Author Archives: ZerotoBillion

I’m reading a book called Bad Blood by John Carreyrou about how a fancied billion dollar startup called Theranos run by then feted Elizabeth Holmes was a web of lies and cheat. It’s stunning but not surprising.

Theranos was a biotech startup which claimed to change the way we do blood tests. Instead of needles, it developed a method to prick and draw just a drop of blood which through its invented device can be used to do multiple tests instantaneously. So what went wrong? The device didn’t work. Simple. However, Holmes went around the town claiming it did and convinced everyone through fake data and lies that it did and called herself to be the first female self-made billionaire. Now that’s huge.

Nobody called the king naked. Why? One, most of us have this immense urge to be woke and progressive. So if a woman was doing so well and if you question her, you risk being labelled a chauvinist and worse. Also, in an era of low interest rates post 2008, when Facebook had just gotten public, people rushed in to buy whichever Silicon Valley startup they could lay their hands on. Nobody even bothered to get their blood tests done and get results. Anybody who questioned was either bullied, fired or muzzled. So what happened in the end? Holmes have been convicted in January 2022 on multiple counts of felony and awaits her prison sentence.

Why am I telling you about all this? It’s because the more I read about Holmes, the more I went back to the way some of our startups are going around the town at stupid valuations. If the only question one had to ask Holmes was- Can you do a live blood test for me and give results in ten minutes? The whole lie was woven to somehow not answer this question. In the same way, the only question to ask them is- Can you be profitable? And the moment you ask them this, they will give you everything under the Sun but this answer. Does it ring a bell? Let’s see.

Paytm went around the town saying it’s profitable if you look at something called a Contribution Profits. Now what the hell is a contribution profit? It has invented a way wherein it says if you don’t consider some minor indirect expenses, we’re profitable. So what are these minor indirect expenses? As per Paytm’s latest quarterly results which came out yesterday, they’re- marketing, tech expense, employee costs and some insignificant items. Holy Shit.

If a company which is supposed to be a tech company says, for me my employee cost, tech cost is indirect, what the fuck do you think you’re smoking? It’s like Google saying well whatever I pay my engineers and the cost of building my technology should not be seen as my direct cost. And, for someone who throws money down the gutter to generate publicity says marketing cost is indirect and should not be considered when determining my profitability, it’s easiest the dumbest thing I have heard. Now let’s see how much these insignificant items are? Paytm did a quarterly revenue of 1456crores. These items totalled 845crores. What it calls direct expenses totalled another 1000crores.

This means to generate 1456 crores, it’s burning 1850crores. That’s an operational loss of almost 400 crores a quarter. However, since it can’t justify whatever billions it’s worth by admitting to this, it goes around town inventing accounting terms only it understands. We have multiple occasions when accounting frauds led to downfall of high and mighty- read Enron. The reason everyone agrees on one definition of accounting is to ensure we all value similar things similarly. That’s the reason a profit and loss statement is defined in a particular way on which the whole world agrees upon to prevent accounting frauds like Enron.

All I am trying to say is that if someone doesn’t tell you the most fundamental truth about his company or you feel he’s trying to bulldoze you through jargons or want to make you believe that you with your limited understanding can’t understand his invention or product which is going to change the world- guys run for your life. It’s a fraud and it will go to zero. It might be valued at ten billion or the biggest names in the world are lining up for it, but if you can’t understand it, just don’t put a penny in it.

There’s one more thing we should work upon. When you can’t understand something, the ability to say I don’t know is a huge challenge. People like to pretend to be knowledgeable and if they say they don’t understand the newest fad or the latest startup, it’s equivalent of saying I’m dumber than the guy selling it and lo and behold, that’s exactly the insecurity these people prey upon. You don’t have to blabber something when you could say I don’t know. This emotional urge to appear to be smart is injurious to your wealth especially in cases when the smartest thing is to see the obvious and say, can you please elaborate and teach me or show me what do you mean.

