Few people have reached out asking for how I zero in on investments given the returns that I have been able to generate over a long period of time.

It's been hilariously simple. Wrote an one pager doc sometime in 2014 - Posting some key takeaways from that.

1. The price at which one acquires a business determines one's level of return. Investment in wealth creators made at P/E multiples well below their ROE maximises returns.

There is an inherent margin of safety in buying a stock at a P/E ratio substantially lower than its sustainable ROE. This is where the opportunity lies. Buying at a PE at 50% discount to its ROE has ALWAYS led to multibagger returns.

Improving ROE on a sustained basis, on a growing top and bottomline is the key to Wealth Creation. 2. High ROE combined with high growth is the sweet spot. If one can find a company with P/E lower than both, the chances of creating wealth increases exponentially. Also, prices accorded to businesses relatively higher in comparison to their long-term ROE, are unsustainable.

A lot of people have been asking me on optimizing weight training, supplements, food and all. Here's a small thread on what I have learnt during my 11 years journey in fitness.

1. Basics over everything else. Prioritize large muscle groups and do compound exercise 2. So do Bench press, Dumbell presses for chest. Bent over rows and Lat pull downs for Back, Squats and Hip thrusts for legs and glutes, Shoulders presses and lateral flys for shoulders. If you do only these, you are 90% sorted when it comes to workouts.

Book 29 – Bad Money – Inside the NPA Mess and How It Threatens the Indian Banking System

A fantastic read on what’s wrong with the Indian public sector banks–Think the part where @kaul_vivek explains how well Axis has done after being just an investment for the govt. instead.... ...of an enterprise to run captures the overall essence of the book.

Two sets of people it is a must read for – Traders and People working in these PSBs! Traders because they will understand how PSBs as a whole group operates. And for people working in PSBs so that..

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On this world's book day, I am listing some books which really changed the way I look at world and left a lasting impression, shaped the way I am today. And continue to do so.

1. Wings of Fire by Sir APK Abdul Kalam - This was probably the first book

amzn.to/2KsOevW ..that really got under my skin. I think I was in 7th then and had just learnt English (We started english in class 5th then). It was a difficult read lead me to buy Oxford dictionary (the Concise version - Had money only for that. I got to meet him some time later on...

Impact on FMCG sector –

Continuing with Retail thread, Constraints on goods movement and shortage of packaging material have crippled downstream processes.

1/n For Procurement and manufacturing, there are issued with fresh produce procurement since local mandis are shut. There is excess of milk and some players are increasing their use by 20%, but price crash has started happening across states.

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Impact of lockdown on Retail sector -

Lockdown across the country has resulted in non-grocery retail businesses coming to a complete halt. Traditional retail has come to a halt except for stores stocking essentials.

1/n Estimates for losses ranges from USD 0.5-2 billion dollars due to closure of malls, stores and factory production. Job losses imminent 15 lakh modern retail stores in India employing 60 lakh people; several small players may have to shut shop.

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Impact of lockdown on Aviation

No industry is facing as big a challenge currently as Aviation. India has closed both its international as well as domestic borders till April 15th.

1/n For Domestic travel, yield has declined to 12-15%, forward bookings declined by ~35%. For international travel, it is expected to be down ~70% yoy for Q1/Q2 – 25% of all international travellers are foreigners and they are expected to be 0 for some time beyond the lockdown.

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Current impact on Logistics Sector- Short Thread

Movement of goods across the value chain is currently witnessing unprecedented hurdles due to supply side issues and lack of coordination

1/n Overall, only 20% of long distance capacities are being utilized. Volumes are down 75-80% from Feb levels. There is an acute shortage of drivers – More so because they don’t want to be stuck on road amidst no Dhaba/Food resources and also don’t want to face police harassment

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Thread on overall economic impact of the lockdown and some suggestions, curated from various sources. Will also try to provide on ground situation sector wise for major sectors.

The focus currently for everyone seems to be this – Plan now to “Survive” , ..

1/n Plan now to “Survive” , avoid lender defaults, avoid permanent brand damage and plan to win in their own version of what will happen in next 6 months

1. Basic Idea – Build worst case scenarios – Build in 50-100% of topline losses in some of the cases for next few months

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Some inferences from the current loan book mix of banks & NBFCs

ICICC bank seems to be better positioned than HDFC and Axis due to lower exposure to unsecured retail loans and SME loans - Two sectors where the stress is going to be higher. City union bank looks to be in tight situation with ~50% of loan book from SMEs. DCB is faring better than my expectations.

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The art of selling – A thread

Broadly, there are 3 reasons to buy – Business, Management and Valuation. Broadly, there are three reasons to sell – Business, Management and Valuation.

