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 →

The proliferation of internet has enabled a new breed of businesses called Platforms to thrive. Over the last two decades, several platforms have emerged (YouTube, Uber, Airbnb, Google, Facebook, Apple etc) and decimated many traditional businesses. As per a 2017 Credit Suisse report titled “Technology killing Corporate America”, average age of an S&P 500 company has come down to 20 years from 60 years in the 1950s. It is therefore important to understand the investment implications of the era of Platforms.

Continue reading Investing in the Era of Platforms →

2018 has been a year of significant de-rating in multiples of several mid and small cap stocks. However, many businesses with strong moats have been able to avoid the fate of the rest of the market. In most of these cases, stock returns over the last few years have been even higher than the earnings growth. Valuation multiple expansion has been a big driver of returns for these stocks.

Continue reading Moat + Long Runway = Buy at any price??? →