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CAGR Insights – 11 Nov 2022

CAGR Insights is a weekly newsletter full of insights from around the world of web.

Here’s the list of curated readings for you this week:

Personal Finance

  • Passive funds have been gaining popularity among investors. AMFI monthly data shows that passive funds have overtaken active funds in terms of net inflows. The data shows that passive funds have received monthly inflows of Rs.10,260 crore during October 2022 which was higher than that of active funds. Read here
  • More wealth means more alternative investment? –  This divergence of capital away from traditional asset classes like stocks and bonds and towards alternatives (i.e. private equity, hedge funds, etc.) seems to be positively correlated with the amount of wealth that someone has. Read here
  • Centre mulling changes to capital gains tax regime – Parity within asset classes will be a key consideration in the review that may even consider changes in the tax rate. See here.
  • Rewriting is the key to improved thinking- Obviously, revising is hard work. It demands that you put yourself through the wringer, intellectually and emotionally, to squeeze out the best you can offer.Read here.

Investing

  • State Guaranteed bonds are not all safe – What are the chances of a State Government guaranteed bond defaulting? There have been defaults of Madhya Pradesh, Uttar Pradesh, Bihar, Punjab and Orissa state PSU bonds defaulting early in this millennium (especially during 2000-2002). The bonds have been restructured and subsequently honored, but the chances of defaults occurring again should not be ignored, even if possibility of default is low. Read here.
  • The most important skill in finance has nothing to do with math.- It’s no coincidence that most of the all-time great investors — Benjamin Graham, Warren Buffett, Howard Marks, Peter Lynch, etc. — had the innate ability to explain their investment process in a way that everyone could understand it. Read here.
  • Sequoia marks down crypto exchange FTX investment to zero- We are reaching out to share an update on our investment in FTX. In recent days, a liquidity crunch has created solvency risk for FTX. The full nature and extent of this risk is not known at this time. Based on our current understanding, we are marking our investment down to $0  Read here.

Economy

  • U.S. inflation turning the corner – U.S. consumer prices rose less than expected in October, pushing the annual increase below 8% for the first time in eight months, the strongest signs yet that inflation was slowing, which would allow the Federal Reserve to scale back its hefty interest rate hikes. Read here.
  • How Bangladesh went from an economic miracle to needing IMF help – So the country’s economic health largely rests on those three things — exports, remittances and fuel prices — all of which have taken a hit in recent months. Read here.
  • India may adopt 2013 formula to deal with Europe on clearing corporations – India’s financial market regulators — the RBI and SEBI in Mumbai and IFSC, which regulates GIFT City trades — don’t want the European Securities and Market Authority (ESMA) to have the power to monitor, supervise or audit Indian clearing corporations (CCs. Read here.

CAGR Speak

  • So, why does everyone emphasize on starting to invest early? Read here.
  • Interesting read – CFA society India insights – Sep 2022 covers the society’s comments on recent SEBI consultation paper. Our co-founder has worked on the papers as part of CFA’s Research and Advocacy committee.  Read here.

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Check out CAGRwealth smallcase portfolios here.

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That’s it from our side. Have a great weekend ahead!

If you enjoyed reading this issue, please consider following us here, here and here for the encouragement to keep writing this weekly newsletter.

If you have any feedback that you’d like to share, simply reply to this email.

The content of this newsletter is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this newsletter unless mentioned explicitly. The writer may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated on this newsletter.

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CAGR Insights – 03 Nov 2022

CAGR Insights is a weekly newsletter full of insights from around the world of web.

Monthly Market update – Oct 2022

The Indian equity indices staged a strong rebound in October with the blue – chip S&P BSE SENSEX rising 5.9% and NIFTY 50 rising 5.4% in October.

Although the bullish sentiment was widespread, smaller companies lagged their larger peers; the S&P BSE SmallCap clocked up a relatively demure 1.3% gain. The rise has been on the back of strong corporate earnings reports and hopes of a less-hawkish stance from major central banks.

Among sectors, Energy and Banking sectors were the best performing sectors, while the FMCG and consumer durables were the two laggards

Our Co-founders discuss about the share bazaar for the month of Oct, what went well and what should investors NOT be doing! Watch the video here.

