Tough times don’t last, High ROC Companies do

Does an investing strategy that invests in high Return on Capital companies deliver better returns than the market? This post backtests the strategy by simulating investment in deciles of companies with varying ROCs. The results support the hypothesis that a strategy that invests in high ROC companies does better.

Read more

The most profitable industries in India

This post presents aggregated analysis of the most and least profitable industries in India in 2018. Profitability is described by different accounting metrics, each one with its own merits and drawbacks. EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) is useful when comparing companies within a sector where some participants might have made recent investments compared to others who been around a long time. It inflates profitability for companies that aggressively capitalise costs. EBIT (Earnings before Interest and Taxes) ignores the composition of capital structure i.e. extent of Debt involved (like EBITDA). Useful in comparing across industries which might have different tax

Read more

What is the KPIT Birlasoft (de)merger about?

Did you know KPIT Technologies is one of the earliest Indian IT Software companies to go public way back in 1999? After Infosys listed in June 1993, it took a while for the other companies in the sector to start going public. The current flagbearer for the Indian IT sector, TCS, did not list until 11 years later, in 2004. By then, KPIT had already been a publicly listed company for nearly five years. In January 2018, management of KPIT proposed a merger and demerger with the C.K.Birla groups privately held IT Services company, Birlasoft. Wait, merger and demerger? The

Read more

Fundamental Analysis Tools for Investors in India

In the course of finding the most time-efficient way of analyzing companies shortlisted for investment, I’ve come across various tools available to Indian investors. This post compiles a list of some of the tools that I’ve tried either briefly or extensively along with some of their key strengths and weaknesses. Note that this list is far from comprehensive and also that digested analysis from any source is typically only a starting point and not a substitute for diving into past annual reports to gain context of the fundamentals. Overall note of caution on using any tool that aggregates data is to assume

Read more

5 ways finance professionals are like football players

This Sunday, France won the 2018 world cup in an uncharacteristically high-scoring final against Croatia. The 6 goals scored in this final equal the total goals in the last 4 world cup finals before this. One other standout about the final was there weren’t many fouls. This got me thinking. Going by the time they spend lying on the ground clutching some part of their body, football players seem to get seriously injured a lot more than other sportspersons. Why is that? Logically, one (or more) of three reasons must apply as the cause of frequent injuries in football: Football

Read more

What did they not tell us about long-term investing

This post was first published on capitalmind.in A picture is worth a thousand words No pain, No gain Money can’t buy happiness   Or the more contemporary: Privacy is a myth If you’re not paying for it, you are the product They are insightful phrases, originally by wise and often witty people. They convey one powerful idea in a short statement that would take most people pages to describe. Just that they have been used so often in literature and conversation as to have no more insight to offer. A test for whether something someone says is a truism is,

Read more

How Indian investors can invest in foreign equities

Why Indian investors should (also) look overseas Pop quiz: What is notable about these names? ICBC China Construction Bank Agricultural Bank of China Bank of China Ping An Insurance Group No points for saying they are all Chinese companies. Here is another set of names as a clue: JP Morgan Chase Berkshire Hathaway Bank of America Wells Fargo Apple These are more recognisable American companies. What could they have in common with the first set of companies? More than might be intuitive: The 10 companies mentioned above are the top 10 largest publicly-traded companies in the world. In fact, three

Read more

Let’s talk investing with Raunak Onkar

This is the next post in the ‘Let’s talk investing‘ series. In this series, I write about my conversations with investment practitioners, people with real-world investment decision-making experience. My objective in these conversations is to understand their investment philosophy and process, to demystify, at least to some extent, what they do, and to walk away with some thought-starters to help all of us become better investors. Note: These conversations are not meant to offer advice on specific stocks There are over 35 Asset Management Companies (AMCs) in India. The typical AMC offers between 5 and 25 open-ended equity mutual funds

Read more

Nobody knows Anything

Markets have been falling across the board. Some indices more than others. Auditor resignations, Additional Surveillance Measures, Trade wars, Oil prices, the list goes on… The live tracker of stock recommendations for 2018 by the major research and fund houses is down 12% for the year, with 72% of recommendations in the red. There is a general sense of “Oh crap!” about all that’s happening. It’s like that scene from ‘The Matrix Reloaded’ when Neo (the market) battles hundreds of Agent Smiths and they just keep coming and overwhelm Neo. via GIPHY Times like these, it’s natural to look for

Read more

Does sector-picking trump stock-picking?

What do Agrochemicals, Food Products and Household Appliances have in common? What do Telecom Services, Oil Exploration & Production and Electric Utilities have in common? The first set is three of the best performing sectors in India in terms of stock market returns over the last ten years. The second set, you guessed it, is three of the worst performing sectors for stock market investors. Chart shows the top 10 best and worst performing sectors in India in terms of investor returns from 2008 to 2018 Note that cumulative returns here mean median of CAGR returns within each sector Does this

Read more