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(1/n) Brightcom: The Parson ka Saag-a
By
Le Grand Fromage
(Writing sense. At least, some of the time)
Ok, bachha party, tayyar ho jao..As Dharam Paaji said famously " Gaonwalon, is kahani mien action hai, drama hai, comedy hai, tragedy hai". This is a long-ish read, so make yourself comfortable. A shirshasan ( head stand)may be required by many. Let's just hope we don't end in the " shavasana" ( corpse pose). Literally.
So do read & share because this may well be the best piece ever on investment wisdom. Or on investment foolishness.
First up, as far our investment is concerned, we have already complied with the Regulator's data requirements, submitting all our investment remittances, to the company , totaling Rs 56.65 cr, for 1.5 Cr shares @37.7, fully bank reconciled ( with co's HDFC Bank & Equitas Bank accounts).
This post is not about investment explanations. I don't owe anybody any explanation for my own investing. If you have a problem stock in your public funds, then do explain. Else, it's nobody's business but my own. Get that straight & @#$& you if you think otherwise . And if you copy-catted me in this, I only hope you didn't put 50-100% of your capital in a single stock. If you did, head for personal NCLT.
But, yes, I do owe people my Investment Thinking, specially when it comes to 4 AM plays, of which I have done many, making a lot and losing a fair bit too. And more specifically, my investment rationale for BCG, so that it serves as a good ( horror) case study in 4 AM investing.
I have known Suresh Reddy since around 2014-15. He would occasionally meet & explain his business prospects to me. I never got interested primarily because a) it had a lot of debt, b)I saw the balance sheet as being bloated.
Then came COVID. The pandemic was a boon for all Ad Tech companies worldwide as digital spending surged. BCG's numbers were surging too , as were for other similar companies in India and US ( Trade Desk, eg)
That's when, on or around September 2021, that I decided the opportunity looked ripe: balance sheet had been restructured, impairment charge had been taken, ROE was improving, debt was gone, and business was growing sharply. I spoke to overseas executives, noted that EY was auditing a large part of their overseas profit.
However, people would murmur " BCG has governance issues ". I was sure there were, else market wouldn't be trading it at book value for a debt free company, earning 15% ROE.
However, that's exactly the essence of 4 AM investing . Such stocks are cheap because of historical baggage. The bet in 4 AM investing is that problems are known and priced in, while the upsides aren't . The operative term here is "known problems". We can model for known problems. Unknown/undisclosed problems are impossible to protect against.
And when it comes to governance ( or the lack of it), Hyderabad cos are world famous. So are Mumbai, Delhi, Ludhiana, Ahmedabad, Chennai, Bangalore, Jaipur , Kolkata, cos. Indian soil is fertile in growing bumper crops of low-guv cos. We have lots to choose from.
Back to BCG. What lay ahead after my decision, has been, the investing equivalent of The Exorcist+ The Omen + The Ring + FX: Murder by Illusion + The Prestige.
had no clue that a forensic audit was lurking in the woodworks at the time of my investment. &what has unfolded since has been stupefying, gobsmacking, astounding.The latest interim order lays bare things that would shame a porn star. It also shows the utter lunacy in some Mgt decisions.I mean:if an employee has to buy shares in your company, you can give a loan/arrange an NBFC loan, like many companies do. Why go through crooked hoops to facilitate the purchase? There are many other examples one can see, of sheer stupidity, apart from maniacal malfeasance, at play. The feeling one gets as an Investor, upon reading the interim order is of eating a sandwich of one part shock, one part horror, with the middle layer of sheer anger.
By
Le Grand Fromage
(Writing sense. At least, some of the time)
Ok, bachha party, tayyar ho jao..As Dharam Paaji said famously " Gaonwalon, is kahani mien action hai, drama hai, comedy hai, tragedy hai". This is a long-ish read, so make yourself comfortable. A shirshasan ( head stand)may be required by many. Let's just hope we don't end in the " shavasana" ( corpse pose). Literally.
So do read & share because this may well be the best piece ever on investment wisdom. Or on investment foolishness.
First up, as far our investment is concerned, we have already complied with the Regulator's data requirements, submitting all our investment remittances, to the company , totaling Rs 56.65 cr, for 1.5 Cr shares @37.7, fully bank reconciled ( with co's HDFC Bank & Equitas Bank accounts).
This post is not about investment explanations. I don't owe anybody any explanation for my own investing. If you have a problem stock in your public funds, then do explain. Else, it's nobody's business but my own. Get that straight & @#$& you if you think otherwise . And if you copy-catted me in this, I only hope you didn't put 50-100% of your capital in a single stock. If you did, head for personal NCLT.
