Company A is a listed ‘Consumer-Tech’ business in a highly competitive industry. The IPO of this company was significantly oversubscribed by retail and institutional investors. Excluding the Promoters, this ‘tech’ company has NO Engineers in its top management. The median salary of the employees in the company was less than 2 lakhs in FY21 (2.5 lakhs in FY20). The highest salary that any employee/senior management draws is less than INR 25 lacs per annum (ex of Promoters).

Find anything fishy in the above data?

Continue reading Market Cap Without Human-Cap? →

Continue reading In Defence Of DCF →

Since we started the PMS in 2016, one of the largest sectoral allocations in the 2Point2 Long Term Value Fund has been in the Gold Loan space. Despite having sold a good chunk in some of the names (due to increasing concentration), it continues to be a fairly large allocation.

Naturally, we end up getting tons of questions related to these businesses. Below we share our answers to some of the most frequently asked questions. This should also help to articulate our investment thesis and why we continue to invest in this space.
Continue reading Q & A: The Gold Loan Business →

The equity markets in India (and globally) have had an extraordinary rally in FY21 with Nifty 50 returns of 64%. Mid and Smallcap stocks have done even better with Nifty Midcap 100 return of 79% and Nifty Smallcap 100 return of 98%. Continue reading Portfolio Management Services (PMS) VS Mutual Funds (MF)? →

2Point2 Long Term Value Fund completed 4 years this quarter. The fund performance in this period has been reasonably good considering the tough market conditions (particularly for small and midcap stocks). While we have made many successful investments, the overall portfolio performance was dragged down by some laggards. Since inception, we have made 31 investments (25 core investments and 6 special situation positions) out of which 5 investments had losses of more than 15%. We discuss below these 5 investments – the investment thesis, what went wrong and learnings if any.

Continue reading Our Worst Investments (So Far) →

India has a large number of listed Holding Companies (HoldCos) that hold shares of other listed and unlisted companies. A large part of the value of these HoldCos stems from their stakes in other businesses. Globally, HoldCos trade at a discount to the underlying Net Asset Value (NAV) of their holdings. These discounts tend to range between 5-20%. HoldCos in India are unique because the HoldCo discount is sometimes exceptionally high, ranging from 50-80%.

Continue reading Investing In Holding Companies →

“Whatever men attempt, they seem driven to try to overdo. When hopes are soaring, I always repeat to myself ‘Two and two still make four and no-one ever invented a way of getting something for nothing’. When the outlook is steeped in pessimism, I remind myself, “Two and two still make four and you can’t keep mankind down for long.”

– Bernard M. Baruch

Continue reading Investing In The Time Of Corona →

Bernie Madoff was the king of Wall Street. He had served as the Chairman of Nasdaq, the world’s second largest stock exchange (by market capitalization of shares traded). He was a prominent philanthropist serving on the boards of non-profits and donated millions to various charitable causes. He also happened to be the mastermind behind the world’s largest Ponzi scheme estimated at 65 billion $s. For his role in this scam, Bernie Madoff was sentenced to 150 years of prison.

Continue reading The Markopolos Method →

The government surprised the markets last month by cutting corporate tax rates to 25.6% from 34.9% (all inclusive) earlier. All else equal, the future profits of a company currently operating on a full tax rate should increase by ~15% and therefore the intrinsic value should also go up. However, the reality is a bit complicated. We share below our thoughts on the impact of tax cuts on different companies.

Continue reading Impact of Tax Cuts on Intrinsic Value →

In 1969, Eddie Antar opened a consumer electronics store in New York. Eddie’s stores (later renamed as Crazy Eddie) became popular for selling electronics at deep discounts to their competitors.

Continue reading Avoiding Landmines: The Panama Pump →