The Gallops

Subject: Results Season Over What Next

15, Aug 23

Hello Partners,

This current results season was a mix Bag relative to the Previous ones. This results season saw relatively fewer positive surprises which the number of Inline Numbers as well as Disappointments increased Substantially.

Stocks that we have been following for Quite a bit remained a Mix bag as well while a Couple of them continue to surprise as expected and move higher.

We are in times where New Addition looks relatively risky and we remain sceptical of the potential move given he move the market has seen in the last 6-8 months.

What we know:

1. PSU’s have continued to Outperform the Market. Orders and Conviction is increasing by the day and the Outlook remains healthy as well.

2. Railways, Power, Defence remain Strong themes and numbers here continue to show for themselves

3. Wind Energy has emerged as a new theme and Stocks within the space are moving strongly and fast

4. Consumption space remains under pressure with most of the Stocks disappointing across the space excluding Trent and Ethos specifically.

5. Private Banks continue to lag the Public Sector ones.

6. Building Material Space continues to see Strong Traction (Cables, Steel Tubes)

7. Chemicals is falling into a Worse than expected Cycle (The Bottom might be near)

8. Pharma is picking up pace

9. IPO’s are back and Flying

It remains a very tricky times for the Market from New Idea generation perspective. Where would the next set of disappointments comes will always eat our head. It is time to be cautiously optimistic, looks for ideas and keep them ready to add now or valuations at which one is comfortable.

Today I shall Share Charts of Stocks on 2 Fronts: Stocks which we have been following for a while and they continue to perform and Some Strong Setups to look out for.

Stocks which we have been following:

Stock-1- Bector Foods

The Outperformance here continues. We should have bought this one.

Stock-2- Usha Martin

The Results here have been Strong as well

Chart-3- Newgen Software

Numbers while were relatively lower, but the markets doesn’t seem to be too agitated about it, the price action continues.

Chart-4- Trent

The Rally here has continued on the back of Strong Results and continued strong Outlook

Let’s now look at Stocks which are setting up well:

Stock-1- Metro Brands

Stock-2- Caplin Point

Results here have been very strong, and continued to be so for a while now

Stock-3- SteelCast

(Strong Numbers and Strong Outlook)

Stock-4- Kfintech

(Consolidating right above the IPO Base)

BE Cautious and Trade Well.

Let me further share some Reading Links:

1. https://www.fortuneindia.com/long-reads/regional-retailers-come-of-age/113570 - Regional Retailers come of age
2. https://wggtb.substack.com/p/trading-for-a-living - Trading for a living
3. https://collabfund.com/blog/how-to-read-lots-of-inputs-and-a-strong-filter/ - How to read by Morgan Housel
4. https://empirefinancialresearch.com/articles/the-risk-reduction-strategy-most-investors-refuse-to-learn - Using Options to reduce risk
5. https://seths.blog/2023/08/the-low-stakes-argument/ - The Low Stakes Argument
6. https://fliphtml5.com/prph/sbrn/ValueQuest_-_Green_Industrial_Revolution_Megatrend/ - Green Industrial Revolution
7. https://aswathdamodaran.blogspot.com/2023/08/the-price-of-risk-with-equity-risk.html?m=1 - On Equity Risk premium
8. https://inc42.com/features/zomatos-profitability-paradox/ -Zomato’s Profitability Paradox
9. https://blog.validea.com/failure-points-in-investing-learning-from-the-james-webb-telescopes-journey/ - Failure Points in Investing
10. https://klementoninvesting.substack.com/p/against-cassandras-the-performance The Performance impact of Cassandras
11. https://oilprice.com/Metals/Gold/Germany-Looks-To-Gold-To-Help-Weather-Financial-Storm.html - Germany is looking at Gold

Some Nice Videos to Watch-

https://www.youtube.com/watch?v=sN7ECT4Cbdw

https://www.youtube.com/watch?v=tyytQso6YYQ

Happy Independence Day 

Have a Great Week 

Subject: IT Takeoff

18, Jul 23

Hello Partners,

IT has had a large surprise move in the recent past both in the US and India. The current move has surprised the entire market amidst the numbers mostly coming in weaker than expected. TCS, LTIM, Tata Elxsi all have mostly been in line or disappointed the broader market.

