“I used to know things, then 2020 happened” – Alexis Gay
Imagine telling someone back in March that equities are an essential asset class. Try telling someone now the foundation of a good investment plan is asset allocation which should include debt and gold in addition to equities.
2020 has been that kind of year. Where Markets moved at light speed, and we wrote about it, a lot. Here’s a compilation of some of our best investment writing in 2020.
IPOs
In all, 16 companies hit the markets in 2020. We covered 11 of those in detail for Premium subscribers
Looking at the current prices one cannot complain about returns from IPOs in 2020, however the issue with IPOs is due to the humungous demand the allotment is minimal and does not move the needle for the investor. Some of the IPOs that we felt were expensive and refrained from applying have also done well, this implies the mood of the market. 6 of the 11 IPOs we covered hit the markets in September, when conditions were conducive for coming to the markets.
Some of our IPO analysis posts. Note some of them have been unlocked for free access.
Mindspace REIT IPO [link]
Happiest Mind IPO [link]
Route Mobile IPO [link]
CAMS IPO [link]
UTI AMC IPO [link]
Gland Pharma IPO [link]
Burger King IPO [link]
Mrs Bectors IPO [link]
Industry Analysis
Understanding industry dynamics helps investors differentiate between companies riding strong but cyclical tail winds from companies that have built deep differentiation into their business models that will likely sustain for some time. They are a key part of our portfolio construction process, both in the PMS, and in the Premium Model portfolio.
Here are some of our industry deep dive posts through 2020:
The Indian Paint Industry and why Asian Paints dominates
Their early introduction of tinting machines, the machines that mix different colours to deliver your specific shade, is one of the reasons for their market leadership. [link]
The two-wheeler industry and a deep value opportunity
Three out of the Five top-selling motorcycle models are made by Hero Motocorp [link]
The Indian Tile & Bathware Industry
The ₹27,000 Crore Indian tile industry is fragmented, 55% of it is with small regional players and the remaining 45% with large organized players.
[Part 1] goes into the size, structure and companies in the tiles segment while [Part 2] goes into the Bathware segment
The Aviation Industry and COVID impact
Low utilisation combined with lower ticket prices mean airlines have been seeing significant cash erosion over the months post-lockdown. [link]
The nascent broadband market is about to roar
In the last seven years, home broadband has grown at an unimpressive 4% each year compared to 56% for mobile broadband. The pandemic created the perfect storm for that to change. [link]
They don’t sound as exciting as the Pharma and Technology spaces, but two industries poised for significant growth over the next few years:
The Indian Plastic Pipes Industry and Steel Pipes Industry
Capitalmind Model Portfolios
At Capitalmind, Premium subscribers get access to five investment portfolios: three equity, one fixed income, and a NIFTY + Futures Trading Strategy.
We reimagined the LongTerm MultiCap Portfolio in April 2020. The LongTerm Portfolio revamped
The Momentum Portfolio withstood the March Covid Crash and has delivered satisfactorily in 2020. Momentum Portfolio Mid-Year Review.
Capitalmind Chase, our NIFTY + Futures Strategy has had a fantastic year riding the trends, both long and short: Introducing Capitalmind Chase – A systematic index trend-following strategy.
Chase results get updated weekly on this twitter thread.
Fundas
In our funda series, we break down a financial concept or an idea and explain it in simple terms.
A lot of focus is given to the income statement, it captures the latest earnings of the company. However the balance sheet and cash flows carry a lot of weight in analysis of a company. A look at the balance sheet and cash flows over a period of time indicates the cash flow generating capacity of the company and how the assets of the company have been funded over the years. We wrote about the importance of balance sheet and cash flows and what to look at in these statements.
What is delisting? why does a company delist? How does the delisting process work? All of this answered in our delisting post and why we felt the Vedanta delisting would not go through.
The rewards of direct stock picking are huge, however stock picking is not easy. There are lot of factors that go into being a successful stock picker. Many investors prefer the direct route and if one develops or has the ability to pick stocks this is the best way to participate in the equity markets. For someone starting off or having an interest to pick stocks there needs to be framework in place, we had written about how to think about picking stocks in India to highlight these very things.
And we keep reiterating that a good investment plan starts with asset allocation, security selection, and then market timing, in decreasing order of importance.
