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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

There is no doubt that financial Services and NBFC’s have been the leader of this Bull Market. IDFC is one of the newest bank and has recently completed its 1st Full year of Banking operations has done pretty well.

Let’s understand the larger trend that has emerged in the Private Banking space.

There have been different  strategy era’s in the private banking space in the  last 15 years which has resulted into wealth creation for Investors.

2003-2009 was about branch expansion and cross selling on services like credit card and auto loans which made the Emergence of HDFC Bank and ICICI Bank.

2009-2016 was about Kotak Bank, IndusInd Bank and Yes bank, where they emerged as the Fastest growing banks due to their focus on Niche Services and Digtal Foray.

2016 – 2020 the trend is clear i.e. its Digital Plus Rural. Till now banks have concentrated on 20% of population who has 60% of the countries net worth, however going forward the focus will be on the 80% population which doesn’t have access to credit facilities. With Digitalization, financial inclusion has become a possibility and the leaders in this pack could be IDFC Bank and RBL Bank.

10 Important Factors you need to know about IDFC Bank.

Factor #1 – About The Management Management – At Stallion Asset when we buy a Bank, We look at the Banker rather than bank only. Dr Rajiv lal is a veteran economist for last 30 years and has worked in various RBI Committees along with ex Governor Raghuram Raju, he has been a partner of popular private equity firm Warburg Pincus, head economist at Morgan Stanley clearly suggesting that he is a seasoned player who understands the game really well.

Factor #2 About the Bank – IDFC became a bank from an NBFC in October 2015, It offers wide variety of corporate and retail banking products and services to ~1.38 million customers. The Bank enjoys a presence of 74 Core Branches ; 47 ATM’s ; 8,600 points of presence covering 20 states, 150 districts, 19 major cities and almost 33,000 villages.

The bank is Divided into 3 Parts
1) Bharat Banking –  (Rural Side of the Bank) –This is the Microfinance unit of the company which started after it acquired Grama Vidiyal Micro Finance and has a unique outreach model to cater to local consumers. It has its branches built in difficult geographies and it has a unique outreach servicing model focused on financial inclusion. IDFC has acquired 12 Lakh customers in a small timeframe of 1 year.

2) Bharat Plus(Digital urban focused side of the Bank) It primarily caters to the needs of  mass affluent (Salaried class)  & affluent segment (self employed) business banking segment. The Bank has acquired 1.4 Lakh Customers since inception, out of which 20,000 are digitally acquired.

3) Wholesale – This is the legacy exposure of Infrastructure loans the Company had before it became a bank. The Percentage of Infrastructure loans have come down from 75% to 51% in FY2017 after 1.5 years of commencement of bank.

Factor #3 -Branch Light and Asset Light Business Model. –

IDFC bank is the bank of the future is focusing  more on technology and partnership and rely less on branches. Currently it has 74 Branches under its network likely to go up to 200 Branches by 2020 and corporate Business Correspondents will go up from 350 currently to 1000 by 2020. Further aggressive use of  micro ATM’s to 100,000 touch points from 8600 Currently & is expected to make en-roads in making banking simple and accessible, anytime and from anywhere along with Bank focus on serving the rural underserved communities & self employed. The average break-even of new branches is 4-6 months, the lowest in the industry.

Factor #4 – Impressive first Full Year of Operations –  There are only a few banks that become profitable in the first year of their operations since a lot of the cost are front loaded. Since IDFC Bank had a ready made loan book of Infrastructure loans, this helped it to be profitable in the first year Itself. The Bank recorded a net profit of Rs. 1,020 crore for FY17, delivering a 25% growth in net profit. Net interest income improved 20%, while the cost-to-income ratio was steady at 54%. Fee income has continued to increase at a healthy pace of 26%. The Balance Sheet grew y-o-y by 35% to 112160 Cr in Mar 2017.

Factor #5 -Growth Without Equity Dilution – Capital Adequacy Ratio stood strong at 18.9% with Tier I capital ratio at 18.5%. The bank does not plan to raise Tier I capital atleast for the next 2 years. The comfortable capital position provides healthy support for expanding loan book at a strong pace. The bank had a CASA of only 4% in FY2017 which the company has guided to Increase to 15%, which will decrease cost of funds.

