Author Archives: ZerotoBillion

With another down day, markets have erased all gains since August 2021 and are hardly up 5-6% for the past one year period. The relentless move on the up has shown equally powerful one on the way down. Let’s see where we were and are and how things can go from here:

The broader market is down close to 15% since October high. However, multitude of stocks, including both the fancy( Dixon, Indiamart, IEX), quality( Ultratech, HDFC group, Divis) and what I call the Saurabh Mukherjee ones( Dr Lal labs, Alkyl Amines etc) are down 25-40% in some cases. The pain is worse in some of the junk stocks which went up with the wind. People extremely bullish on India are now predicting a protracted bear run for the foreseeable future.

What negatives are we seeing around us? Russia- Ukraine is on top of the list. This has led to extremely sharp move on the upside in commodities which were already experiencing a super cycle since the bottom of April 2020. Most commodities are either at decadal or lifetime highs. This has stoked fears of higher inflation and low margins for corporates. The low interest rate regime may finally be coming to an end.

Also, there is relentless FII selling for the past one year or so. YTD in the current FY2022, FII have sold close to 2.5l crore worth of Indian equity. So are we done for good? Is the India story over and we sell everything and go home!

Let’s put some facts on the table. India’s merchandise exports have hit all time high and are track to cross $400 B this FY. Even with so much selling, Rupee has hardly budged from 75 levels thereabouts. And, with everything which could have gone wrong having gone wrong, we are down 13% on nifty, sensex and nifty 500 while mid and small cap is down just under 20%. However, if you take the mother ship in US, Dow is down similarly and Nasdaq had hit the 20% down mark last week. So it’s not that India has fallen more than everyone else and only we paid the price.

Coming to some sectors and stocks. Today marked a day when the quality pack( HUL, Nestle, Britannia, Asian Paints etc) were top losers. Since IL&FS crisis, this was a pack which went up come what may and everything else underperformed significantly. Only when Reliance doubled after Jio deals, it regained the highest weight in Nifty, which it had given up for HDFC Bank. And, ITC is actually up for the week. This I believe signifies stock rotation which was long overdue.

This bunch of supposedly highest quality stock has been trading at extremely high valuations, be it PE or PB vs the rest of the market and a narrative was set up that valuations doesn’t matter for this group. Another bunch of stocks traded at obscene valuations ( Dr Lal Path, Jubilant foods, speciality chemicals etc) were justified on similar lines. This excess is now being corrected. When did you last see HDFC group,HUL, Britannia hitting 52 week lows in a market hardly down 10%. More significantly, this group’s returns over a two and a half year period( from Corporate tax cut time in September 2019) is either flat or negative against a market which is still up 35-40% after this fall. So leaders of the bull run have changed and we are in for a massive time corrections in this pack.

Today might also signifies beginning of the end of ITC’s miseries. It was India’s best performing stock since inception of Sensex in 1980 until 2014. However, like many stocks do, it has gone into a massive price and time correction for almost 8 years. And I believe it’s time is here and now. A cash minting machine making almost 15000 crores profits every year with zero debt and 6% dividend yield can’t trade at 18 times earnings.

In my earlier post ( https://zerotomillion.business.blog/2021/11/07/all-money-is-equal/), I made a point that all companies with similar earnings should trade at similar valuations, factoring in for +- 10-15% for sector tailwinds or governance premiums. Let’s put this test for ITC:

Let’s add the trailing 9m earnings of Britannia(1138cr) , Asian Paints( 2188cr), Pidilite(945 cr), Nestle(1758cr), Titan( 1671cr),Dabur( 1448cr), Marico(998cr). It comes to 10146 crores. Now let’s add the combined market cap of all companies. Britannia- 81k crore, Asian Paints- 262k crore, Pidilite- 115k crore, Nestle- 167k crore, Titan- 216k crore, Dabur- 95k crore and Marico- 65k crore. Thus, a combined market capitalisation of over 10l crore.

Let’s take ITC. It has a 9m trailing earnings of 11225 crores and a market cap of 2.77l crore. This just doesn’t add up. It has more profits than all these biggies combined and a market cap of just one fourth of them. So the bet is clear as to which way the wind is blowing.

Now if we do the maths again, ICICI Securities has a trailing 9m earnings of 1042 crores and today a market capitalisation of just 20k crore. This also doesn’t add up.

We have seen similar times in the market when great quality companies have undergone massive time corrections. It happened with Microsoft between 2001-13,. Reliance between 2008-14, HUL between 2001-07 and many more. I believe the time to lap up on ITC is now and here as it has done it’s 9y of penance as it is still trading at 2013 prices. Further, I’ve no reason to believe that a company with ICICI securities kind of earnings, return ratios and growth rate is available at 15x earnings. I’m betting it’s not a $3B company but will eventually become something like a $25-30B company in years to come.

