Later came a stage where I realized Benjamin style was not working.
A thread: How to value? 🏦💰❓
Sharing my learnings from my journey so far.
Later came a stage where I realized Benjamin style was not working.
If you have been following me for the past 1 year you would have noticed how my valuation method has changed.
“Take help of someone to learn it” is the crucial line there.
read bruce greenwald book on value investing. he has taught valuation. just learn how to compute company sales and profit on average and value that. many get wrong by looking at just trailing pe/pb. take help of someone to learn it.
— ContrarianEPS (@contrarianEPS) February 9, 2021
Again if you have been following me for more than a year, I used to be the “CCL Product guy”. I was so bullish on the company that I had my 70% portfolio in it.
After we connected we discussed various businesses, especially CCL Products because we both were tracking it very carefully. Soon, he offered me to write blogs for @soicfinance and the learning started.
@badola_arjun Hi keep up the good work, and keep putting out content. Really liked your work on CCL and the Buffett letters \U0001f4af\U0001f601
— ishmohit (@ishmohit1) November 20, 2020
1. Good business available at extremely cheap valuation
2. Great-Good business with reasonable valuation
3. Good business but can’t compromise on valuation
In this situation the business analysis provides you insights that you understand such a business should not be trading at current valuation.
The example for this situation would be companies like ICICI Securities and Manappuram Finance.
Manappuram Finance: This gold lending business is another one which falls under this category...
In this situation you would be able to identify that there is a Great-Good business which on the face of it looks expensive but actually available at reasonable valuations.
In this category falls the music streaming business Saregama.
Disclosure: my buying price is around Rs.2400 with the highest allocation.
The stock was already 10-11x from its March 2020 lows and trading around 40 PE.
My first reaction was, “Dammit! I missed the bus.” I saw the chart and looked at the 1999-2000 peak and thought “Aur kitna upar jaayega”…
He said absolute valuation matters. New facts of the business were emerging as their Caravan sales went to zero, the hidden gem came into the limelight.
1. Their music streaming was growing above 20% (rather they have increased the guidance to 25-30% now)
3. no threat from new entrant (except foreign players)
4. Top player was losing out focus on the music business
5. visibility of growth for next 2-3 years
Over here, one identifies a good business but the entry valuation is very important here. As with these businesses the cycle could change suddenly, their raw material prices could fluctuate, or they do not have moat, etc.
I was a little late to read this business and missed the opportunity. I couldn’t buy a small player at 40 PE, 3.5 Price to Sales, and with lowest return ratios in the hope that management would perform. The risk to reward was not in favor.
The mistake in the first situation would be opportunity cost. In second, it would be the risk in identifying the wrong business and in third it is overpaying for the business.
More from Valuation
You May Also Like
Russia hasn't been a willing partner in this treaty for almost 3 decades. We should have ended the pretense long ago.
Naturally, Rand Paul is telling anyone who will listen to him that Trump is making a HUGE MISTAKE here.
Arms control agreements are good when you have willing partners. Lightens the load on our military.
— John Noonan (@noonanjo) October 20, 2018
Russia hasnt been a willing partner in years. There will be gnashing of teeth from people who do arms control advocacy full time, but this is right movehttps://t.co/WmQE43ERCB
Rand is just like his dad, Ron. 100% isolationist.
They've never grasped that 100% isolationist is not 'America First' when you examine it. It really means 'America Alone'.
The consistent grousing of pursuing military alliances with allies - like Trump is doing now with Saudi Arabia.
So of course Rand has also spent the last 2 days loudly calling for Trump to kill the arms deal with Saudi Arabia and end our alliance with them.
What Obama was engineering with his foreign policy was de facto isolationism: pull all the troops out of the ME, abandon the region to Iranian control as a client state of Russia.
Obama wasn't building an alliance with Iran; he was facilitating abandoning the ME to Iran.
Obama wouldn't even leave behind a token security force, so of course what happened was the rise of ISIS. He also pumped billions of dollars into the Iranian coffers, which the Mullah's used to fund destabilizing activity [wars/terrorism] & criminal enterprises all over the globe
To me, the most important aspect of the 2018 midterms wasn't even about partisan control, but about democracy and voting rights. That's the real battle.
2/The good news: It's now an issue that everyone's talking about, and that everyone cares about.
3/More good news: Florida's proposition to give felons voting rights won. But it didn't just win - it won with substantial support from Republican voters.
That suggests there is still SOME grassroots support for democracy that transcends
4/Yet more good news: Michigan made it easier to vote. Again, by plebiscite, showing broad support for voting rights as an
5/OK, now the bad news.
We seem to have accepted electoral dysfunction in Florida as a permanent thing. The 2000 election has never really
Bad ballot design led to a lot of undervotes for Bill Nelson in Broward Co., possibly even enough to cost him his Senate seat. They do appear to be real undervotes, though, instead of tabulation errors. He doesn't really seem to have a path to victory. https://t.co/utUhY2KTaR
— Nate Silver (@NateSilver538) November 16, 2018