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.

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

Stoicism and Investing

Stoicism and Investing In my experience, investing is 9% theory, 1% execution, and 90% managing your emotions. That’s why I’ve been applying the philosophy of Stoicism to my investing strategy—it helps me to manage the most important part: Emotions.   At some point, you must take action. But we tend to keep searching for that special piece of wisdom that makes the difference. So we keep reading more books, listening to more podcasts, and following the different investing sages.   As a result, we never take action, and we become our own worst enemy.   Until you take your own money and put it on the line, you never know what it feels like to invest. I can say that I’ve made nearly all the investing mistakes one can make.   But Stoicism has helped me to become a better investor because it made me more level-headed.   Every time you invest in something, you’re taking a risk with your hard-earned money, which will always remain scary. But no matter what happens, don’t talk yourself out of investing. You can’t afford it.   In the long term, markets still move in one direction: Up. You either take the ride up, or you stay where you are. https://dariusforoux.com/stoic-path-to-wealth/

The history of memes

Richard Dawkins, the evolutionary biologist, coined the term “meme” in his 1976 book The Selfish Gene, likening discrete bits of human culture that propagate between people to genes. Dawkins shortened the ancient Greek word “mimeme” – with an apology to his classicist colleagues – to meme, to rhyme with “cream”. He suggested that memes were melodies, ideas, catchphrases or bits of information that leap from brain to brain through imitation, expediting their transmission.   He coined the term to highlight just how human culture can replicate itself. And in that sense memes have been around probably since humans have had cultures they have shared. But we can also see the kernels of what makes modern internet memes so successful in ancient forms of popular culture. https://www.bbc.com/future/article/20220928-the-surprising-power-of-internet-memes

Incentives are the most powerful force in the world

No matter how much information and context you have, nothing is more persuasive than what you desperately want or need to be true. And as Daniel Kahneman once wrote, “It is easier to recognize other people’s mistakes than our own.” What makes incentives powerful is not just how they influence other people’s decisions, but how blind we can be to how they impact our own.   A big thing here is recognizing that people are not calculators; they are storytellers. There’s too much information and too many blind spots for people to calculate exactly how the world works. Stories are the only realistic solution, simplifying complex problems into a few simple sentences. And the best story always wins – not the best idea or the right idea, but just whatever sounds the best and gets people nodding their head the most. Ben Franklin once wrote, “If you are to persuade, appeal to interest and not to reason.” Incentives fuel stories that justify people’s actions and beliefs, offering comfort even when they’re doing things they know are wrong and believe things they know aren’t true. https://collabfund.com/blog/incentives/