This was an eventful week, even if you’re not a Paytm shareholder! Markets killed all the naysayers and put sellers on Friday with a sharp reversal in what until then looked like an uninterrupted move on the upside. Let’s talk about a few things one by one.
TaMo has come out with unbelievably good set of numbers which makes the current price of ₹880/-deliriously cheap. On a trailing basis, it’s hardly trading at 18-19 PE and like I mentioned in the past post, it’s on its way to 2000₹. Two related things have happened; one, it finally crossed Maruti’s market capitalisation after 8 years and two, it now has 14th highest weight in Nifty 50 index which I believe will go only upwards from here. The stars are aligning and with the additional production kicking in full throttle from its Ford Sanand plant, the party is now truly on.
Personally, it has been a huge multibagger and the taste of this victory is very sweet and full of money!
BSE is releasing its Q3 numbers on Monday and the Friday volumes are on a tear. At over 3.56 lakh crore notional turnover, it is on its way to do close to 20% of the market which will allow the thesis to play out completely.
Now let’s come to Paytm. In my view, it’s not going to stop at 400 or 300 but will go down to a low two digit figure in the medium term. It’s a horrible time to be a BCCI sponsor, along with Byjus but when too much money is chasing too little brains, people tend to behave as if they’re gods, when nobody is. I had long maintained that Byjus deserved to go to zero and it’s now trying to raise money at 99% discount. Read this again- it was valued privately at $22Billion and is now trying to raise money at $220 million. It’s like a stock trading at ₹100 going to ₹1/-.
If I have one piece of advice, stay off Paytm for you’ll be burnt trying to value hunt here. When the Revenue Secretary talks of money laundering charges, it’s a horrible piece of information.
I am only waiting for all these great money managers who were gung ho on Paytm until last month trying to explain how they always saw it coming.
Currently, I’m reading a book titled Chaos Kings by Scott Patterson and it’s possibly the best financial book since I the Big Short. It’s about a hedge fund Universa whose idea is to lose small money during good times but make exponential returns when the crash happens. They made over 4200% returns in three months of Covid in March 2020! Yes, over 42 times of a their money!
The principle of avoiding large irreversible losses makes a lot of sense to me and this is one reason, I’ve begun to fret about being in absolutely debt free, free cash throwing dividend heavy companies in my portfolio. I love the secular themes, the decadal stories like HDFC AMC and Reliance which in my opinion will be up 5-10x in this decade.
A large part of your effort should be to survive in the next crash and if you, like me are hundred percent invested, it makes sense to be absolutely certain that a price drop in your stocks is a buying opportunity and not a cause of concern to your financial well being. And no company which isn’t leveraged can go broke! Thus, an ITC or a Colgate survive for centuries while a Paytm rise to the sky and then in flames, all in a matter of a few years!
Longevity is precious and the companies which are alive and thriving for decades deserve that much respect, doesn’t matter what an Ashneer Grover say. The truth is, people like him or a Vijay Shekhar Sharma deserved to make a lot of money for the work they did. They, however, made a few hundred times more than they deserved and could handle. This, corrupted their very idea of looking at the world and the accompanying arrogance was born. So the next time you hear a person who has suddenly become wildly rich, be a bit cautious!
PS- JLR said its highest end Range Rover is selling like hot cake. The car and thus the stock, is aspirational!
Life is all about Compounding! 