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Zeal to Read

Weekly Newsletter

Zeal to Read

Weekly Newsletter | by 2 | on 2021-01-31 03:00

At Zebu we spend a lot of time reading news and articles that cover a wide range of topics, including investment analysis, psychology, technology, etc. We have been sharing our favourite reads with clients under our weekly ‘ Zeal to read ’.

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One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute. – William Feather
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News you may use

As demand returns, FMCG majors post strong Q3.

Auto drivers bridge last-mile gap for e-comm companies, kirana shops in smaller towns.

Cabinet clears policy on PSU privatisation ahead of Union Budget:  The contours of the policy and the strategy to privatise PSUs will be announced by Finance Minister Nirmala Sitharaman in the Budget

Commercial vehicle recovery may gather speed in FY22

Disinvestment: FY22 target to be around Rs 2 lakh crore. FY21 receipts to be barely a fifth of target; BPCL sale, LIC IPO unlikely to materialise this fiscal.

Economic Survey says ‘V-shaped recovery’ expected, GDP growth seen at 11% for 2021-22

Economic Survey: Intense lockdown saved lives, helped faster recovery, says CEA

FDI inflows into India jump by 13% to $57bn in 2020: UN -At $163Bn, China Pips US, Becomes Largest Global Recipient

FMCG firms report recovery in urban markets, personal care

Govt has Loads of Money to Spend, may Borrow Less -While markets expect a drop, Centre may spring a surprise by borrowing to take advantage of the low interest rates

India Inc’s Q3 Nos Point to Strong Rebound in Economy – Performance reflects turnaround in overall demand amid festivals and a lower base

India smartphone market falls 2% to nearly 145 mn units in 2020: Canalys. A report by research firm Counterpoint earlier in the day had pointed to a 4 per cent dip in smartphone shipment to over 150 million units in 2020

India’s gold demand dips to 25-yr low in ’20 due to Covid

Inflation is a key risk to India’s V-shaped economic recovery.

Infrastructure Investment Funds: An attractive enabler for infra sector.  The government has set a Rs 100 trillion investment target for national infrastructure pipeline projects over the next five years, out of which 12000 crores are to be spent on prioritized government infra projects.

Insurance penetration inches up but stays much below global average: Eco Survey

Oil and gas companies seek pandemic relief in the upcoming Budget. The Centre had considered tax sops for exploration and production operators in May 2020

Rs 1 trn announced for strengthening agri-infra, cold storage. Narendra Singh Tomar informed that the government has set up a Rs 1 lakh crore fund under the “Aatmanirbhar package” to strengthen the crops storage infrastructure and reduce post-harvesting losses.

Sensex loses 3,500 points in 6 days. Analysts turn wary of a quick rebound

Weak diesel demand signals a slow rebound for industrial India

Views may be of use

Akin’s Laws of Investment Analysis
“Space is a completely unforgiving environment. If you screw up the engineering somebody dies (and there’s no partial credit because most of the analysis was right…) “

Source: (https://snippet.finance/akins-laws-of-investment-analysis/)

The Day the Stock Market Became a Video Game
Years from now we’ll look back at today as the day the stock market became a video game, replete with a cast of characters and a storyline to compete with the best of them.To be sure, it didn’t happen overnight. It’s been slowly building towards gamification since the start of the pandemic. Stuck at home and flush with stimulus cash (with nowhere to put it – 0% rates, etc., etc.), the stock market was the perfect medium to become the Roblox for adults.

Source: (https://compoundadvisors.com/2021/the-day-the-stock-market-became-a-video-game)

The Three Elements of an Investment Time Horizon
The most influential aspect of investment decision making is our time horizon. By understanding the period over which we hope to invest we can better frame what we are trying to accomplish and how we might achieve it.  If we are not certain about what the potential duration of our investment is, then we cannot hope to have a clear rationale for making it. Owning equities for three months bears little relationship with doing so over thirty years. Time is the defining feature.
Source: (https://behaviouralinvestment.com/2021/01/27/the-three-elements-of-an-investment-time-horizon/)

