 15-20% for next 10 years, with high quality management, 50%+ dividend Payout Ratio, Strong distribution network seems to be a build to last business and with a float of just 2300 Crores. We strongly believe that the profits of next 10 years of HDFC AMC would be more than the total Profit pool of Top 5 asset management companies today.




These are 4 Common Indian Stock Market Myths you should definitely know about.


Myth #1 -There is absolutely no doubt that Warren Buffet is one of the best investors the world has ever seen but there is a common myth that he buys stocks and holds it forever as he himself once said that his favorite holding period is forever. As per Research done by John Hughes (Prof at University of California) of his holdings from 1980-2006 (Twenty six years) he found that the average holding period for Warren Buffet was only 1 year, with approximately ONLY 20% of stocks held for more than two years. About approximately 30% of stocks were sold within six months of purchase.

A lot of Investors know that Warren Buffett owns Shares of Coca-Cola  but only a few Investors know that the Stock price of Coke was 43$ in 1998 and the Stock price is Same at 43$ today. (20 years later).

Conclusion of Myth #1- Warren Buffet only holds 20% of Stocks for more than 2 years and not all good companies are good stocks.


Myth #2 – Indian Equity is the Best Asset Class Ever- Nifty Started in 1994 and since then it has given a return of 10% CAGR which is 3% higher than the prevailing FD Rates of 7% but did you know that in 1995 the FD Rates of SBI was 13%. You could have easily beaten the Index  by  investing  in a long Term Fixed Deposit. Secondly, you might have seen people comparing Gold and Sensex. When Nifty Started in 1994, the Sensex was 4400 and Gold was also 4400. Today Sensex is at 35000 whereas Gold is at 32000, not a lot of difference!

Conclusion Myth #2 – Diversified Asset Allocation decreases volatility of Returns though overall portfolio returns were not impacted much


Myth #3 – You probably might have received a Whatsapp forward that an investment of Rupees 10,000 Invested in Wipro in 1980 is worth 500 Crores today – Well have you ever received a message that an Investment of Rupees 10,000 in Wipro in year 2000 (18 years ago) is worth only Rupees 5,000 today? (-50%)

Conclusion Myth #3 – Market clearly Moves in Trends and Cycles hence we at Stallion Asset believe that Buy and rotate works better than Buy and Hold approach.


Myth #4- MutualFundSahiHai- It is True that Mutual funds have performed well and given 11% CAGR in last 10 years which is 3% better than the Index but did you know  that the returns of Mutual Fund unit holders is just 4% CAGR in the last 10 years (Rough Calculation from AMFI Data till December 2016). According to Industry data, 43% of  Retail Equity Mutual fund Investors changed their Scheme or sold their unit within 1 year whereas 62% sold mutual fund within 2 years. How much time you spend in a equity mutual fund is more important than “Kaunsa Mutual Fund”.


Conclusion – We don’t wish to undermine any asset Class but we want to highlight the reality of different asset classes. We at Stallion Asset believe that there is a lot of money to be made in the Indian Stock Market as we grow from an economy of 2.5 Trillion$ to 5 Trillion $ in the next 8 years but we need to select the right stocks. Indians will not double their use of sugar or tea in next 8 years, they would buy more Air Conditioners, more Mutual funds, More Cars etc.

Disclosure – Amit Jeswani & Family may or may not hold the stocks discussed. Please use this education purpose only and Stallion Asset won’t be responsible for data.

Stallion Asset is a SEBI Registered Equity Advisory Company with Niche in Catching long term Trends. Plans Start from 8,999

The above was written by Amit Jeswani, CFA, CMT (Founder of


“Kya Lagta hai Market”, Probably the most asked Question in the Indian Stock Market, but does it even matter? Most Fund Manager/Investors Spend 90% of their time thinking the next 5% Index Move while big wealth is Created CATCHING LONG TERM TRENDS.


It has taken 70 years for India to Reach 2.5 Trillion Dollar Economy, though India will take only 7-8 more years to reach 5 Trillion i.e. the Total amount of Money that was made in Last 70 years would be made again in the next 7-8 Years. The Question is how much will you make? I have absolutely no doubt that the ones who can catch a few right trends in next 7-8 years are going to be very very rich. China took 5 years to double, US took 10 years to double from 2.4 to 5 trillion$, it is estimated that India will take 7 years to get there.


