Sashwath's Investing journey from 2019-2024... |Vinod Srinivasan| |Sashwath|
Summary
TLDRThis video discusses the concept of 'Buy and Hold' investing, emphasizing the importance of moderation and pragmatism in investment strategies. The host, Vode, shares his personal experience with Finolex Cables, illustrating how to identify undervalued companies and the rationale behind holding onto them despite market fluctuations. He also addresses the importance of not treating the content as financial advice, but rather as a discussion of ideas and personal investment journeys.
Takeaways
- 📢 The video content is based on personal perspectives and opinions, not to be taken as professional investment advice.
- 🚫 The speakers are not registered investment advisers and do not claim to be; they caution viewers to exercise risk and consult with a professional for investment decisions.
- 🤔 The video discusses the concept of 'Buy and Hold' investing, questioning if it's always the best strategy given various life circumstances and financial needs.
- 💡 The importance of moderation in investing and spending is highlighted, suggesting a pragmatic approach to managing one's portfolio.
- 🔍 The 'Buy and Hold' technique involves identifying undervalued companies with strong fundamentals and holding them for the long term.
- 📈 The speaker shares their personal experience with investing in 'Finix Cables', illustrating how they evaluated the company's fundamentals and market position.
- 📊 The company's financial health, including low debt, strong reserves, and consistent promoter holding, was a key factor in the decision to invest.
- 📉 Despite a temporary dip in the stock's market value, the underlying business performance remained strong, indicating a potential undervaluation.
- 🛑 The video touches on a family control battle that may have affected the stock's market perception, but the fundamentals remained solid.
- 📚 Reference is made to 'Common Stocks and Uncommon Profits' by Philip Fisher for further insights on intrinsic value and investment strategies.
- 📦 The concept of 'coffee can' investing is introduced, suggesting a strategy of buying undervalued stocks and holding them for a long period, regardless of short-term market fluctuations.
Q & A
What is the main disclaimer given by the speaker at the beginning of the video?
-The speaker clarifies that the content of the video is based on their own perspectives and opinions, and should not be taken as investment advice. They are not registered investment advisers and advise viewers to exercise caution and consult with a registered advisor before making any investment decisions.
What is the primary topic discussed in the video?
-The primary topic discussed is the concept of 'Buy and Hold' investing, specifically in the context of pragmatism and when to consider exiting a position, using the example of Finolex Cables.
What does the speaker mean by 'coffee can investing'?
-Coffee can investing refers to a strategy where one buys a group of stocks below their intrinsic value and holds onto them for a long period, metaphorically storing them away in a 'coffee can', without actively trading them for about 10 years.
According to the speaker, what are the key financial indicators to identify a good company for 'Buy and Hold' investing?
-The key financial indicators include a company trading below its intrinsic value, having good fundamentals such as low or no debt, strong promoter holding, profitability, and competitive profit margins.
Why did the speaker choose to invest in Finolex Cables during the pandemic?
-The speaker chose to invest in Finolex Cables because it was trading at a significant discount compared to its intrinsic value and its competitors, despite having strong financials, low debt, and a consistent promoter holding.
What was the situation with Finolex Cables' PE ratio during the period of 2019 to 2022 as described in the video?
-The PE ratio of Finolex Cables started at 21 in 2019, dropped to 8 during the pandemic, and then rose to 20 and even peaked at 30 in 2021, before sliding back down to 42 in 2022.
What was the issue that caused investors to shun Finolex Cables compared to its competitors?
-The issue was a control battle between family members who owned stocks in each other's companies, Finolex Cables and Finolex Pipes, creating uncertainty that deterred investors.
How did the speaker justify holding onto Finolex Cables despite its PE ratio rising to 30 in 2021?
-The speaker justified holding onto the stock based on the rationale of 'coffee can investing', believing in the company's strong fundamentals and the likelihood of its price eventually reflecting its intrinsic value.
What is the speaker's view on the importance of promoter holding stability in a company?
-The speaker views stable promoter holding as a positive sign, indicating that the promoters are not dumping the stock or engaging in shady practices, which can be reassuring for potential investors.
What advice does the speaker give regarding the timing of selling a stock that has increased significantly in value?
-The speaker suggests that if a stock's price significantly exceeds its intrinsic value, it might be a good time to exit. However, they also emphasize the importance of holding onto stocks that have strong fundamentals and potential for long-term growth.
What resources does the speaker offer for those interested in learning more about investing?