Now let’s come back to the broader markets. All bull runs have sharp, brutal and multiple corrections. This is the nature of the game. The reasons can be anything and we have seen a lot of things for which markets have taken a breather. Remember 2018? When in the name of LTCG, markets fell 10-15% and we thought the world was over? In2016, Demonetisation had almost 15-20% drop, 2013 it was taper tantrum.

Either you believe that it’s going to be WW III and the world is coming to an end or it will pass. Like I said, don’t bet against survival of human race and don’t bet against India. You wanted a dip, this is the bloody dip. This can be dip, dip,dipper but eventually it will go up. Have you heard the story- If only I had bought Eicher motors in 2002 or Infosys in 1995, I’d have been a millionaire. It’s your turn to make those stories real.

This too shall pass!

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This was one hell of a week. We went from worrying about inflation in the US to prophecies of WW III in no time. Also, if we look it on a monthly basis, everyone went from worrying about Covid to inflation to elections in India to all out war. This, my friends, is the pitch on which long term investing is played.

As all of us are now making geopolitical predictions, here’s my two cents. Russia is winning, hands down. If you ignore the propoganda on Twitter, ask yourself this- the Ukranians citizens in Kyiv are posting their live videos, including how they’re on guard against approaching Russians, their comedian President is making Instagram reels saying he’s enemy number 1, and if the Russians really wanted to bomb everyone and kill this man, how difficult would it have been! I mean, you don’t even need an army to do that. Israelis have taken out men and of all things secret nuclear reactors deep inside Syria, Iraq, Iran and all other enemy territories without deploying even the army. Their sleuths did this. So for all those saying Russians miscalculated/ repulsed etc, need to wake up and smell the coffee.

For someone who hoodwinked the entire West and went inside Ukraine, how difficult would it have been to bomb civilians like what US did to Japan in WWII and finish it off in half an hour? The endgame is to bring Ukraine down to knees, prop up a friendly regime and go home. The only losers in this game is US and NATO. Donald Trump must be a very happy man right now! Also, this is a stark reminder to all of us why you need a strong India, an aatmnirbhar India and a no nonsense administration. It’s so soothing that the Ukrainians who basically always opposed us at each opportunity are now begging us to mediate on their behalf. As an Indian, I’m a very proud man!

Let’s come back to the markets. After an unbelievable drop on Thursday, we had a superb Friday and if nothing special happens tonight and tomorrow, we’re set to see a massive plus day on Monday, going by how US closed on Friday. I must say the drop took each one of us by surprise but I did what I always do as reflex- buy, buy and buy. Let’s see how and why:

On Thursday, we opened about two percents down and with the news of Russian attack. People predicted catostrophe and global destruction. They almost preempted a US led NATO invasion and that this was WWIII. Well, all you had to ask yourself was this- is the world really coming to an end! And to all of you, I have a simple talisman. When the two sides of the bet are: the world is coming to an end, we’re all going to die and two: this too shall pass, this is the easiest bet on offer. The world doesn’t end that easily. This is what Seth Klarman said in his famous video about 2008 global Financial Crisis: ” We didn’t think the word is ending, we couldn’t believe as to how people could think that the world is ending, The World Doesn’t End This Easily!”. This is a man who put close to $4 Billion in six weeks during September- October 2008 and is a legendary investor of the same league as Buffet.

So I didn’t know if this was bottom but from my Covid crash experience knew that the selling was unreasonable. People sold because they said companies with European exposure might suffer. Agreed to some extent. So I understand Tata Steel dropped and to a distant angle, Tata Motors sold off. However, on a day cash market turnover was probably highest ever, why did BSE drop 10%? Why did TCS drop whose almost all engineers are working from their respective homes in India? So this is what you must remember when the screen tells you something you would not be able to explain to a ten year old. I didn’t know if TaMo would collapse in Europe, which anyways is too far fetched but knew half my office is lining up to buy a Nexon. However, I was happy that atleast United Spirits held up as joy or sadness, who says no to Johny Walker.

The point I’m trying to make is that too much macro predictions will take you nowhere as you will be so worried that won’t be able to make any sensible decision. Whenever you face such a dilemma, take a deep breath and zoom out on life, look at it on a monthly or yearly chart and ask how many things market worried about and sold off actually happened. In January we sold off because of third wave, in Feb because of rising inflation in US and now this.

Here’s my takeaway- Be extremely optimistic of the India story. Foreigners have sold over 2.25 lakh crores in this FY alone( April to date) and our market is down hardly ten percent from top. This is when Nasdaq is down more than 20% and most US and global markets are down much more than us. The Indian retail is rising. Our SIP is over 11k crore monthly. The total AUM of Indian MF industry is hardly $500 Billion. This is when only 8 cr Indians have demat accounts. Imagine what will happen when 20cr Indians flock to buy stocks in years to come.

