Curiosity@Intelsense

 

Multidisciplinary learning is one of the best ways to improve our investment acumen. Here is a summary of some of the best learnings of the week.

China and the US are at the forefront of the new cold war. History teaches us that there is armed conflict when one superpower tries to challenge another existing superpower. This is known as the Thucydides Trap. This time around the conflict could potentially be around technology and commerce. In 2008 China spent a third as much as America did on R&D and about half as much as Europe, after adjusting for differences in the cost of living. By 2014 it had surpassed Europe. By 2020 its spending was 85% of America’s.   The fruits of this investment are becoming apparent: in August a Japanese research institute calculated that China now produces more of the world’s most highly cited academic research than America does. Since 2015 more patents have been issued in China than in America. China’s output of a basket of sophisticated goods including information technology, pharmaceuticals and electronics is expected to surpass America’s this year, according to a report published by the Information Technology and Innovation Foundation, an American think-tank. “China has become a serious competitor in the foundational technologies of the 21st century,” concluded another report last year from the Belfer Centre at Harvard University.   From war to an emerging new trend in commerce. Social commerce, or the act of buying through and after being influenced by social media, is silently growing. Already enormously popular in markets such as China, social commerce remains a small but rapidly growing segment in the United States. In 2021, $37 billion in goods and services were purchased through social-commerce channels.   By 2025, that figure is expected to swell to nearly $80 billion, or 5% of total US e-commerce. Globally, the social-commerce market is expected to grow to more than $2 trillion by 2025.

Sales Growth of Social Commerce in the US

I was interviewed by the Business Today channel and shared some thoughts on the market. The interview was geared more towards the real estate sector. Here is the link to the interview.

Realty Remains Firm In Trade, Analysing Anarock Report On Housing Sales In Top 7 Cities

Thought of the Week:

“The secret to doing good research is always to be a little underemployed. You waste years by not being able to waste hours.” – Amos Tversky This is a very important thought. Time management gurus will tell you to timebox your calendar and pack your schedule, accounting for every hour of your day. But if you are always doing something, when are you thinking? When are you letting your mind wander to make connections between the ideas that may be swirling just beneath the surface of your conscious mind? It is important to have a little slack in your schedule. Just be slightly underemployed.

Audio/Video of the Week: ASML's Secret: An exclusive view from inside the global semiconductor giant

In the Netherlands stands one of the world’s biggest drivers of technological progress: ASML. It supplies machines that make chips on a scale of just a few nanometers. And the world is crying out for chips. ASML makes the most advanced machine in the world; the lithography machine to make computer chips. And with chips as a strategic asset, ASML and its machine are at the center of the world geo-political stage. What is ASML’s secret, and who are the people who build this wondrous machine? This is a wonderful documentary on ASML and how the semiconductor industry is shaping up in the age of geopolitical conflicts.

ASML's Secret: An exclusive view from inside the global semiconductor giant | VPRO Documentary

Intelsense Insights:

Quiver smallcase continued its stellar performance last month. It was up 7.15% in the last month in a turbulent market. To subscribe to Quiver: https://intelsense.smallcase.com/smallcase/INSMO_0005 Min investment is 5 lakhs. The fees are 2% per year. 1/12th of the total fees is deducted every month. So, for a corpus of 5 lakhs, the monthly fees would be around Rs 830-850 (depending on the exact capital value during the month).

Quiver performance (since inception)

Footnote: You can sign up at https://www.getrevue.co/profile/intelsense to receive all blogs from me directly into your inbox.   To subscribe to any of Intelsense Research services, visit www.intelsense.in. If you wish to know more about our PMS offerings, mail us at equity@intelsense.in

National Logistics Policy – A Brief Look

National Logistics Policy 2022 is a policy initiative aimed at improving India’s overall efficiency in logistics. Here we take a brief look at what it means.