Factor #6 – Selling out Legacy Loans – The bank sold its legacy infrastructure loans of Rs 2000 Cr net of provisions  in Q4FY17 to ARCs by way of security receipts. As a result of this sale, the Gross NPA levels reduced to Rs 1540 Cr (3%) in Q4FY17 from Rs 3590 Cr (7%) in Q3FY17. The net NPA levels stood at Rs 580 Cr (1.1%) in Q4FY17 as against Rs 1250 Cr (2.6%) in Q3FY17. Profitability wont be impacted in near future since management has provided adequate provisions for the stressed assets.

Factor #7 – Vision 2020 – The management has given aggressive guidance and is on the mission to transform the bank.

Factor#8 – Risks – The company is investing a lot of money in Microfinance segment and we at Stallion have been bearish on that part. We Believe that Loan Waiver is a New Normal and will continue happening for next two years until 2019 Elections Atleast.

The Company needs to show its best in digital platforms, a place where RBL is clearly winning in all fronts. Kotak has come out with 811, and has guided to acquire 1.5 crore customers.
IDFC doesn’t have the brand name yet, but with Mr Rajiv Lal at the forefront you can Expect the Unexpected. They have guided for atleast one acquisition which is very risky as valuations of banks ain’t cheap and the options available are South Indian Bank and Karnataka bank for them.

Factor #9 – Valuations- IDFC has a book value of 43/Share and Adjusted Book value of 41/Share i.e. it trades at 1.3x P/B . IDFC has a Market cap of 20,000 crore and did Earnings of 1020 crores i.e. trading at PE of 20 times. The valuations are reasonable but only if they can reach their 2020 target without screwing up in the acquisition, microfinance portfolio, they will get higher valuation. CASA growth is also very important which stands at 4% currently (Guided 15% in 2020) as cost of capital decreases with increase in CASA.

Factor #10 – Stallions View and Conclusion – At Stallion Asset We do understand that Rural plus Digital is wealth where wealth will be created. IDFC is reasonable at 1.3x Book especially after most legacy loan issues are now cleared but the story is not very clear as the bank is only 1 year old. We need to understand that there are many Small Finance banks (Rural Space) coming in as well as competition from payment banks (Digital Space). IDFC Bank are targeting 1 crore customers by 2020 which is a tall task but have an amazing management team. Most loans given out in microfinance division are subprime loans and are risky.

IDFC Bank is definitely not a 1 year story but a 5 year story and if it plays out, you can expect a 3-4-5x returns, and worse case you can lose 30% from these levels. We at Stallion like more clarity before investing especially because IDFC will be acquiring a bank, and expected volatility in microfinance division;things are not very clear now, probably we will have to pay a higher price for clarity, but we are comfortable to pay up a little more for certainty.

Subscribe now to Stallion Asset’s Multibagger Service, Plans Start 8,999

Disclosure – Amit Jeswani and Family have no Positions in it. This is not a advise, please use this for education purpose only.

 

Housing Finance as a Theme has been on Fire, this is no secret that we at Stallion Asset are bullish on NBFC Space. Vijay Kedia, in his latest Tweet stated that Housing Finance’ sector could be the next market leader. In His Interview on Budget day on ET Now he said that he is long on LIC housing and wants to enter CanFin Home as well.Vijay Kedia Tweet Housing FinanceThe First person to buy the Housing Finance theme was Basant Maheshwari, (Big Fan of him) way back in 2014. Our understanding from his Interviews is that he is long on PNB Housing and Can Fin Homes. Rakesh Jhunjhunwala, the big Bull is backing

DHFL.

Lets Understand the Housing Finance Space in the next 3 mins.

Housing Finance is an easy business to understand, the company borrows at a Rate, lends at a higher rate, the difference is the gross profit. There are two main cost 1) Operating Cost and 2) Credit Cost (NPA)

Modi Government has been pushing for reforms in Housing finance space with interest subsidy of 4% for loans upto 9 Lakh and 3% on loans upto 12 Lakh. They have also given infrastructure status to affordable housing projects.