So as I said earlier, be proud of the fact that you’re witnessing a rising India, an India which is respected and will be a major super power in our lifetime. Stay Bullish on India, stay invested!

This I believe is a late post on this subject as most of you have already heard the story of IEX- India is a large country with huge power production and demand but very little power trading. In Europe and the US, power/energy trading is almost over half of all that is produced and India will catch up. Hence, the runway and opportunity size is extremely large.

We witnessed a sharp surge in IEX price last year when it almost went up 4x in a matter of six odd months and became one of the darlings of the then roaring market. It also issued bonus and is now down close to a third of its all time high.

So what’s my take in this. I have to be honest that I didn’t buy into the story the whole of last year, especially around the time when it was a clear buy- a pre bonus level of sub 400. I actually was happy that my BSE position was beginning to be rewarded and at that time, I was only slowly waking up to the idea of buying growth stories. So I missed the bus completely.

However, I did follow the stock closely, not just the price but also the business. I was surprised when Mohnish Pabrai and Guy Spier both showed large interests in it( here’s a link- https://youtu.be/f_2Smx_1hDM and https://youtu.be/PpEDGdILAEU) I totally missed it until a few weeks back when I was researching more of the upcoming power exchange by BSE.

The key in a Bull Market is to keep some stocks on your radar and then when they’re down but not out, dig deep into their businesses and see if you can add or build your potential. IEX was one of the stocks and it kept popping up my radar. It ticks all my boxes, high profit margins, long runway for growth, operating in a market with huge tail wind especially when the government of the day is pushing hard to take energy trading to over 25% in a few years. So what stops me from owning this one?

My position in BSE is a reason I never looked to own either MCX or IEX. It’s one problem which occurs to most people while taking large bets on similar companies that when you know both the bets are good, you somehow develop one of them and say- this covers me on this one easily so why both. Also, I’m a firm believer in making large bets, atleast 5% of my portfolio to begin with and with BSE being almost a third of my entire worth, I never thought IEX will own much value.

However, of late I have developed a liking to buy long term stories which potentially can go up atleast 5-10x without much stratospheric to happen. And when you hit one of those bets, all you do is to raise that position and hold through all the volatility. BSE for me is that bet where I believe the runway for growth is exceptionally large and it can be a ten bagger from here atleast.

Now, what about IEX? Can it live side by side with BSE in a portfolio and even NSE potentially? Well, the answer is a very close yes. I operate with a thumb rule. Whenever I look to decipher on the India oppertunity, I see what similar stocks have done in the US and Europe. So I dug deep into the European energy stocks, especially the European Energy Exchange, owned by the Deutsche Bourse group. It’s a massive cash machine, generating over 1000 crores annual profits, without much capital. The real eye opener was however when I checked its annual report. It says it’s main competitors are the ICE group ( which owns the NYSE), Nasdaq and the CME group.

So I checked out their numbers and I couldn’t believe myself. For the Intercontinental exchange group, the total revenue from exchange operation is close to $3.8 Billion and of which close to $1.2B is energy trading!!! Only 300million dollars is the equity trading revenue. Similarly, NASDAQ earns over 1/6 of its annual revenue from trading energy derivatives. So potentially, Energy trading in India can generate more money than what NSE or BSE can ever make in their equity devisions.

BSE recently talked in their concall about their readiness to operate its own power exchange- Hindustan Power Exchange and that they’re eager to launch power derivatives once it gets launched with SEBI approval in India. Also, BSE is about to launch its Gold Spot exchange. Both these businesses will be revenue accretive from the word go.

A big selling point for IEX is it’s near monopoly in spot power trading. The only thing I have to check is if BSE can make a dent to the tune of atleast 25-30% in this market in one quarter of its launch. Because if it doesn’t, the final box will be ticked and I’ll lap all the IEX I can because doesn’t matter what happens, power trading will generate humongous amount of money in India going forward.

this is the first time I’m writing before owning a stock as I wanted to talk out loud on this subject. The only thing which this research did was to make me believe even more fiercely in the BSE story as even in Europe, all three major exchanges have substantial market share in energy derivatives so it won’t be a one man show for IEX. The whole market will be enough for a lot of money to be made by all players.

So here’s my takeaway- for all of us waiting for NSE IPO for a rerating of BSE are looking at the wrong item. BSE will be rerated based on its blue ocean businesses- gold spot exchange, and hopefully power exchange. And to any of you who think that 2300 is a large price to pay, imagine what will happen when it will eventually become a $20B business in 20 years( share price of close to 40000)

I’ll be completing five years in the stock market this weekand this post is part reminiscing of the journey and partly some more thoughts on what’s happening around us.

In mid February 2017, my father bought for me the first stocks of my own money- HUL, Asian paints and Sun Pharma. Thanks to him, I knew trading was out of question and they’re to be held for long term. Beyond that, as someone from engineering background, I knew next to zero about accounting or finance. All I knew was if everyone sells, you buy and when everyone buys, you sell. It’s more or less a variation in buy low, sell high strategy.

