RESTART

 After being disqualified from the Paris Olympics, Vinesh Phogat lost her medal and said bye to her sport forever.

For an Indian to win an Olympic medal is one of the greatest achievements and missing a medal which was (almost) won is a huge setback. Bad luck. But is an Olympic medal so important to accept defeat and withdraw from a sport that was her life ? From 'give it all' to 'give it up'.

A story of Akbar Birbal comes to my mind. Akbar drew a line on paper and asked his courtiers to make it small without erasing any part of it. While other courtiers were confused with this riddle, Birbal the wisest, simply drew a longer line next to the existing one and automatically the existing line became shorter. Contrast used effectively. 

Is it not possible for Vinesh to use contrast to reshape her thoughts ?

Start with her birth. For a female to be born alive in Haryana is itself a remarkable measure of good luck. With a state infamous for female foeticide, Vinesh was one amongst the females who lived. That's good luck.

Sex Ratio in Haryana is 879 i.e. for each 1000 male, which is below national average of 940 as per latest census. [Source : Census 2011]

She is educated and playing a sport of her choice. In an alternative scenario, she could have been illiterate, working in farms and tending to cattle. That's more of good luck. She has proudly represented India at the highest level of sport and wears an Indian jersey. This jersey can only be earned and can't be bought no matter the amount of money one may have. Every Indian knows her and respects her like an Olympic medalist. This is all good luck which only one in many hundred million may get. 

If she counts 'good luck' in her life and compares it with the 'bad luck' of missing the Olympic medal, the bad luck would fall pale in comparison.

This brings a book to my mind which I read. The Sindhis by Mark-Anthony Falzon

We all know Sindhis are good at making money and loads of it. But one thing that they are better at is more noteworthy : They never give up.

Any setbacks that Sindhi businessmen face are commas in the long story and never full stops.

On similar lines, I remember a story I read about Swami Vivekananda.

Once a young man was depressed over breaking up with his girl friend. Swami Vivekanada told him " Breaking up with a girl friend is bad but losing the confidence to find another one is worse". 

In a recent movie 12th Fail, one character which I found even more endearing than the main character was Gauri Bhaiya and his restart tea stall. Gauri Bhaiya had one answer for every setback and failure : Restart.

Connecting all the above, I would say -

Should you ever face a professional or personal setback in your life: set the right contrast , look up to the Sindhis, invoke Swami Vivekananda, listen to Gauri Bhaiya and -

RESTART

Part Sherlock Holmes. Part Columbus

This is what I enjoy about my work- the fun of discovering new things and the joy of connecting them.

While glancing through the latest annual report of HDFC Bank , among the many photographs out there, I curiously stopped at this one. 'Jal Minar' provides drinking water to the rural population of a village. Nice name. Jal Minar like Qutub Minar

HDFC Bank has joined hands with Sehgal Foundation to install this. 

I became curious about the Sehgal Foundation. Who set it up ? What does it do ?

Sehgal Foundation was set up by Dr Surinder (Suri) Sehgal and Dr Edda Sehgal to improve the quality of life of the rural communities in India.

Dr Suri Sehgal and Dr Edda Sehgal are crop scientists and experts on hybrid seeds. They set up Proagro group (seeds company) which was later acquired by Bayer. They decided to use their wealth for philanthropy and set up the Sehgal Foundation.

Don't forget to watch the story of Dr Suri Sehgal The American Story

The foundation's website looks pretty comprehensive and in the spirit of transparency, a host of information is available on the website including audited financials going back many years. Curiously, I checked a few of them and found the name Lady Bamford Charitable Trust as one of the donors. This name sounded a little unusual and I further checked about this name.

This trust has been set up by Lady Carole Bamford. She is married to Lord Anthony Bamford who is the owner of a heavy equipment manufacturing company.

The name of the company is J C Bamford Excavators Limited or simply JCB. Oh, JCB I have heard and seen it all the time.

I didn't know that B in JCB stands for Bamford.

HDFC Bank > Sehgal Foundation > Lady Bamford > JCB

As I said, Business analysis is part Sherlock Holmes, part Columbus and a lot in between.

GREED IS IN THE AIR

Anybody with even a slight interest in the equity markets will know that there has been a party going on in that arena for the last couple of years. With every passing month, the noise decibel has been only going higher. There was a small interruption on June 4 post the election results but it seemed that the cops had turned up to see if all the approvals for the party were in place. And after the cops left the venue, the emboldened party goers went into a frenzy.

What do the valuations look like ?

I tried to compare the historic Nifty PE valuations with the current valuations to gauge the margin of safety. As per this note, it might not be prudent to rely on that comparison since NSE switched the earnings calculation method in April 2021.

Standalone versus Consolidated: NSE published standalone PE for the NIFTY up until March 2021. Starting April 2021, they switched to using consolidated earnings to calculate the NIFTY PE ratio. Therefore you see in the table below, a dip from 40.1 in March 2021 to 32.7 in April 2021. This means the NIFTY PE ratio now is not directly comparable to the PE ratio before April 2021. Any analysis that draws a relationship between historical returns to prevailing PE ratios can't be directly be applied to the current NIFTY PE Ratio.

[Source : Capital Mind]

So, I will leave it at that and look for some other signals.

Let's, look at the IPO subscriptions. Promoters are most knowledgeable about their businesses and they know the right time to cash their chips. Read this and this. Opportunistic promoters are taking money home by selling shares while the exuberant investors, particularly the small investors are falling head over heels while deploying their money in the stock market.

Another signal is the sheer number of first time investors who are entering the market. These investors have not experienced any sustained bear market and they don't know how stomachs churn when stocks fall down by a large percentage. In the past few months, I received hurried calls from a couple of my friends (who are very successful businessmen but have no clue about the stock market) to understand how to invest in stocks. Their enthusiasm makes me nervous and I don't think I was successful in tempering it.

The last signal for me is the lack of margin of safety in the valuations of businesses I like and would be open to investing. Since the valuations are not in my favour, I have no other option but to wait.

How long will you wait ?

I look for businesses that (1) I understand (2) earn an attractive economic return (3) are run by quality managements & (4) are available at a reasonable price. I will not invest till ALL the above conditions are met. I have been waiting to make an investment of a significant size and the current valuations are making the wait longer. I am prepared for that and sincerely hope that my clients are with me on this.

If you don't invest, what do you do in the mean time ?

I show everyday at my work with enthusiasm and remember Prof Donald's Sull's idea of active inaction. "Inaction does not have to mean that nothing is going on. When troops are not in battle, they keep themselves in a state of active preparedness." I am trying the same.

I read up on new businesses, review the existing ones, exit the ones which I think were a mistake or are not as good as I thought earlier.

Are you making a market forecast that the market will fall substantially ?

No, I am not. I am also sure that nobody can forecast that. All I am saying is that multiple signals have turned yellow and risk reward is not favourable. Hence, it is prudent to be cautious.

What does Rapper Badshah has to do with all this ?

All work and no play makes Ankur a dull boy. Since I don't want this note to be dull, I will end this with a groovy & peppy number by Rapper Badshah "Abhi to party shuru hui hai" 

He says in the song :

Baad mein na kehna, pehle hi de doon warning

party chalegi till 6 in the morning....

I know the party is on. I don't know if it will go till 6 in the morning. But I think there is a high chance that whenever it ends, it will result in a bad hangover.