Housing Finance has clear tailwind and has an expected growth rate of 20-22% till FY 2020. In Particular the governments push towards affordable housing, reduction in interest rates and rising income level are expected to contribute towards increased housing demand.

Banks or NBFC?

If Money is an commodity, the one with the lowest cost of money should ideally win. Out of the total housing mortgages of 16.6 Lakh Crores in 2016, Housing Finance companies were 6.2 Lakh cr. or 37.5% of market Size. The Share is expected to increase further to 39% by 2020 as per Crisil. The competition is high in High ticket size Loans where banks are big players, whereas NBFC dominate the low ticket size space in the mortgage business. Historically banks have been inefficient on the collection side and have had higher NPA.

 

 

HFC to Bank

 

 

In Fiscal Year 2017, the estimated gross NPA level for HFCs in the housing loan sector is estimated at 0.50-0.7% while it is slightly higher for banks, at 1.60% clearing showing that NBFC’s have managed their portfolio a lot better than banks.

Which NBFC Should i choose?

We have identified 7 Factors that affect the Valuations of Housing Finance companies.

valuation Housing FinanceWe are now doing peer comparison of housing finance company for Various Factors.

#FACTOR 1 – Growth in AUM – Higher the expected growth in AUM, higher the valuation. PNB housing is the fastest growing HFC, Basant Maheshwari loves growth and hence he has invested there.

Loan Growth Housing Finance

#FACTOR 2 – Gross NPA – Higher the NPA, Lower the Valuation. NPA is affected with asset quality of companies. It is perceived by the market that salaried class doesn’t default as their income is very stable and where self-employed individuals may get affected due to business volatilityCanFin homes has superb asset quality with Gross NPA of just 0.24% and has given 84% loans to Salaried class.

Gross NPA

#FACTOR 3 – NET INTEREST MARGIN – In a commodity business, the one with the highest margin wins, in the housing finance business, money is a commodity. Higher the Net Interest margin, Higher the Valuation.

NIM Housing Finance

Net Interest Margin is a factor of cost of borrowing and price of lending. Indiabulls has the highest NIM’s due to its corporate lending loan book and Loan Against Property. Repco and Gruh have higher NIM because of their presence in lowest income group where competition is lowest from banks. LIC housing finance is the lowest cost borrower, but gives out loans only to salaried class where competition is high.

#FACTOR 4 – Average Ticket Size 

Average Ticket Size Housing Finance

Gruh is the lowest with an average ticket size of only 7 Lakhs as its rural focused whereas PNB has the highest average ticket size due to its Urban Focus. Higher the Average ticket size, higher the competition from banks. NBFC cannot compete with banks on the pricing front as banks have low cost of capital. DHFL has an edge in the low income housing finance as it has immense amount of experience of dealing with the needy.

#FACTOR 5 – Return on Equity – Higher the ROE, Higher the valuation of a housing finance company. Gruh Finance backed by HDFC has the highest ROE of 31.5%, followed by Indiabulls who has high exposure in Corporate loan book.

ROE Housing Finance

Valuation – Housing Finance companies also have perceived character of the Promoter Premium or Discount in their valuation. The Price to Book Ranges from 1.5x Book to 12.3x Book. PE Ratio ranges from 10 to 46. DHFL has the lowest P/B and PE whereas Gruh has the Highest.

valuation Housing Finance

Stallion Asset Take -There is no doubt that Housing Finance is in a multiyear bull market, There is strong Sector tailwind, 2-3x GDP Growth, NBFC as a class has been a leader in this bull market and we continue to believe that the story is far from over. How will we come to know that NBFC bull market is over? When Reliance capital goes up 100-200% in 2-3 month period, that would be the end of the NBFC bull. In every bull market the horse leads from the start, but in the last phase of the bull market the pigs run the fastest. When the pigs start running, we will be cautious on the sector. 

Conclusion –  The big boys are backing it with Rakesh Jhunjhunwala in DHFL, Vijay Kedia in Canfin Homes and LIC Housing, Basant Maheshwari in Can Fin Homes and PNB Housing, Motilal Oswal has Invested 600 Crores in Aspire (affordable Housing Finance).

Incase your looking for the full Excel of housing finance data, feel Free to Mail us at info@stallionasset.com and we will provide you for free.