The Idea is simple, there will be 100’s of entrepreneurs out there who will increase their profit 10-15x from current levels, they will grow at 30-40% and we need to back them. The Biggest Trend is India.


Within India there will be Sector Trends that will change every 3-4 years like:


Automobiles – India Sold a whooping 2 Crore Two Wheelers India V/S 1.7 Crore Two Wheelers sold by China. Interestingly India Sold 33 Lakh Passenger Cars in FY2018 V/S 2.4 Crore in China. Slowly but Surely in the next 10 years we are confident that India will sell 1 Crore+ Cars and the average ticket size of a car would also Increase rapidly. Out of these 33 Lakh Cars, more than 50% i.e. 18 Lakh Cars were sold by Maruti alone. Maruti has a Market cap of 2.6 Lakh Crores and did Profit of about 8000 Crores in FY2018.


Financials – This is one space where the Opportunity is Largest into all Three Spaces i.e. Lending, Protection and Wealth Management.


Lending – The Top 45 Business houses in India are 50% of Nation’s banking debt even after nationalization of banks. The Top 20% of India is well banked and Opportunities are now on the lower ticket size retail lending (80% of Population). With Upsurge of MFI, SME Lending, consumer finance, affordable home loans, Retail Credit is a big trend which are typically small ticket size loans with higher NIM spreads. India’s Credit needs will grow at 15-16%, whereas Smart private Bankers/NBFC can grow faster at 20-30% easy for next 7-8 years. Their is an Opportunity to grow look book by 3-5x easily.


Protection – This Again is a multiyear theme, from Life to Auto insurance to Health to crop to even your cellphone. Here not only there will be Growth of 15-17% in the general Market but there will be large Market share shift from PSU Insurers to Private companies, we believe Private Insurers can grow 20%+ for a long long time.


Wealth Management & Investment- We Strongly believe that Markets are underestimating the financialization of savings as a theme, the total Profit pool of top 5 Asset management companies (57% Market Share) in India is just 1800 Crores in FY2017. The Profit Pool is so small that one midsized popular hedge fund Pershing Square made more Profit than the Entire Indian Asset Management Industry, We at Stallion Asset have absolutely no doubt that the Profit Pool will grow multi fold in next 5-10 years and there will be massive wealth Created in this space.


Air Conditioners – I hope the Indian summer is not killing you because you are in A/C room right now reading this blog but you will be suprised to know that only 4% of Indian Households own a Air Conditioner, (10% Indian own Air-Cooler) whereas 85% of Indian Household have fans. In China the Penetration of Air conditioners grew from 8% in 1995 to 70% in 2004. Voltas is the Market Leader with 24% Market share in A/C in India and Sold 10 Lakh Air conditioners this year and will do a Profit of 650 Crores in FY2018 and has a 20,000 Crores Market Cap.  10 years from today, I dont know what profits Voltas will make but I am confident that India’s Penetration of Air Conditioners will go up from 4% to at-least 15%.


Large Format Retail Stores- There are 3700 Tesco Stores in UK, 4100 Walmart Stores in USA where in India, D-Mart has 155 Stores and Big Bazaar 260. Remember The population of UK is 6 Crores, the Population of USA is 32 Crores and Population of India is 125 Crores.


Conclusion – I repeat “MORE MONEY WILL BE CREATED IN THE NEXT 7-8 YEARS THAN INDIANS CREATED IN LAST 70 YEARS” There are opportunities to make it large. There will be cyclical ups and downs but smart stock pickers would easily make 10x in next 10 years. Don’t Miss this BIGGEST TREND EVER by trading nifty for 100 points, options, Futures etc.


Stallion Asset is a SEBI Registered Equity Advisory Company with Niche in Catching long term Trends. Plans Start from 8,999

The above was written by Amit Jeswani, CFA, CMT (Founder of

Disclosure – Amit Jeswani & Family may or may not hold the stocks discussed. Please use this education purpose only and Stallion Asset won’t be responsible for data.

I Feel Happy to write this blog after a long time, its been an exciting last 6 months at Stallion Asset where we met over 100+ managements and its always good to get a feel of the onground Situation.