(Either it Tops here for a while, Or continues its Upward Journey)

Given the move in the index, it could ideally indicate either of the 2 things:

1. The Worst is behind us and the numbers possibly have bottomed and there is only improvement going to come in going forward

2. The Market thought the worst is behind it while it actually isn’t

Looking at the Numbers and the Commentary, It’s hard to believe that the worst is behind us and hence time consolidation cannot be ruled out here. While the Tech Services as a Segment was continuing to underperform, We have finally seen some significant slowdown come into the ER&D Space as well with Tata Elxsi reporting a mere 1.4% QoQ Growth down from it’s previous trend of 8-10%.

While we cannot ignore the charts, in case one is looking to trade the segment, they have to be very cautious and focus only on the Strong players here. Some of the Companies which we believe should continue to outperform the Industry would be- Persistent, Coforge and KPIT from the Larger Guys. Nucleus would be watched closely. It is setting up very well on the charts. With this let’s look at some IT and Non-IT Charts:

Chart-1- Nucleus Software (A Potential BO pre Results)

Chart-2- KPIT

(Stock is holding up Well)

Chart-3- Paytm

(Strong Consolidation post the Breakout) (Numbers have been Strong here)

Chart-4- APL Apollo

Strong Growth here as promised by Gupta Ji, The Market now will look for EBITDA/Ton before bidding this higher)

Chart-5- Apollo Pipes

(A Beautiful Consolidation post a Breakout)

Some Weekly Reads: 

1. https://www.moneycontrol.com/news/trends/lifestyle/indias-lab-grown-diamonds-finally-their-time-to-shine-10876401.html - India’s Lab Grown Diamonds
2. https://findthemoat.com/2023/07/05/the-economics-of-selling-on-the-internet/ - The Economics of Selling on the Internet
3. https://blog.validea.com/the-value-trap-conundrum-and-six-criteria-to-help-deal-with-it/ - 6 Criteria to avoid Value Traps
4. https://seths.blog/2023/07/customer-traction-is-the-hard-part/ - Customer Traction is the Hardest Part
5. https://2point2capital.com/blog/index.php/a2023/07/10/size-does-matter/ - Size Does Matter
6. https://acquirersmultiple.com/2023/07/tom-gayner-never-be-in-a-hurry-to-sell/ - Never be in a Hurry to sell
7. https://www.oaktreecapital.com/insights/memo/taking-the-temperature - Howard Marks Newsletter
8. https://twoquants.substack.com/p/trading-the-night-effect?sd=pf - Trading the Night Effect
9. https://solidarity.sgp1.cdn.digitaloceanspaces.com/dev/quarterly-reports/5Cwu0G37zHY3YqRMjpEjhetcszJo11Yi6BrsJVJm.pdf - Solidarity Letter to Investors
10. https://www.fundsmith.co.uk/media/cygbfqd0/fef-2023-semi-annual-letter-web.pdf - 2023 Semi-Annual Letter to Investors (Fundsmith)

Some Interesting Interviews:

1. https://www.youtube.com/watch?v=hdr9tV9mxDs&t=3678s
2. https://www.youtube.com/watch?v=-2dFmsCaYzY&t=2398s
3. https://www.youtube.com/watch?v=gwSO_oRDPpM&t=5s

Have a Great Week

Subject: Markets Overheated? And Top 15?

08, Jul 23

Hello Partners,

There are always 2 sides to every Investor, When the Market is going down they curse the Markets, and When it goes higher they feel happy yet scared about holding onto their gains expecting the market to fall.

4-6 months back when the market was correcting, you would be asking the following:

1. Why is the market falling so much, the results were decently good?

2. Everyone is saying it is India’s time yet why aren’t stocks going higher?

3. Will the Market keep falling? Should I sell out and sit out of the market?

4. I think I should book my Profits. (Jitna hai leke niklo)

5. The Global market is the reason we are falling, the moment things stabilise there only then we will go higher, How can India diverge and stay independent.