CLICK HERE TO DOWNLOAD THE COMPLETE IMAGES OF HOUSING FINANCE COMPARISION

Disclosure– Amit Jeswani and Family have  Vested Interest in Housing Finance Companies. This is not a recommendation and use this for Education Purpose Only. Stallion Asset is a SEBI Registered Equity Advisory Company (INH000002582). The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision.

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Rakesh Jhunjhunwala, the badshah of Dalal Street needs no Introduction and was seen on dalal street buying his Mentor Radhakrishna Damani’s Favorite stock TV18 Broadcast Limited. Rakesh Jhunjhunwala now owns 3.2% of the company whereas Damani owns 2.44%.

Tv18 Broadcast Enjoys Strong Parentage of Mukesh Ambani Owned Reliance Industry. The Following blog will explain you why exactly are these 3 legends backing this company.

 

About the Business TV18 Broadcast is India’s most diverse and leading Media and Entertainment conglomerates with interest in television, internet, films and entertainment.

 

Dont Forget to Read the Valuation Paragraph of TV18 for amazing ClarityTv18

TV18 Owns very popular Channels like CNBC, Colors, MTV, Sonic, Etc.

Tv182

The Company pays Royalty for Using CNBC brand of about 30 Crores a Year whereas it has a joint venture for Colors and other MTV with Viacom18. Tv18 entered the Regional Market by buying out ETV for 2053 Crores.

Financials – 

Tv 18 3

The company has been recovering in the last few years as investment in Colors starts to yield returns. Company has focused on very high Quality Content in colors in its Popular Shows Big Boss, Nagin Jalak Diklaja etc which has made colors the number 1 GEC channel in Q3 FY2017.

 

Investment Rational –

Subscription Revenues Set to Surge: The 2 Primary Revenue Generator are Advertisement & Subscription. Subscription Revenues are given by DTH players, however with the onset of digitalization especially in Tier III & IV cities , subscription revenues are all set to improve.

 

Advertising Fees Early Signs of Picking up: : TV18 was under tremendous pressure as advertising revenue had plummeted due to the economic slowdown and 12 minute ad cap regulation. Going ahead, advertising revenue is expected to pick up as economy improves. 

 

Grabbing Regional Channel Space : Do you know Sun TV has an operating margin of 70%? Sun Tv has been maintaining this margin level in the toughest of All times. Tv18 entered the growing regional space by acquiring 100% stake in ETV news, 50% stake in ETV GEC via Viacom JV and 24% stake in ETV Telugu spending a whopping 2052 Cr. However, the acquisition gives the TV18 a foothold into fast growing regional space. ETV acquisition has also led to better bargaining power with Multi system operators , DTH players and advertising companies and has enhanced its presence in Media & Entertainment Space. TV 18 has a significant presence in hindi speaking belt via ETV. It also has strong presence in Maharashtra, Karnataka, Rajasthan & Gujarat. Digitization and improved content to increase viewership share of regional channels from 27% in FY2012 to 43% in FY2020E

Sector Tailwinds – The size of India’s television industry was estimated at Rs 542 billion in 2015, which is expected to grow at a CAGR of 15% to touch  Rs 1,098 billion in 2020.

 

Strengthening & Transition of Colors Brand: GEC has undergone consolidation with STAR, ZEE and Colors exchanging top 3 places in the last few years. In Q3FY17 Colors continued its strong performance and was the #1 channel among its comparable peers.Colors has gained higher market share in urban area as per BARC ratings while still increasing its presence in rural areas.

Valuation – 

Tv183

Lets understand the Listed Space to Understand the Valuation of TV18.

Tv184

Zee Entertainment is clearly the Market Leader of the Pack with 1000 crores of profit and 47,600 Crores of Market Cap. Sun Tv a regional Player has PAT margins of 35.5% clearly having competitive advantage in South regional entertainment Market. TV18 has lagged behind in PAT due to a lot of investments in Colors to make it number 1 channel in GEC.

Tv18 6

Tv18 7

Typically Industry Opearting Margins are between 25-70%. TV18 has operating margin of 9.8% only but it has presence in both Regional play in ETV and GEC like colors. The margins of Tv18 have been poor because of continuous investments in new Channels. A diversified Market leader like TV18 can easily Fetch a PE multiple of  20-25x. The question that is what will be the earnings then if margins expands to 25-30%.

