UV LESSONS: A COMPILATION (VOLUME -1) @unseenvalue

 Investors must learn to differentiate between Mistakes and Bad Luck.

#UV_Lessons

Mistake - taking a punt on debt-ridden stocks like #GVK #Jaypee

Bad Luck - quality stock down xx% due to a market-wide or a stock-specific

black-swan event - #DivisLabs down 50% on cGMP violation.

 Don't hold ur mistakes for long & don't put 'SOLD' against ur winners - hold
winners as long as GARP thesis holds (lesson extract below)

Growth at reasonable price and not ANY price. E.g. 'Gold standard' NBFCs at > 10
TTM P/B would be an exit as can find safer bets for my

 Those who bought quality in 2017 looked stupid for an interim period, but
that's okay - as markets are never a sprint. The harder we work, the luckier we
get. It pays to stay inside your circle of core competence.

 Reading the management, is one of those skills that you never lose once
you’ve learnt it. Few examples from my personal experience! Ajay Piramal
#Godrej_Group #Neuland #VIP Ravi Shroff (#ExcelIndustries) #RPG #Bajaj
#Indoco Dishonest ones: #OrchidPharma #RSSoftware
 A passionate, competent and ethical management doesn't become satisfied
simply coz a goal is reached. Each milestone ignites the fire to aim even
higher. 10k Cr MCap stock would be deemed small cap in 2025-2030

Identify -> Fill it -> Shut it -> Forget it

 Lot of my high conviction stocks were in operation theatre due to (perceived)

“problems”. #escorts #jubilantLife #RPGLife etc. Gods tossed the coin on my
behalf and it was Heads Remember you get handsomely rewarded for
buying a so-so biz at a great MCap/Sales!

 I have learnt over time that great management teams deliver positive
surprises & immoral ones make comical excuses blaming macros for their own
sins! Researching people is tough for investors as it’s more subjective /
judgement based. Number crunching is mechanical.

 No 2 voice patterns are same | No 2 finger prints are same | No 2 DNAs are
same So how can 2 value investing approaches be the same? Don’t try to
 clone anyone – follow your own unique strategy and with Gods help you will
win big time!

 When a great management team exists a biz completely to focus on the

remaining biz, the 'smart move' must be studied carefully by the market
participants as ethical & competent management with extra bandwidth can do
magic! #ExcelIndustries exited #ExcelCrop in 2016
 #UV_Lessons are always a hindsight product. We cannot learn lesson in
the foresight

 Brilliant investment opportunities are few n far between. When we find such
stocks, in our circle of competence - we must buy a lot and hold them for a
very long time. Allocation must mirror conviction else needle won’t move.

 Researchers have argued that dividends signal future performance! When a

company enhances pay-out YoY – take that as a vote of confidence from
mgmt. #Nocil on way to generate 10% yield on an investment of 39 bucks
(2016) & a 10X capital gains over next few years!

 Every once in a while, we stumble across quality “unseen value” that offer
fantastic bargain (green zone in the picture). Be brave to buy a lot & hold for a
very long time! By God’s grace – we might be sitting on a large cap that was a
micro / small cap 20Y ago.
 Feeling a bit iffy with your small caps ?!?! Make sure they are conservatively
financed and promoter’s conduct is not raising any red flags. Experience
tells us a lot about what to avoid or exit if you happen to own such stocks.
Good luck!
 If #Pidilite #HDFC or similar pedigree comes up with a great set of numbers
and markets don’t cheer those? Well don’t panic or rush to change your thesis
as quality can consolidate for a very long time. Look at 10-20Y graphs and
you see continuous new peaks !

 Making mistakes in life or investing is not a bad thing. Not learning from them
is! When we make mistakes, we out to muse and find ways to side-step
making the same ones again. Mistakes that don't kill us - only make us
stronger!

 It’s onerous to switch CDMO supplier once manufacturing process is FDA /

PMDA approved, in particular for #biopharma. 25-35% EBITDA | 20-40% EPS
CAGR over next 10Y My money my conviction - I really don't care about this
short-term correction!! #CRAMS #Biotech #API
 This result season whilst we celebrate / mourn P&L numbers, just beware that
accounting profit hides more than it reveals!! Economic profit is a purer
measure of profit - a more accurate measure of a biz’s ability to generate
surplus value (eventually higher MCap)

 No matter what the excuse!!! If promoters sells stake AND the funds are not
being reinvested in the business – it’s a signal that they believe their stock is
faily valued, period! Discl: holding #JubilantLifeSciences since Sept’13.
#JubilantLife #cmo #cro #crams
 Oil rises rupee weakens!! Greater the importance of an item as a proportion of
total cost, the more sensitive buyers will be about the price they pay!! Look for
those #B2B where the service / product they deliver is a small fraction of
buyer’s finished product cost.

 Creating enterprise value requires 3 things: 1.Increasing ROCE 2.Reducing

WACC (Wt. avg. cost of capital) 3.Increasing rate of Operating Cash Flow
growth Important thing is not to look into the rear-view mirror #chemicals
#speciality_chemicals

 When #biocon made initial investments in R&D, it was paying an 'entry fee' for
a right, but NOT the obligation to continue that research. These genuine
 future-options make certain businesses trade at significant premium to the
‘disrupted camp’. #biotech #disruption

 Avoid long term investments in industries with high EXIT barriers. #steel
#sugar #telecom #textiles etc. Even if there are limited players - huge exit
barriers (e.g. excess capacity, political, social or obsolete technology) will only
worsen pricing pressure!! Sometimes if your redundancy or layoffs costs are
too high - you might be forced to keep running that money guzzling plant
forever as exit is not an option. #Corus Transaction is a good case study
@TataSteelLtd Similar cases in other sectors too! Be conservative

 #Pharma's dead | Long live Pharma! When products / services are highly
differentiated – suppliers (#cdmo #cro #crams) will be more powerful ! If it is
expensive/disruptive to move from one supplier to another, buyer (innovator)
becomes relatively weak and dependent !

 “You are likely dealing with distinct sectors if there are differences between
them in more than one force, OR where differences in any force are large” –
Michael Porter There is a MYTH that forces in #biotech #biosimilars #cdmo
#cro #crams are same as #pharma

 Sector dynamics / structures can change over time and businesses operating
within them can start generating superior ROCE. Example: #Chemicals
dynamics shifted a lot from 2013 to 2018. Invest calculating “where the puck
will be in 5Y rather than where it is today”
 Data is a pure commodity; true ‘moat’ lies in the interpretation of publicly
available data. #uv_lessons Extract form an old speciality chemicals AR: -This
is a flash in the pan (many had this view) -No it seems more structural in
nature & hence sustainable (few had this view)

 In a space that is very heterogeneous and difficult to read - one HAS TO take
a basket approach. In #Chemicals and #CRAMS - 2 individual stocks could be
chalk and cheese so there is no such thing as “sector” in these 2 spaces !
Ditto for #biopharma #cdmo #biotech !

 In a struggling business waiting to turn around (which may or may not happen
anytime soon), never hold the stock waiting for dividends. #unichem Dividends
are good as long as the base business is growing at good margins & future is
not iffy.