PS: I’m a bitcoin non-believer. I read quite a lot on it and don’t understand a thing. So I realised if I don’t get it, most people around me also don’t. But all they’re trying is to pretend to get it and try to fit in so that someone doesn’t say oh you’re so dumb. Well, the only way you can buy a bitcoin or its siblings is if you believe in it. Like Justin Beiber’s beliebers. You can’t question, can’t argue, join the movement and change the world.

Well, good luck with that!

A lot has happened in the last one month. Even though markets haven’t moved much, a number of stocks have been beaten to near death. Netflix has halved, Cathie Wood is not the superstar she was, Zomato is buying businesses on borrowed money and ofcourse, FIIs have sold massively. So I thought it’s time to dwelve a bit on some of these issues and see if we can make sense of the world around us.

The biggest news for me was the pain these neo-tech-fin-consumer companies were subjected to. Most are trading below half of their highs and some are well below IPO prices. The good news is that now more people are calling their bluffs for being what they were- junk, money burning trashes. In markets, as long as the price rises, nobody calls the naked king. The moment it turns and shorts pounce on, a lot of skeletons comes out of the closet. Now everyone can see Paytm is just a capital burning train with no revenue in sight. It was fantastic to see legends like Uday Kotak, Sanjiv Bajaj and Kumar Mangalam Birla voicing their concerns on froth in private markets. End of the day, your market cap depends on net profits you make and not on the projections you make while raising private capital.

Zomato is buying two businesses which is a case of conflict of interest as it’s CEO is already on boards of both the businesses and the transactions are happening at stupid lofty valuations. Google about it for details. My take is that acquisitions are an acceptable form of growth. However, this should be funded by your own cash flows and not by paying other people’s money. Tencent is known to acquire fantastic companies( here’s a link https://youtu.be/_-D3hoftCaY) but Pony Ma puts his own cash. Most of these companies have no revenue if you take funding out of equation. They’re selling a thing worth 100rs for 80 and this 20rs is the venture funding. Now they say call us Decacorn. Well, plain bullshit.

End of the day, a business is worth the cash flow it generates, not the amount of venture funding it burns to death.

In my opinion, a lot of these firms will fall another 50-70% before being sidelined from primetime public discussions and we’ll move on to the new fad. Remember this, Suzlon traded at 2000rs in 2007, Reliance Capital at 2500 and RCom was a Sensex stock. They all trade below 5rs today. So a Paytm falling to 20rs won’t be such a big deal.

Coming to discuss what’s happening in the US with Tech firms. Well I believe what Apple has shown with $125B in quarterly revenue is the true strength of underlying businesses. However, Netflix falling 50% isn’t that big a deal for one reason- you can’t simply extrapolate early lead into everlasting moat. Netflix is in a business which has no entry barriers except money. Now Amazon is on its heels for atleast 7 years, Disney and HBO also have upped the ante. And as far as India is concerned, my bet is Reliance will be the predominant player in five years time. The reason is clear. You want to watch TV, you get jio fibre which offers pre bundled apps like Amazon prime, Liv etc. So instead of paying the Amazons and Sonys, you pay through Reliance. You want to watch Netflix on phone, your data is from Jio. And now with Jio entering content market, you’ll see very quickly Reliance hiring half of Bollywood on its payrolls. I mean how difficult is for Reliance to buy Dharma productions and hiring all A list stars on exclusive contracts.

The next big theme in India will be what happened in the US with Netflix and Prime. With tens of billions of dollars available with Reliance from its oil to chemical business, I am betting in five years time, it will have as big a library as Netflix in India. The game about subscription based model is to buy as much as library and somehow keep delivering new hit content. As the latter is not predictable, you can’t be sure of customers flocking to your app forever. This is where Amazons and Reliances will win because they are not dependent on these models to grow. They’re doing this to deploy their excess cash and gain some extra returns. Even if they get one Spiderman in a year( $400B revenue worldwide), it will suffice. On the other hand, people like Netflix don’t have any other businesses to generate cash and stay in the game.

As we enter the second year of this decade, we will see large companies garnering even larger shares of India’s growth. Lockdown actually helped accelerate this process as the unorganised players had to keep their shops shut while you could order brands online. Come 2030, we’ll have atleast a few companies over $500B market capitalisation.

