Flattish QoQ results.

www.bseindia.com/xml-data/corpfiling/AttachLive/74bcb9ab-d48e-4180-bd3f-5dc2196931ed.pdf

Hi @Cshar thanks for contributing.
I just did a quick search and from various sources I found Mr. Pabrai has 9 stocks. 3 in US (worth 1400 crores), 3 in India (1200 crores) and 3 in Turkey (I beleive over 2000 crores). Total value of his investements in equity seems to be ~5000 crores.

However, point to note is that his networth as per investopedia is about 16000 crores. What does this mean? He has invested only one third of his networth in stocks. His largest investment seems to be in Alpha metalurgical resources of USD114 million i.e. about 1000 crores. So just to put in context this is 20% of his total equity portfolio and 6% of his networth.

So understanding the context is very important. If I have a stock with 20% allocation and it is 50% of my networth or is it 6% of my networth. If its 50% of my networth following someone else’s 20% equity portfolio then may be its not right. However, if its 6% of my networth with even higher 60-80% of equity portfolio then I dont care much and also no one else should.

In 2014 when late RJ sir bought shares of Spicejet every friend of mine was trying to jumpin to follow him. However, my friends were putting high % of their networth in SpiceJet vs. sir’s less than 0.5% (13.4 crores from his networth of ~10000 crores).

So we should not follow the ones we dont know much about.

yes seems so. All the promoter selling seems to be absorbed by the public category with negligible increase in DII and FII holding which are anyway below 1% and no names appear there!

A fellow investor talked to company officials. As per him, they had some raw material loss which was insured. No machinery is burned and they had just 5 days operational loss.

Considering both are in an industry with tailwinds and have done significant capex (I assume capex is completed), both could be good investment candidates. Since cashflow parameters aren’t mentioned, let’s assume they are equally capable on cashflow conversion (probably an oversimplification but let’s proceed).

It all depends on risk appetite and starting valuations.

Company A’s recent past is chequered and you mention this is due to incorrect vision, so is there reason to doubt management’s capabilities and decision making? Due to suppressed RoE and margins, with better margins and growth coming back you can expect earnings growth and rerating. Look at mean margins and increasing utilisation for forecasting. How much can they grow the business in a good cycle? Put together with your exit multiple, you could estimate the returns.

Company B is already probably a market leader thanks to sustained higher margins. How much can this company grow? With same margins, the returns should mimic the earnings growth largely. Importantly, are there levers for margins expansion through operating leverage or efficiencies? This would add to returns above.

One thing to note is typically during a good cycle, you never know for sure if the growth is sustainable or just a good cycle upbeat.