10 investing mistakes I made in last 10 years.
My name is Sahil, & I am a human. Therefore, I err. This is a catalog of those errors & my apology for committing them. A promise to myself, to do better
Includes both errors of commission & errors of omission.
π§΅β€΅οΈ
My name is Sahil, & I am a human. Therefore, I err. This is a catalog of those errors & my apology for committing them. A promise to myself, to do better
Includes both errors of commission & errors of omission.
π§΅β€΅οΈ
Format of the thread:
π: Why I invested (or didn't).
βΉοΈ: Why I now consider my decision to have been wrong.
π§ : What I learned from the mistake.
π: Why I invested (or didn't).
βΉοΈ: Why I now consider my decision to have been wrong.
π§ : What I learned from the mistake.
Inspiration for the thread comes from @ishmohit1 's tweet yesterday:
https://twitter.com/ishmohit1/status/1487074168222875651?s=20&t=qhyNHQmoIqwMQ9ZBYCkHhw
Please dont take any company i mention is a buy or sell reco. I am not a sebi registered analyst. Do your own due diligence. Try to focus on the learnings. π
https://twitter.com/sahil_vi/status/1487092516990369792?s=20&t=qhyNHQmoIqwMQ9ZBYCkHhw
Outline:
1. Vaibhav Global (Omission)
2. Vaibhav Global (Commission)
3. Strides Pharma (Commission)
4. Apollo Tricoat (Commission)
5. IEX (Omission)
1. Vaibhav Global (Omission)
2. Vaibhav Global (Commission)
3. Strides Pharma (Commission)
4. Apollo Tricoat (Commission)
5. IEX (Omission)
6. Tips Industries (Omission)
7. Chemcrux (Commission)
8. ITC (Commission)
9. Navin Fluorine (Omission)
10. Tejas Networks (Omission)
7. Chemcrux (Commission)
8. ITC (Commission)
9. Navin Fluorine (Omission)
10. Tejas Networks (Omission)
1. Vaibhav Global (Omission)
π
Looked at it in May-20. Trigger to look at it was fact that vijay kedia sir used to own it. Looked at TTM growth of 11-12% & thought why should I pay 18 p/e for 12% growth.
π
Looked at it in May-20. Trigger to look at it was fact that vijay kedia sir used to own it. Looked at TTM growth of 11-12% & thought why should I pay 18 p/e for 12% growth.
βΉοΈ
At 200 rupees, it was available at a princely p/e of 18. Did not study it deeply enough. Had i studied it deeply enough, I would have realised the growth triggers. What pandemic was doing to this biz. Would have had a good margin of safety.
At 200 rupees, it was available at a princely p/e of 18. Did not study it deeply enough. Had i studied it deeply enough, I would have realised the growth triggers. What pandemic was doing to this biz. Would have had a good margin of safety.
π§
In investing, the rear view mirror is always cleaner than the windshield. Money is made by understanding the near future possibilities AND ensuring margin of safety. Don't get fooled by the past.
In investing, the rear view mirror is always cleaner than the windshield. Money is made by understanding the near future possibilities AND ensuring margin of safety. Don't get fooled by the past.
2. Vaibhav Global (Commission)
π
Relooked at it in Feb-21. Now recognized the really impressive low cost vertical integration moat they have built. Understood the really good tailwinds that existed.
Understood industry structure.
π
Relooked at it in Feb-21. Now recognized the really impressive low cost vertical integration moat they have built. Understood the really good tailwinds that existed.
Understood industry structure.
βΉοΈ
what changed?? The moat is real. It still is. I had overestimated the tailwinds. I thought they could sustain the covid period 25% growth rates. Allocated capital at 60 p/e too thinking earnings could grow 40-50%. It didn't.
what changed?? The moat is real. It still is. I had overestimated the tailwinds. I thought they could sustain the covid period 25% growth rates. Allocated capital at 60 p/e too thinking earnings could grow 40-50%. It didn't.
π§
I can end up making mistake of commission AND omission in the SAME company. Mistakes are NOT permanent. They are temporary. There is redemption. I CAN get it right in the future in same company. Need to remain agile/fluid.
I can end up making mistake of commission AND omission in the SAME company. Mistakes are NOT permanent. They are temporary. There is redemption. I CAN get it right in the future in same company. Need to remain agile/fluid.
3. Strides Pharma (Commission)
π
Commentary was strong. Looked like US generics biz might have bottomed out. Stellis looked like a great opportunity. A Bio CDMO incubated for 10 years. Available at low valuations.
βΉοΈ
π
Commentary was strong. Looked like US generics biz might have bottomed out. Stellis looked like a great opportunity. A Bio CDMO incubated for 10 years. Available at low valuations.
βΉοΈ
I had not done enough due diligence to understand the dynamics of the generics biz. Its cost structure. TO what extent covid could disrupt it. All generic cos started making older medicine they had stopped since USFDA stopped inspections. Impacted sales volume AND margins.