After meeting a lot of managements its very clear to us that India is not exactly in a strong growth path but it’s a story of value migration. This theme has played out in the last 4-5 years and we are fairly confident that it will play out well in the next 4-5 years.

The SME’s we met are under major stress and the migration toward a new India has been very painful, but every disruption creates a trend (opportunity).

We see the Following Trends

1) Unorganized to Organized

2) Government to Private

3) Small Companies to Big Companies.


Data Says India is Value Migration Story rather than a Growth.


Private Banks V/S Public Sector Bank/Insurance Companies –  History is Proof that Government companies are the worse entrepreneurs. When government gave permission for private airlines to do business in India, market share of Indian Airlines (Air India Now) came down from 100% to 13.5% now in last 15-20 years. With Privatization of Telecom in 1999, the then Market leaders i.e.  BSNL and MTNL have gone down to less than 10% today.

Similarly it won’t be different this time when the Shift happens from inefficient PSU banks to Private banks. The total Credit Growth in India has fallen to less than 6% this year as 70% of the Market i.e. the PSU Banks are struggling whereas 30% of the Market i.e. Private Sector Banks are growing at 20-25%. A 6% Growth is definitely not a Sign of a Growing Economy.

The Same Trend is visible in Insurance companies who have taken taken share away from PSU’s after private companies were allowed to function 17 years ago. The Market Share of Private Non Life Insurance companies stands at 48% in FY2018.


Aviation – The number of Passengers flying broadly annually in domestic airplanes have increased from 6.5 Crores in 2014 to 13 Crores this year. The Growth has happened broadly due to lower airfares and there has been a clear shift from people travelling from 3 tier AC to Airlines. In the same 3 year period the Number of people travelling by AC has increased by only 1% CAGR against historical increase of 5%. The number of Passengers which were getting added to Train AC coaches were 3 crores a year broadly till a few year back, which is exactly the same number that airlines have added, a clear case of Value Migration.

Jewellery – Most Listed Jewellery Stock tanked 30% after Demonetization was announced but in 4 quarters after demonetization we have seen a strong move towards organized space which is 25% of the market, whereas the unorganized space is 75%. The Jewellery Market in India grew at 3% this year, though unorganized space saw degrowth of 7% whereas organized space grew at 25%. There is no Strong Demand in Jewellery, its just the growth of organized space at the expense of SME.


Conclusion – India is going through a major disruption in Small Business’ and this is a big opportunity for organized Players. Organized Real Estate companies are in a great spot where the real estate business is a proven 50-100 year old business and 80% of the competition is going to down. We believe the next 10 years a lot of wealth can be create as value migrates from unorganized players (80-90% market share) to the organized pie, here again there wont be a lot of growth in the overall sector but pie will shift towards efficient organized players.


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Stallion Asset is a SEBI Registered Equity advisory company. These are not recommendations, but just our thought process. The Data has been taken from company filings and various research reports that we keep reading.




Last year on the 7th of January, 2017 we Shared the Magic Multibagger Formula  and the performance has been amazing. These are Top 10 Stocks according to a strategy  which is endorsed by Warren Buffet, written in “the little book that beats the Market” by Joel Greenblatt. Joel Greenblatt runs a hedge fund named Gotham Capital and has compounded capital at 40% for 20 years from 1985 to 2006.

This is the performance of the Companies according to the Magic Formula (2017) last year.  Click Here to Read the 2017 Magic Multibagger Blog

In the Book, Joel Greenblatt gives out his Magic Formula. The Result’s of the Magic Formula in the US Markets have been Amazing and has delivered 30.8% between 1988 and 2004 with delivering negative returns only once.



The Magic Formula is Easy – Buy Good Companies for Cheap Valuation.

We Ranked all companies listed in Indian Stock market above the marketcap of 500 crores According to 2 main Factor’s of the Magic Formula

1)Good Companies that have High Return on Capital Employed (ROCE)


2)Cheap Companies that trade at a Low Enterprise Value to EBITDA Ratio (EV/EBITDA).


** Please note we have Excluded Holding Companies, Utilities and Financials.


Here is the list of top 10 stocks according to the Magic Formula for 2018.