Coming back to the markets. FII have been relentless in getting out of this market. However, I am feverishly bullish on India growth story and did add whatever little I could to existing positions. The key is to know why you bought what you bought so that it times like these when the world around you is losing its mind,you go out and buy. As JP Morgan famously said- you buy when there’s blood on the street, even if the blood is yours.

I’m lucky that buying on the way down is now natural to me because I entered the markets in 2017 and not in 2020. For the first 3 years, I only saw my portfolio down 20% when everyone made money. I bought Tata Motors all the way down from 435 to 64! That was my test and now looking at the rewards, I know it pays to be bullish on India.

As I write, most of us would have been so tired of asking ourselves- is the market falling too much, is it the bottom or the beginning. The real answer is- nobody knows. The better question to ask is- what should you do about it?

One confession at the beginning- I’m delighted to see what’s happening to Paytm and its siblings. I’ve always maintained that their business models are dumb, working on borrowed cash by venture capitalists at lofty valuations and are never going to work beyond a point as they can never make a dime in profits. Also, they don’t have any differentiation to say what they’re doing can’t be done. I mean, Zomato, Swiggy, dunzo, etc etc are all the same. Basically half of them want to deliver grocery in shortest time possible and the other half wants to make you buy now and pay later. No value addition, no difference, no profits.

So now that we have seen atleast a five percent drop in our portfolio today, what should be done? I’m a true believer, a frenzied believer in the idea that India will be richer, better, more competitive in ten years time than it is today. I don’t see any reason to be less bullish on India Today than I was yesterday, or when Nifty was at 18700. If that is still true, all you have to do is to thank god for this flash sale and buy more of what you’ve already been buying/ wanting to buy for some time but the price wasn’t right.

Remember this- only on days like today when there’s blood on the street, twitter is predicting apocalypse and everybody wants to sell and run, on days when you puke looking at your portfolio are the days when biggest deals are available. On days like these, you get a Tata Motors for 60rs and a BSE for 300. On days when people are selling everything for whatever little they can and truly believe that the world is coming to an end, are the days when you go out and say- The World doesn’t end so easily. India is not going to end and it’s just a price correction when I am going to buy more. Unless you can buy today, you’re in a wrong place.

So what am I doing personally? I added to what I already own even when my closest friends laughed at it. I truly believe some of the prices we’re getting today are going to look like dreams ten years from now. I mean how many of you remember there was a time when Bajaj Finance traded at 150 or Reliance at 300 or an Asian paints at 200. Unless you can buy them at those prices, you’re never going to make it big and keep jumping in and out of the markets, buying and selling on whims and losing more often than not and forever cursing the market.

Today is as great an opportunity to buy than it ever was. India is on cusp of a multi year economic growth and the next decade is going to make all of us richer than we were in the last. Believe in India, believe in the power of compounding and believe in the idea that you’re going to be very very rich in a decade if you can buy and hold and add to the companies on right side of this story. Whatever happens in the next one month, or budget or Federal Reserve or Covid or border tension or whatever else which can happen will not matter in three years.

The fun begins now!

There has been a considerable attention all of us have paid towards the EV play stocks, ranging from charging station operators to auto components makers to vehicle producers. With India having unveiled its EV charging policy today, my gut has been proven right and I now firmly believe India’s EV play is likely to be similar to its Telecom revolution. Let’s see what, how and why.

There’s no denying the fact that EV is here to stay. However, a lot of people have been betting on companies vying to put in Charging stations such as Tata Power etc, which in my opinion is a bit misjudged bet. If EV is like our telecom revolution, it’s end game is every person charging at her home with a plug-in fast charger, which charges in under 30 minutes to run atleast 500km in single charge. This vehicle has to compete with the IC vehicles in performance, looks and durability, ofcourse along with price. Now on the former front, players such as battery makers, charging infrastructure players are being rewarded and on the latter front, it’s about which car or bike is better and who wins the race.

