Rohan Profile picture
Disclosure : 1. Tweets are opinions, not recommendations. 2. PGDM in Financial Markets Practice 3. Puppers are life.
16 Sep
The leaders rally first & become overvalued FAST. There's great premium for showing urgency to pump a lumpsum amount in such stocks early on in the rally.

The laggards start their journey after all the good stocks have already gone up. << One can do SIP in such slow movers. Image
Should we only buy the leaders?

No.

Figure out where we are in the Bull cycle.

Have the leaders..

1. a) taken off in a big way
1. b) or starting to take off

Have the second rung stocks..

2. a) caught up with the leaders
2. b) yet to catch up

Your alpha comes from there
The second rung stocks too have the potential to reach the same destination, albeit, with a lag. Use this lag for timing your investments. If the leader is in a strong uptrend, start SIP-ing into the other one. Catch the leader at any future drawdown.

Read 5 tweets
9 Sep
A short thread🧵

The US armed forces faced a dilemma during WW2, because returning bomber planes were riddled with bullet holes and they needed better ways to protect them.

The army knew they needed armor to protect their planes but the question was, “Where should they put it?”
When they plotted out the damage these planes were incurring, it was spread out, but largely concentrated around the tail, body and wings. So the most natural impulse was to armor the parts with the most bullet holes.

But..
Abraham Wald, a statistician, made an observation—the military would make a terrible mistake by upgrading the armor along these sections.

Why?

Because the military was only looking at the damage on returned planes. They hadn’t factored in damage on planes that didn’t return.
Read 5 tweets
8 Sep
Maruti, fundamentals history :

20Y EPS growth CAGR : 12%
10Y growth CAGR: 7%
Current EPS : 140rs /share
Yield at CMP : 2.5%

What is this *Yield? 👍

Explanation in the comments section below 👇 Image
Read 4 tweets
30 Jul
When a stock falls, it opens up deeper arbitrage opportunities during a 'falling knives' scenario. This discount attracts a rapid influx of fresh cash until the arbitrage opportunity gap is filled (i.e the market stabilizes) to the point of 0 alpha.
Earnings yields is mostly stable and smooth curve. It's the stock price that fluctuates due to sentiments, liquidity, news cycle, perception etc.

Let's say the long term earnings yield was growing at 9%. If you bought at

(A), your returns = 5%.
(B), your returns = 15%
If you track yield, you'll get better entry points and get better bang for buck. If you track only price, there's a risk of getting trapped at (A) where all technical indicators are bullish.
Read 7 tweets
29 Jul
Stock prices respond disproportionately to free float availability (or lack thereof) than to theoretical Excel valuations. The growth rate x float decides the PE multiple, that's why every co. can't be 15PE. A co. with just 10% float will deviate that much from its DCF valuation.
If there's 2 similar co.'s, one listed (with 15% float available to investors) vs another co. unlisted. The market will arrive (rightly so) at wildly divergent valuations for both. The second co.'s valuation is based on 100% ownership, while the 1st one on a limited supply basis.
If both were listed with 100% float available to free-market forces, or if both were unlisted, then one can do a side by side DCF, otherwise sharing social media infographics comparing stats of Nestle vs Amul, vs ITC without considering locked up float shows lack of wit.
Read 6 tweets
29 Jul
The central narrative of my investment narrative has never been and will never be :

a) Catching stocks at the bottom
b) Catching potential multibaggers
c) Being obsessed with the chosen few 'potential multibaggers'
d) Buying 'safe' stocks and avoiding errors at any cost.

👇
b) Never treated this as a 'potential multibagger' when I bought it, just a better-than-average candidate among others.
Read 6 tweets
29 Jul
"This stock in my portfolio has reported a dip in earnings yield, what to do?"

The answer depends on the yields of other stocks in the PF. Has this yield dipped from 15% to 12%? are others at 10%? this is still your best performer. ADD!

Are there higher yielding stocks? MIGRATE
Keep 30-35 names in the holding, and another ~35 in the watchlist. This is your universe. Don't bother with other names.

Maintain an Excel sheet on all 70 of your candidates to keep track of the yield on each. Keep adding/trimming weights based on relative performance.
You'll get an inkling if you've built a good portfolio when one stock's yield dips, the higher yield alternatives are all found WITHIN your PF.

If all high yield stocks are outside your holding, in your watchlist, then you need to clean your demat and buy your watchlist instead.
Read 4 tweets
21 Jul
#PayTmIPO a cursory glance

Revenue growth rate is mediocre/stagnant.

Let's dig deeper to see if we can find any redeeming qualities. Image
#PayTMIPO

Marketing expenses have gone down. All other recurring expenses are constant. Image
#PayTMIPO It's still in losses but the losses have subsided a bit. Image
Read 6 tweets
25 Jun
#SupremeIndustries NPM has jumped drastically in 2021.

