Why General Insurers get free money and why we hold ICICI Lombard
General insurance is simply the business of receiving premiums upfront and paying claims at a later date. This timing difference creates a negative working capital cycle and allows general insurers to deploy and earn investment income on the policyholders’ funds (float) in the interim period. A well-run general insurer is able to consistently raise float […]
The Strong Shall Inherit The Post-Covid World
Marcellus’ Little Champs portfolio witnessed revenue growth of 10% YoY and PBT growth of 35% YoY in 3QFY21 (which compares favourably to 1% and 13% respectively seen in 2QFY21). This growth is driven not only by a recovery in the underlying industry demand but also by market share gains from weaker peers. Furthermore, thanks to […]
“Consistent Compounders” Demonstrate Stellar Market Share Gains
Marcellus’ CCP Portfolio delivered earnings growth of 29% YoY in 3QFY21 backed by revenue growth of 19% YoY. Almost all stocks in the CCP portfolio gained significant market share over the past six months from both organized as well as unorganized competitors. The non-Financials part of the portfolio reported 45% YoY growth in earnings during […]
Indian Financials: The antithesis of traditional value investing
For investors with a time horizon of greater than 5 years, less than 20% of the share price returns of Indian banks and NBFCs are attributable to entry valuation implying that over 80%+ of returns arise from book value per share growth. However, the proliferation of price to book (P/B) multiples in investment literature along […]
Spotlighting Mold-Tek Packaging
This month we place the spotlight on Mold-Tek Packaging, a leader in supply of injection-moulded rigid packaging in India across Paints, Lubricants and Food & FMCG industries. Mold-Tek commands one of the best operating performance track records in the packaging space with an average EBITDA margin of ~18% and pre-tax ROCE of ~20% over FY18-20. […]
Disrupt, Dominate, Deliver Strong Free Cash Flows and Repeat!
Whilst there are various investment philosophies aimed at swapping disrupted incumbents with new disruptors, such investments entail taking speculative risks around the future dominance of the new disruptor. At Marcellus, we believe that dominance cannot be sustained without disruption, and disruption is not worth investing into if it doesn’t generate substantial free cash flows for […]
The Difference Between Investing and Gambling
Many investors erroneously believe that because the markets have run up in the past few months, the probability of the markets delivering negative returns in the future is now higher. The past twenty-one years (2000-2020) of data suggests that there is no significant correlation between returns delivered in the previous six months and the next […]
Winter Sunrise For Low Quality Small Caps
After witnessing steep declines over CY18 and CY19 and continued woes in 1QCY20 with the onset of the pandemic, small caps had their proverbial ‘rising from the ashes’ moment with the BSE Smallcap index returning 114% from its March 2020 low. However, a downside of this has been unwarranted exuberance in low quality small caps. […]
SIP vs Market Timers – Who Wins the Consistent Compounding Race?
Over the past 25 months, investors who waited for a market correction before deploying top-ups from their recurring income into Marcellus’ CCP PMS would have experienced a significant drag (of at least 3-5% on annualized returns, if not more) vs SIP based investments. This is due to a combination of three factors: a) low correlation […]
Covid-19 and market share gains for the Kings of Capital
Ahead of the Covid-19 related NPAs being made public in the next few months, we first try and simplify the complexity created by the moratorium offered to borrowers, standstill asset classification for lenders and the Supreme Court order on not recognizing NPAs. We further illustrate how the lenders in the Kings of Capital portfolio are […]
Spotlighting Suprajit Engineering
Unlike their peers, Little Champs portfolio witnessed a healthy recovery in earnings (EBITDA up 14% YoY) in 2QFY21. More importantly, Little Champs’ net cash position has remained intact through 1HFY21 giving them the firepower to gain market shares from their weaker peers. This month we place the spotlight on Suprajit Engineering which has consistently outpaced […]
The Maths, Science and Art of Investing in Equities
Equity investing can be a complex business. The variables at play are numerous – not just the macro and micro variables relevant to a stock, but also the psychological factors facing an investor. Maths, Science and Art are subjects that have improved our ability to understand the complexities of the world around us. Whilst decisions […]
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