If we see how telephones have moved to smart phones, the real juice is in garnering market share in smartphones, and not in being a component maker to iPhone or Vivo. Also, the charging station operators will be like the PCO operator or a cyber cafe guy whose shop was killed the moment people got wireless phone at cheap rates and cheap data to consume. In 2002, anybody who would have said India’s telecom story will be huge is proved right. However,if you would have believed that a guy running a STD booth wi be rich ten years later, than you misjudged. It’s extinct now. Similarly, if you believed Indians will consume a lot of smartphones , you were right. However, if you believed, it will be great for cheap Chinese firms or telecom companies, you misjudged.

Similarly, this whole charging station theme is going to take us nowhere. Today, India has allowed anybody to operate a charging station without license. So a guy running a shop can very well open one and he doesn’t need Tata Power to set him one. He can just put solar panels on his rooftop and provide a socket. Also, come elections, politicians will offer free charging stations, zero price etc as freebies and in five years, even though we will have huge number of charging stations, nobody will be paying a dime for them.

Secondly, those believing that a battery maker is going to make a lot of money needs to look no further than her smartphone. Ten years ago, in an age where we have less than a GB RAM and one camera, a decent phone cost not less than 30k. Now, at the same price, you have almost 12GB ram and latest operating system. So even when the phone got smarter year after year, it’s almost being offered at same price, which means adjusted for inflation, phones are getting cheaper every year. And for every company to survive, they have to bring out even smarter phones at same price range, barring let’s say Apple.

In the same way, batteries will keep getting more powerful and cheaper as EV revolution unfold. So except a few early players, they are not going to make a killing. Also, in five years time, when you’ll have your car being recharged in 15 minutes to run 500km, you will still not be paying extra bucks for battery.

However, the real juice in telecom was made by the phone manufacturers who led the way. Apple is now worth more than $3 trillion. Similarly, we have Tesla over a trillion market cap. My bet is, a carmaker who can keep rolling out models after models of cars which can be better in all ways will get a disproportionate share of market’s adulation. And the ones who think they can wait it out are staring at irrelevance.

On this note, we had Greaves Cotton suddenly being treated because it has significant stake in Ampere which makes electric two wheelers. If that’s a template which is going to play itself out, Hero might be on the cusp of a very strong upmove as it owns 34% in Ather Energy, another electric startup and just yesterday announced another 420crores investment to raise its stake further.

So in my view, this Tata Chemicals and Tata Power type fad will fade away. These two will still survive as they’re part of a larger Tata plan to build in house capacity to eventually sell more Tata Motors cars. However, other companies which have caught investor frenzy recently might not take you to the moon and back.

The US has Amazon, China has Tencent and India, maybe Reliance Industries. Those of you following my blog have not seen me talk about it much but I truly believe Reliance is going to surprise all of us in this decade and beyond.

Here’s a company which recently bought a five star hotel in Manhattan, a golf resort in London a few weeks back and has been busy buying a quick delivery app along with Sodium battery startups and a bankrupt solar company, all in the past few months. This sounds a bit haphazard to most of us, more like a billionaire buying toys for his kids but it does make sense, a lot of it.

Let’s rewind a decade to 2012. Amazon was yet to launch its India operations, prime day, Echo & Alexa or even Prime music n video. It didn’t even tell folks that it was a hugely profitable warehouse running the biggest cloud computing network this world has ever seen or will ever see. It was worth about $150B thereabouts. In the next five years, it did everything I mentioned above, produced Emmy winning movies and is numero Uno in India, way ahead of Flipkart ( I don’t even know if anyone still busy from there).

It’s selling groceries, books, iphones and everything else you need, along with movies and music and payments. All that because it had money flowing in from its warehouse , the AWS. No matter what happened to its retail or how much money it loses in payments, it still will churn cash quarter after quarter on the back of its cloud database facilities, the Amazon Web services.

For what Tencent has been doing in China and beyond, you’ve to watch some recent videos of Mohanish Pabrai which are sure to blow your mind off. https://youtu.be/-vF_nZ526y0 this is one of them.

Coming back to Reliance. It’s trading at about$220 B market cap with almost $8B profits. What it doesn’t tell you is that on the back of a hugely profitable oil to chemical business, it has become the indisputable leader in Indian telecom but hey, you already know it. What else am I telling you here?

