🔆 Saturday Coffee Newsletter
- Market Overview: Top stocks & asset classes
- What’s New: Blue Star shakes things up
- Good Reads: 4 articles on investing
- Pop Quiz: Answer and win a cool prize!
What’s up with markets? 📉📈
Gold & Silver continued to slide down last week as well. However, gold as an investment has beaten Nifty 50 over the past year – mostly thanks to INR depreciation of 10%. Crude fell 4% over the last week to close at $ 83.1.
Nifty 50 is directionless after the budget and keeps moving in a range. This week, Tech Mahindra was up ~11% for reasons best known to Mr. Market. ONGC was up 6.5% due to a cut in windfall tax on aviation fuel. Adani Enterprises was down 7% as it struggles to find a price to settle down.
Blue Star shakes things up 👀
Capitalmind Outliers is our proprietary discovery tool that helps you identify potentially promising stocks with technical trends in their favor. This week we discuss Blue Star.
Blue Star is a long-standing company that provides products, services, and turnkey solutions in heating, ventilation, air-conditioning, and refrigeration services among other things.
It seems a forced transition is underway in one of its businesses. Blue Star has priced its products high in the room air-conditioners business, placing it in the premium segment. The company feels that focusing solely on the premium segment is incongruous with its growth aspirations.
Putting Blue Star and its competitors into Porter’s Generic Strategies framework, we see that Blue star is currently placed in Superior Quality, narrow scope quadrant where it competes with Mitsubishi Electric and O’General. Both are tough competitors, especially given their brand recall in air-conditioning globally.
Therefore, to market to a wider base, Blue Star is intuitively repositioning its room air-conditioning portfolio towards mass-premium and affordable categories. This means, moving toward the right in the below framework.
It will be interesting to see if Bluestart is able to pull this off. Strategic shifts are easier to formulate but quite difficult to execute.
We do have some precedence for companies transitioning from being a narrow scope, superior quality player to a broad scope, superior quality player.
- Apple differentiated its iPhone through superior quality, design, and user experience. Come 2013, it made its first attempt at lower price points with iPhone 5C but received mixed reviews since 5C had fewer features and competitors were offering better specs at lower prices. In 2016, Apple made a second attempt at lower price points with its iPhone SE to a much better reception.
- In its early years, Marico focused primarily on its ubiquitous coconut oil Parachute, but later expanded its offerings not only within, but also beyond the hair care category. Last year, coconut oil accounted for less than half of Marico’s domestic business.
- Mahindra & Mahindra initially forayed into automobiles as a utility vehicle and agricultural equipment maker. Over time, M&M expanded beyond utility vehicles and entered commercial vehicles, and passenger vehicles.
In short, there’s no telling for sure how Blue Star will play this. If you want to take a guess, hit reply, and do let us know what you think.
(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)
What we are reading? 📝
- Like running, investing is a solo sport and your mental models will shape the outcomes. Read What Running Teaches You About Investing
- Mistakes will be made. It’s a normal part of investing. The question is what will you do when you make one and how bad will the outcome be? Read: Wise Words on Investing Mistakes
- A technical view on the US stock market: Five Clues This Isn’t Just a Bear Market Rally
- How to worry less about the behavior and unpredictability of investment markets? Read: All Markets Are Uncertain
Pop Quiz 🎁
It’s simple. Reply to this email and answer the question.
Each week, we randomly pick one winner who gets something cool!
Last week’s winner: Anirudh 🎉
This week’s question
Recently, US president Joe Biden released a statement that read,
“The United States can and will lead the world in manufacturing. I am proud to announce… This purchase will support over one million American jobs across 44 states, and many will not require a four-year college degree. This announcement also reflects the strength of the U.S.-India economic partnership”
How the tables have turned. An American president thanking India for its business to support jobs in USA.
What is Joe Biden referring to?
-> Hit reply to this email and answer.
(If you’re reading this on the website and want to participate in the quiz, subscribe to the newsletter.)
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