Certain ownership constructs are inherently disadvantageous to minority shareholders. I my 3rd essay of this series, I cover all that is bad about them. And I cannot be nice about this.
Such a well articulated essay. Especially the insights around efficient markets for conglomerate discounts + there being no counter-balancing forces like hostile takeovers etc. for checks and balances against "owner-less" entities in India. Thanks for sharing.
For good businesses with excellent promoters and good context, which are typically owned for decades, what is the exit plan? Do we have to wait till atleast one of the above filters is hit or do we wait for a certain ROI/IRR to be realised? Or do we keep trading only in such stocks?
I have box full of junk share certificates which has no value today. World is full of cheaters in different form and one has to be careful while investing. As Anand rightly called the promoters as History sheeters. Some of the AP based promoters are falling under this category.
Post M: Embarrassingly dumb question: When a company like Estée Lauder, Starbucks, etc. generates significant capital in China. How does the capital get out? If you manufacture there you can use it, but what if not?
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Post M: For Nike it’s easy; all the profits get reinvested in production. For Starbucks I presume that the HoldCo charges the ChinaCo a massive royalty to use the brand. But I have no idea what I am talking about.
Is it safe to assume that, in the very long term, the companies that will benefit are the ones that can find a way to invest the surplus generated offshore (India) to build production capacities offshore (India? an arbitrage on talent or labor. (Unless the brands are super sticky and has some prestige element to it, like beauty products)
If we apply the above framing to GOOG and AMZN, they can create surplus in India, use the surplus to acquire (invest) talent in India and develop products, that they can sell all over the world.
Thank you for being a rare sane voice in a largely insane universe..
Such a well articulated essay. Especially the insights around efficient markets for conglomerate discounts + there being no counter-balancing forces like hostile takeovers etc. for checks and balances against "owner-less" entities in India. Thanks for sharing.
Awesome write-up sir..thanks for sharing.
Thank you sir
For good businesses with excellent promoters and good context, which are typically owned for decades, what is the exit plan? Do we have to wait till atleast one of the above filters is hit or do we wait for a certain ROI/IRR to be realised? Or do we keep trading only in such stocks?
I've written whole essays on 'own forever' approach that we follow
Thanks for replying :) I'll check out those blogs.
I have box full of junk share certificates which has no value today. World is full of cheaters in different form and one has to be careful while investing. As Anand rightly called the promoters as History sheeters. Some of the AP based promoters are falling under this category.
I saw a beautiful question with respect to MNC's investing in overseas...
https://twitter.com/Post_Market/status/1427245603789197317?s=20
Post M: Embarrassingly dumb question: When a company like Estée Lauder, Starbucks, etc. generates significant capital in China. How does the capital get out? If you manufacture there you can use it, but what if not?
...
...
Post M: For Nike it’s easy; all the profits get reinvested in production. For Starbucks I presume that the HoldCo charges the ChinaCo a massive royalty to use the brand. But I have no idea what I am talking about.
Is it safe to assume that, in the very long term, the companies that will benefit are the ones that can find a way to invest the surplus generated offshore (India) to build production capacities offshore (India? an arbitrage on talent or labor. (Unless the brands are super sticky and has some prestige element to it, like beauty products)
If we apply the above framing to GOOG and AMZN, they can create surplus in India, use the surplus to acquire (invest) talent in India and develop products, that they can sell all over the world.