My version is that Jio isn’t where the juice is. Jio was just a means to achieve the end which is to capture an ever growing Indian household who has more money to buy stuff, as it grows richer. Since Jio is here, people can now go online and shop. This is the level 1 when one in three Indians pay monthly rent to Reliance in form of recharges. The second layer is Jio Fibre when it’s making people addicted to its services because at 1000rs, it’s unbelievable the kind of things you get. You don’t pay Amazon for prime, you pay Jio for Amazon prime and get a hell lot others for free.

However, this is all peanuts when you realise Reliance is selling everything from milk at Reliance Fresh to luxury clothes in partnership with Armani Exchange and Hamleys toys to Zivame to now jewels. If you combine everything and take a holistic view, a company who’s deploying cash to make sure a customer ends up buying one or the other things from one of its subsidiaries, you realise you’ve an Indian Amazon in the making.

My simple bet is in three to five year’s time , most urban Indian households would be paying about 5000pm to Reliance, in one or the other form and that makes it a bigger story than a lot of Dmarts and Asian Paints put together. This is not expensive at $220B. It is a steal here for if nothing unforseen happens, this is going to be the first Indian company to cross $1 Trillion in market cap. That’s still a 5x from here.

PS: I learnt this lesson the hard way as I had Reliance way back in 2018 at now adjusted Rs 800 per share. In my over enthusiasm for Graham’s methods, I sold it at about 1100. Then came Covid and the Jio platforms deals which changed everything.

One of my first blogs was titled” joys of being an individual investor.” This blog is however the flip side of the story when as an Individual, you’re left to fend for yourself and end up miserable and bewildered.

So most of my retail friends have put in 1-5l or some more into stocks they know next to nothing about, basically as tips from friends or colleagues and are either happy the price has gone up or are lost as to why this sure staircase to heaven has nosedived to hell. If you’re one of them, you’re not alone.

The problems are aplenty. 5000 stocks to choose from, multiple ways to make money, hundreds of mutual funds and all of them stuck at jobs which makes their lives miserable. They don’t know if there is a way to get rich and if there is, it’s not for them they have been made to believe. Leaving the rat race called career is not for them, they have learnt it in school. Now all they want is some extra cash to buy a flat, a car, put kids in good schools and die at 80. Unfortunately, this is true for many of us who think we are financially independent. We aren’t.

There’s a huge difference between being financially secure and being independent. Your salary makes you secure to pay bills, it doesn’t buy you freedom.

Wealth is freedom, to do what you want, with whom you want, for howsoever long you want and at what place you want.

Unless one strive to be financially independent, she’s destined to be middle class, fighting for that extra increment or promotion to somehow buy that duplex people call Villa.

Now why do so many of us don’t get rich? This is where the power of vision comes into play. In markets, you get whatever you truly wish for. You want an iPhone, you’ll get it. You need a car, you’ll make enough to buy one. You want a vacation, it will be done. However, less than 1% of those in the markets are here for bigger stakes. You don’t get rich buying ten shares of Tata motors and seeing it rally upwards. You don’t get rich partime. It’s a full time passion and demands the dedication of a fanatic.

Most people are either too afraid to put in large sums of money or believe it’s a casino and are punting around. One big problem I’ve observed is that most people truly believe that you don’t make money in the markets. It’s all for big operators, not for us. Hence they stay away or stake too little to begin with. A growing percentage are the ones who believe it’s a get rich slam dunk machine and can buy them an iPhone or a vacation but not serious money. And somehow they’re convinced that the money they made here is to splurge and not to reinvest. Since they had not toiled hard for it, this money is somehow less powerful than their hard earned salary. This has been covered in my earlier blog https://zerotomillion.business.blog/2021/11/07/all-money-is-equal/

The biggest money myth people have is that you have to work hard to earn money. This is like saying since Elon Musk didn’t go door to door selling cars, his $300Billion networth is a myth. Stop living in the prehistoric age when your labor equalled your output. We’re in an age where if your mind can come up with one idea, you can make millions, if not billions. However, we salaried persons have been fed this deep within that any money you make easily is bad, evil almost. So if you made 1l in stocks, either splurge it or convert it safely to FD or gold.

