Perspectives

Investment thesis on Delhivery

We took an initial position of 3% in Delhivery, a logistics firm.

Logistics is an industry with decadal tail winds. We believe the sector will grow 12%+ and leaders can grow at 15%+ for long periods of time.
Delhivery has a competitive edge and is investing to enhance the same.
It can be 20% ROE business at scale.
We are aligned with the thought process of the promoter / management team.
We are paying a price that is broadly reasonable.

What does Delhivery do?

Delhivery is India’s largest fully integrated third party logistics services provider with a nationwide network covering over 18,600 pin codes. The company provides a wide range of logistics services

Why are Gold prices rising

We are an Equity fund house. We will not be buying Gold in portfolios. However, I would like to share my understanding of why Gold prices are doing well and why they should continue to do well.

Gold has no attraction to fundamental investors as it generates no cash flow. However, Gold has served as a store of value. Here is the empirical evidence.

Investment thesis on Yasho Industries

In an earlier blog, read here, we discussed the importance of seeking Asymmetric outcomes.

What are conditions under which one could find Asymmetric outcomes? One needs:

Large and growing market opportunity that creates opportunity for rapid profit growth at acceptable ROEs (18%+)
A promoter that will continue to invest for growth but not be imprudent with risk taking. Is enhancing organization’s capabilities.
Broadly acceptable entry valuations.
Patience – you need time to allow compounding to work and progress is seldom linear.

We believe Yasho Industries fulfils all these conditions at present.

Worsening macro situation in China and high interest rates in the US

Enclosed note discusses our views on the worsening China macro situation and high interest rates in the US.

Indian markets if the BJP loses the 2024 election

We have put together a brief note to explain our perspective on impact to Indian markets if the BJP loses the 2024 election.

Outlook for future returns

We have put together a brief note to discuss our outlook for future returns.

Investment thesis on IndiaMART InterMESH

A key attribute of our firm’s culture is the focus on writing a detailed investment thesis on every position of interest. Writing clears the cobwebs in our minds and allows us to get more specific feedback from peers we respect. It also reduces the chances of errors.

IndiaMART is a company we have owned since 2020. We enclose a more detailed thesis that explains why we believe this company can provide Asymmetric outcomes this decade and why the trailing PE ratio, often used as a valuation proxy, provides an erroneous representation of IndiaMARTs true value.

Is it different this time?

Like most valuation-conscious investors at present, we too are grappling to deploy capital at acceptable valuations. In many new accounts opened since January 2023, we continue to hold 20%+ uninvested cash. While we are not accepting capital from new partners at present, if we did, we would be able to deploy only ~40% in Week 1, most of it in Large Caps.

Our uninvested cash prompted a partner to ask us recently whether we are missing “something”. Sentiment for India is very positive. There is a wall of FII money waiting to enter India. SIP flows continue to be strong. Hence can’t valuation multiples continue to climb higher? Is it different this time?
It is not different this time, just the behavioural cycle at play in Small caps and select sectors.

Our perspectives on valuation euphoria in Small and Micro Caps at present

We have put together a brief note to explain our perspective on valuation in Small & Micro Caps

Looking for Asymmetric outcomes

The enclosed blog discusses the power of Asymmetric outcomes, where to look for such returns, what it takes to achieve them, and how we think about what share of the portfolio we allocate to such ideas.