- Wealth PMS (50L+)
“There’s a quick and easy way to test whether an activity involves skill: ask whether you can lose on purpose.”
~ Michael Mauboussin, The Success Equation
You cannot lose on purpose at Roulette, or the lottery, which makes them all about luck. But, you can lose on purpose at Chess, which means there has to be skill involved.
Being able to lose on purpose proves that an activity is not all about luck and that some skill is involved.
Let’s apply this logic to investing.
Can you “lose” at investing, i.e. underperform the market, on purpose?
This shows, short term success in investing is more about luck but long term success is more about skill.
(Quick question: Reply with “Yes” if you would like to see a thought provoking quote every week)
Metals led this week as Tata Steel and Hindalco were top gainers among the Nifty 50 pack. Healthcare was out of favor with Apollo and Cipla being with top losers.
For a change, let’s look at the last column today. In 2022, Gold has been the best asset class to invest in and equities are the worst. Contrast that to the Euphoria of equity markets going in 2022 and you understand how euphoria ends.
For 2022, USDINR takes the cake for being the biggest mover. Generally, you would expect USDINR to depreciate by 3% to 5% over the year, but this year it depreciated twice as much.
2022 was a year full of worries. Worries of war, inflation, liquidity, FII selling, covid fear…
Check out which stocks climbed the wall of worry 💪 and which ones fell off it 📉
Capitalmind Outliers is our proprietary discovery tool that helps you identify potentially promising stocks that have technical trends in their favor.
This week we’re discussing Apar Industries (HQ in Mumbai, with a Mcap of ₹6,850 crores), whose interests span a variety of businesses, with conductors, specialty oils, and cables as major revenue generators:
If this seems perplexing, here’s the model that Apar seems to be using: The core of most of their businesses is in being a power transmission and distribution ancillaries provider—the company first diversifies into the product for this space and would consequently expand into other niche sub-categories within these categories.
Conductors: Apar is a global leader in aluminum and alloy conductors, and has a 23% market share within India. This is a near-commodity business, since new business realizations are dependent on raw material prices, and existing fixed-rate projects become less profitable during inflationary periods.
Thus, Apar is shifting from being primarily a run-of-the-mill aluminum conductors company to one with a higher share of value-added products, which now account for 49% of the business at present. Premiumisation is more apar-ent (sorry) in the chart below:
Specialty oils (marketed under the brand POWEROIL): Apar is the third-largest transformer oils maker in the world, and has a 60% market share in power transformer oils, and a 40% market share in distribution transformer oils. The company also makes white oils, process oils, and petroleum jelly.
This segment, too, is cyclical in nature given that long-term agreements have formula-based pricing mostly dependent on crude prices, and are typically backward looking in nature:
Wires and cables (marketed under the brand APAR SHAKTI): Apar is a leader in specialty cables for renewable applications, and makes wires and cables for general and niche applications, with a range of 500+ products in its portfolio. The company claims that this business is witnessing high demand from railways, defense, and renewable energy users.
Apar’s relatively smaller Anushakti range of Light Duty Cables crossed the 100 crores mark last year, and the company is targeting a topline of 250 crores in this segment, on the back of higher marketing spending and distribution network expansion.
While wires and cables have been growing at a high rate for Apar, operating margins have declined:
Given that demand for most of Apar’s products is driven by CAPEX cycles of their end-customers, there is an element of cyclicality in many of their businesses.
To be sure, Apar is attempting a premiumization drive, but whether the surge in its stock price is a result of a cyclical up move, or an appreciation of its higher value add positioning is the question to ask here.
(Disclaimer: The information conveyed in this post is intended for informational purposes and shouldn’t be considered as investment advice. Please do your own research before making investment decisions)
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