From a mere 54 cr in 2008 to 978 cr in 2021, that's a huge leap in profits. For context, the dividend they paid out this year (279 cr) is 6x times their 2008 profit. Image
#SupremeInd management has diligently worked to eliminate their debt from 2008 to being completely debt free now. Image
ICR has shot up from 3 to 50 over the last decade. This is a sign of hefty cash on the balance sheet. The fact that the management isn't paying it out as dividends shows their intention to reinvest it into their business. Image
Read 6 tweets
25 Jun
There are FOUR inferences :

#1) When stocks fall but fundaments seem fine : Correction has started but people are unaware, and buying.

This is when the market has already commenced its first leg of downmove, but the news still isn't doing halla-gulla about anything bad.
#2) Stocks and fundamentals both are bad : Market has bottomed, and people have stopped buying.

This is when the news is doing maximum halla-gulla, people are shit scared and despite good prices, they wont hit the BUY button.
#3) Stocks are rising but fundaments are bad : Bull market has started, but people are not buying.

By this time the market has already concluded its first upmove, but the news is negative and the ground reality is yet to catch up. The smart money has taken it up on anticipation.
Read 8 tweets
15 May
They have 2 major segments, pipes and adhesives. 77% revenue comes from Piping and the rest from Adhesives.
Both segments have very high margin.
Read 8 tweets
15 May
Power sector, a bird's eye view thread : 🧵
IEX and PowerGrid appear to be slightly better options (अन्धों में काना राजा) in a capital intensive and dud sector.
IEX and PowerGrid have made decent revenues and profits consistently for a decade.
Read 5 tweets
15 May
Atul, Pidilite, Alkyl amine, Fine Org and Aarti Ind have among the best margins in the sector.
Pidilite, Atul, Alkyl amines, FinOrg have among the best ROE.
Pidilite, Atul, Alkyl amine and FineOrg have among the lowest debt.
Read 5 tweets
14 May
Tasty Bites : 50% 🚀 since last mention 5M ago

Fundamentals always precede technical breakouts. Gotta catch em young when the fundamentals are improving & the momentum traders are still clueless.
Fundamentals :

35% CAGR in EPS in the last 5 years.
Read 8 tweets
13 May
Life insurance is potentially the sector which will experience this kind of margin expansion over the coming decade. Most insurance companies presently have wafer thin margins between 2% to 4%.

Even a meagre 4% revenue growth at 6% margin will make their EPS zoom up by 300%. Image
Presently all Insurance stocks are fully valued (i.e 4% margin priced in but 6% margin not priced in)

Someone who enters now will ride the expansion from 4% margin to 6%. Those who had the foresight to enter at half the rate in 2020 March will get a 6x bagger when EPS goes up 3x
Additionally, Insurance companies reinvest the premium corpus accumulated with them which creates a secondary revenue stream with zero added expansion cost. Very high operating leverage business model and an under-penetrated sector (75% Indians don't have insurance cover). Image
Read 5 tweets
13 May
If the uptrend has sustained for a greater time (12Mo) whereas the correction is relatively quick and deep (3Mo), as though it is in a hurry to complete a pattern, it is usually the accumulation zone for a fresh impulse wave. Image
Whereas, if the correction is taking its own time & allowing (i.e inviting) people to buy, it is usually a distribution prior to multi-year stagnation

Smart money knows deep, swift corrections scare retail investors into selling, while long consolidation attracts value investors Image
Moral : Smart money is smart for a reason

They don't do what laymen do i.e consensus buying in 'value stocks'. Possibility of returns is greatest at the point where your brain tells you "it's too risky to buy THIS at THIS PRICE".

"Deep value emerging" = smart money has exited.
Read 4 tweets
13 Feb
Entering a good investment opportunity is hard enough, having an exit strategy is exponentially harder due to the risk of exiting too soon and losing the potential gains, or not exiting soon enough and facing an erosion of notional gains. Can you eat the cake and have it too? 👇
Once you are favorably positioned in an investment, say you enter at X & 2Yrs later it has grown 3X. Then, without killing the golden goose, just extract your X out of it. Now the engine is running on risk-free capital. This is a mind-hack to prevent you from getting cold feet.
Let the 2X ride the trend perpetually, don't worry about under/overperformance henceforth.

Invest the X you just extracted in a 'new economy' sector that is poised to do well for the coming decade.
Read 10 tweets
4 Feb
Tata Elxsi, a short overview :

Sales trend :
Tata Elxsi profit trend :
Tata Elxsi reserves :
Read 4 tweets
4 Feb
"Internet Software & Services" sector an overview of listed peers. A thread 🧵

TataElxsi has the largest marketcap in the sector, followed by Tanla.
Sorted by sales figures, it's clear that the market is rewarding TataElxsi with some premium marketcap, because there are companies which make similar sales but don't enjoy the same valuation (and with good reason) :
Profit analysis makes the reason for the premium valuation evident.

Tata Elxsi is able to convert a large(r) part of their revenues into profits and hence higher FCF and dividends fall in the lap of minority share holders.
Read 10 tweets
2 Feb
Relaxo sales history :

2004 : 201 cr
2020 : 2419 cr

15Y Sales growth trend : 17% CAGR
Relaxo profit history :

2004 : 5 cr
2020 : 226 cr

15Y Profit growth trend : 26% CAGR
Read 10 tweets