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TechnoFunda Investing Newsletter
Weekly Wrap - Issue # 92
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Welcome to the Technofunda Investing community. Thank you for being Life Long Learner...!!!
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📈 Market Kya Lagta Hai
Nifty 50 🔼 +0.86%
Midcap 150 🔼+2.04%
Smallcap 250 🔼 +2.41%
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Sectors in Focus
Major Corporate Developments This Week
- Mahindra & Mahindra: Co announces cut in prices from September 6
- Adanipower: Co and Drukgreenpower to set up a 570MW hydro power project in Bhutan.
- NTPC Green Energy: Co signs MoU with VOC Port Authority to establish green hydrogen fuelling station and hydrogen-based mobility solutions at Tuticorin Port
- Tata Motors: Co cuts its prices to pass on full benefit of GST cut to customers NDTV
- Mastek: Co UK named supplier on NHS London Procurement Partnership’s DTCS framework to drive clinical digital transformation
- Glenmark Pharmaceuticals: Co initiates multi-country Phase 3 clinical trial for Envafolimab in resectable Stage III non-small cell lung cancer; DCGI approval received for enrollment in India; clinical trial applications submitted in Russia, Brazil, and Mexico.
- Sterlite Tech: Co subsidiary launches the world’s slimmest IBR cable with 864F for hyperscalers in the United States
- Bharat Forge: Co subsidiary acquires 950-acre land in Andhra Pradesh for defence energetics complex
- Yasho Industries: Co secures 15-year supply agreement with global MNC worth ~₹150 cr annually
- Axiscades Tech: Co announces strategic electronics, semiconductor and artificial intelligence (ESAI) division wins powered by its unit Mistral Solutions
- Campus Activewear: Co acquires land & building at SIIDCUL Pantnagar for ₹74.75 crore to expand manufacturing capacity; plans ₹230 crore investment for additional 7.2 mn pairs capacity by FY28
- Aarti Pharmalabs: Co inaugurates new state-of-the-art manufacturing facility at Atali, Gujarat; Phase 1 has 440 kL reactor capacity with 63 reactors; site is scalable up to 8-10 times Phase 1 capacity; aiming for CDMO/CMO revenue goal of ₹1000 crores.
- Piccadily Agro: Co to triple ethanol capacity and double malt & barrel storage by H1 FY2026. This could add approximately 50% to the Co’s existing revenue stream in near term
- Kayens Technology: Co to launch its first made in India semiconductor chip on 5th October
- Netweb Tech: Co wins order worth ₹1734 cr for the supply of servers based on NVIDIA’s cutting-edge Blackwell architecture
- Man Industries: Co wins order worth ₹1700 cr. Co’s total unexecuted order book stands at approximately ₹4700 cr || Co says this order will add around 50% to Co’s annual revenue
- Zomato: Co increases platform fees on food delivery orders to ₹12 from ₹10
- Tata Motors: Co says with reduction in battery costs, can bring EV price closer to gasoline cars if 5% tax maintained
- Quadrant Future Tek: Co secures ₹129 cr Railtel order for Kavach system on 607 RKM of East Central Railway
- Dee Development: Co wins order worth ₹170 cr.
TechnoFunda Investing Quote from Legends -
Sir John Templeton’s quote emphasizes the importance of independent thinking in investing. To outperform the average investor (the crowd), one must be willing to take a different path — whether that's in identifying overlooked opportunities, maintaining discipline during market euphoria or fear, or challenging popular narratives. Simply following consensus leads to average results, but true outperformance requires conviction, patience, and the courage to go against the tide when your analysis supports it.
📚 Book I'm Reading This Week
Same As Ever: Timeless Lessons on Risk, Opportunity, and Living a Good Life by Morgan Housel is a thought-provoking book that explores how human behavior, emotions, and decision-making remain consistent over time, even as the world changes rapidly. Through engaging stories and sharp insights, Housel delves into themes like risk, greed, fear, luck, and resilience—showing that understanding the constants in human nature can provide clarity in an uncertain world. The book encourages readers to focus on what truly matters, helping them make better choices in investing, relationships, and life itself.
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TechnoFunda 101 - Power Capsules
Learn technical as well as fundamental concept in a simple way
Circle of Competence: Staying in Your Zone for Smarter Investing
In investing, as in life, knowing your strengths and limitations is essential for long-term success. One of the most effective mental models in this regard is the concept of the Circle of Competence, popularized by legendary investors Warren Buffett and Charlie Munger. It’s a simple but profound idea: focus on what you understand, and avoid areas where you lack expertise.