Since then US has posed one of the best H1 since the 1980’s with Nasdaq climbing more than 30% in 6 months, Indian market has moved one sided to hit new highs, Small Caps have moved into an orbit of their own and Suddenly the India Story seems to be reflecting in stocks. However the Questions or Queries that I have been hearing lately include:

1. Don’t you think the Markets are over heated?

2. Should we book some profits?

3. I am almost sure the results are going to disappoint.

4. The Markets have run up a lot, I think it will correct,

No matter what the market does, it is in our nature to Question things. While we want the too good to happen always, we on the other hard get too agitated when it does happen.

What do then we as individuals do, to surf through these moments ?

A short answer to it would be: “Do Nothing”. Thinking about the market direction has never helped anyone. We rather invest our time focusing on Companies who are going to grow largely insulated by the macro conditions and would be affected as less as possible because of the weaker market conditions. Timing has never worked for anyone and I believe it will never work for anyone in the long run.

In our Top 15, 13 out of 16 Stocks are either at All time Highs/52 Week Highs or are within 5-7% of All time highs. (Redtape remains unlisted) and Dmart and Affle continue to remain weak. We remain confident of the Stocks within the recommendation basket and believe they should continue to do well.

Some of the themes that you would want to look out for in the current Results seasons include: Railways, Power Ancillary, Infrastructure, Financials.

With this let’s look at some Stocks, which are looking attractively placed:

Stock-1- Ethos Ltd

(A Follow Up post a Second Breakout) Hopefully the numbers will be good.

Stock-2- Rategain (A Similar Pattern as Bector Foods)

Stock-3- Pricol

(We are studying this one closely)

Stock-4- Triveni Engineering

Chart-5- Rainbow Hospitals

Some Nice Articles to Read:

1. https://awealthofcommonsense.com/2023/06/how-should-you-judge-your-investment-performance/ - How should one Judge their Investment Performance
2. https://collabfund.com/blog/fear-of-acorns/ - Fear of Acorns
3. https://businessindia.co/magazine/ibc-in-severe-distress-with-poor-results - IBC in severe Distress
4. https://themarket.ch/interview/value-over-growth-is-the-trade-for-the-second-half-of-2023-ld.9270 - Interview with Larry McDonald
5. https://www.moneycontrol.com/news/business/markets/three-basic-rules-for-amateur-retail-investors-looking-to-play-small-and-microcaps-10901981.html - 3 Rules for Microcaps
6. https://acquirersmultiple.com/2023/07/warren-buffett-the-secret-to-keeping-shareholder-turnover-low/ - The Secret to keeping Shareholders Turnover low
7. https://seths.blog/2023/07/actionable-feedback/ - Actionable Feedback
8. https://www.capitalmind.in/2023/07/return-on-capital-shareholder-returns/ - Impact of ROC on shareholder Returns
9. https://behavioralvalueinvestor.substack.com/p/what-do-the-best-investors-do-that - What do best investors do that we don’t
10. https://www.evidenceinvestor.com/lessons-in-life-and-investing-from-harry-markowitz/ - Lessons from Harry Markowitz
11. https://acquirersmultiple.com/2023/07/charles-munger-investing-is-not-for-everyone/ - Investing is not for everyone
12. https://collabfund.com/blog/smart-things-smart-people-said/ - Smart things smart people said
13. https://www.fortuneindia.com/long-reads/return-of-wind/113256 - Return of Wind Sector

Nice Interviews:

1. https://youtu.be/rdAKWK0BqsM
2. https://www.youtube.com/watch?v=nZbD7f-fJZY&pp=ygUYcGl5dXNoIGdveWFsIHBvZGNhc3QgQU5J
3. https://www.youtube.com/watch?v=G2pKm6PD63Q&t=1s

Have a Great Weekend

Subject: The Weekender (01/07/2023)

01, Jul 23

Hello Partners,

We gladly present to you Our Weekender. We Hope you enjoyed reading last weeks Articles. Any Suggestions on What else can we add to this would be really appreciated.

