On Cyclicals

All hell breaks loose once the growth slows down; as every investor rushes to exit at the same time. The decline is 5x faster than the rise.

Pharma learnings 101:

Higher the difficulty to manufacture, Lower the competition, Higher the pricing power.

Higher the regulatory oversight, the Bigger is the moat for those who comply.

#PharmawithJST

Where is Hikal heading in the next 5 years?

Explained judiciously by Mr. Sameer Hiremath in the Q4FY20 Concall.

Note: It will not be a smooth journey.

Krsnna Diagnostics IPO notes: 'Let's do Good' ❓

Hit the 'retweet' & help us educate more investors

A thread 🧵👇

#IPOwithJST

1/ Basics about the IPO

Issue Dates: 4 - 6 August
Issue Size: ₹ 1,211 Crore (400crs Fresh Issue & 811crs OFS)
Mcap at the upper band: 2994crs
Price Band: ₹ 933 - 954
Retail Quota: 10%

Promoter stake to go from 32% to 27% post IPO.

2/ About the company.

Krsnaa Diagnostics provides technology-enabled services such as imaging (including radiology), pathology/clinical laboratory, and teleradiology

to public and private hospitals, medical colleges and community health centres across India.

3/ They focus on the public-private partnership (“PPP”) diagnostics segment and have the largest presence in the diagnostic PPP segment.

Contracts are typical of long-term in nature.

Won 77.6% of all tenders since inception & have thus deployed 1823 diagnostic centers.

4/ Operational performance indicators

A thread on the snippets (paragraphs & quotes) from the book ‘Why We Sleep’ by Matthew Walker 💤

One third of our lives, better read about it.

This thread will be updated as I read further & further.

1/ “Two-thirds of adults throughout all developed nations fail to obtain the recommended eight hours of nightly sleep.”

Imagine if you don’t have that rare ‘short sleep’ genes 🧬 that allows you to do will less than 5 hours of sleep 🛌.

2/ It’s going to get ugly.

3/ Pandemic.

4/ Why to learn about sleep.

Commodity Supercycles.

Hit the 're-tweet' & help us educate more investors.

A micro thread 🧵👇

1/ What is a commodity supercycle?

They are near decade long periods where commodities trade well above their price trend

supercycles are rare

Going back 100 years, Only 3-4 supercycles have been identified & each was tied to a transformational period of economic development.

2/ A one-two year rally in commodity prices is NOT a supercycle, rather could just a rebound from an imp. event as what even happened after the 2008 great recession.

3/ Two commodity supercycles have occurred since the end of World War II.

The 1st started in the mid of 1960s & lasted through the 1970s.

Likely driven by a collapsing US dollar, higher inflation & 2 oil price shocks.

4/ Why US dollar is an important monitorable?

Raw materials are almost always priced in US dollars.

When the value of the dollar drops, it costs more dollars to buy commodities. At the same time, it costs a lesser amount of other currencies when the dollar is moving lower.

Remember in March when all the headlines/'experts' were saying that the 10Y was going to hit 2% very soon, and it was going to cause this and that to happen, etc.?

No-one actually knows what interest rates or the economy is going to do & people are just terrible at predicting it

Howard Marks strongly believes that investing based on macro predictions is a bad idea (macro predictions are more often wrong than not): “I don’t believe in macro forecasts”, here's an extract from his memo earlier this year as well:

Bull runs in small caps are usually fast and furious, and the cycle repeats itself every 3-4 years. Every time, retail is sold stories of business turnaround and stock charts look fantastic for meteoric wealth creation. For the class of 2020-21, here's a couple of past stars.

These small cap stocks with 30-40 crore market cap went up 23X and 11x in a span of 24 months between April 16 and April 18. The story looked great then, but subsequently once liquidity and interest disappeared, the prices went right back to where they came from.

When in the thick of the action, it can be difficult to keep a level mindset. To keep the narrative believable, these companies are able to massage their top-line and bottom-line for a short period of time to show an imminent turnaround. Note the trends in these financials.

The company usually exhausts its ability to massage the financial statements very soon and the business health plummets dramatically. One collapsed so dramatically it has been selling fixed assets. The other one is Uniply Industries - a simple search on Twitter will suffice.

Newer small cap investors may be subscribed to many Twitter handles, Telegram channels, groups and even premium advisory services. Don't take anybody's word for the narrative being sold to you. On-the-ground-research and scuttlebutt can be plain fiction.

Guy in 1989: "Wow, those Nifty Fifty investors were so stupid."
Same guy in 1999: "Yes, a 250 P/E makes sense for Cisco."

Guy in 2011: "Wow, those tech bubble investors were so stupid."
Same guy in 2021: "Yes, 25x sales and a 450 P/E makes sense for a car company."

Please do read.

Src: Primedatabase website.

Cycles | S. Naren

@unseenvalue @sahil_vi It is mean reversion for company's performance. Crowd thinking usually takes a belated u turn after the prices have retreated significantly.