π§
If 90% biz is commodity, 10% is specialty, probably worth waiting until 100% clarity around value unlocking. Warna 90% can tank your thesis. TOO many moving parts makes co hard to understand AND track.
If 90% biz is commodity, 10% is specialty, probably worth waiting until 100% clarity around value unlocking. Warna 90% can tank your thesis. TOO many moving parts makes co hard to understand AND track.
4. Apollo Tricoat (Commission)
π
60% ROCE, unique market creating steel based products like window frame, chaukhat. Strong parentage. High growth. Good starting valuations. Shrinking working capital cycle. Value migration play. What is not there to like??
π
60% ROCE, unique market creating steel based products like window frame, chaukhat. Strong parentage. High growth. Good starting valuations. Shrinking working capital cycle. Value migration play. What is not there to like??
βΉοΈ
turns out the parent (APL apollo) was 3 steps ahead (no pun intended). They wanted to merge this pure-play value add biz into the semi-commodity parent.
turns out the parent (APL apollo) was 3 steps ahead (no pun intended). They wanted to merge this pure-play value add biz into the semi-commodity parent.
That would mean that i would be selling my higher value co at lower valuation to buy a lower value commodity co at higher valuation. Didnt make any sense to me.
π§
I need to give more weightage to evaluating the group as a whole & understand the actions of the larger parent co in order to be aware of corporate risks (mergers). Same risk could happen in astec too.
I need to give more weightage to evaluating the group as a whole & understand the actions of the larger parent co in order to be aware of corporate risks (mergers). Same risk could happen in astec too.
5. IEX (Omission)
π
Evaluated it when @shubham_TLI made a video in Oct-20:
Puura video dekha. Didnt study. Why? Because i thought government cos would be clients. "Want to stay away from PSUs"
π
Evaluated it when @shubham_TLI made a video in Oct-20:
Puura video dekha. Didnt study. Why? Because i thought government cos would be clients. "Want to stay away from PSUs"
βΉοΈ
Been a 4x from there. The platform aspects of IEX are seen now. Were probably not so appreciated in Oct-20. This is a 80% operating margin co doing 45% ROE. Great industry tailwinds. Market coupling. Industry dominance.
Been a 4x from there. The platform aspects of IEX are seen now. Were probably not so appreciated in Oct-20. This is a 80% operating margin co doing 45% ROE. Great industry tailwinds. Market coupling. Industry dominance.
π§
Should have studied more deeply. It makes sense to first study the biz and THEN look at the valuation filter (or any filter like PSU clients).
Should have studied more deeply. It makes sense to first study the biz and THEN look at the valuation filter (or any filter like PSU clients).
6. Tips Industries (Omission)
π
Saregama is a more dominant entity. Larger catalog. Higher bargaining power. Better corporate governance. Why should i study the smaller lesser dominant entity deeply?
π
Saregama is a more dominant entity. Larger catalog. Higher bargaining power. Better corporate governance. Why should i study the smaller lesser dominant entity deeply?
βΉοΈ
Because the industry structure (music streaming) is such that it might make sense to own both. Saregama got rerated quickly which also shows us the upside for tips IF they can resolve their pesky issues (not being able to strike a deal with gaana)
π§
Because the industry structure (music streaming) is such that it might make sense to own both. Saregama got rerated quickly which also shows us the upside for tips IF they can resolve their pesky issues (not being able to strike a deal with gaana)
π§
I should not be afraid to own 2 cos in same sector. My zeal for diversification of cashflows is such that i find it hard to own 2 cos from same sector. Need to do better on that front.
7. Chemcrux (Commission)
π
A microcap with amazing ROCE of 38%. Differentiated product offering like api intermediates like lasamide. Spec Chem player. Good growth of 22% sales cagr. Value migration. China+1. Huge Capex to double capacity.
π
A microcap with amazing ROCE of 38%. Differentiated product offering like api intermediates like lasamide. Spec Chem player. Good growth of 22% sales cagr. Value migration. China+1. Huge Capex to double capacity.
βΉοΈ
I had weighed the environment pollution concerns too low. they got many GPCB closures before and after i bought. Sometimes they only operate 10-11 months a year due to closures. Ankleshwar is one of most polluted towns in india.
I had weighed the environment pollution concerns too low. they got many GPCB closures before and after i bought. Sometimes they only operate 10-11 months a year due to closures. Ankleshwar is one of most polluted towns in india.
π§
For chem cos, environment & regulatory compliance is a MUST have filter. This is part of the reason i dont own any spec chem now. Ones which have best compliance are expensive. Many of the cheap ones have iffy compliance.
For chem cos, environment & regulatory compliance is a MUST have filter. This is part of the reason i dont own any spec chem now. Ones which have best compliance are expensive. Many of the cheap ones have iffy compliance.
8. ITC (Commission)
π
I got seduced by the 5% dividend yield. This is as good as an FD or maybe even better!! 5% dividend yield + capital appreciation. Waah, what a combo. Add to that an improving FMCG biz & you have a sure shot winner. Right? Right??
