Sashwath's Investing journey from 2019-2024... |Vinod Srinivasan| |Sashwath|

Summary

This 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

00:00

📈 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.

05:02

📊 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.

10:04

🚀 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.

Keywords

💡Investment advice

Investment advice refers to recommendations or suggestions provided by a professional or an expert on how to invest money in financial markets. In the video, the speaker clarifies that the content is not to be taken as investment advice, emphasizing that they are not registered investment advisers. The term is used to set the expectation that viewers should not make investment decisions based solely on the information provided in the video.

💡Buy and Hold

Buy and hold is an investment strategy where an investor purchases stocks and holds onto them for a long period, regardless of market fluctuations, with the expectation that the value will increase over time. The video discusses this strategy, questioning its suitability for all investors and exploring the conditions under which it might be most effective.

💡Intrinsic value

Intrinsic value is an estimate of the true value of a company based on its fundamentals, which may be different from its current market price. The video mentions intrinsic value as a key factor in identifying undervalued companies that are good candidates for the buy and hold strategy. For example, the speaker discusses how they used intrinsic value to determine that Finix Cables was undervalued.

💡Moderration

In the context of the video, moderation refers to a balanced approach to investing and spending, suggesting that investors should not be overly aggressive or reckless with their investments. The speaker aligns with the view that investors need to exercise caution and moderation in their investment strategies.

💡Finix Cables

Finix Cables is a company mentioned in the video as an example of a company that was undervalued and followed the buy and hold strategy. The speaker discusses their personal investment journey with Finix Cables, highlighting its financial performance and market conditions during their investment period.

💡PE Ratio

The PE Ratio, or Price-to-Earnings Ratio, is a valuation ratio calculated by dividing the market value per share by the earnings per share, used to determine if a stock is overvalued or undervalued. The video uses the PE Ratio to illustrate the undervaluation of Finix Cables compared to its competitors and to track changes in its market valuation over time.

💡Promoter holding

Promoter holding refers to the percentage of shares in a company held by its promoters or founders. In the video, the speaker checks for promoter holding as part of their due diligence when evaluating a company's health and potential as an investment, using it as an indicator of the promoters' confidence in the company.

💡Coffee can investing

Coffee can investing is a term used to describe a strategy where an investor buys stocks at a perceived undervalue and then metaphorically 'stores them away' without checking on them for a long period, expecting the value to increase over time. The video discusses this strategy and its potential benefits and drawbacks.

💡Value investing

Value investing is an investment approach that involves buying stocks that appear to be trading for less than their intrinsic value. The speaker identifies as a value investor and uses this approach to identify undervalued companies like Finix Cables, which they believe will eventually trade at a price that reflects their true value.

💡Reserves

Reserves in a financial context refer to the funds kept by a company as a buffer against potential future financial needs or losses. The video mentions reserves as part of the financial health check of a company, noting that Finix Cables had significant reserves with minimal debt, indicating financial stability.

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

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given below and my team would respond to

you if you want an Amazon Kindle copy

you can click the link below finally

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send a mail to B English at gmail.com

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