We conservatively expect that Operating Margins can expand to 25% in 3 years, Sales growth of 12% and PE multiple of 25. Using this approach, we believe that the company will be valued at at-least 16,000 Crores against about 6300 Today. Please note Zee Entertainment trades at 50+ PE and Colors is now better than Zee in viewership rating.

Conclusion

Tv18 is available at High margin of Safety, the bet is on the Business model rather than on the Financial. We are confident that the company will turnaround in coming years, but even if it doesn’t the odds of someone losing money is low. Media is a very high fixed cost business. The gestation period is extremely high. It will be extremely difficult for newer channels to be launched & start competing against the big guys for gaining viewership and market share. TV18 has demonstrated a successful business model over the years and across the segments; the company’s channels are among the top leaders in their particular segments. ETV channels via its subsidiary are near break-even and will start performing in coming years. Colors has become profitable but we believe margins can improve substantially in coming years. With Rakesh Jhunjhunwala and RadhaKrishna Damani Betting big in this stock, this looks to be a good pick.

Please note – From FY2017  Viacom18, Indiacast and IBN Lokmat have now been accounted following “Equity method”, as proportionate consolidation method is not allowed as per New Ind AS. We have made this report based on 2016 and prior annual report as quarterly data wasn’t sufficient.

 

Disclosure – Amit Jeswani and His family has no Positions in this Stock. Stallion Asset is a SEBI Registered Equity Advisory company. The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision.

By Now you might know Dolly Khanna, She is famously called the lady with a midas touch. Her latest stock pick is Trident Limited (1.03% Stake), a leading manufacturer and exporter of Home Textiles & Paper products. She is very bullish on Textile, as she already owns Nitin Spinners and Nandan Denims. Even in our last blog the ‘Magic multibagger’, using Joel Greenblatt’s Magic Formula, 2 out of the 10 stocks were textiles (KG Denims and Pasupati Acrylon).

Let Understand Trident in 5 mins (Everything you need to know about it)

About the Company – Trident Group and a leading manufacturer and exporter of Home Textiles & Paper products. Co has its manufacturing facilities set up in Barnala in Punjab &  Budni in the state of Madhya Pradesh in India. Company’s domestic sales contribute 39% whereas 61% is export sales. Textile business contributes 78% to the revenue whereas the paper business contributes 22%.

Trident 1

The company has been in Investing mode for last 2 years and has lately and has invested 1,667 crores in home textile division via a combination of debt and Equity.The company has guided for a revenue of 1200 crores during optimal use of capacity in the new plant which commenced commercial production in febuary 2016. The company expect 40-50% capacity utilization in FY 2017, a contribution about 500-600Crs to topline and 80% utilization in FY18.

Financials at a Glance –

Trident 2

The company’s business model over the last few years have moved from a commodity type Yarn producer to value added home textile market. The company has been focused on high margin, high value product not only in the textile division but also in the paper division where they have guided to increase share of high margin copier business to 60-70% from 50% of current sales.

Understanding Companies Business Model – The main 2 segments of Business are Textile Business (78%) and Paper Business (22%)

Trident 3

Trident’s paper business has been doing better compared to the textile business. The company has been in transition mode from a commodity player to Value added paper.

The company boost of a great client portfolio in its textile division like Target, Wal-Mart, Macy’s, IKEA, Ralph Lauren in International market and Domestic Giants like ITC Hotels, Page Industries etc.

Case for Operating Leverage – The Company has had 18% margins on average when it was in commodity business of yarn. With new capacity coming in and utilization improving till FY 2018, there is a strong case for margin improvement to 20-23% by 2018.

Case for Financial Leverage –  70% of long term debt falls under the purview of lower interest rates since its under the TUFS scheme(Interest Subsidy given by government) . Trident has repaid outstanding term loans of Rs. 366 crore in H1 of FY17, which included prepayment of Rs. 151 crore of high cost debt .The co has targeted to keep net debt to equity ratio of 1.25x by FY18E Vs 1.4x in H1FY17. The decline in the current interest rates of the co will also be beneficial. It must be noted that cost of capital is low for trident due to TUFs scheme and paying off long term debt will decrease return ratios.