-The speaker offers two books they have written, 'The Alchemy of Money' and 'Ordinary Stocks, Extraordinary Profits', and provides a WhatsApp number and an email for interested individuals to procure copies or seek consultation.
Outlines
📈 Introduction to Buy and Hold Investing Philosophy
The speaker begins by cautioning viewers that the content of the video is based on personal perspectives and should not be taken as investment advice. They clarify that they are not registered investment advisers. The video's main topic is the Buy and Hold investing strategy, which the speaker and their uncle will discuss from their viewpoints. They explore the idea of investing in undervalued companies and the considerations for selling these investments, especially when life circumstances require it. The speaker uses the example of Finix Cables, a company they invested in, to illustrate their approach to value investing.
📊 Finix Cables: A Case Study in Value Investing
The speaker delves into a case study of Finix Cables, a company they began investing in during 2019. They discuss the company's financial performance, noting its low debt, strong promoter holding, and resilience during the COVID-19 pandemic. Despite the company's solid fundamentals, it was undervalued compared to its competitors, which the speaker identifies as an opportunity for value investors. They explain their rationale for buying and holding the stock, even as its price and PE ratio fluctuated, by comparing it to the market performance of similar companies.
🚀 The Coffee Can Investing Strategy and Its Long-Term Benefits
The speaker introduces the concept of 'Coffee Can Investing,' which involves buying stocks below their intrinsic value and holding onto them for an extended period, regardless of market fluctuations. They argue that this strategy can be successful due to the inherent growth potential of well-chosen companies. Using Finix Cables as an example again, they demonstrate how a long-term hold, even through periods of high PE ratios, can result in significant gains. The speaker also mentions their books and offers contact information for those interested in further consultation or resources.
Mindmap
Keywords
💡Investment advice
💡Buy and Hold
💡Intrinsic value
💡Moderration
💡Finix Cables
💡PE Ratio
💡Promoter holding
💡Coffee can investing
💡Value investing
💡Reserves
Highlights
The video content is based on personal perspectives and opinions and should not be taken as investment advice.
The importance of exercising caution and risk assessment in investments is emphasized.
The video discusses the concept of Buy and Hold investing and its practicality for investors with various financial needs and constraints.
The necessity of moderation in investment and spending is highlighted.
A detailed explanation of the Buy and Hold technique, including identifying a company trading below its intrinsic value.
The role of company fundamentals, debt levels, and promoter holdings in evaluating a company's value.
A case study of Finix Cables, a company chosen for its undervalued status and strong fundamentals.
The impact of family disputes on the market perception and stock price of Finix Cables.
The resilience of Finix Cables' profits and earnings per share despite the COVID-19 pandemic.
An analysis of the balance sheet of Finix Cables, showing strong reserves and minimal debt.
The concept of 'coffee can' investing, where stocks are bought below intrinsic value and held for the long term.
The potential for significant gains through coffee can investing, even with some investments falling short.
The author's personal experience with Finix Cables and the decision to hold onto the investment.
The fluctuation of Finix Cables' PE ratio and the decision-making process regarding when to sell.
The availability of the author's books for those interested in further insights on investing.
An invitation for viewers to consult with the author for personalized investment advice.
A call to action for viewers to subscribe, like, and turn on notifications for the channel.