Here’s the list of curated readings for you this week:

Personal Finance

  • The Present Defines the Past- Whatever you’re thinking right now, you have to realize that you’re being biased by current events. The present is redefining your past.Read here.
  • SEBI has reduced the Face Value and trading lot for debt – SEBI has reduced the Face Value and trading lot for debt securities issued on private placement basis to 1 lakh from 10 lakhs. This is a welcome step to make debt securities accessible to retail investors. Read here
  • Demystifying: Top-Up Plan Vs A Super Top-Up Health Insurance Plan, Which Is Better?– Whether you should buy a top-up or a super top-up plan should depend on your medical requirement. Ideally, one should weigh all pros and cons before investing in any such plan. Read here
  • Underpenetrated equity markets in India- Its still 7% of the population. See such data and some more on this link by Abakkus investment.  See here.

Investing

  • Minimizing Drawdown Lay the Foundation to Quick Recovery– Many investors mistakenly base the success of their portfolios on returns alone. However, it is equally important to consider the risk involved in achieving those returns. Read here.
  • Indians just love gold – India’s gold demand jumped 14% on year to 191.7 tn in the September quarter, as retail investors responded to the drop in prices and weakness in equity markets, the World Gold Council said in its Gold Demand Trends report. Read here.
  • The Dhanlaxmi bank fiasco- The bank’s share price has crashed by 93% since 2010. It’s almost a penny stock now (below ₹10). And few days back, the shareholders had enough.  Read here.

Economy

  • Powell Sees Higher Peak for Rates, Path to Slow Tempo of Hikes- The Federal Reserve raised interest rates by three-quarters of a percentage point again on Wednesday and said its battle against inflation will require borrowing costs to rise further, yet signaled it may be nearing an inflection point in what has become the swiftest tightening of U.S. monetary policy in 40 years. Read here.
  • India has the potential to drive a fifth of the global growth over the next decade, with market capitalization likely to grow by over 11% annually to $10 trillion, according to global investment bank Morgan Stanley.Read here.
  • Foreigners Turn Sellers of India Bonds on Index Disappointment – Global funds sold 24.4 billion rupees ($295 million) of index-eligible Indian sovereign bonds in October after JPMorgan Chase & Co. refrained from including the debt in its gauge. Read here.

CAGR Speak

  • Happy to share that we currently have clients from 230 locations in India.  Read here.
  • “Some of our corporate records are not traceable.” Said a company in DHRP. Read here.
  • Shruti shares her learning from moderating CFA Society India workshop in Mumbai on Family Offices. Read here.

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Check out CAGRwealth smallcase portfolios here.

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That’s it from our side. Have a great weekend ahead!

If you enjoyed reading this issue, please consider following us here, here and here for the encouragement to keep writing this weekly newsletter.

If you have any feedback that you’d like to share, simply reply to this email.

The content of this newsletter is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this newsletter unless mentioned explicitly. The writer may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated on this newsletter.

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CAGR Insights – 28 Oct 2022

CAGR Insights is a weekly newsletter full of insights from around the world of web.

Here’s the list of curated readings for you this week:

Personal Finance

  • In search of deposits, bankers embark on door-to-door campaign – Video of Canara Bank employees selling FD scheme on road is from Goregaon East, Mumbai, confirm branch employees. Read here.
  • Invest in companies that Handle hard well – The adversity will separate the wheat from the chaff, the three-stars with upside from five-stars without it, and those who can “handle hard well” from those who cannot. Read here.
  • Ready reckoner for Passive funds – The latest edition of Cafemutual’s Passive Ready Reckoner is now out. It gives you all details that you need to know – daily AUM, TER, tracking error, tracking difference (1 year), and returns (1, 3 and 5 years). Additionally, it also captures the 1-year average trading volume and impact cost for ETFs.Read here.