I was then in Imphal, already working and preparing for my last attempt of UPSC on the sides. So for entire 2017, I didn’t pay much heed except buying small quantities of shares with whatever money I had. After I flunked my mains, in early 2018, I asked myself as to what I wanted to do in life and then developed a craving to study for CFA charter. So I brought some books and began to teach myself everything about finance and accounting I could lay my hands on. Around this time, I also had begun to read investing books and was under the thrall of Ben Grahamic style of investing, religiously looking at PE and PB of the stocks I covered. Around that time, as I learnt to appreciate the balance sheet and P&L statement, I also read about the biggest names in value investing such as Graham, Buffett, Howard Marks etc.

One man and his style did influence me and it was Rakesh Jhunjhunwala. His story always inspired and continues to inspire me. Since I was single and had plenty of time, I began to read all the books I could and did what is call the dirty works- learning to read the balance sheets, reading quarterly and annual reports of companies I owned, reading for CFA taught me basics of F&O, portfolio management and everything the professional investors do. As I was alone, I began to hear a lot of YouTube videos of all the investors I could find- both domestic and international. Talks at Google series, videos of Rakesh Jhunjhunwala, Ramdeo Agarwal etc all helped me a lot to understand the nuances of the market.

Knowledge as we know is cumulative and by the time 2018 ended, my portfolio was inching towards ten lakh mark. However, this was a very polarised market and doesn’t matter what happened, I was always down 10-20% on my stocks. Tata motors had already collapsed from when I began to buy at 435 to 250. I couldn’t fathom it but all I did was to buy. However, in late 2018- early 19, I decided to not pursue CFA as I realised 1. The portfolio management theory and DCF methodology is junk and 2. I can’t buy 100 stocks and claim to beat the market and 3. I wanted to be an individual investor.

So by 2019, I decided to go full throttle and become an individual value investor. I sold my HUL at 1700, Asian Paints at 1100 and Reliance at 1100 types and converted all to IOC, Tata Motors, and of all things Yes Bank. I kept adding to my positions and realised some key things- quantity matters, dividends matter. However, my biggest learning was yet to come. It was when I sold both Reliance home finance and yes Bank and booked a total loss of over 2.25l when I realised Quality matters the most. Looking back, it’s a small price to pay or otherwise, I won’t have achieved what I did last year because I would have still been buying junk like Jet Airways, PNB etc.

So by Covid lockdown 1.0, I had lost over 2l , read almost all investing books I could find, built a sizeable portfolio, learnt to read and understand basic accounting statements, and began to breathe market day in and day out. And during the lockdown, I went all in and bought whatever I could as much as possible and this paid off brilliantly. JP Morgan says- you buy when there’s blood on the street, even if the blood is yours. From covid low, my portfolio is up 6x, ofcourse with incremental capital but this has been hell of a ride.

Also, my biggest learnings have come in the past year when on August 31, 2020, I finally broke even on my portfolio for the first time. Yes, for 3.5 years, I didn’t even break even on portfolio basis but held on. Patience pays off in the market and hence they say, time in the market is more important than timing the market. I learnt that selling HUL, Asian paints and Reliance was not smart but dumb, not averaging up was dumber and buying junk is the dumbest. Hence my current philosophy is something like this- don’t buy junk, buy growing companies which are on the right side of technology and the India story, be doubly sure of quality ( I have zero exposure to Adani group, I just can’t figure the price movement) and have not more than 10-12 stocks. Top 3 holdings in my portfolio are over 60% and top 5 over 80. Quantity, quality and price, they all matter.

Now let’s see what’s happening to my favourite stocks:

1. BSE- it’s back to its life highs and here’s a very big lesson. From 2014, nifty is up 3x, Nestle 4x, HDFC BANK 4x but Bajaj Finance is up 50x. I heard someone say a very important thing- in a market, some stocks will have their own mega bull runs, irrespective of the overall market. So even if the market goes nowhere, these stocks will be up 10-20-100 times. If you spot one of them, and hold it, don’t fall for the quick buck but just hold and let the home runs count.

Tata motors- The stock is holding in a weak market but the best part is that people are still not buying in the story. They’re still buying Maruti and Mahindra while the company sells more EV month on month. Since FII are selling, Tata motors DVR is artificially down an extra 30% to 240 and is a lip-smackingly good buy. In three years, I see Tata Motors selling huge number of cars and the stock going up atleast thrice from here.

Icici securities- This is a no brainer ten bagger from here. The stocks growing 30% plus year on year, return on equity 70% is trading at 15 times earning is a ten bagger on sale. I won’t be surprised if it goes to 5000 plus in three- five years or less.

Happy Investing!

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.