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Sectors in Focus

Major Corporate Developments This Week

1. GIPCL: Company signs ₹2,832 cr loan agreement with National Bank for Financing Infrastructure and Development
2. MOIL: Company increases prices of all ferro-grades of Manganese Ore by 25-40% for May.
3. MOIL: April Update: Manganese Ore production up 22% YoY at 1.60 lk tonnes.
4. Mazdock: Company has signed individual Shipbuilding Contracts with the European client for construction of three (03) units of 7,500 DWT Multi-Purpose Hybrid Powered Vessels.
5. Adani Green: Company secures finance worth of $40 cr from international banks for 750 MW power plant.
6. Gujarat Tool: Company acquires 65-acre land parcel in Gujarat to set up a green energy project at an investment of Rs 572 crore.
7. Century Tex: Birla Estates, real estate venture of Aditya Birla Group, books sales of Rs 5,400 crore from a project in central Mumbai.
8. Godrej Ind: Godrej Group reaches family settlement agreement. Family members of the group have also entered into brand & non-compete agreement.
9. GE T&D: Company Secured orders from Power Grid to build a State Transmission Asset Management Centre in Odisha.
10. Jindal Stainless: Company to invest Rs 3,350 cr on capacity expansion.
11. Tech Mahindra: Company partners with Atento to provide GenerativeAI-powered solutions, services to global enterprises.
12. RVNL: Company emerges as lowest bidder for construction project worth Rs 391 crore.
13. Wipro: Company wins multi-million-dollar deal to transform Nokia’s digital workplace services.
14. NMDC: Increases lump ore price by ₹400 & fines by ₹200/ tonne.
15. KEC International: Company has secured new orders of Rs 1,036 crore across its various businesses.
16. Coromandel International: Company commences activity to set up phosphoric acid & sulphuric acid plants worth over Rs 1,000 crore in Andhra Pradesh
17. Techno Electric: Company has bagged new orders for ₹4,063 crore.
18. Cholamandalam: Company’s General Insurance Hits Rs 7598 Crore Gross Written Premium Milestone.
19. Prestige: Company sells luxury homes worth Rs 1,300 crore in South Mumbai project.

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Achievers of Technofunda Community City Meet-Up in Mumbai

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TechnoFunda Investing Quote from Legends -

The quote by Thomas Russo emphasizes the concept of "quality investing," which prioritizes the intrinsic value derived from a company's long-term competitive advantage rather than its immediate market price. Russo suggests that the most reliable safeguard for investors is not found in pursuing low purchase prices but in choosing companies that possess enduring competitive strengths. These strengths ensure that the company can maintain superior performance, profitability, and market position over extended periods. This approach focuses on the fundamental qualities that enable sustained success, thereby providing a more substantial and lasting margin of safety for long-term investment.

📚 Book I'm Reading This Week ​​​​​You Can Be A Stock Market Genius You Can Be A Stock Market Genius: Uncover The Secret Hiding Places Of Stock Market Profits is a book that helps people in understanding the ways by which they can make successful investments in the stock market. The author of this book, Joel Greenblatt, has penned down the insights that he gained from his own experiences as a stock market investor. In this book, the author discusses the advantages that individual investors have over professional money managers, and the ways by which those advantages can be leveraged to their maximum potential. According to the author, individual investors are able to perform focussed investing and don’t need to maintain a unnecessary portfolio of numerous stocks like money managers. Because there are no time restraints that money managers usually have to deal with, individual investors can go ahead and evaluate their stocks over longer periods of time. In this way, they can afford to wait for those catalysts that drastically increase the value of stocks. The author emphasises the importance of investing in spin-offs, which are usually those firms that branch out from the parent organisation. It is a useful book for amateur investors looking to gain a strong footing in the stock market. List of All Books I have Shared →

TechnoFunda 101 - Power Capsules

Learn technical as well as fundamental concept in a simple way

Peter Lynch's Six Categories of Stocks

The Peter Lynch is one of the most successful fund managers of all time. He managed a fund called Magellan at US Investment Giant Fidelity Investments and during his 13 yr tenure, he delivered an average CAGR of 29.2%. In 1989, a year before retirement, Lynch wrote and published a book called 'One Up on Wall Street'. Almost 32 years later, the teachings of the book remain relevant. Chapter 7 of the Book Titled "I've Got It, I've Got It - What is It?" talks about the need to classify stocks. Peter's argument is that you need to know what kind of stock you hold in your portfolio. Not all stocks are the same. Different stocks possess different characteristics and its these characteristics of a company that ultimately determine the return expectation and actual returns on the stock over a long term. Very important to know what kind of a stock you own!