Investing

  • Fundamental Analysis of Asahi India Glass– Dr. Vijay Malik brings out deep insights on Asahi India Glass, India’s leading producer of automotive and float glass. Read here.
  • A Primer on Free Cash Flow  – Free cash flow is one of the most dangerous terms in finance, and I am astonished by how it can be bent to mean whatever investors or managers want it to, and used to advance their sales pitches, says Prof, Aswath Damodaran.  Read the blog here.
  • Hedge funder David Einhorn says value investing may be gone forever- There have been serious changes to the market structure and pretty much most of the value investors have been put out of business.  Watch the interview here.
  • Understanding the hospital industry – The hospital industry is emerging rapidly due to progression in technology, increasing penetration in health insurance and growth in various lifestyle diseases across the country. This knowledge session by Parag Parikh Mutual fund team provides valuable insights. Watch here.

Economy

  • India’s Plan to Unlock Gold Gets New Focus With Trade Gap Near Record- The deposit plan and a related sovereign gold bond scheme, which allows an investor to buy a bond priced at the value of gold without an underlying physical asset, are a “far cry from success,” representing less than 2% of India’s annual gold consumption. Read here.
  • ECB raises rates by 75 bps for 3rd straight time, hints at more hikes – In recent months, soaring energy and food prices, supply bottlenecks and the post-pandemic recovery in demand have led to broadening of price pressures and an increase in inflation, the central bank said. Read here.
  • RBI MPC holds an additional meeting – The Monetary Policy Committee will hold an additional meeting, according to a press release issued by the Reserve Bank of India today. The meeting will be held under provision of Section 45ZN of the Reserve Bank of India Act, 1934, which pertains to drafting the committee’s report to the government on failure to meet the inflation targetting mandate. Read here.

CAGR Speak

  • Succession planning – Who is Next? This is one of the most daunting challenge several companies in India face. Read here.
  • Are women less confident about managing their own money?  Read here.

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Check out CAGRwealth smallcase portfolios here.

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That’s it from our side. Have a great weekend ahead!

If you enjoyed reading this issue, please consider following us here, here and here for the encouragement to keep writing this weekly newsletter.

If you have any feedback that you’d like to share, simply reply to this email.

The content of this newsletter is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this newsletter unless mentioned explicitly. The writer may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated on this newsletter.

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Learning from Warren Buffet Series – Part 5

Berkshire Hathaway Shareholder letter – 1983-85

Key Takeaways from the letters (in no particular order)

Learning 1

Allocation of capital is the key – Allocation of capital is the key factor to judge a business management or a fund manager. It is one of the most crucial factors which decide the fate of the business or fund. We as investors need to keep an eye on the capital allocation decisions of management. We often see management retaining large sums of the business earnings and reinvesting it in lower return of investment projects, unrelated businesses, just so that management can expand their empire or at times we see companies having a high dividend payout ratio when they actually need to deploy capital in their business. Both these circumstances are alarming. Market in general rewards management which has a history of good capital allocation decisions.

This is true for businesses and individuals alike as capital is not free, every decision we as individuals take to save, spend or invest capital matters.

Learning 2

Become a learning machine – To be successful one need to keep learning and updating oneself. To become a learning machine one has to voraciously read, think and aim to become little wiser every day. This concept been beautifully captured in an article on the Buffet formula in the widely read and followed blog “Farnam Street”. I strongly suggest that you read the full article here.

The biggest difficulty in life is not learning new things; it is to unlearn the old. Keynes articulated the problem crisply when he said: “The difficulty lies not in the new ideas but in escaping from the old ones.”

Learning 3

Invest in management who eat their own cooking – Buffet in his 1983 annual letter to shareholders lists down the major business principles which he follows and one of the most important one is that he has an ownership orientation instead of thinking like a manager. He and other directors are all major shareholders of Berkshire Hathaway. This is one of the key takeaways for us as investors – look for companies with high Promoter holdings or mutual funds where the fund managers have their own funds invested.

Learning 4

Study your failures rather than your success – Buffet emphasizes that both in life and other aspects of life studying and learning from your mistakes is of great importance. He embodies it by giving a full detailed account of his reason of shutting down the textile business and the loss in earnings caused by the delay in taking this decision.

Learning from our mistakes has one added advantage we tend to not repeat them again in future (hopefully). As Charlie Munger says “All I want to know is where I’m going to die so I’ll never go there.”

Learn more from Warren Buffet through previous parts of our series:

Part 1 | Part 2 | Part 3 | Part 4