Unless you begin to take money seriously, you’ll forever be short of it. Learn to make money work for you and not the other way round. Financial independence is possible and there are millions of humans who are already up there.

So in this new year, if you’re entering the stock markets, commit yourself to work hard doing research, learning basics of markets and finance and listen to the big ones who have done this for decades. Making money is simple, not easy. Once you put in the work, and begin to believe you can make a million dollars, you will find a way to surprise yourself.

2021 has been a kind one for me and I believe for all of you too. This has been the first time when many of us who began investing 4-5 years ago have seen some green, like very dark green in our portfolio. Until then, specifically until August 2020, when my portfolio broke even for the first time, it was mostly a journey of being down 10/20% on portfolio level. So here are a few learnings I’ve experienced and some random thoughts thereabouts:

Investing is the art of making money predicting the future. However, since that’s impossible to do, most of us try to drive looking in the rear view mirror. However, this is the biggest mistake one can make believing that the future is more likely to resemble the present in one or the other form. In that ideal state, a stock which goes from 100 to 400 will go back to 80-120 at some stage when you can buy it back and make similar gains. Well, real world doesn’t work that way. I too am guilty of believing if Reliance goes from 800 to 1600, I can buy it back at some stage when it falls to 800, totally ignoring the changes which has happened in the meantime. Many of my friends who were not willing to buy Tata motors at 100 are now staring at the screen at 470 believing it’s going to come back to those levels at some stage, ignoring what has been happening to the company and its business. Its like asking to buy Tesla at 100 when the price is already 1100. It doesn’t work that way.

We need to look at the way a company’s business is going to look in three five years and if that has changed fundamentally, what was possibly cheap at 100 might be cheaper at 300. Let me illustrate this with something which has stopped participating in the bull run for a while.

I picked up ISEC at around 400 and bought it all the way up to 900 and still am buying it at 750 thereabouts. Why? Because I believe two years ago, a company which was making 400 crores in a year is now making almost that much money in a quarter and I sincerely believe it’s going to make almost 1000 crores in a quarter, not too far away in future. The key here is to believe certain things which are most likely to be true than to predict hypothetical stuff using Excel. My case is simple- Indians of my generation are now increasingly going to put money in stocks either directly or through Mutual Funds and ofcourse through NPS. In either case, as more money is going to come in to the markets, more money is going to go to brokers through commission even if the brokerages are going to go down since volumes will be huge. Today we do about 1l crore cash volume daily which I believe in ten years will be atleast 20 times from here as our markets become more mature. So even if the brokerages are going to go down, this incredible increase in volume will more than make up for it.

Now as we’re looking at digital only brokerages, this industry is going to consolidate going forward with incremental market share being accrued to the strongest incumbents. Even if ISEC maintains its 10 odd percent market share or say even if it makes 7/8% of a ten times bigger pie, it’s sales will grow atleast 10 times with profits rising 20-25 times and share price hitting through the roof. Let me explain.

These businesses have a very limited fixed cost in terms of salary and some day to day expenditure and technology related costs. So once they have the systems in place, let’s say their current fixed costs is around 300 crores per quarter, and sales around 800 crores. So they make 500 crores gross profit. Since fixed cost won’t rise to add more clients as all it need is ten additional computers for another 1lakh clients or so, let’s say sales grow 50% to 1200 crores in two years. And let’s say fixed cost rise to 350 crores. So it’s gross profit goes up to 850 crores, which is 70%. But when sales grow to 2500 crores, and even if cost rise to 500 crores, it’s making 4x profits to 2000 crores. And with every additional rupee it makes, it’s profits grow exponentially. This is what scale businesses can do. And once your profits begin to grow that fast, you’re sitting on a very big compounding machine.

My simple bet in these stocks is that they’re all going to go up atleast 10x in ten years if not more. And with dividends, they’re a true multibagger stories we’re going to look back in this decade.

My biggest learning this year has been to a. Bet on India and B. Don’t bet against technology. I missed a lot of good stuff because I was trying to look at the balance sheets a bit too much. Too much of Ben Grahamic Value investing is harmful to your wallet, is a lesson I learnt last year.

