Equity Advisory

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Saturday, 28 September 2019

Weekly Reading: Some Interesting Stuff


1) Mercedes-Benz gets into the E-Scooter segment with a new launch planned for early 2020
E-scooters have only been allowed on German roads since June, and it is already hard to conceive of a traffic scene without them. These agile, electrically powered scooters are the perfect way to cover short distances quickly and without harming the environment. The new E-Scooter in the Mercedes-Benz EQ brand family was developed in cooperation with the scooter specialist micro and is specifically designed for the first or last mile, making it the perfect companion for those wanting flexible mobility solutions. Co-branded with micro, the Mercedes star and the EQ logo appears on the handlebar stem as a trademark for Electric Intelligence.

2) Experiment with genetically modified mosquitoes produces unexpected results
An experimental trial to reduce the number of mosquitoes in a Brazilian town by releasing genetically modified mosquitoes have not gone as planned. Traces of the mutated insects have been detected in the natural population of mosquitoes, which was never supposed to happen.

3) Australia Is Using New Technology to Catch Drivers on Phones
The government intends to roll out 45 Mobile Phone Detection Cameras across the state by December. In fact, each unit contains two cameras. One camera photographs a car’s registration plate and a second high-set lens looks down through the windscreen and can see what drivers are doing with their hands.
The units use artificial intelligence to exclude drivers who are not touching their phones. Photos that show suspected illegal behaviour are referred for verification by human eyes before an infringement notice is sent to the vehicle’s registered owner along with a 344 Australian dollar ($232) fine. 

4) "Invert. Always Invert." ~ Charlie Munger
The Stoics believed that by imagining the worst-case scenario ahead of time, they could overcome their fears of negative experiences and make better plans to prevent them. While most people were focused on how they could achieve success, the Stoics also considered how they would manage failure. What would things look like if everything went wrong tomorrow? And what does this tell us about how we should prepare today?
Avoiding mistakes is an under-appreciated way to improve. In most jobs, you can enjoy some degree of success simply by being proactive and reliable—even if you are not particularly smart, fast, or talented in a given area. Sometimes it is more important to consider why people fail in life than why they succeed.
You can learn just as much from identifying what doesn't work as you can from spotting what does. What are the mistakes, errors, and flubs that you want to avoid? Inversion is not about finding good advice, but rather about finding anti-advice. It teaches you what to avoid.

5) Is SoftBank nearing the end?
In what may turn out to be a reckoning for Son, Wall Street has started running from companies backed by SoftBank and its Vision Fund. The chief executive of WeWork stepped down this week after a botched initial public offering. Uber’s stock has fallen nearly 30% from its IPO price in May. And shares in Slack, which provides a workplace messaging service, have tumbled more than 40% from their first day of trading in June.
SoftBank’s critics said its investments have poisoned the ecosystem for young companies by encouraging founders to take excessive risks with little regard for building businesses that can last through the ups and downs of the economy. They are hoping the WeWork debacle will force investors to be more sceptical about fast-growing companies. Even Son has acknowledged that the businesses his company invests in need to become financially sustainable more quickly.

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Friday, 20 September 2019

Good Times Ahead (I hope!!)


Below is the note I sent to the subscribers of the Intelsense equity advisory earlier today.


Today was a momentous day for Indian markets. Not only did we see a huge upmove, we also saw a complete U-turn in policy stance. The government had been projecting a very aggressive tax stance during the budget and after it. I think the realization that the economy was really in big trouble had not sunk in. Today's announcements of reduced corporate taxes come as a relief to me simply because this is the first real "action" the government has taken. I am ignoring the small tinkering with minor policies over the last few weeks as inconsequential.

The action is really big and bold. Cutting peak tax rates for corporates this drastically is HUGE. It signals that the government is willing to bite the bullet, take the pain of much higher fiscal deficit to spur growth. Some of the larger corporates were paying upwards of 33%-35% and a reduction to 25% means a 33% reduction in their tax outflows. This is itself would boost earnings growth significantly (around 8%-10%). Earnings growth was what has been missing from corporate India for a couple of years now. So, the markets should re-price stocks at least 10%-15% higher wherever the tax benefits are significant.