Comparison with Peers and Valuation- We value the Paper business at 800 Crores assuming a PE multiple of 10 times. The two main competitors of Trident in home textile division are welspun (23% CAGR in last 5 years) and Indocount (25% CAGR in last 5 years). Both have grown fairly well in the last few years compared to Trident which has grown at 15% CAGR in last 5 years. Trident has been a late entrant in bed linen business but it has fresh capacity to increase revenues from 3700 crores to about 5000 in next 2 years. The Operating Margin of Welspun in FY 2016 stood at 26.38%, whereas it stood at 20% for Indo Count. Since trident is fully backward intergrated (Inhouse yarn business) we believe that it can increase margins by 300 bps to 23% from current 20% in next 2 years.

Trident will reap benefits of increasing scale of operations, highly integrated manufacturing process in both home textiles and paper, and continued access to low-cost raw material for paper division will ensure healthy and sustained operating profitability  in the medium term. We believe trident will do an EPS of 8-9 in FY 2018. We value Trident at 10-11x FY 2018 and give it a fair value of 95 by march 2018. We also believe that the downside risk in this stock is limited to 50 and any dip remains a buying opportunity.

Risk – The company has been frequently diluting equity, which has resulted in low growth in EPS. We don’t expect any further dilution of Equity as debt capital is very cheap for the company and debt/equity is well under control.

Conclusion – Ramping of utilization both in the towels and bed-linen facilities in Budhni (Madhya Pradesh) and sound export prospects for home furnishing will be key trigger for the stock prices in the medium to long term. We believe that trident is a stable business and since it is fully backward integrated in the next few years it can have strong margin expansion.

Disclosure – Stallion Asset is a SEBI Registered Company and this is not a Recommendation. Use this for Educational Purpose only. Amit Jeswani and His Family have no positions in Trident.

 

 

 

Those who know me know that I buy more books than I can finish. I sign up for more online courses than I can complete. I fundamentally believe that if you are not learning new things, you stop doing great and useful things.

Today i thought why not combine ‘Art of War’ with Investing, a book i am greatly influenced by . I Learned about the book called ‘Art of War’ from this movie called “Wall Street” (1987). Art of War is written by Sun Tzu, a Chinese general 2500 Years ago and the learning’s are still very relevant. I am Convinced that if he was a Investor, he would be the best Investor in the world.

 

Those who know me know that I buy more books than I can finish. I sign up for more online courses than I can complete. I fundamentally believe that if you are not learning new things, you stop doing great and useful things.

Today i thought why not combine ‘Art of War’ with Investing, a book i am greatly influenced by . I Learned about the book called ‘Art of War’ from this movie called “Wall Street” (1987). Art of War is written by Sun Tzu, a Chinese general 2500 Years ago and the learning’s are still very relevant. I am Convinced that if he was a Investor, he would be the best Investor in the world.

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I am Going to Write 3 Quotes from his book and show to how Investing is so Similar to a War, the only difference is that its a Financial War and there is no Bloodshed.

Quote #1 – If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.

I Would say this, know the market and know yourself and in 100 years you will consistently beat the market. 90% of investing wins is because of your Psychology and discipline rather than your IQ, its really important to know yourself. Understand the market is prime and We at stallion have been consistently beating  the market, and till the time we are learning the right things, we will beat it. We follow a consistent Strategy of Growth at a Reasonable price and have full conviction in it.

Quote #2 – Every battle is won before it’s ever fought.

If you know your strategy has worked well for last many decades, you know that you will win this time too. In our Blog Good to Great, I had written “Have You ever seen a Dealer at the Casino nervous after loosing 3 consecutive games? The Answer is No, but on the other hand if a Gambler loses 3-4 games consecutively he will get nervous and probably order a whisky. This happens because the casino dealer has a strategy in place and he knows he will win repeating the same thing again and again.”

Quote #3 – The supreme art of war is to subdue the enemy without fighting 

The Supreme art is to win in the market without fighting the market, Never ever go against market trend. The market can be irrational long enough for you to stay liquid.