π
I got seduced by the 5% dividend yield. This is as good as an FD or maybe even better!! 5% dividend yield + capital appreciation. Waah, what a combo. Add to that an improving FMCG biz & you have a sure shot winner. Right? Right??
βΉοΈ
Well, not quite. 3 major concerns:
1. Capital allocation: Hotels. Gruesome biz
2. Cigarette is an ESG negative industry. Hard to get valuations.
3. SOTP valuation wont work because of holdco dicount. Not unless there is a demerger.
Well, not quite. 3 major concerns:
1. Capital allocation: Hotels. Gruesome biz
2. Cigarette is an ESG negative industry. Hard to get valuations.
3. SOTP valuation wont work because of holdco dicount. Not unless there is a demerger.
π§
I should Focus on investment objectives. My objective is 25% CAGR. 5% dividend yield is orthogonal to my objective. ITC might compound its shareholder wealth by 15% but if it does not meet my objective, its a mistake.
I should Focus on investment objectives. My objective is 25% CAGR. 5% dividend yield is orthogonal to my objective. ITC might compound its shareholder wealth by 15% but if it does not meet my objective, its a mistake.
9. Navin Fluorine (Omission)
π
Saw @soicfinance video in Aug-20 on NF:
Was at 50 p/e multiple. Did not want to spend time studying a co with high valuation because growth was priced in. Right? Right??
βΉοΈ
π
Saw @soicfinance video in Aug-20 on NF:
Was at 50 p/e multiple. Did not want to spend time studying a co with high valuation because growth was priced in. Right? Right??
βΉοΈ
If i had spent time in understanding navin, i would understand about its awesome Florine platform, its competitive advantages, its unique ability to operate in innovator CRAMS space. The wonderful industry tailwinds & industry structure that exists.
But i didnt study, do i did not understand.
π§
Another good investment falls prey to my valuation bias.
Instead of understanding WHY the valuation was high, I chose to not study it. This valuation bias is something i find hard to overcome.
Another good investment falls prey to my valuation bias.
Instead of understanding WHY the valuation was high, I chose to not study it. This valuation bias is something i find hard to overcome.
But i have started taking baby steps (I hope) by owning tiny positions in Tatva & Sona, hopefully studying them well & figuring out whether high growth can overcome valuation barriers. I could be wrong. Here there & in many places.
But will always try to be a life long learning machine.
10. Tejas Networks (Omission)
π
Started studying in Nov-20 after seeing vijay kedia sir invest. Listened to couple of concalls. Company was not making profits. I let my "past filter" get the better of me. Company has not made profits. So why should I study it more?
π
Started studying in Nov-20 after seeing vijay kedia sir invest. Listened to couple of concalls. Company was not making profits. I let my "past filter" get the better of me. Company has not made profits. So why should I study it more?
Is what I thought.
βΉοΈ
Had i studied it even more, i would have understood the tailwinds this industry is enjoying. I would have understood how rare network product R&D cos in india are. I would have understood WHAT made Tatas invest in Tejas. The 5G tailwinds. The need for IP switches.
Had i studied it even more, i would have understood the tailwinds this industry is enjoying. I would have understood how rare network product R&D cos in india are. I would have understood WHAT made Tatas invest in Tejas. The 5G tailwinds. The need for IP switches.
π§
I need to evaluate a company based on its forward financials. Not its past. Work hard to understand any competitive advantages, what the original investor's thesis might have been.
I need to evaluate a company based on its forward financials. Not its past. Work hard to understand any competitive advantages, what the original investor's thesis might have been.
Some Consolidated learnings:
1. I have a valuation bias. It prevents me from studying great companies.
2. I sometimes have a past bias. It prevents me from seeing the future clearly.
3. I definitely have ownership bias. Need to evaluate competitors fairly.
1. I have a valuation bias. It prevents me from studying great companies.
2. I sometimes have a past bias. It prevents me from seeing the future clearly.
3. I definitely have ownership bias. Need to evaluate competitors fairly.
4. I have bias against government related cos. PSP, IEX. Need to do a better job in evaluating them fairly instead of dismissing them pre-emptively.
<End of thread>
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Consider following if you're interested in reading similar threads in the future.
Have a nice weekend.
For those wondering whether I have been investing for 10 tears, I have not.
Hack: 1st ten is decimal (normal 10), second is binary (10 equals 2 in binary).
What else did you expect from a computer science student. ππ π
gbmb.org/blog/differencβ¦.
Hack: 1st ten is decimal (normal 10), second is binary (10 equals 2 in binary).
What else did you expect from a computer science student. ππ π
gbmb.org/blog/differencβ¦.
A meta thread of all my threads:
https://twitter.com/sahil_vi/status/1406848206181335046?s=20&t=-0VkLg1RQ-c0LB_3nAW8Vg
Holco discount * what I meant was conglomerate discount.
I use them interchangeably although they are not. π π
I use them interchangeably although they are not. π π
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