Transcripts
hi guys just before we get into the
video the content which we're going to
be covering in this video is completely
based on our own perspectives and
opinions none of this should be taken as
uh impetus to move and do something in
terms of your Investments we're not SEI
registered investment advisers nor do we
claim to be we hope that you exercise
caution and risk in whatever Ventures
you take and uh we wish you the best and
please do not treat this as investment
advice this is just both of us
discussing ideas with each other with a
camera turned on yes your investment
should be done with a good SE registered
advisor and it should be done slowly and
prudently not happly by watching a video
hi everyone welcome back to be rich it's
me vode and I got shed with me today
today I thought I'd talk to him from our
point of view and ask his opinions on
things you guys have been wondering all
the time and been unable to ask him so
I'm going to play the role of the
audience while Char tries to convince me
otherwise why I should follow along and
not do what I'm doing currently okay
shash so what do we have for us today is
a very interesting topic and given that
a lot of you enjoyed yesterday's video
where we looked at the numbers and
really had a visual feel for the video
we're experimenting by recording our
screen and opening up some stock
profiles and uh you know going through
the process in the way in which I would
go about thinking uh about how to uh
invest so the topic today which um my
uncle had asked me in the morning when
he went to get coffee was that look it's
all good and great that you talk about
Buy and Hold buy and hold forever but
most investors don't have the luxury of
holding forever uh that's very true and
we not all of us are Warren Buffett not
all of us are Aras not all of us are
able to hold on to it forever because we
have expenses we have family members who
need the money at this point or you have
children who you have to educate a lot
of expenses which end up coming up and
you might have your retirement and you
might have to exit a certain amount of
positions to pay for that retirement
many costs there's no end to these costs
I would like to say I'm more in the camp
of my uncle over here which is that you
need to have moderation in how you
invest and how you spend so let's talk
about pragmatists version of coffee can
investing or rather buy and hold
investing how would you go about looking
at a company is Buy and Hold the best
strategy is there a when you should be
exiting these are the questions which I
want to go through today and hopefully
you can keep bouncing questions off of
me which are viewers might be wondering
at home so the Buy and Hold technique
for those of you who are not familiar
with it is that you identify a brilliant
company which is trading below its
intrinsic value we've made multiple
videos on how you can calculate
intrinsic value but a way to eyeball
intrinsic value can also be that uh you
look at what a company is trading at
whether it's fundamentals are good that
is it has almost close to no debt it has
a huge promoter holding these are check
marks for whether a company is good or
not whether it's profitable whether it
has competitive profit margins although
this is a little bit of a it's not it's
optional this is not that big of a
category but mainly it has to be
profitable and it has to have zero debt
and it is has to have a huge promoter
holding and there are a few other uh
pointers which you can check in the book
Common Stocks uh by Phil fer the author
of the book so once you have these fun
mentals in check and once you have
determined that this company is trading
well below what it's worth compared to
its peers how can I go about uh
investing in it let's say I buy a
company for 20 rupees and its actual
value according to my own calculation is
40 rupees and uh tomorrow it goes up to
40 or 50 rupees or 60 rupees even and
you say is it time to exit now because
you know it's well above its intrinsic
value it's at 60 70 or even 80 rupees
double its intrinsic value I think it's
a great time to exit that is a valid
opinion and we will be looking at how I
think about it so if you look at the
screen right now we have a company which
um I had picked up during the pandemic
era a little before the pandemic era
2019 and I bought into this company in
during the pandemic as well after
consultation with both my uncles we
discussed about this extensively and
this company is called finix cables
again this is not uh stock advice this
is just me going through my investing
Journey with you guys so fin X Cables is
a company which produces or rather
manufacturers electrical wires and
telecommunication wires and they've been
doing this for quite a while the office
here uses finel X Cables for their
electrical needs and they also produce
heaters and lights as well so finix
cables is generally considered a very
good product and um a lot of people use
it this was a company which during as
you can see on the screen if you go into
screener and you look at the tenure
chart of finx cables during 2019 uh to
2020 it was trading anywhere between 200
Rupees to about 450 rupees in 2019 I
started accumulating finx cables at
around 440 rupees and I bought more of
it during the dip in 2020 and I kept
accumulating until finx cables went all
the way up to 500 rupees after which I
said you know what there are better
opportunities in the market and I
stopped buying it but for the sake of
this exercise let's look at how that's
played out so fin X Cables when I
started buying it in 2019 was at a PE
ratio of 21 and uh when I kept buying
into it it went all the way down to a p
ratio of 8 and it moved up moved up
moved up in 2021 it went back all the
way back to 20 and it went to a peak of
30 almost well above its uh long-term
average and slid back down in 2022 and
now it's at a PE of 42 some of you may
be wondering this is all well and great
how do I know that this is a value buy
how is it trading below intrinsic value
this is uh a good question and a
question which I'm going to answer right
now if you look at the peers of finel X
Cables and when I looked at in 2019 I
saw that companies like polycab which is
another huge company which is another
market player in the same industry as
finex cables it was trading at a very
very large premium it was trading at 59
times earnings and uh it was even then
back then it was trading anywhere
between 50 to 60 times earnings Ki
Industries was also trading somewhere in
that ballpark so this company finex