Major hurdles in the logistics industry:

India’s logistics costs amount to 13% to 15% of GDP. The country ranks 44th in logistics, while the economy ranks fifth in the world. Indian long-haul logistics is dependent largely on road transport as bottlenecks in their means of transport like railways and waterways abound. Trucks in India run around 300 kms in a day compared to a global average of 400-500 km. Out of this, the empty drive rate is as high as 40% - the primary reason being a lack of information and coordination. The railway is the second most opted medium in the country. However, both goods trains and passenger trains are run on the same rails and the passenger trains are given higher importance. Safety from damage and theft is inadequate and leaves businesses open to liabilities during goods transport. Moreover, dependency on other modes to transport goods through rail as the railway network is not always closely integrated with manufacturing and warehousing hubs.

Cost per ton-km across various modes in India

What is the government trying to achieve with the New Logistics Policy?

The main objective is to reduce costs incurred in logistics from 15% to around 8% of the GDP in the coming years. This should help in building an efficient warehousing system and creating hubs or centres for streamlining the entire supply chain process and reducing the bureaucracy and promoting cooperative federalism in trade and commerce. Reduced logistics costs should help in the accelerated growth of enterprises, SMEs and MSMEs thereby generating more employment opportunities and the development of human capital. It should also help in the emphasis on “Supply Chain Management” as an area of study and career.

Methods proposed under the policy

NLP proposes a Unified Logistics Interface Platform(ULIP) - a single portal comprising all the digital services related to logistics bringing together the unorganised service providers to standardise cost.   A common tracking of inventory levels to better facilitate the demand addressing capacity and introduction of advanced technology in tracking and coordination of various services. Ease of Logistics Service (ELOG) will be launched for grievance redressal and support to aid the continued smooth functioning of operations. ULIP is also to be well integrated with digital tools across the logistics value chain to provide an end-to-end dashboard for efficient planning and execution. 30 logistics systems of 7 Ministries/Departments have been integrated through 102 APIs with ULIP. The aim is to create a UPI kind of structure in which every single transaction of the logistics department can be authenticated.

Integration of ULIP with other digital tools

Possible hurdles that must be addressed

Huge costs are needed for the initial infrastructure developments primarily in roads, trucks, rails, warehouse development and technology implementation. Logistics is largely a disorganised market and implementation of uniform systems can be initially challenging. Reduction of tax revenue on various fronts for the government might cause bias in the effective implementation of this policy. As a digital system, system availability, efficient and fast operation, maintaining resilient and reliable backup facilities and cybersecurity are very important for smooth functioning. Any disruption that causes a delay could cause higher losses under the hub system.

How will it help?

Curiosity@Intelsense

 

Multidisciplinary learning is one of the best ways to improve our investment acumen. Here is a summary of some of the best learnings of the week. If you like this collection, consider forwarding it to someone who you think will appreciate it.   You can sign up to https://www.getrevue.co/profile/intelsense to receive all blogs from me directly into your inbox.   To subscribe to any of Intelsense Research services, visit www.intelsense.in. If you wish to know more about our PMS offerings, mail us at equity@intelsense.in

Narrative becomes important in the absence of earnings

In speculative periods when stock prices soar, investors frequently ignore the underlying earnings, balance sheets, etc. of stocks they own. Instead, recent price momentum dictates investors’ buy/sell decisions. Thus, a rising stock price alone is often enough justification to warrant buying shares.   One advantage that these unprofitable companies arguably have is that without existing profits, it’s impossible to compare the practicality of future profit projections.   In Simple Principles of Investment, published in 1919, the author joked: “If there is nothing to compare, there is nothing to criticize.”   Consequently, companies in this camp have more “gray area” to stir up enthusiasm, as it’s harder to disprove the feasibility of their narratives and projections. As a result, without actual profits, the company narrative becomes increasingly important for attracting capital. https://canvas.osam.com/Commentary/BlogPost?Permalink=why-fundamentals-matter

It's Supposed To Be Hard

Every investor knows, or should know, the truth about money management: More than 80% of professional investors underperform their benchmark (more depending on how you calculate it). Those stats are used in an often cynical way to show how the industry is broken, crowded, and ineffective.   But wouldn’t it be weirder if it were different?   Wouldn’t it be strange if every slightly ambitious investor could pick a few stocks and earn returns capable of generating dynastic wealth with other people’s money? Or even most of them? How and why could that world possibly exist? The reason Warren Buffett is interesting is because there’s only one of him.   The thing to keep in mind is that in any endeavor that has the potential to deliver big rewards, the best you can do is put the odds of success in your favor, which means recognizing that if you make 100 attempts at something, 99 of them might be failures but one might be an enormous win. https://collabfund.com/blog/its-supposed-to-be-hard/