1. https://www.financialexpress.com/industry/microfinance-sector-in-india-back-to-growth-a-fundamental-analysis/3142078/ - Microfinance about
2. https://buggyhuman.substack.com/p/on-investment-firms-brand-and-reputation - On Investment Brand and Reputation
3. https://thereformedbroker.com/2023/06/17/todays-market-pivots-from-a-funeral-to-a-party-as-fast-as-a-vfw-hall/ - Markets will pivot
4. https://www.fortunesandfrictions.com/post/how-returns-happen - How Returns Happen
5. https://www.cnbc.com/2023/05/09/warren-buffett-and-charlie-munger-doubtful-about-ai-and-chatgpt.html - Munger on AI
6. https://aswathdamodaran.blogspot.com/2023/06/ais-winners-losers-and-wannabes-nvidia.html - AI winners and losers
7. https://monevator.com/commodities-diversification/ - Does Commodity Diversification make any sense
8. https://seths.blog/2023/06/reality-as-reassurance/ - Reality as Assurance
9. https://acquirersmultiple.com/2023/06/guy-spier-the-power-of-doing-nothing/ - Power of Doing Nothing
10. https://collabfund.com/blog/a-few-questions/ - Morgan Housel

Have a Great Weekend

Subject: The Weekender (24/06/2023)

24, Jun 23

Hello Partners,

We gladly present to you Our Weekender. We Hope you enjoyed reading last weeks Articles. Any Suggestions on What else can we add to this would be really appreciated.

1. https://www.ruffer.co.uk/en/thinking/articles/the-ruffer-review/2023-05-always-a-puzzle-never-a-game - Lessons Inherited from a Value Investor
2. https://finance.yahoo.com/news/warren-buffetts-japan-bets-nearly-190930079.html#:~:text=Jo%20Yong%2DHak-,Warren%20Buffett%27s%20Japan%20bets%20have%20nearly%20tripled%20in%20value%20to,since%20Buffett%20disclosed%20his%20wagers. - Buffets Japan Bets have tripled in Size
3. https://humbledollar.com/2023/06/two-dollars-to-win/ - Two Dollars to Win
4. https://www.mbi-deepdives.com/metamoat/ - Meta’s MOAT
5. https://vosscapital.substack.com/p/software-siphon - Stock Based Compensation in Software Companies
6. https://acquirersmultiple.com/2023/06/howard-marks-the-cardinal-sin-of-investing-2/ - The Cardinal Sin of Investing
7. https://themarket.ch/english/who-has-the-oil-price-advantage-the-saudi-prince-or-the-speculators-ld.9179 - Saudis vs Oil Speculators
8. https://basehitinvesting.substack.com/p/attributes-of-a-great-business-and - Attributes of a Great Business
9. https://www.usv.com/writing/2023/06/hallucinations-as-a-feature-not-a-bug/ - Hallucinations as a Feature
10. https://www.morningstar.com/portfolios/what-role-should-cash-play-your-portfolio - What Role should cash play in a Portfolio 
11. https://collabfund.com/blog/why-you-believe-the-things-you-do/ - Why you believe the things you do
12. https://seths.blog/2023/06/project-management/ - Project Management

Have a Great Week

Subject: SmallCaps starting a New Bull Market?

17, Jun 23

Hello Partners,

It was not long back where the Markets were expecting Q4 FY23 to be one of the worst Results season in a while and I believe atleast 50% of the people would have bet their money on the Market seeing a correction. 

With Fed not stopping, US looking wobbly, India having its own problems with Growth, It was not looking like a rosy picture at all. But we did come out with Shining Colours, Something that was completely unexpected.

Small Caps have possibly started a New Bull Market, The Current price move is not a normal one. We have in our previous post also written about it

We have seen this pattern multiple times in the last Decade. Small Caps in Stage 1 rise anywhere between 30-70% in Stage 1 before flying out in Stage 3 again. For now the Stage 1 has gone up by 23% only.This does not mean that It will go up more, but the history says so it should. We however keep looking at the Screen to know.

The next Question one asks, What should we do when the Stocks fall (Stage 2). We say “Nothing, Be excited because this is a phase where you have recognised the Potential Leaders. Stocks here correct by as much as 20% very fast, And give us a perfect entry point.” This is the time not to be scared, but Just Buy.

Stage 3 is always the craziest Part and the Returns just Blow off to the upside. You could well make 2-3x during such rallies, if in the right stock.

Look at this Rally, The first move was 32%, Post which there was a fall of 9% and then a Stage 3 was of around 97%, One sided rally.

We are hopefully in a similar market in Stage 1.