Equity Investing and War Rules Remain the Same. Its all about following a consistent strategy, Research, Position Sizing, Risk Management and Rules.

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Trend is in favour of emerging markets and looks very strong for India – Shankar Sharma, First Global.

On 12th September Shankar Sharma, who i am a fan of said that emerging markets are set for a major bull market. We went a little deeper to dig in the data points that suggest why he said what he said.

We compared two Indexes MSCI Emerging market Index and MSCI World Index.

MSCI World – The MSCI World Index captures large and mid cap representation across 23 Developed Markets countries. With 1,645 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

The MSCI Emerging Markets Index captures large and mid cap representation across 23 Emerging Markets (EM) countries. With 836 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

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We did a Relative Strength study of Emerging Market Index and World Market.

 

Emerging Market Index Relative Strength

 

Emerging Market Index’s Relative Strenght against World Index has started gaining momentum as the Relative Strenght Index has crossed it’s 20 mont moving average. This is a sign of strength as you can see from 26 years of data that we have presented here.

 

msci-eem

The above chart is of MSCI Emerging market Index.The MSCI Emerging market index was in a range between 35 and 45 for 4 years between 2011 and 2015. The Range Shift happened when crude prices went below 40$.  Crude prices have bounced back and are consolidating between 40-50$. There is a Inverse Head a Shoulder pattern appearing on the Chart which shows bullish sentiments in the Index.

 

msci-eem-vs-sensex-dollex

 

The Above Chart is of MSCI EEM (Red) and Sensex Dollex 30(Black). Clearly there is strong correlation between the two. Sensex 30 is all Sensex companies in USD dollar terms, it is an proxy of gains of FII Investments in India.

Conclusion – We are bullish on the prospect on emerging market index, infact this year economies which have struggled the most have performed the best like Brazil (+32%YTD). If Prices rise on Bad news, normally the price is right. We believe if MSCI emerging market ETF is to rally to 45, then Sensex dollex 30 can rally all the way upto 4000-4500.

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We at Stallion Asset concentrate our studies based on data on wealth creation. Today i am going to reveal a Secret which will make Stock Investing simpler for all of you.

“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.” – Sun Tzu

Have You ever seen a Dealer at the Casino nervous after loosing 3 consecutive games? The Answer is No, but on the other hand if a Gambler loses 3-4 games consecutively he will get nervous and probably order a whisky. This happens because the casino dealer has a strategy in place and he knows he will win repeating the same thing again and again.

The Only thing consistent about markets is your strategy. We at Stallion Asset don’t Trade Stocks, instead we believe in a strategy. I am very confident that our Strategy of Growth at a reasonable price will consistently outperform Markets.

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We at Stallion Asset are in business of Buying Multibagger stocks and holding them. According to our Wealth Creation Study, Companies become Multibagger’s because of a Transition.

The 3 Most Important Transitions are

1)Worse to Bad (Highest Return)

2)Bad to Good (Stallion Normally Invest’s Here)

3)Good to Great

 

Worse To Bad – These Transitions normally happen to due change to change in Management, Change in corporate Governance, asset Sale, or Change in Macroeconomic activities. Lately the Rise in Sugar Stocks due to rise in Global Sugar prices and Paper Stocks Come under this category. These are not sustainable for long term as these business’ continue to remain bad.

Bad To Good –  These Transitions Normally Happen due to change in Macroeconomic Environment.  They last an entire business cycle of 3-4 years. This is where we at stallion Asset concentrate as we believe in Buy and Rotate approach. The recent change in Cement Stocks due to pick up in Infrastructure activity is an Example of this Sector.

Good to Great– These are Normally companies where visibility of earnings of Increases. The more longevity of Growth market senses, the more valuation Increases. Consumption companies are an recent example where market expect sustainable growth of 15-20% for next decade hence all these companies trade between 30x-50x

Conclusion – The Current Real GDP Growth of India is about 8%, adding 5-6% Inflation to it, Increases Nominal GDP Growth to 13-14%. There will be Sectors growing at 25% and there will be sectors growing at 2%. We strongly believe that wealth will be created if your in the right stocks in the Sector growing at 25% in this bull market rather than bottom fishing 2% Growth Sectors.

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