But, yes, I do owe people my Investment Thinking, specially when it comes to 4 AM plays, of which I have done many, making a lot and losing a fair bit too. And more specifically, my investment rationale for BCG, so that it serves as a good ( horror) case study in 4 AM investing.
I have known Suresh Reddy since around 2014-15. He would occasionally meet & explain his business prospects to me. I never got interested primarily because a) it had a lot of debt, b)I saw the balance sheet as being bloated.
Then came COVID. The pandemic was a boon for all Ad Tech companies worldwide as digital spending surged. BCG's numbers were surging too , as were for other similar companies in India and US ( Trade Desk, eg)
That's when, on or around September 2021, that I decided the opportunity looked ripe: balance sheet had been restructured, impairment charge had been taken, ROE was improving, debt was gone, and business was growing sharply. I spoke to overseas executives, noted that EY was auditing a large part of their overseas profit.
However, people would murmur " BCG has governance issues ". I was sure there were, else market wouldn't be trading it at book value for a debt free company, earning 15% ROE.
However, that's exactly the essence of 4 AM investing . Such stocks are cheap because of historical baggage. The bet in 4 AM investing is that problems are known and priced in, while the upsides aren't . The operative term here is "known problems". We can model for known problems. Unknown/undisclosed problems are impossible to protect against.
And when it comes to governance ( or the lack of it), Hyderabad cos are world famous. So are Mumbai, Delhi, Ludhiana, Ahmedabad, Chennai, Bangalore, Jaipur , Kolkata, cos. Indian soil is fertile in growing bumper crops of low-guv cos. We have lots to choose from.
Back to BCG. What lay ahead after my decision, has been, the investing equivalent of The Exorcist+ The Omen + The Ring + FX: Murder by Illusion + The Prestige.
had no clue that a forensic audit was lurking in the woodworks at the time of my investment. &what has unfolded since has been stupefying, gobsmacking, astounding.The latest interim order lays bare things that would shame a porn star. It also shows the utter lunacy in some Mgt decisions.I mean:if an employee has to buy shares in your company, you can give a loan/arrange an NBFC loan, like many companies do. Why go through crooked hoops to facilitate the purchase? There are many other examples one can see, of sheer stupidity, apart from maniacal malfeasance, at play. The feeling one gets as an Investor, upon reading the interim order is of eating a sandwich of one part shock, one part horror, with the middle layer of sheer anger.
1/2The forensic audit outcome of overseas subsidiaries didn't look end of world. The utterly blatant disregard for compliance hygiene in this round is completely beyond the end of the Universe.
So, let's circle back to 4 AM investing. In this, we never put more than 20% in aggregate across all such companies. And then we work with companies to mend their ways. Fund managers get all hoity-toity when it comes to 4 AMs. " We do only good fundamentals,high governance cos". Sure. That's why they all were piling into the IPOs of DLF, Reliance Power, Future Capital & dozens others over history (including last 2 years" tech listings). If these were" Good Guv" plays, then Pakistan is a AAA-rated nation.
Has 4 AM investing worked? Ah, it's worked like magic on steroids. Infra cos in 03-04, hailing from aamchi Mumbai & Hyderabad, started life at 0.5x book value and 5x PE, & ended life in 2007 at 15x book, and incalculable PEs. Right through that journey, they remained exactly the same: bribing governments for contracts, pumping order books, cheating on road material. I bought them (so did every MF and FII with a pulse & a finger to hit the Buy button with), made 15x, sold them, shorted them and built my penthouse through them. Thank God for such Low Guv slum-to-penthouse plays.
And Chemical cos from Gujarat, from 2011-12? Ah, what a beautifully uplifting bunch of low-guv plays they were: Shifty Gujus that could give the Hyderabadis an inferiority complex. A PE manager told me 10 years ago " I met the owner of xyx chemical co . I wouldn't even share a sandwich with this guy, he's so poisoned with low governance ".
This chemical co is worth 20,000 Cr ++ today, up 100x in that same period.
So I bought chemical cos too. Made a lot. All 100% 4 AM , maybe even 2 AM, material. God bless their low guv souls.
And let's talk a bit about what role we, as super minority investors, play in 4 AMs. We tell them to do the right thing to create shareholder.value. Beyond that, not a lot. Even sophisticated investors get very little additional information than street investors specially when it comes to hidden dirt.
But who shall cast the first stone? No Fund Manager today will admit to buying India Bulls, Satyam, Yes Bank. RJ had DHFL & Bhushan, and privately, sang hosannas about them. He did the same for A2Z Infra, before souring on it. Both of us lost a ton of money on A2Z as it went from 4 AM to 12 midnight and remains firmly there.
Manpasand was owned by a few excellent investing brains. So was EKI. Dozens others.
Look, fact is: companies across the world and India, lie, cheat, deceive, fabricate.