But. And there is always a but.

But, that is a one time benefit. Say a company was earning Rs 100 as PAT today after paying Rs 35 as tax. If their tax reduces to Rs 25, then the PAT directly jumps to Rs 110. Now the company has an extra Rs 10 in hand. So, those companies which are able to reinvest this additional money most efficiently would reap the most long term benefit.

Companies will have multiple options to decide what they do with the additional cash. Some could be:
- repay debt
- invest in capex
- reduce prices to spur growth
- pay more dividends / do buybacks
- incentivise employees to produce / sell more
- waste it by splurging on inconsequential or reckless spending
- all of the above

Any or all of the moves would have second and third order consequences most of which should be good.

A major beneficiary of this move could be that as the markets become more buoyant, it will be possible to carry on large disinvestment programs of PSUs.

The other major benefit is that we will become a much more tax competitive nation for global corporates when they decide on moving their supply chain to. Today, there is significant issues in China (China-US trade war has spurred an uncertain environment for global companies who have very large setups in China. Now, they are aggressively looking at alternative locations to hedge their bets. India will now be a possible favourable destination. If we can get our act together on land and labour reforms we will be unbeatable, but that is probably asking for too much!!

The global situation continues to be problematic. Large countries are facing severe economic headwinds. Close to $18 trillion dollars are currently in negative yield and projections are there that US will have to continue to cut policy rates significantly. All the large economies are struggling. China, which fuelled, the last global commodity rally by its consumption, is facing tough times of its own. China-US trade war, the drone strike on Aramco, Brexit looming its head again continue to pose serious challenges to the macro environment. We will keep that at the back of our minds but continue to focus on individual companies that we own and would like to own.

My sense is that we will move from a negative growth spiral which we had got ourselves into and into a positive growth spiral now. Our job of identifying good quality, well managed, growing companies do not change. I will be reviewing the portfolio stocks and the allocations over the weekend and will communicate any changes. If nothing else, today’s announcement has boosted my sentiments from cautious for somewhat more bullish!! ;-)

Hoping for the best!


P.S.: If you think you or someone you know will benefit from the equity advisory, you can visit www.intelsense.in
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Thursday, 12 September 2019

Weekly Reading - Some Interesting Stuff


1) A Santa Monica Tech Startup Has “Hacked” Meditation
Extraordinary experiences are the norm at Upgrade Labs in Santa Monica, a gymlike facility devoted to biohacking—“the art and science of becoming superhuman". The propagation of Upgrade Labs is part of a mission, according to CEO Martin Tobias, to bring the wellness-boosting fringe technology employed by pro athletes and the ultrarich to the (relatively affluent) masses. At $50 a pop for an individual hack or five grand for a curated “stack” of therapies, options include atmospheric cell training, pulsed electromagnetic field pick-me-ups, cryotherapy, and vitamin cocktails designed for injection straight into your veins.
Of all the treatments, though, the lab’s waterless virtual float tank is perhaps the most intriguing. The contraption stimulates relaxation and creative drive by, essentially, syncing your brain waves. The eyeshade is fitted with pulsing LEDs that blast white light through your closed eyelids. The headphones pump out binaural beats. The whole experience begins as sensory overload, but, for some at least, it eases into a profoundly relaxing, mentally rejuvenating experience. All this occurs because, purportedly, the rhythms of light and sound bombarding your sensory organs are specifically attuned to encourage one elusive thing: the production of theta waves in your brain.

2) An interview with Alibaba Group chairman and CEO Daniel Zhang
The other important thing is that they tend to spend more. China is famous for being a high-savings-rate society, but the younger generation are more willing to improve their lifestyle through spending, and that presents huge opportunities. In this digital era, when we talk about Alibaba’s future, we focus on helping our business partners win through successful digital transformation, rather than about how we can make ourselves even stronger. When small businesses can grow faster and grow healthier, it will benefit the whole society. As the Chinese economy transforms into a consumption-driven economy, Alibaba has a huge opportunity to understand consumers’ changing needs. We help connect the whole world with China to facilitate easy trading and access to the world’s largest consumer market.