The Quality Factor—What Exactly Is It?
The existence of a quality premium in stocks that has been persistent over time, pervasive around the globe, and robust to various definitions have been well documented by studies such as “Buffett’s Alpha,” “Global Return Premiums on Earnings Quality, Value, and Size,” and “The Excess Returns of ‘Quality’ Stocks: A Behavioral Anomaly.” While there is no consistent definition of the quality factor (as there is with other factors), quality stocks typically have the following characteristics: low earnings volatility, high margins (profitability), high asset turnover (efficient use of capital), low financial leverage (little debt), low operating leverage (low fixed costs), and low specific stock risk. These are the traits AQR Capital Management used to define their version of the quality factor: QMJ, or quality minus junk. Companies with these attributes historically have provided higher returns, especially in down markets.
Source: (https://alphaarchitect.com/2021/01/28/the-quality-factor-what-exactly-is-it-2/)

Here is something you can’t understand
Practitioners of this ancient art of dumpster diving hold up Warren Buffett as their patron saint; the living embodiment of their investment philosophy and all its haughty ideals. Which is absolutely hilarious because Buffett hasn’t been pursuing those types of investments for five decades. He’s been buying growth companies in growing industries and paying a premium almost every time as he’s put a position on. In the rare cases that he’s attempted to buy “cheap” stocks, he’s ended up with absolute lemons like IBM and Wells Fargo, which have all been eventually sold after losses and a bit of reputational bruising. Buffett may sing from the value investing hymn book from time to time, but the night before services he’s at the billiards hall with the rest of us. Berkshire has spent the past five years as Apple’s largest shareholder, with its P/E ratio soaring by 300 percent during their ownership. They never so much as flinched.
Source: (https://thereformedbroker.com/2021/01/25/here-is-something-you-cant-understand/)

How Apple Is Organized for Innovation
Apple is well known for its innovations in hardware, software, and services. Thanks to them, it grew from some 8,000 employees and $7 billion in revenue in 1997, the year Steve Jobs returned, to 137,000 employees and $260 billion in revenue in 2019. Much less well known are the organizational design and the associated leadership model that have played a crucial role in the company’s innovation success.
Source: (https://hbr.org/2020/11/how-apple-is-organized-for-innovation)

The Munger Operating System: How to Live a Life That Really Works
To get what you want, deserve what you want. Trust, success, and admiration are earned.
It’s such a simple idea. It’s the golden rule so to speak: You want to deliver to the world what you would buy if you were on the other end. There is no ethos, in my opinion, that is better for any lawyer or any other person to have. By and large the people who have this ethos win in life and they don’t win just money, not just honors. They win the respect, the deserved trust of the people they deal with, and there is huge pleasure in life to be obtained from getting deserved trust.
Source: (https://fs.blog/2016/04/munger-operating-system/)

Economic Survey [2020-2021]
No clear correlation is observed between sovereign credit ratings and cyclically adjusted primary balance (per cent of potential GDP) across India’s sovereign credit ratings cohort (Figure 8). India remains a negative outlier, currently rated much below expectation for its level of cyclically adjusted primary balance (per cent of potential GDP). (p.93)

Average change in indicators during India’s threshold sovereign credit rating downgrade (investment grade to speculative grade) between 1998-2018. In the short term, this downgrade was negatively correlated with Sensex return, which declined by five per cent during the downgrade and declined by 0.2 per cent over the next two weeks. In the medium term, Sensex return declined by 12 per cent during the event and declined by 0.8 per cent over the next six months. “(p.109, Table 4)

India is an innovation outlier in terms of its level of development (per capita GDP in PPP terms). India is the third largest economy globally in PPP terms and the second largest in terms of population. Since per capita income is a function of the population, we examine whether India is a positive outlier because of high population. (p.244)

India’s trend of larger resident-share in total trademark applications is similar to that observed across other top ten economies (GDP current US$) except Canada (Figure 41). Larger share of residents in total trademark applications filed in India is a positive sign for advancement in innovation. (p.271)

India has had a generous tax incentive structure to boost R&D in the country as compared to several other top ten economies. (p.281)
Source: (https://www.indiabudget.gov.in/economicsurvey/ )

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Note: the above material is neither investment research, nor financial advice. Zebu Share and Wealth Managements Private Limited [SEBI Registration No: INZ000174634] does not seek payment for or business from this email in any shape or form.

 

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