Indian Financials: A compounding miracle hiding in plain sight
In this newsletter we illustrate why investing in Indian Financial Services stocks is highly rewarding for long term investors not only in terms of absolute returns but also in terms of risk adjusted returns. The data over the past two decades suggests that: (i) the Bank Nifty has delivered far higher absolute returns than the […]
Spotlighting Alkyl Amines
This month we place the spotlight on Alkyl Amines, a leading manufacturer of aliphatic amines – a key ingredient in the pharma and chemical industries. Over the last ten years (FY10-20), Alkyl has delivered earnings CAGR of 34% with an average pre-tax RoCE of 23% (these numbers look even better for the last 3 and […]
Rewards of waiting for a ‘lower purchase price’ in CCP vs others
Share price performance of the Nifty50 and Marcellus’ CCP portfolio constituents over the past two decades shows that the benefits of waiting for lower purchase prices fade away meaningfully as the quality of the portfolio’s fundamentals improves. Investors who make periodic investments in companies with weak fundamentals benefit substantially from timing the purchase prices – […]
India’s Kings of Capital – Part III: Aditya Puri
While we focused on the capital allocation skills of Uday Kotak (click here to read) and Deepak Parekh (click here to read) in our preceding pieces in this series, the genius of Aditya Puri lies in the fact that there have been no miraculous moments, no solitary lucky break or grand transition programs which have led to […]
Spotlighting V-Mart Retail
This month we place the spotlight on another portfolio company, V-Mart Retail, the largest affordable fashion apparel retailer in tier 2, 3 and tier 4 cities of the north-eastern Hindi heartland. V-Mart commands one of the best RoCEs in Indian retail (pre-tax average RoCE of 28% over FY17-20) and has delivered net earnings CAGR of […]
The Role of Technology in Consistent Compounding
It is widely believed that new technology leads to disruptive innovation. However, companies that have consistently innovated over longer periods of time have combined existing technologies using a recipe that is heavy on intangibles and difficult to replicate. It is this recipe which enables consistent compounding over long periods of time despite several disruptions in […]
How to spot naughty lenders in India?
Given the leveraged business model of lenders, investors need to be even more vigilant about accounting quality when investing in banks and NBFCs. We find a clear correlation between accounting quality and share price returns of Financial Services companies. In specific, companies with only the highest accounting quality have managed to generate positive returns over […]
Spotlighting GMM Pfaudler
As expected, 1QFY21 was a tough quarter for the earnings of most Little Champs portfolio companies. However, management commentaries pointed towards several positives on demand recovery, cost reduction measures and market share gains – all pointing to a healthy recovery in earnings over the coming quarters. This month, we place the spotlight on GMM Pfaudler, […]
The Criticality of Succession Planning in Consistent Compounding
All businesses face the event of succession of key management personnel, whether it be promoters or professionals. However, succession planning is a process that is not adequately engrained in the DNA of most organizations due to the variety of challenges involved in this process. As a result, many great businesses with strong competitive advantages fail […]
Spotlighting Garware Technical Fibres
In this month’s newsletter, we disclose the stock specific holdings in Marcellus Little Champs strategy. Besides the obvious requirements of clean accounting and prudent capital allocation, common traits across Little Champs are dominant positions in respective niches, high RoCEs & high reinvestment rates and consequent high earnings growth alongside a healthy balance sheet. In this […]
Importance of Lethargy Tests in Consistent Compounding
Consistent compounding requires focus and discipline over long periods of time. However, just like assembly line workers in a manufacturing process may find themselves bored by the repetitive nature of their work; consistent compounders also run the risk of boredom / fatigue / complacency in the long run. This can then lead to mistakes cause […]
Little Champs Are Using The Crisis To Their Advantage
The Little Champs portfolio delivered a PBT growth of 1% in FY20 (compared to the BSE Smallcap’s median decline of 10-15%), a resilient show despite an economy disturbed by Covid-19 towards the year end. Furthermore, with their cost and cash focus, Little Champs have been able to maintain healthy RoCE (19% pre-tax) and debt levels […]
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