Not all of these will be Multibagger, but these are good companies at below reasonable valuation. I haven’t Back tested this strategy in the Indian Stock Market, but in the US market this strategy has worked really well.


This is definitely not a Stock Recommendation but this strategy has worked really well and we havnt researched these companies. We will Review this strategy at the end of 2018. Incase you are looking for the full Excel, feel Free to Mail us at and we will provide it to you.


Sign Up for a Free Trial With Us and Get a Multibagger Stock Idea.

Feel Free to Contact us on 02240033944

2017 was a great year for most Stock pickers and our core Stallion portfolio was up about 100% this year against 27% for Nifty. This was a year where Low PE, High PE, High Growth, No Growth, Cyclicals, High Quality, Low Quality, Value, crypto-currency absolutely all worked and creating wealth was a easy job for Smart Investors.


The Secret of catching Future Multibaggers is studying Past Multibaggers, market follows a pattern, its always similar. Below are my Biggest Learnings of 2017


1) Never Ignore Cyclical Stocks – We at Stallion haven’t invested in Cyclical stories and commodities in our core portfolio but we invested considerable time this year in understanding previous cycles of Sugar, Paper, Chemical, Metal, Power etc between 1994-2016. Every Cyclical Cycle is broadly the same, and the maximum amount of money is made when things go from truly horrible to just getting better.


The Reason Cyclical Stocks run up is due to a Temporary mismatch in Demand and Supply which gets accelerated Earnings Growth for 8-16 Quarters. The Most Important Factor in Cyclicals Stocks is Timing, because over long term these stock are not going to create wealth but in the short term (1-2 Years), they can give you 5-10x gains. After studying data for 20 years, we have come a conclusion that in absolutely every Cyclical rise, the prerequisite was Insider Buying in the Entire Sector (Not just one Company), be it Sugar, Paper, Chemical, Graphite or even Steel very recently.  



2) Every Bull Market is the Same – Every Bull Market start with Money Flowing into High Quality, High Growth Stocks, Followed by High Growth and Low Quality, and Finally the best returns are made in Low Quality, Low Growth Companies. As Expected High Growth, High Quality have under performed in the latter half of this year, whereas Low Quality, High Growth was the star in the last 6 months.


3) IPO in Bull Market – Good Story, Strong Earnings Growth, Small Float, Perceived Longevity in a bull Market backed by a New Entrepreneur (not a Corporate house like Godrej or Reliance) are the perfect ingredients  for a Bubble. The Valuations of D-Mart, Shankara, Team Lease etc can’t be understood (unless you value them using 2027 financials ofcourse), and they can remain expensive for a long long long time till the end of this bull Market.


4) Bitcoin Trend – Every Old Bubble lays the Seed for the Next Bubble. In 1905 Electricity was Discovered by Thomas Edison and Electricity Manufacturing companies went up 1700x in next 10 years, which gave form to Radio in 1921. Radio was the only form of Entertainment, News and Radio Stocks went up 300x in next 7 years till 1929. The discovery of Electricity sowed seeds for Radio Bubble, Similarly Internet bubble of 2000’s layed seeds for Bitcoin in 2009 and 10-15 years from today i guarantee you that the Digital currency will be like what internet is today.


5) SME IPO’s –  They have created massive wealth for Investors, We took a Random sample of 30 SME’s and in 24 of them (80%) have huge Jump of Profitability right before the IPO Year (Be Smart Here). The Trend of SME IPO’s has just Started and someday within the next 10 years, there would be more SME’s than companies on the Main Exchange. A New India is being created backed by entrepreneurs who are solving problems, this is just the start though you have be a little smarter in picking up SME Stocks, PE Ratio isn’t the right matrix in SME, Management Quality is.


Conclusion – Our Economy is going from 2 Trillion to 5 Trillion in next 10 years, our country will make 1.5x more money than what we have created in last 70 years, there are going to be big Trends in the Market, this is our time to buckle up and catch those Trends. Markets were kind this year and we doubled our money, but we need to ride the Bull with caution as markets are running on back of Liquidity.


Disclaimer – Please use the above Information for education purpose only.


Click Here, Incase you’re interested in Compounding capital at 25% CAGR+ for a long long time. Prices Start 8,999

We at Stallion Asset are keen watcher of trends around the globe, though we completely missed the Bitcoin Trend even after it always met criteria’s of a possible perfect bubble, we screwed up.