Source: How to think about Asset Allocation in India (click image to read the post)
Stock Deep Dives
In our taking stock series, we look in depth into companies.
Specifically
- Focus on the business of the company – basically what service/product the company sells to generate revenues and make money
- Structure of the industry in which the company operates in
- What are the drivers of a particular business and are these sustainable?
- Degree of competition, where does the company stand against competition? does it have any advantage over others in the market?
- Management quality – captured through media interactions of senior officials of the company, capital allocation and management response on conference calls
- Financial trends – CFO, comparing CFOs with net profits, working capital requirements and cash conversion cycles, debt/equity and are the assets funded through debt or equity and trends in ROE and ROIC’s
Some of the stocks that we wrote about
New age businesses – IndiaMart, Affle, Infoedge and Dixon and the promise that they hold for the future.
The chemical industry has a lot of tailwinds going for it, how does Atul fit into all this? and what are its future prospects?
Stocks in the oil & gas space – Gail, BPCL, Mahanagar Gas and Aegis Logistics. We had a series of posts on the Oil and Gas sector, the latest one being: PSU Oil and Gas stocks: Reset to brent @ $50
What makes Balkrishna Industries the leading OHT market player in the country and the competitive advantages it has over other players?
Demystifying the life insurance sector and where does ICICI Pru Life insurance stand in the industry. Take on the largest sprit company in India – United Sprits
Do basmati stocks offer value?, where does Dr Lalpath Labs stand in the growing Indian diagnostic space and what are its future prosects
We looked at Gareware Technical fibres, which is not very well covered stock.
A look at Bharti Airtel and series of posts on the events unfolding in the telecom sector.
All other detailed write ups on stocks can be fond on our website.
What data says
Numbers are the foundation of analysis. We sort through data to see what the past tells us.
What do we buy after corrections? We look at the past corrections to arrive at this and here are our findings
Where can one find opportunities after a mid cap carnage?
A look at data for over 900 companies and their earnings, cash flows, market cap growth over the last decade to see which sectors/stocks work.
Performance of the Nifty 50 Index and stocks from the last samvat to this samvat, the sectors and stocks that have performed/underperformed
How does addition/deletion from the index impact a stock’s performance? here are our findings
Pitfalls of mid cap and small cap investing, we look at 7 quality companies and see what happened if we bought them at all time highs?
Finally, we attempt to answer the million dollar question : Will the markets correct and what to expect in our Is a market crash looming? Some cues on what to expect post.
Experimentals
In our expermentals section, we look at short-term opportunities for return. They vary from low to high risk in nature.
Two examples this year
An opportunity in the boring old IDFC – Where we highlight how IDFC Limited a holding company for IDFC Bank and AMC is cheap compared to their holdings in both these entities, this is even considering the discount that holding companies trade at in the market.
A special situation opportunity in Majesco
All the experimentals identified during the year can be found here.
TLDR Annual Reports
During the year we started a new series on culling out only the key insights from Annual Reports. We call this series AR Nuggets. We look at the latest annual reports of companies and highlight and summarise our key learnings from these. We looked at annual reports of Hero Motocorp, APL Apollo and Maruti.
Other Coverage
A lot of developments have taken place during the year which have impacted stocks – right from Yes Bank, DHFL, Reliance and Laxmi Vilas Bank. We have been on top of these developments are below is our coverage on these events
Right from RBI limiting withdrawals from Yes Bank, SBI taking 49% stake in the bank, rescue of the bank and whether investors should participate in the bank’s FPO, we have had it all covered in the Yes Bank saga.
We looked at DHFL’s bandra book and how 11,000 Cr appeared in disappeared in DHFL’s books. What happens to DHFL’s shareholders in the resolution process?
How does Reliance plan to get net debt free? and Silver Lake’s investment in reliance ventures
The merger of Laxmi Vilas Bank with DBS and its impact on the shareholders of LVB.
Finally, Why do stocks that have declared bankruptcy and are insolvent still trade? What the factors that lead to this situations, we look at this with some examples in our Walking dead post.
We have a bunch of new features and improvements in the works and can’t wait to roll them over the next few months.
Here’s wishing all our readers a healthy, happy, & rewarding 2021
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