Heard of this company some time back. I have started looking at it. This company is into Diamond and gold jewelry exports. It’s main market is US . It is into designing jewelry, managing the logisitics etc . Some positives
– Good ROE
– Very low fixed assets
– moderate WCAP requirement. Mainly in the Raw material inventory
– 10 % plus Net margins
– No debt
– 40 Rs / share of cash on the balance sheet
Some points which i need to figure
– what is the nature of the ‘investments’ in the balance sheet.
– what are the long term plans of the company
– nature of competition ?
– How good is the management. The company seems to have good Fresh cash flow. Other than some captial required for WCAP , the FA requirements are very low. So most of the Net profit is free cash for the company. Need to figure out what the company would be doing with the cash.
The biggest pain however is that the company’s website does not have their annual report or detail financial results. That is could be real dampener !!
Evaluating asian paints
asian paints has been the no.1 paints company for the last 20+ years. This company has returned almost 24% p.a returns since its IPO. Are these returns sustainable ?
Even if the level of returns may not be , i have always felt the company has strong and sustainable competitive advantages like
– A strong distribution network with lockin at key retail dealers through their color world package
– Strong brands in the paints industry like apcolite, apex, gattu etc
– economies of scale in manufacturing, adverstising distribution due to the high market shares (40 %+ )
– good pricing power as the company has been able to sustain margins inspite of raw material price increases
– good management – evident through the track record of managing low WCAP, low debt, sensible accquisitions and good brands and products
In the medium to long term the company should continue to do well in india. The challenge for the company is to port these strengths to their internation operations. That seems to be happening for the time being
Buffet’s talk at Notre Dame
capital, and its going to be a dollar bill ten years from now. You want a dollar bill that’s
going to compound at 12%’
management have to think before they decide to raise prices?” You’re looking at
marvelous business when you look in the mirror and say “mirror mirror on the wall, how
much should I charge for Coke this fall?” That’s a great business. When you say, like we
used to in the textile business, when you get down on your knees, you know you call in
all the priests, rabbis, and everyone else, “just another half cent a yard”. Then you get up
and they say “We won’t pay it”. Its just night and day. You KNOW those businesses. I
mean, if you walk into a drugstore, and you say “I’d like a Hershey bar” and the man says
“I don’t’ have any Hershey bars, but I’ve got this unmarked chocolate bar, and its a nickel
cheaper than a Hershey bar” you just go across the street and buy a Hershey bar. THAT is
a good business.’
thing in investments and also in terms of your career. Because in your career what train
you get on makes a lot of difference. Because frequently, perhaps generally, when people
get out of business school, they don’t give enough thought to exactly what sort of train
they’re going to get on. And it makes a tremendous difference whether you get involved
in a prosperous company; one that’s going to really do well. On balance, you want to go
with a company whose stock is going to be a good investment over the years because
there’s going to be much more opportunity; there’s going to be more money made, you’re
going to (garbled). And if you get involved with some of the businesses I’ve been
involved with like trading stamps
you have a choice between going to work for a wonderful business that is not capital
intensive, and one that is capital intensive, I suggest that you look at the one that is not
capital intensive.
today on the plane (garbled). I’ll grab whatever comes in the morning. American Banker
comes every day, so I’ll read that. I’ll read the Wall Street Journal. Obviously. I’ll read
Editor and Publisher, I’ll read Broadcasting, I’ll read Property Casualty Review, I’ll read
Jeffrey Meyer’s Beverage Digest. I’ll read everything. And I own 100 shares of almost
every stock I can think of just so I know I’ll get all the reports. And I carry around
prospectuses and proxy material. Don’t read broker’s reports. You should be very careful
with those.
Checking on Britannia industries
Started looking at britannia industries. It is selling for around 14 times FY05 earnings. The bottom line seems to be growing in low teens. There is very low debt on the balance sheet. In addition found the following interesting
– 30 % ROE
– almost 100 Rs / per investment – need to figure out what is this investment ( net of debt )
– Very high asset TO ratios.
– good free cash flow
– slight improvement in the margin (which seem adequate for an FMCG company )
– strong brands , extensive distribution network, good history of new products
What i still need to figure out
– The NP growth is almost to the tune of 30 % for the year. How sustainable is it ?
– Competitive scenario – ITC / HLL entry into brakery business, how will it impact britannia
– How will the management handle the free cash flows ? will they continue share buybacks or make some bad accquisitions or investments ( need to figure out these investments)
One the strangest points is that britannia does not have a website. How can a 1000 crore + company not have a website ? So it is diffcult to get their annual report