Psychological investing

If your horizon stretches ten years or more, then owning a good business is one of the safest places to be. Even better: own a portfolio of such businesses. Thank goodness we have public equity markets, where we can easily buy pieces of some of the best businesses on the planet.    What makes investing hard is that things don’t unfold in an even, or predictable, manner. There are some great runs, there are nasty drawdowns and there are extended periods where you seem to go nowhere. Each presents lots of opportunities for investors to make costly mistakes.   You can lower the risks of making mistakes, too, by severely limiting the kinds of businesses you own in the first place. Investors usually focus on trying to find ideas that will perform, or perhaps where they feel they won’t lose money. But I will suggest another, less appreciated angle: think about the psychology involved in owning the name.   We have to admit part of investing is psychological - maybe the most important part. And we know the market will test us along the way. So, we have to look for businesses we would be comfortable holding even during bad times. https://www.woodlockhousefamilycapital.com/post/a-safe-place-to-hide

Quote of the Week:

“Life, in part, is like a poker game, wherein you have to learn to quit sometimes when holding a much-loved hand— you must learn to handle mistakes and new facts that change the odds.” ~Charlie Munger

Audio/Video of the Week: How to Time the Market

🔴 How to Time the Market (w/ Milton Berg)

Insights@Intelsense

Quiver smallcase https://publisher.smallcase.com/smallcase/INSMO_0005 has been performing well since its inception with a CAGR of 25.78%. It has been able to outperform consistently over the entire duration.

CAGR of 25.78%

Consistent Outperformance

Insights@Intelsense: Draft National Electricity Plan, September 2022

To subscribe to any of Intelsense Research services, visit www.intelsense.in. If you wish to know more about our PMS offerings, mail us at equity@intelsense.in

Insights@Intelsense

The Draft National Electricity Plan, September 2022 offers great insight into the Power Sector. Here we do a deep dive into some of the critical portions from the standpoint of infrastructural development and opportunities that may open up in this space. The plan envisages achieving a capacity addition of nearly 50% of the already existing installed base.

The total installed capacity for our country has grown at a rate of ~7.84% CAGR since independence.

The growth of installed capacity and energy generation has seen some tapering off compare to other historical 5 years periods and is expected to gain momentum from here.

Major reforms were undertaken in the Distribution Sector along with liquidity infusion during COVID -19.

The plan forecasts Region wise Energy requirement for the next decade.

The need for Inter-regional transmission capacity is stressed and also considered in the plan.

The estimated fund requirement for the capacity addition is a massive 14.35 lakh crore over the next 5 years.

The fund requirement to complete these projects is expected to provide growth opportunities for the Banking Sector at large.

The planned capex will open up requirements for the entire supply chain. Boiler, Turbine &Generator (BTG) form a major part of the thermal power plant. This is expected to benefit BHEL the largest player with L&T, Thermax & others.

Another very important part is emission control equipment like FGD - Flue Gas Desulphurisation and SCR - Selective Catalytic Reduction.

BHEL is already doing large FGD orders and working for SCR also.

The construction machinery requirement for a 660 MW set is outlined in the plan.

The plan mentions need of civil contractors to execute Hydro projects.

Wind Power plants execution can be achieved but focus on building quality turbines will be essential.

The plan stresses the need for developing indigenous sources for critical items.

The key material requirement is expected to provide major demand boost to Core Sector such as Cement & Steel. Major Cement demand coming from Hydro plants and for Steel from Wind projects.

Castings, Forgings, Tubes, Turbines and Generators requirement for Thermal Power Stations.

An FGD system alone will require huge amounts of Material for construction.

Limestone requirement for FGD is also expected to be massive.

Land Requirement in terms of Acre/MW was estimated.

Emission norms highlight the importance of FGD

The investments, if they fructify, could be a significant game-changer in the infrastructure space in India.