Neil Bahal

Neil Bahal

04-03-2022

13:23

A thread on the ideal investment framework as per me: 1-Begin with Top down. First identify Mega Trends like EV, Tech, Autonomous vehicles, QSR etc. If the sector itself is growing 12-15%, the best players will grow 25-30% easily. *Automatically you blacklist cyclicals.

Starting with Mega Trends is 50% of battle won. Avoid cyclical stuff like commodities, real estate, infrastructure, govt cos, power etc. Basically your usual NCLT guest house residents.

2- Focus on promoter quality, especially in Indian mid and smallcaps. Many do not consider minority shareholders as equals. They consider shareholders as liabilities. ie- In Bull mkt they know they will get good mkt cap for showing good earnings.

But in bear 🐻 phase, they know they won't get valuation for showing profit growth and they want to keep all 100% to themselves so they revert to doing accounting shenanigans. I call them 'Barsaati Mendaks'. These stocks go up in bull phase but fall 50%+ in bear phase.

3- Focus on Debt free companies. Cos which are debt free cannot go bankrupt. Sleep peacefully.

4- Use Special Situations to buy the above type companies for much below their actual intrinsic value. Special situations are an awesome way to get good stuff for cheap. For example, most consumer cos like Bajaj Electricals, Crompton etc trade at 30x ebitda but ...

Eureka Forbes was available at 10x 'steady state' ebitda when Advent PE agreed to buy this asset. A steep discount to all listed peers.

In a nutshell, Mega Trends + Good Promoter + Debt free + Special Situations = the gold standard of investing as per me. This is what we largely do in your Negen Capital PMS. 🙏


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