We believe EMS is the space which should probably lead this Rally. They are showing crazy signs of leadership, But let’s see who will rebound the fastest post the fall as and when it comes.

With this let’s look at some of the Stocks, Which are showing signs of leadership and one would want to keep them in their Radar:

Stock-1 and 2- Kaynes and Syrma SGS

Stock-3- Bector Foods

A Bad Bad Miss for us this one.

Stock4- Rainbow Hospitals

Stock-5- Stylam

Keep an eye on some of these.

Some Nice Articles to Read:

1. https://www.moneycontrol.com/news/business/markets/old-bridges-kenneth-andrade-takes-a-contrarian-bet-on-it-services-pharma-10775691.html - Interview with Kenneth Sir
2. https://inc42.com/features/d2c-brands-that-are-disrupting-indias-consumer-market/ - 75 Brands disrupting Indias Tech Stack
3. https://www.forbesindia.com/article/take-one-big-story-of-the-day/can-hindustan-aeronautics-limited-deliver/85631/1 - A Note on HAL
4. https://thereformedbroker.com/2023/06/11/the-day-the-treasury-topped/ - The Day the Treasury Topped
5. https://portfoliocharts.com/2023/06/12/how-investing-personality-types-frame-your-money-perspective/ - The 8 Fundamental Investing Mindset
6. https://dailyreckoning.com/the-great-dollar-paradox-2/  - The Great Dollar Paradox
7. https://collabfund.com/blog/compounding-optimism/ - Compounding Optimism by Morgan Housel
8. https://www.moneylife.in/article/rajesh-exports-audit-report-and-comparative-cash-flow-statements-missing-from-filing/71097.html - The Mysterious Rajesh Exports
9. https://awealthofcommonsense.com/2023/06/this-is-why-you-stay-the-course/ - Just Stay the Course

Some Nice Interviews:

https://www.youtube.com/watch?v=SP6kKi2nMz4 - Circling the Wagons, Crazy Interview

https://www.youtube.com/watch?v=tx_z0o6ObPU&t=3831s - How does Nassim Taleb think?

Have a Great Weekend

Subject: The Weekender (02/06/2023)

02, Jun 23

Hello Partners,

We gladly present to you Our Weekender. We Hope you enjoyed reading last weeks Articles. Any Suggestions on What else can we add to this would be really appreciated.

1. https://candorinvesting.com/2023/05/27/inox-wind-a-classic-turnaround/ - Inox Wind a Turnaround Story
2. https://marqueefinancebysagar.substack.com/p/irrational-exuberance - Irrational Exuberance
3. https://www.whitecoatinvestor.com/14-financial-milestones-worth-celebrating/ - 14 Milestones worth celebrating
4. https://themarket.ch/english/china-is-in-danger-of-growing-far-below-its-potential-ld.9068 - On China vs America
5. https://awealthofcommonsense.com/2023/05/the-stock-market-is-not-a-casino/ - The Stock Market is not a Casino
6. https://allstarcharts.com/smash-that-reset-button/- When to Reset
7. https://static.gurufocus.com/Fund_Letters/Q1%202023/1659682885705138176.pdf - Letter to Investors
8. https://acquirersmultiple.com/2023/05/warren-buffett-my-strategy-for-investing-in-banks/ - Strategy for Investing in Banks
9. https://retireby40.org/reinventing-yourself/ - Reinventing Oneself is not easy

A Great Video for you all to learn from:

https://www.youtube.com/watch?v=rEZukMdkQiA&t=7821

Have a Great Weekend

Subject: Small Caps Flying

31, May 23

Hello Partners,

While the Markets has been inching towards All time highs, Small Caps and Micro Caps as a space has been on a tear. Stocks within the space have seen some Unreal momentum and have been making New Highs Day in Day out. While the Small Cap Index is up 17% in the last 2 months, The Microcap Index is higher by 23% and is at New Highs.

People could keep Questioning whether such a Rally is sustainable or not, However one cannot ignore the fact that the rally has come on the back of Strong Numbers following through.

The Markets have been very wise in only bidding up numbers where performance has been strong instead of bidding it up irrespective.

I will today try and share some Stocks within the Small Cap Space, Which might be nice poised. Such Stocks might or might not have broken out, But performance tailwinds remain strong here. We have been studying all the 3 companies closely.

