βHow to Pick good & safe companies in Sugar Sectorβ
Thread π§΅π
Thread π§΅π
Where We are?
Firstly, Sugar is a cyclical business. Ethanol theme is just a tailwind, the industry has not shifted from cyclical to structural.
Let us understand one thing
"Out of all the investor less than 0.5% of investor actually know where we are at the Sugar Cycle"
Firstly, Sugar is a cyclical business. Ethanol theme is just a tailwind, the industry has not shifted from cyclical to structural.
Let us understand one thing
"Out of all the investor less than 0.5% of investor actually know where we are at the Sugar Cycle"
What Do We mean?
As sugar is cyclical business, we have to bet our position as per cycle. No one knows at what point we are standing right now: At the top, In the middle or its just the Beginning of the Cycle.
Hence to all the investors let's not get carried away with stories.
As sugar is cyclical business, we have to bet our position as per cycle. No one knows at what point we are standing right now: At the top, In the middle or its just the Beginning of the Cycle.
Hence to all the investors let's not get carried away with stories.
Facts v/s Story
π Share Price of most of sugar companies from bottom is already up by 2x-3x. Few have crossed ATH
π Sales of 60% companies has already increased by 50-70% since last 2 years.
πPE multiple of the most of sugar cos decreasing (but still not below 7).
π Share Price of most of sugar companies from bottom is already up by 2x-3x. Few have crossed ATH
π Sales of 60% companies has already increased by 50-70% since last 2 years.
πPE multiple of the most of sugar cos decreasing (but still not below 7).
How to stand safe?
πFrom past, we have understood bad investment are those where cos goes bankrupt.
Apart from bankruptcy every good cos. faces turbulence, but over long period survives well in market.
Hence we would avoid companies who had chance to destroy our portfolio.
πFrom past, we have understood bad investment are those where cos goes bankrupt.
Apart from bankruptcy every good cos. faces turbulence, but over long period survives well in market.
Hence we would avoid companies who had chance to destroy our portfolio.
Whom to Avoid?
Rather than doing deep down, we created a elimination list for the industry.
Elimination Rules:
1. Remove cos whose D/E is more 2
2. Remove cos whose Interest Coverage Ratio is less than 1.
3. Remove cos who are in Loss (on TTM & 2021 basis).
List in Image
Rather than doing deep down, we created a elimination list for the industry.
Elimination Rules:
1. Remove cos whose D/E is more 2
2. Remove cos whose Interest Coverage Ratio is less than 1.
3. Remove cos who are in Loss (on TTM & 2021 basis).
List in Image
Conditions for avoiding:
From above list, there may be many stories of turnaround cos. While it is also common in cyclical that during start of up cycle, leverage cos gives higher return.
But
π We might not be at the beginning of the cycle
π Priority is to protect the capital
From above list, there may be many stories of turnaround cos. While it is also common in cyclical that during start of up cycle, leverage cos gives higher return.
But
π We might not be at the beginning of the cycle
π Priority is to protect the capital
Cos. to Add but with Caution β οΈ
Few companies are there who are doing big business and are generating good profits. But with these they also have high debt.
Rules:
1. Must avoid Elimination rules
2. D/E not > 2 & Interest Coverage more than 1
List in Image
Few companies are there who are doing big business and are generating good profits. But with these they also have high debt.
Rules:
1. Must avoid Elimination rules
2. D/E not > 2 & Interest Coverage more than 1
List in Image
Condition:
Above cos. may repay their debt, but tailwind should support, and one must dive in before investing.
One can add filter of lower Inventory Days & Benchmark for 5year Sales & Profit Growth.
We would avoid this list, to avoid complexity of debt understanding.
Above cos. may repay their debt, but tailwind should support, and one must dive in before investing.
One can add filter of lower Inventory Days & Benchmark for 5year Sales & Profit Growth.
We would avoid this list, to avoid complexity of debt understanding.
Cos with Low Risk:
These list includes cos which are less leveraged and if the cycles starts moving down, than these may turn down.
These co. have little risk of Debt, and we are interested in picking these cos.
(Rana Sugar Highlight): Best AR for Industry Information
These list includes cos which are less leveraged and if the cycles starts moving down, than these may turn down.
These co. have little risk of Debt, and we are interested in picking these cos.
(Rana Sugar Highlight): Best AR for Industry Information
Debt Free Cos:
These are the cos who are almost debt free.
"For those who want to spend little time tracking this cyclical industry & want to ride safely should prefer these list."
Highlight:
Dwarikesh: AR for understanding Supply Chain
Balrampur: AR to study Ethanol Market
These are the cos who are almost debt free.
"For those who want to spend little time tracking this cyclical industry & want to ride safely should prefer these list."
Highlight:
Dwarikesh: AR for understanding Supply Chain
Balrampur: AR to study Ethanol Market
Why Focus on Debt Free Cos:
π You will understand the cycle with very little fees (low risk)
π Your co. will never be out of business
π No destruction of capital
π As these co. have no interest payment, during industry upmove, these co. may reward shareholder.
π You will understand the cycle with very little fees (low risk)
π Your co. will never be out of business
π No destruction of capital
π As these co. have no interest payment, during industry upmove, these co. may reward shareholder.
Conclusion:
For all those who had witnessed sugar cycle, can watch for Cos. with Caution.
Rest for investors like us who don't lies in 0.5% of expert category should watch for last 2 category.
Following Simplicity for protecting capital will let you be in market for long term.
For all those who had witnessed sugar cycle, can watch for Cos. with Caution.
Rest for investors like us who don't lies in 0.5% of expert category should watch for last 2 category.
Following Simplicity for protecting capital will let you be in market for long term.
For understanding Sugar Industry do read our previous thread
https://twitter.com/tycoonmindset05/status/1409498933361999872
For understanding How will Ethanol Tailwind benefit the industry, do read our below thread
https://twitter.com/tycoonmindset05/status/1411685530664804359
Below are the list of companies which fits as per our techno-funda basis last year. Few of these companies are still on our radar.
To know where we are looking to invest in the Sugar Stocks, do join our Telegram Channel
To know where we are looking to invest in the Sugar Stocks, do join our Telegram Channel
https://twitter.com/tycoonmindset05/status/1404220958693490696
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