Remember Apple backdating Jobs' options, a blatantly criminal act? Remember Hank Greenberg manipulating AIG's numbers over decades? Welch at GE? VW's fabricated data on emissions? Ranbaxy fabricated data on their drugs ( as also several US pharma companies serving contaminated drugs over decades). Madoff? Wirecard? Amtek ? Educomp?
All these were owned by very smart investors but smart investors don't get financials-piercing, night vision, x ray goggles as standard investing equipment.
We can and will be tricked. We just hope 10% of the time on 10% of our capital.
Hence, I have no desire or interest in bearing anybody's investment cross but my own. Figure out your own wealth plan. Don't try getting it for free from me. 4 AMs aren't a sure thing. If you want a sure thing, buy an SBI FD. And leave the stunts to the professionals.
Buying a 4AM is risky. When it doesn't work, it's like Chetan Sharma's low full toss to Miandad.
When it works, it's like Shoaib Akhtar's yorker to Dravid.
For pessimists, so far, BCG is looking more Chetan Sharjah than Shoaib Calcutta.
For optimists, BCG is looking more Chetan with the hat trick.
To me, BCG is looking like an eccentric BS Chandrashekhar, who himself didn't know whether his next ball was going to be a full toss for six or a googly through the gate.
So, let's circle back to 4 AM investing. In this, we never put more than 20% in aggregate across all such companies. And then we work with companies to mend their ways. Fund managers get all hoity-toity when it comes to 4 AMs. " We do only good fundamentals,high governance cos". Sure. That's why they all were piling into the IPOs of DLF, Reliance Power, Future Capital & dozens others over history (including last 2 years" tech listings). If these were" Good Guv" plays, then Pakistan is a AAA-rated nation.
Has 4 AM investing worked? Ah, it's worked like magic on steroids. Infra cos in 03-04, hailing from aamchi Mumbai & Hyderabad, started life at 0.5x book value and 5x PE, & ended life in 2007 at 15x book, and incalculable PEs. Right through that journey, they remained exactly the same: bribing governments for contracts, pumping order books, cheating on road material. I bought them (so did every MF and FII with a pulse & a finger to hit the Buy button with), made 15x, sold them, shorted them and built my penthouse through them. Thank God for such Low Guv slum-to-penthouse plays.
And Chemical cos from Gujarat, from 2011-12? Ah, what a beautifully uplifting bunch of low-guv plays they were: Shifty Gujus that could give the Hyderabadis an inferiority complex. A PE manager told me 10 years ago " I met the owner of xyx chemical co . I wouldn't even share a sandwich with this guy, he's so poisoned with low governance ".
This chemical co is worth 20,000 Cr ++ today, up 100x in that same period.
So I bought chemical cos too. Made a lot. All 100% 4 AM , maybe even 2 AM, material. God bless their low guv souls.
And let's talk a bit about what role we, as super minority investors, play in 4 AMs. We tell them to do the right thing to create shareholder.value. Beyond that, not a lot. Even sophisticated investors get very little additional information than street investors specially when it comes to hidden dirt.
But who shall cast the first stone? No Fund Manager today will admit to buying India Bulls, Satyam, Yes Bank. RJ had DHFL & Bhushan, and privately, sang hosannas about them. He did the same for A2Z Infra, before souring on it. Both of us lost a ton of money on A2Z as it went from 4 AM to 12 midnight and remains firmly there.
Manpasand was owned by a few excellent investing brains. So was EKI. Dozens others.
Look, fact is: companies across the world and India, lie, cheat, deceive, fabricate.
Remember Apple backdating Jobs' options, a blatantly criminal act? Remember Hank Greenberg manipulating AIG's numbers over decades? Welch at GE? VW's fabricated data on emissions? Ranbaxy fabricated data on their drugs ( as also several US pharma companies serving contaminated drugs over decades). Madoff? Wirecard? Amtek ? Educomp?
All these were owned by very smart investors but smart investors don't get financials-piercing, night vision, x ray goggles as standard investing equipment.
We can and will be tricked. We just hope 10% of the time on 10% of our capital.
Hence, I have no desire or interest in bearing anybody's investment cross but my own. Figure out your own wealth plan. Don't try getting it for free from me. 4 AMs aren't a sure thing. If you want a sure thing, buy an SBI FD. And leave the stunts to the professionals.
Buying a 4AM is risky. When it doesn't work, it's like Chetan Sharma's low full toss to Miandad.
When it works, it's like Shoaib Akhtar's yorker to Dravid.
For pessimists, so far, BCG is looking more Chetan Sharjah than Shoaib Calcutta.
For optimists, BCG is looking more Chetan with the hat trick.
To me, BCG is looking like an eccentric BS Chandrashekhar, who himself didn't know whether his next ball was going to be a full toss for six or a googly through the gate.
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