Stock-1- Dreamfolks

Stock-2- Polymed

Stock-3- Sula

Moreover there are 2 Sectors making All New Highs and almost all the Stocks within the Space are doing so as well: EMS Companies and the Microfinance/Small Finance Space.

Stocks within both the sectors have moved ferociously and the numbers here are expected to continue to come in Strong. You might want to look at Companies within the Sector in case there is a correction.

Let me now give you some interesting reads that I have been reading over the last week or so:

1. https://buggyhuman.substack.com/p/the-great-disconnect - The Great Disconnect
2. https://www.physicianonfire.com/why-did-we-care/ - 10 things we let go of with age
3. https://alphaarchitect.com/2023/05/gold/  - Gold a Safe Haven Asset
4. http://blog.intelsense.in/2023/05/mtar-technologies-stock-story.html - MTAR Tech
5. https://themarket.ch/english/neglecting-emerging-markets-is-a-huge-mistake-ld.8983 - Neglecting EM is a Huge Mistake
6. https://seths.blog/2023/05/compounding-head-starts/ - Compounding Head Start
7. https://behaviouralinvestment.com/2023/05/22/investment-junk-food/ - Investment Junk Food
8. https://dailyreckoning.com/time-to-take-off-the-bear-suit/  - Time to take the Bear Suit off
9. https://www.morningstar.in/posts/64394/4-learnings-journey-neil-parikh.aspx - 4 learnings from my life

Listen to this Interview: Great insights on Quality Investing

https://www.youtube.com/watch?v=gggd4dohwkM

Have a Great Week Ahead

Subject: The Weekender (19/05/23)

19, May 23

Hello Partners,

We gladly present to you Our Weekender. We Hope you enjoyed reading last weeks Articles. Any Suggestions on What else can we add to this would be really appreciated.

1. https://www.cnbc.com/2023/05/06/berkshire-hathaway-annual-meeting-live-updates.html - Recap of Berkshire Hathaway AGM
2. https://aswathdamodaran.blogspot.com/2023/05/breach-of-trust-decoding-banking-crisis.html - Decoding the Banking Crisis
3. https://www.drvijaymalik.com/mining/ - Business Analysis of Mining Companies
4. http://rogersplanning.blogspot.com/2023/04/maybe-retiring-at-35-was-bad-idea.html - Maybe Retiring at 35 was a Bad Idea
5. https://whatsimportant.substack.com/p/investings-big-blindspot - Blindspots in Investing
6. https://ritholtz.com/2023/05/half-empty/ - Glass Half Empty Investors
7. https://www.theatlantic.com/technology/archive/2023/05/free-online-shopping-returns-retailer-policy-changes/673975/ - The Free Returns Party is Over
8. https://www.vox.com/technology/2023/5/1/23702451/silicon-valley-saudi-money-khashoggi - How Saudi Returned Money to Silicon Valley
9. https://students.marshall.usc.edu/sites/default/files/USC_Marshall_CIS-SIF_Stan_Druckenmiller_Keynote_2023.mp3 - Stanley Druckenmiller Keynote Speech
10. https://www.fortuneindia.com/enterprise/invesco-slashes-swiggys-valuation-to-55-bn/112610 - Swiggy Valuations
11. https://behaviouralinvestment.com/2023/05/09/should-investors-trust-their-gut/ - Trust your Gut

Some Nice Interviews-

1. https://www.youtube.com/watch?v=2GtAlz1k8aU&t=3276s
2. https://www.youtube.com/watch?v=HR_gJ6WOe60
3. https://www.youtube.com/watch?v=Q9_tp8kGqhQ

Have a Great Weekend

Subject: New Winner=Old Winner? (2)

06, May 23

New Emerging Ones/Back from the Dead (Current Quarterly Outperformers till now)

Stock-1- Usha Martin

(Result were Strong here with First ever Concall, Likely to sustain)

Stock-2- Glenmark Life Sciences

Back from the Dead here, Very Strong numbers

Stock-3- Stylam

(Outperformed during a Bad Cycle)

Stock-4- Syngene

(This one is possibly ready for a New Trend)

Have a Great Weekend