1/n 1. Business – The biggest reason to sell is the realization that thesis is not playing out. For that, one needs to know, before and during investing, what’s the thesis? When you are wrong, you are wrong. What most people do is to wait before getting even to sell – This is ..

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Indian credit card industry – A thread

While at 925mn debit cards are highly penetrated, credit cards is still a nascent industry ~ 50mn card base (3.5% per capita, unique cards ~60% of this), 1.2% of bank credit and 3% of spends/GDP.

1/n The top 3 players – HDFC, SBI & ICICI corner >50% market share in the segment and there is a strong entry barrier in terms of creating the initial opex needed to attract customers – rewards infrastructure and Merchants network – The gestation periods are really long here.

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A small thread on analyzing financials (Banks as well as NBFC, more so NBFC). This is triggered by @amey_candor session on analyzing lending business. It’s one of the simplest and useful 50 mins that one can spend to understand the lending business. @amey_candor 1. Key idea is – Lending business is all about who does best recoveries. Growth doesn’t really matter much.

Stock returns are highly correlated with low levels of GNPA – Manappuram Finance (Invested since 75) which grew only at 13% returned 33% CAGR since 2014 – GNPA at 0.6%.

Book 24 – Dead Companies Walking

This is about understanding when a company is sliding towards bankruptcy, regardless of the stock price.

Also, how to short it. It also helped me understand when to start selling, which has been a big issue with me.

amzn.to/34oy3ag 1. One of the most important assertions of the author is that “Things go wrong more often than they go right”. Failure is the common outcome of any business venture and this doesn’t necessarily have to be frauds. Good, smart people fail. And one of the key reasons is they fail...

Book 23 - A Zebra in Lion Country by Ralph Wanger

Author’s investment philosophy have two essential elements 1) Buy small companies 2) Identify a major trend, and then buy companies that will benefit from the trend.

Amazing one on small cap investing

amzn.to/2riFrGx 1. He believes that we are living in a world where the environment changes at an increasingly rapid rate. He thinks by concentrating on smaller companies one can improve once chances of catching the next wave. Ralph Wanger insists that focusing on themes help us to narrow...

Book 20 – How I almost blew it by Sidharth Rao

The book is a brief chronicle of some of the digital entrepreneurs of India. he author tries to get some common thread and leanings across their journey and it’s a good refresher read on these firm’s journeys.

@sidharthrao @sidharthrao 1. Some of the most common reasons for failure or almost blow up is consistent across the firms – Desire to grow at fast pace without being profitable, spending too much money without the commensurate revenues, ambition to diversify without getting the core correct and...

Book 18 – A bank for the Buck

The book is all about the history and philosophy of how the bank was formed, what is it that separates it from others and why a firm is all about its people.

A must read to understand the marvel that HDFC Bank is and what drives the same. 1. In Short, HDFC bank has not done anything unique. Doing very ordinary things in ordinary ways with extraordinary execution and redefining the distinction between real risks and perceived risks are what make HDFC bank different from the rest.

Book 15 - Why We Sleep: Unlocking the Power of Sleep and Dreams by Matthew Walker

One of the off-track books that I read recently. An amazing, in-depth look at sleep, the research behind it, and its huge array of benefits – mentally, emotionally and physically. 1. Key takeaways are 12 sleeping habits, which though not unknown, forms a basis of detailed discussion around sleep - Consistent sleep schedule, getting early morning sunlight, tech free bedroom are key habits.

A small thread on PSU bank merger announced recently

There is one big reason for any merger – Synergy. And that means laying off people. And shutting down branches where there are duplicities of presence and business. And both have been categorically denied by the finmin. So what is the impact then?

1.Short story – NONE. It means nothing and achieves nothing. On the contrary, it significantly weakens Union Bank and Indian Bank, two of the strongest banks which have been merged with weaker ones in the current wave.

Operating leverage has been one of the most talked about topics in some of the industries and the thread attempts to discuss some of the important drivers for changes in earnings due to operating leverage.

1/n Operating leverage can come in from better volumes (higher margin due to scale), better product mix and lowered costs.

1.The easiest way to think about operating leverage is as the ratio of fixed to variable costs. Higher fixed costs upfront means higher room for operating..

Investing in high PE stocks – Observations

The cornerstone of the thread here is a paper by M Mauboussin wherein he discusses the drivers of PE & breaks it down in 2 components – Steady state value & future value creation. We will focus on the second part – Future VC

1/n 2/n

Now for a company not growing with Return on Capital at least as much as cost of capital, the correct PE is inverse of its long term growth rate. So, for argument, since long term growth rate in India is at 7%, ~14x is the correct PE for that type of business.