What is the Circle of Competence?
Your Circle of Competence is essentially the areas in which you have expertise or a thorough understanding. Everyone’s circle is different, shaped by their background, career, and personal experiences. For some, it might be technology, for others, it could be consumer goods or finance. The key to success is to recognize what lies inside your circle and, more importantly, what lies outside of it.
As Buffett puts it, “You don’t have to be an expert on everything, but you do have to know where your circle of competence is and stay inside it.” This approach allows investors to avoid the pitfalls of overconfidence, helping them stay grounded in areas where they have a genuine edge.
Why Circle of Competence Matters in Investing:
- Informed Decision-Making: When you invest in companies within your circle of competence, you can assess their business models, financial health, and future prospects with greater clarity. This deep knowledge allows you to ask the right questions and avoid falling for surface-level narratives or media hype.
- Minimizing Risk: Stepping outside your circle can lead to poor decisions based on incomplete or misunderstood information. Investors who chase opportunities in industries they don’t understand are more likely to misjudge risks, leading to costly mistakes. Staying within your circle helps reduce this risk by ensuring you make decisions from a position of strength.
- Confidence and Conviction: Investing within your circle of competence allows you to hold positions with greater conviction, even during market volatility. When you understand a business thoroughly, you're less likely to panic when stock prices fluctuate, as you have a clear vision of the company's long-term potential.
Real-World Example: Warren Buffett and Coca-Cola
A famous example of the Circle of Competence in action is Warren Buffett’s investment in Coca-Cola. Buffett had a deep understanding of the consumer goods sector, particularly beverages, due to his personal consumption habits and knowledge of the industry’s economics. He recognized Coca-Cola’s strong brand, global distribution network, and ability to generate consistent cash flow.
Rather than chasing technology stocks or industries he didn’t fully grasp at the time, Buffett stayed within his circle, investing heavily in Coca-Cola during the late 1980s. His deep understanding of the business and its competitive advantages gave him the confidence to hold the stock through various market cycles, making it one of Berkshire Hathaway’s most profitable long-term investments.
How to Identify Your Circle of Competence
- Reflect on Your Expertise: Start by asking yourself which industries, products, or companies you know inside and out. This could come from your professional background, hobbies, or personal interests. For example, if you work in the pharmaceutical industry, your circle of competence likely includes drug companies, regulatory processes, and medical innovations.
- Know Your Limits: Equally important is recognizing where your knowledge falls short. If you’ve never studied the semiconductor industry or don’t understand how blockchain technology works, it’s probably outside your circle of competence. Acknowledging these gaps can help you avoid making uninformed investments in these areas.
- Expand Your Circle Slowly: While it’s important to stay within your circle, that doesn’t mean you can’t grow it. Gradually expanding your competence by learning about new industries or studying successful companies can give you more opportunities over time. Just be sure to do so methodically, rather than jumping into unfamiliar sectors without thorough research.
Practical Steps for Using the Circle of Competence in Investing
- Stick to What You Know: Before making any investment, ask yourself: “Do I truly understand how this business operates?” If the answer is no, take a step back. Focus on companies where you understand the drivers of growth, the competitive landscape, and potential risks.
- Avoid FOMO (Fear of Missing Out): The temptation to invest in "hot" sectors or the latest market trends is always there. However, stepping outside your circle to chase returns can lead to disastrous outcomes. Remember, it’s better to make no investment than to make an uninformed one.
- Use Your Competence to Your Advantage: If you have deep knowledge in a particular area, use that expertise to find hidden gems that others may overlook. For instance, if you understand the dynamics of the renewable energy sector, you might be able to spot undervalued companies poised for long-term growth.
- Diversify Within Your Circle: While it’s important to stay within your circle, you should still diversify your investments across different companies or industries you understand well. This can help mitigate risk while ensuring you remain confident in your portfolio.
Conclusion
The Circle of Competence is a vital mental model for anyone looking to make smarter investment decisions. By staying within the boundaries of what you know and avoiding areas you don’t fully understand, you can increase your chances of success while minimizing risk. Whether you're investing in large-cap stocks or small businesses, the key is to develop a deep understanding of your chosen field, make informed decisions, and resist the temptation to venture into uncharted territory.
Remember, the most successful investors aren’t those who know everything—they're the ones who know their limitations and operate with a clear sense of competence.
🎙️ My Weekly Podcast For You
Keep Compounding...
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Vivek Mashrani, CFA
Founder, TechnoFunda Investing
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