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Here is how Lynch has classified each stock into six broad categories:

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🐌 The Slow Growers

These are large and aging companies that barely manage to grow slightly faster than the average GDP growth of an economy. Slow Growers pay a generous and hefty dividend but their sales and earnings aren't going anywhere. Slow Growers didn't start out that way. They were once fast growers in their industry but ultimately consolidated a large market share. Because their industry doesn't grow by very much, these companies do not grow and as such their stock doesn't move by a lot. According to Peter Lynch, the only reason to buy these stocks is dividends. Since its profits are not reinvested for growth, they tend to return them to investors by paying them high dividends.

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🎖 Stalwarts

These are large companies that are growing slightly faster than GDP of an economy. Large companies that are still able to grow, with annual earnings growth rates of slightly faster than GDP of an economy; examples include Nestle, HUL, and Marico Ltd. If purchased at a good price, Lynch says he expects good but not enormous returns--certainly no more than 50% in two years and possibly less. Lynch suggests rotating among the companies, selling when moderate gains are reached, and repeating the process with others that haven’t yet appreciated. These firms also offer downside protection during recessions.

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🚀 Fast Grower

These are usually small and aggressive companies (though not always) that grow at least 20% each year. Companies like KPIT Technologies fall under this "small and aggressive" category. However, remember even companies like Titan, can still be counted as a fast grower in spite of being around for a long time. This is the place where you can expect multi-baggers but it does carry more risk than some of the other categories mentioned above. The risk comes from the market's expectations of growth and any slight disappointment would plummet the stock. The obvious sell signal is the growth slowing down. It sounds easy to say but is actually difficult to spot. Some signals can be the entry of strong competitors and the earnings growth falling to the level of the market average.

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↪ Turnaround

Turnarounds are companies that were once well respected high flyers that now have their wings clipped. Lynch uses Chrysler as an example in his book. In today's terms it could be Orchid Pharma. If you own these stocks you have to realize that you are making a risky bet and that it could totally burn out. So you can expect either high rewards or losing almost your entire capital. This is the toughest category to spot a sell-signal, if the depressed PEs return to their pre-fall level, that is your sell signal.

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🔄 Cyclicals

These are companies that rise and fall mainly due to macro-economic and sector specific conditions. If there is a recession, they struggle and they flourish during a boom. Most Materials & Mining fall in this category. Everyone knows about cyclicals but what is not commonly understood is these are very volatile. You cannot own, say NMDC, and expect to have a smooth ride up (unless you picked it right at the turn of the cycle). The key to owning cyclicals is timing the economic cycle. For example, you do not want to be holding Steel stocks if you expect China to slow down. Buildup of inventory is the main sell-signal in this category according to Lynch.

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🏦 Asset Plays

These are companies that own some asset that is valued higher than the total market cap of the company. Essentially you can buy the entire company, strip its assets into piecemeals, sell them and earn more than what you paid to buy the company. An Example of an Asset Play in Indian context was Bombay Dyeing. Bombay Dyeing as a company is gruesome cash losing business. The company however owns a residential project with 270 units yet to be sold. The total estimated value of this inventory is about 2100 crores, which was at that time slightly above its current market cap. The basic sell signal in case of Asset play is when the company is valued at least equal to its net asset value.

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These classifications by Peter Lynch offer a systematic approach to evaluating stocks based on their growth prospects, market conditions, and inherent risks, providing an essential toolkit for informed investment strategies.

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🚀 My Content For This Week 🎬 YouTube: Indian Railways Sector Analysis​ ​ ​ 📋 Twitter: Vivek Mashrani, CFA @MashraniVivek 📢📢📢📢 Ever heard the saying 'sell shovels during a gold rush'? Well, imagine if you could apply that concept to your investments!! Welcome to the world of proxy investing! A thread... https://twitter.com/i/web/status/1787080591449411854 4:53 PM • May 5, 2024 0 Retweets 1 Likes Read 1 replies ​ 📲 Instagram: https://www.instagram.com/p/C6bw3dbs7nZ/​

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Keep Compounding...

Vivek Mashrani, CFA Founder, TechnoFunda Investing

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