So my suggestion to you is to try and find stocks which are on the right side of India story and also on the right side of technology. If they’re not growing when India goes to be a $5trillion economy, is not making efforts to move or grow business using new edge technology and is not betting on a green future, better stay out of them.

It takes a lot of time to buy Reliance at 2500 and not look at Ambuja cements at 250. It’s a mental leap I took this year.

For those of you who are yet to do some hardwork on your own, put this as your new year pledge.

Ye fatne wala time nahi hai, ye bull market correction hai.Most people will be out of the market in no time and when it recovers, only the true believers, who have stayed invested and bought more will be rewarded.

This blog emanates from a conversation I had with my wife yesterday when the screen was bleeding and indices fell another 3% for the day. Portfolio ofcourse would be down some more and we scrambled for money to add something we always wanted to buy.

Basically it happens this way- it’s a Bull run, market falls, you buy, market recovers, you feel happy. It goes on until when it dips and you buy, market doesn’t recover. Then you see it happening for some time that whenever market moves up, more selling happens. Now you’re in deep shit. You see market recovers 100 points and falling 500. So you stop buying and get out of the market. Then one day, bull resumes its upwards journey. Market moves up and people sell. Voila, it doesn’t fall. People cover their shorts and market zooms upwards on thin volumes. By the time people gather their nerves and begin to participate, it’s already up good 10% and mst stocks which have fallen are up over 15-20%. Thus, those who went out not only sold at the wrong Time, they also missed on the gains when it recovers.

Having the nerves to buy when your portfolio is down nuts and there is bad, very bad news on the screen required a sense of maturity which if you develop, and you don’t load up on junk or the fancied stocks, you’ll make handsome gains.

Two months ago, India was the shining land of Sun which was on path to recovery and CNBC made you believe it’s India’s decade. You wanted to buy Tata Motors at 540 believing it’s marching to four digits. Now two months and some Omicron cases later, you don’t buy it at 440 because their will be no sales as there is an impending lockdown maybe and what not. Well, I’ve spoken about it multiple times that when the price is right, news will be horrible and screen miserable.

In order to sustain gains in markets, you’ve to develop a sort of immunity to market grapevine. You’ve to believe in the work you have done and that the stock is a living company which has survived multiple decades of turmoil and this too shall pass.

The problem is we tend to focus on decadal growth stories when the market is right and pay a heavy price buying into the. On the other hand, when the market falls, we tend to believe the company will never make any money . The biggest fallacy of stock market is to equate stock price with company’s future.

So what am I saying here? Nothing different. Stay invested, fully and totally. Buy into what you believe are the companies which can make greater profits over three five seven year periods and which you believe are on the right side of technology. This has been my biggest learning. I’m now only looking to invest into firms which are adapting and developing new technologies and which can scale non-linearly. Happy investing.

Today’s fall has been fantastic! There are falls and there are down circuits but this is special- 5% down on a non circuit day is something. However, with the pace it was rallying upwards, it was also not totally unanticipated.

This brings me to an important lesson market teaches you and the one you must learn early on. On a long term basis, if you’re making around 15% compounded, you’ve done well for yourself. At around 20% annualized, you’ll join the league of legends who are worth north of hundreds of millions of dollars. So to get used to making 2% a day is expecting an average of 1000 in T20s.

How do I see the current fall? Well, if BSE was going to go up 40% in a week, it had to come down 20% in two days. So this is the importance of staying in the game, for longer term than just the happy days and waiting it out patiently until the market rewards your thinking by moving in your direction. Most people who were looking to make quick bucks have realised making money is difficult and to maintain it is even more so, in an environment when if you get 5% on FD, you’re lucky.

There has been a new generation of day traders who have flocked to the market in last year or two when making money suddenly became easy- you buy the dip and it goes up, simple. You chase momentum and money triples in a month or less- Simpler. This is I believe the beginning of a strong trend when you’ll see failed dips and multiple months when buying dip can get you killed. How do I believe I’ll behave? Well, not differently.