3) Mixed reports on the efficacy of diet soda
A new study that found prodigious consumers of artificially sweetened drinks were 26 percent more likely to die prematurely than those who rarely drank sugar-free beverages.
Chemical sweeteners like aspartame and sucralose have also been extensively studied, with little evidence that they negatively impact human health, according to the F.D.A.
Still, many scientists say more research is needed to determine the long-term effects of consuming artificial sweeteners.

4) Data analytics is now big in sports
Days before the 2019 ICC Cricket World Cup began in May, media reports said the Indian cricket team had signed a deal with StatSports, a Northern Ireland-based performance tracking and analysis company. It produces a small device that sits between the shoulder blades on an athlete’s back, worn in a vest under the jersey. The device measures metrics such as distance covered, speed, acceleration, deceleration, and dynamic stress load. It allows the coach and support staff to analyse and record data about the players’ movements and manage their workload.

5) Is SoftBank a Ponzi scheme?
Using the valuations which are largely concocted by SoftBank themselves (since they’ve often been leading the financings of these “unicorns” and it is the last round of investment capital which is often the metric used for valuing these things), they’re looking to front-run IPOs and get out.
The entire “growth” story, which is to say companies that can continuously grow market share (preferably at a loss) looks to be rolling over.
It’s the classic Ponzi scheme. You always need fresh new capital to pay off the old capital in order for the scheme to continue. When there is no fresh new money, everything reverses and folks quickly realise the value of positive cash flow.

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Friday, 6 September 2019

Weekend Reading - Some Interesting Stuff

1) Chronic stress is starting to centre stage in diseases
According to the Health and Safety Executive (HSE) of the United Kingdom, stress, depression or anxiety accounted for 57% of all “sick days” in 2017/2018. The mind’s rising leverage over productivity is prompting interest in what might be impeding its performance. The focus has fallen on stress.

2) Earphones (buds / pods) are making you go deaf … slowly
Hearing loss isn’t just the stuff of senior citizens: 1 in 5 teens will experience hearing loss — a rate that’s 30% higher than it was 20 years ago. 
At maximum volume, earbuds and AirPods can be as loud as 110 decibels, which is the equivalent of someone shouting directly into your ear. According to the CDC, being exposed to 85 decibels over a prolonged period, or repeatedly, puts you at risk of hearing damage. If you’re listening to your earbuds at the maximum volume of 110 decibels, you’re at risk of hearing loss after just five minutes — barely the length of two songs.
When you’re using earbuds on a plane or train, you’re really pushing the limit of what’s safe. Some trains get up to 80 or 90 decibels. Then you’re pushing the limit 13 decibels over that, and that’s when it gets really dangerous.

3) Is non-standard labelling leading to food wastage?
In the US, as much as $218 billion on uneaten food is wasted every year. When analysing the entire supply chain, including farming and processing. Globally, the carbon emitted by wasted food can be classified as its own country—the third worst carbon emitter in the world, behind the U.S. and China.

4) Amazon’s latest payment method uses flesh and blood.
The e-tailing giant’s engineers are quietly testing scanners that can identify an individual human hand as a way to ring up a store purchase, with the goal of rolling them out at its Whole Foods supermarket chain in the coming months. The high-tech sensors are different from fingerprint scanners found on devices like the iPhone and don’t require users to physically touch their hands to the scanning surface. Instead, they use computer vision and depth geometry to process and identify the shape and size of each hand they scan before charging a credit card on file. The system, code-named “Orville,” will allow customers with Amazon Prime accounts to scan their hands at the store and link them to their credit or debit card.

5) An interview with Keshub Mahindra, now 95, discussing what life has taught him and lessons he would like to share with younger generations.
Keshub Mahindra is chairman emeritus of India’s Mahindra Group, a $20.7 billion conglomerate. His father and uncle founded the company in the mid-1940s. Mahindra joined the business soon after its inception, took over as chairman in 1963, and retired in 2012 after leading the group for five decades.
I believe happiness is an attitude of the mind. I tell my children, be happy in whatever you are doing, but I also tell them, be tolerant, be open, be honest, and transparent. That is how you should be. Take joy in the happiness of others.
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