The 3 Most Important Criteria of a Perfect Bubble are

1) A Great Story about the Future

2) Nobody Understands how to Value it

3) The Asset In-Play should be very new to the market and scarce.


This Blog is more about comparing trends than explaining what Bitcoin is, because we ourselves have a limited understanding of the future of bitcoins.


Remember the Trends in any asset class are always the same, only the name changes, everything else is the same.  They always start with Solid fundamentals, which the blockchain Technology has, but then speculation takes things over and rapid rally in prices gets more investors (this is happening Now) and at the end they end up holding a futuristic business  at a ridiculous price.


When will bitcoin Prices fall and this bubble Burst? – I have no Idea when it will happen, can be 15,000, it can happen at 25,000, we have no tool to predict the madness of the Crowd but in these are 3 main pre-requisites of a Bubble getting Over and valuation definitely has nothing to do with it.


1) There has to be Euphoria

2) There has to be Bad News

3) There has to be Dry up of Liquidity.



Now we obviously have well very established point 1 but euphoria can definitely become a lot lot more euphoric and it will unless you get bad news and dry up of Liquidity, the bubble wont end. It will definitely not end only because someone think its expensive. This dry up of Liquidity & Bad news can happen due a Bitcoin Exchange collapsing, a Fraud, possibility of a hack, governments screwing up, but it will happen soon.


The Road Ahead – The Stock Market is always futuristic and right, though they always over do it. The Price of Zee Entertainment went up 200x in 1998 and 1999 because markets believed that in the next 10 years every home would have a color TV and they would watch Zee TV, well the markets were right, but like always they overdid it and it took 16 years for Zee TV for reach its 2000 highs again. The Stock Price Corrected 95% as falling stock prices are followed by more selling.


Bitcoin is like the Infosys of IT Bubble, its the leader of the pack and all other new ICO’s are like the HFCL’s. I can guarantee you that you wouldn’t even hear about the name of the new ICO’s 5 years later. Remember even infosys fell 85% after the IT bubble. Again what markets believed was right that the world would be fully digital, they would search on the internet, shop on the internet but like always they overdid it in the Valuations.


Fun Fact- There is more than 90% Correlation between Google Search of Bitcoin and Price of bitcoins.


Can i Enter Bitcoin Now? – It is now a speculative bubble, its a great Example of greater fool theory, and to predict a top of a bubble is a job of the greatest fool. All I can say is that this is a trend and probably in the last few weeks or months. By the time this trend ends and you come to know, the prices will be down 35% and you would think that this would bounce back and then you would sell it . The Bounce won’t come and the prices would fall another 20-30%, and then you would think its already half, how much more will it go down and you know what would happen next.


How do i Know Bitcoin has Topped out – 1) Top would be made in Seconds and bitcoin will not spend time there.

2) Bitcoin will give a Dow Theory Breakdown and the pattern of Higher Tops and Higher bottoms would be broken.  There Would be a lower top made and a lower bottom.

3) Bad News and Dry of Liquidity will definitely have to happen for the bubble to end.

4) Bitcoin has never fallen more than 35% from its top after it crossed its previous high and gave a breakout, so right now your trailing stop loss would be 35% from its Highs. (Can’t Promise this will always work)


Conclusion – The Markets are never wrong about the Future, they just extrapolate and overdo it. Digital Currency is definitely the thing of the future and just like RBI is coming up with Lakshmi as India’s Digital Currency, every other country will come up with its own currency. We are very confident that the world would move from paper currency toward digital currency and this is definitely the Start. As far as Bitcoin goes, its a great technology, but right now at current prices its just speculation, history has been created and bitcoins will be remembered forever.


PS- Someone in some Book of his in 2025 would write “Crypto Currencies in 2017 were valued at 300$ Billion (can go higher), this is more than the Market value of the Entire Land in XXXX, this is worth more than the Entire Market cap of XXX Industry.”


Trends are always the Same, they are predictable, they are awesome, Catch one and you’re done for life.


Click Here, Incase you’re interested in Compounding capital at 25% CAGR+ for a long long time. Prices Start 8,999

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