Thread by @unseenvalue

“When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact.” – Warren Buffett

Aim to formulate a thread on Sector - Attractiveness & Repulsiveness!
#uv_sectors

Michael Porter’s 5 forces that shape the Industry’s Structure:

1.Competitive Intensity (Rivalry)

2.Bargaining power of Firms relative to their Suppliers and Buyers

3.Threat of new Entrants

4.Threat of Substitutes

5.Value of product / services to Buyers / Customers

Few Sectors in the “Organized” space have transformed from being Oligopolistic to Hypercompetitive (or Jurassic as I prefer to call them 😊).

Jurassic pockets with near-perfect competition are:

- Great for consumers 🙌
- Unappealing for investors 💣 (e.g. branded Air Coolers)

Branded Air Coolers used to be a perfect setting (tailwind) for #Symphony 🚀

But in recent times the low entry barriers attracted competition (#BajajElectricals, #CromptonConsumer, Usha, #Kenstar, #HSIL and many more) and dented the Sector margins, Symphony's stock price!! 💣

Recent policy changes coupled with high crude oil prices have improved the economics of Sugar / Ethanol sector!

Industry has the option to execute as per the ‘Economics of Strategy’ & switch between Sugar and / or Ethanol as output for the same RM (Cane) – it's +ve news 4 ROCE?