@pressy79t Most of my picks are due to my positive personal experience or from Valuepickr.

The first thing I usually do when I know about a company is – to do search on the company for any fraudulent, unethical or questionable deeds of the management. If I am not satisfied I don’t do further research on the company.

Then I read interviews by the management and MD & A from AR for better understanding of the company and how gets impacted by macro economy. I also speak to friends if there any rumours which don’t get published in news papers. Porters 5 forces framework also helps me a lot to understand the moat. Any red flags, I would stop further work.

Then I look at growth numbers, return ratios, cash flows, etc. I do check P/E, but it is not a show stopper. If I find any issues I will dig further. If not, I add the company with a tracking position. If my opinion about the company does not change for the next few months, I will add more. When I strongly believe the management I try to give benefit of doubt. If I find any any serious issues later I will still come out of it.

I try not to have more companies from same industry from portfolio management perspective. When economic indicators are bad, I try to reduce my exposure to stock market. I have seen three major crashes from 1998. I am lucky to escape with good profits two times. Once, I got screwed as I got greedy and leveraged my portfolio for real estate investment.

I feel most of the things in life are simple to understand, we complicate them unnecessarily (Last week, I was trying to measure portfolio risk by calculating co-variance, correlation coefficients, etc. based on historical numbers when I know by practical exp. that correlation coefficients would be close to 1 during major uptrends and downtrends when most of the stocks tend to behave in a similar way).

This is how I do it. It may or may not work for you.

When I began investing, I had read a report on Tata Investment Corporation. Investments in such companies are to be treated as investments in mutual funds. The only triggers for re-rating of such stocks is if the underlying companies get re-rated. The “holding company” discount is also quite huge and normally more than 50%. This has been my observation too.

@Mahesh @varadharajanr @mikaarun

Hi Guys,

I am doing a deep dive into the company after I read the comment that Prof Bakshi’s fund is invested in the company.This is a business very much similar to MPS (great ROCE, high div. yield, ethical management, turnaround after change in ownership, long lasting customer relationships leading to stickiness i.e. the moat, complete end to end product solutions, global outsourcing opportunity, long past experience of 25 years resulting in expertise in niche area). One thing that is better in this case is that end market growth is expected to be 6-7% vs. 2% for publishing industry, and with more outsourcing, cross selling etc. the co. is expected to grow higher than the end market. Now the only issue is the slowdown in growth in FY15 because of loss of one big customer (which in my view is the biggest risk for the co. as I read somewhere that top 10 customers account for 60-70% of the revenues). I have few questions for the people who have a deeper understanding of the business:

1) Near term growth prospects (2-3 years): What are your views on the near term growth prospects i.e. in what range the co. can grow (is it 10% or 10-15% or 15%+) and what will be the growth drivers. Has the management indicated any growth outlook in the AGM or any interview?

2) Long term growth prospects (3+ years): What is the long term growth outlook for the co. and the industry as a whole?

3) Margins: This is clearly an OPEX story where once the growth resumes the margins will expand but are there any chances/drivers for margin to contract if the growth doesn’t happen, resulting in profits degrowth?

4) Risk of big customer loss: I think this is the biggest risk. It can happen that a big customer decides to bring the system in-house and hence not renew the contract with AKS w/o any of their fault. Last year they lost a big customer. Were there instances in the past also where they lost any of the big customers or last year was a rare one-off?

5) Industry Consolidation: As mentioned in the thread above, there are around 11 players (big ones, some in-house) in the industry so are there any chances of consolidation? Has the co. shown interest in growing inorganically (like MPS)? Or any of the competitors has shown interest in consolidation?

I would request all seniors to take sometime out and reply to the above queries.

Thanks

Retailers are blocking means they are buying or asking company to block if they get stock on consignment or equivalent to liquidate the stock during peak season sales (Read Diwali)

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