cables which had which was also a market
leader which had uh nothing wrong with
its buyes per se was trading at a PE of
only uh
201628 at a point when its competitors
were trading at 59 68 at those in that
range so something felt off so I went to
dig into the financials of the company
to see what exactly was causing
investors to shun this company compared
to its competitors what has made fin
cables are such a poor buy compared to
you know polycab or even Ki Industries
because it wasn't striking me from a
perusal of its annual report because if
you looked at its annual report uh
you'll see that it's uh profit and loss
in 2019 and 2020 even though there was a
bit of decline in their operating
profits During the covid period in March
of 2020 and March of 2021 there was a
decline from 455 crores in 2019 to 2020
and 2021 it wasn't much of a decline
compared to other companies which also
went through the pandemic finel X Cables
actually did quite well and if you look
at its net profit margins or operating
profit margins it didn't fall much
during the covid crisis and if you end
up looking at its earnings per share its
earnings per share actually increased in
2020 and in 2021 when it was affected by
covid it fell down to 18 rupees and it
Rose back up the very next year to 26
and then it's gone onwards and upwards
since then okay so the problem was not
in the profit and loss where else was
the problem I looked at its balance
sheet they had 2,400 crores in reserves
uh and 8 crores in debt during uh 2019
in 2020 they had 2 2,688 cres so it's
gone up the reserves have gone up and in
2021 it went up even further even though
the covid crisis was there they didn't
borrow anything in fact the borrowing
went down from 8 to 7 crores which is a
very tiny amount compared to how much
they have in reserves so this compan is
a Wonder company I mean what's wrong
with the fundamentals there nothing
wrong with the fundamentals they don't
have they barely have any borrowings
they're producing a great product and
they're making profits and the profit
seems to be quite resilient to external
um situations and then I looked at the
promoter holding and if you look at the
promoter holding in the yearly way in
the yearly columns you'll see that the
promoter holding has remained relatively
consistent since March of 2019 all the
way to 2022 there's been nothing wrong
with the promoters nothing Shady with
the promoters dumping the stock or
something to that extent so this has
been a company which uh there was
nothing at least visibly wrong with
according to the fundamentals and it was
being battered by the market what I
realized after going through some of the
investor meeting transcripts annual
general meeting transcripts I found out
that the person who owned finex cables
and the person who owned finel X pipes
they were having a control battle
because the companies had stocks owning
each other that is fin cables had some
stocks of finx pipes and finex pipes had
some stocks of finx cables and there was
a fight between the family members on
who gets the controlling uh position of
finel X Cables which is why uh investors
who don't really like uncertainty
shunned the company back then because
they felt like it was very unstable but
me being a value investor I immediately
knew that look the company is doing
great financially it has a wonderful
product to today it doesn't matter
whether person a or person B is the one
who has controlling stake as long as
they don't borrow too much or as long as
they don't immediately try to exit from
the current product which they're
selling so there seems to be nothing
adversely affecting its earning
potential or its ability to keep making
money and uh throwing away money in its
reserves which is the rationale I used
to buy finel X Cables at the price at
which I did and I held on to it until
now I have not sold my Holdings in finix
cables and uh some of you might say that
look the PE went all the way up to 20
8.5 maybe it was above its intrinsic
value at that point shouldn't you have
exited it uh because immediately after
that in 2022 it went all the way to PE
of 15 so that is a valid question which
is the second part of this video on why
you should hold on to it according to
coffee can investing so coffee can
investing says that you have a group of
stocks about 10 of them and you buy them
below their intrinsic value and you
store them away in the metaphorical
coffee can and you don't think about it
for the next 10 years this method Works
technically because the way it works is
that look you already buying it under
intrinsic value and you know that this
company the price has to move up you
don't know when it's going to move up
you don't know it's whether it's going
to move up tomorrow a year from now two
years from now 3 years from now but it
will because you've done your valuation
correctly so why don't you just uh hold
on to it and write the wave when it does
uh get to that point that is the coffee
can way of investing and the coffee can
way of investing works because if you
buy of these kind of opportunities yes
maybe eight of them fall short but two
of them are likely to be huge successes
and what ends up happening is that the
two successes overshadow all the losses
you may or all the Lost opportunity uh
cost in the other buys which you made
the eight other buys and an example of
this is finex cables because if you had
bought finel X Cables and you just sat
on it without thinking much about it
bought it whenever it fell below its
intrinsic value you would made a killing
today and uh there are other
opportunities like this in the market
currently it's not that this is a
one-off thing that you know it's all
done and over with finel X Cables there
are many more opportunities like finel X
Cables it's a great privilege and honor
that so many of you in thousands have
subscribed to my channel and have
supported me I have written two books in
English the Alchemy of money and
ordinary stocks extraordinary profits
these books are published by us and are
ready if you want to procure a copy send
us a message to the WhatsApp number
given below and my team would respond to
you if you want an Amazon Kindle copy
you can click the link below finally
those who wish to consult with me can
send a mail to B English at gmail.com
once again I thank you for your support
if you like this video press the
Subscribe button of my channel hit the
like button and turn on the Bell
notification
[Music]
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