If you can survive these blips, dips and corrections, not buy junk and have a clear vision of what the company is likely to become in three five ten years, everything is a buying opportunity. The only thing you can’t always do is to buy as nobody can have ready cash available to be deployed everytime. So, when Markets correct and your portfolio bleed, be happy that you’re up 100% for the year and another 5% would have been great but not having it won’t kill you either.

This is why people who have thrived in this market have stressed on one thing- you must learn to survive cycles. You can make 100x in one cycle but can lose everything when the market turns and get burnt badly. This is not what we’re aiming at. We are here to make some money in 2021 and then conserve it to grow in 2022 and still be around when it’s 2025 so that come 2030, you’ll look back and say, oh I’m up 5-10-15x in ten years and it’s been a great journey.

Think long term, be bold and remain invested. Don’t buy junk, work hard to build a portfolio which can weather price corrections. A ten percent drop is nothing. You must be prepared for 20-30-50% drops in order to make 20-50-100x your money.

This is more like a sequel to my early posts on BSE when I celebrated the fact that it has gone up to around 850 odd levels in May 2021 and then again sometime last month when it crossed 1600. However, when yesterday it cruised past 2300, all the way from about 400 in this year itself, my wife insisted I ask myself if there’s anything else I’d like to add. So here’s my two cents, maybe four:

First of all, this has been a massive price movement in the stock. It’s up almost 55%+ in less than a month and there’s nothing even a massive market selloff could do to it’s one side move. Now the real questions are three? One, if it has gone up too high. Two, if it’s a buy or a sell here and last, how high can it go.

First things first. Yes, BSE has had a massive run in the last six months, more than tripling from 600 odd levels. However, if you see that it came with it’s IPO in 2017 February, and got listed at around 1000, it has only doubled in just under five years. So the run isn’t that great. Even from when I first bought it in 2018 at around 735 levels, it’s basically triple in three years. So it’s only optically making up for all those years when it languished at sub 500 levels and nobody wanted to touch it even when the entire market capitalisation of BSE was less than the cash it had on its books. Yes, it happened. Check my earlier posts for details. Also, now let’s see how costly has BSE become. As we have compared it earlier with NSE, it’s still trading at 5% of what NSE might get listed at. It’s closing maket cap yesterday is just over 10000 crores while NSE might very well debut at 200000 crores.

Secondly, if just by being a platform play makes you get valuations north of 50000crores with low to nil profits( read Paytm, Zomato, PB etc), how come India’s best platform stories can’t be valued at 50000 crores with a permanent cash making machine at its disposal? Any money coming to the markets can only come via either the NSE or BSE. And if you’re following it’s turnover data, things are looking better in most segments, including commodity where it’s daily turnover has crossed 5000crores.

The only way to value a stock is by comparing it’s current market capitalisation with what can possibly be over next decade or so. And my estimate has always been that BSE is not a four digit stock but a five digit stock. Ye Maruti nahi, MRF banega!

Now let’s see if it can go up still higher. Well, ownership by Mutual Funds and FII is hardly significant in this stock. Now that it has zoomed up to market cap of 10k crores, my hunch is it will not only be lapped up by institutions but also get a place in some of broad market indices, which will enable additional passive funds flowing in. This is a virtuous cycle which allows stock to stay and move up sharply. Just see how Bajaj Finance went up from 200 odd levels to now 7000levels in a decade. Fund managers have to jump over each other to buy anything which goes up in order to mimic the market and if they’re not buying one of the best stocks in a falling market, how will they sound genius on TV?

Is it still a buy right now? The short answer is Yes. Long answer is what I always say- if you think it’s going to be worth more three years from now and can handle price gyrations in between, buy it. Ofcourse this rally will end at some point and there will be 20-30-40% cuts as it matures. But that’s all part of the game. If you can’t handle 50% price drops, don’t invest.

So now my own take. The feeling is surreal with one stock taking care of the portfolio in a falling Market. It would have been a brutal fall had I not been holding BSE. Though this has been exactly what I learnt from Nick Sleep. He bought Amazon and never sold. So even if everything else goes to zero and Amazon goes up 100x, he did retire a billionaire. The key is to have sufficient quantity so that one BSE becomes an Amazon, your networth moves to nine figures.