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Jacob Wolinsky
Jacob Wolinsky
Articles  | Author's Website |

Amitabh Singhi's Presentation At The Value investing Congress

I am lucky enough to be attending the Value Investing Congress. I took extensive notes on every speech and hope to post each one on GuruFocus over the next few days, in addition I will be posting a couple of interviews I plan on conducting. To follow my live updates from the Congress sign up for my Twitter alerts

http://twitter.com/valuewalk Amitabh Singhi was the first speaker at the Value Investing Congress (I will be interviewing him and posting it shortly on the site).

Amitabh Singhi is Managing Director at Surefin Investments, an India based portfolio management and investment advisory company. Since inception in mid-2001 the fund has returned 29.8% annualized, net of all fees to investors. Mr. Singhi graduated with a B.S. in Economics from the Wharton School at the University of Pennsylvania, with concentrations in Finance and Management.

I will cover all the points of his speech that I was able to write down. Any statement I was unsure of I did not include. However, it is possible that I misheard one or two things.

Singhi focused on investing in India.

Here are the main points that Singhi stated:

it was easy to find lots of net nets a while back in India. You did not need to know about the businesses so well since you were buying them for less than their liquidation value, however now this is no longer the case.

India is like an elephant it moves slowly but surely.

India has the 2nd largest number of listed companies, 5,000 companies are publically traded.

India also has several commodity exchanges.

In the Indian psyche wealth is appreciated, and honored.

With so many companies you can find lots of small cap companies.

There are many small caps in India with very low p/e ratios.

He looks for 4-5 companies a year.

Foreigners are underweight Indian small caps because they aren’t sold to them by brokers.

Small companies in India are barely covered by analysts.

If you combine under-ownership by foreigners, and no analyst companies you have a great opportunity.

You have 850 companies with no coverage at all.

Geographics- India is very diverse, 150,000 dialects, many different religions.

Local state laws dominate many times. It is federalist structure. Some states are even very communist oriented.

It is important to look at India from local perspective; you need feet on the ground. Singhi believes it is very hard for a foreign investor to get a good grasp of the country.

Current GDP in India $1.2 trillion, GDP is expected to increase another one trillion dollars in next five years.

Singhi believes that GDP might double after that.

Services 63%, manufacturing 20%, and agriculture 17% are of GDP.

Agriculture is very important to country despite it being a small percentage of GDP.

There is serious infrastructure problems like traffic jams in India, but the country really changed over past 20 years.

New infrastructure is being built like brand new bridge to Mumbai which just went up recently.

Real estate in the country is booming,

Oil and gas refineries and nuclear plants are going up.

500 billion is going to be spent on infrastructure over next 5 years. Half of that money will come from private sector.

Government knows it has to improve infrastructure.

India has 200k villages ranging from 500 to 50k homes.

Hero Honda group started making cycles in 50s. It is the largest manufacturer of motorbikes in 2001.

Make 5 million bikes a year.

Had 70-80% return on equity for ten years.

Hero Honda had a 15x return in 10 years.

Now selling 2.5k car that can fit family of five (tata company) but can probably fit 8. The stock is currently trading close to 30x earnings so it is expensive despite its impressive ROE.

Housing is big problem. Lots of people live in slums.

But the downtown area of cities like Mumbai look more like New York, and it was all built in past 15 years.

HDFC housing dev finance corp financed a lot of housing 15 x returns in 10 years.

Commercial vehicle is also important.

Trucks are used to transport way goods way above their capacity.

Business finances second hand truck (shriram) their loan to value is low. They securitize loans and sell to banks.

200x return in 10 years. Singhi bought in 2004 and made 15x return.

One of the main problems in infrastructure is power.

80% of GDP is domestic.

Corruption in politics is widespread.

Politicians receive gifts and brag about it in public.

Corruption is also due to arcane labor laws.

Singhi buys four different types of stocks; cigar butts, contrarian stocks, GARP, and special situations

Main idea; BKT make off road tires. The company makes agrimax which produces tractor tires. 90% of its products are exported, including 60 % to New York. It is very labor intensive. The company has a moatm ROE above 20%, 6x earnings 7.5 normalized earnings. BKT currently has 3% market share of 7.5 billion market share. The goal is to increase market share to 7%. Competitors like Michelin are getting out of business because can’t compete on costs. BKT has much higher EBITDA margins and can afford to cut prices. They have strong global distribution networks in Europe and US.

Singhi avoids industries like metals and mining and oil and gas to great extent because they obtain licenses through corruption. He does a lot of scuttlebutt. Under 100MM everything gets pained with same brush, but you can find 5 companies.

Many of the companies mentioned are trading at fair earnings, not great earnings. However, the valuations are not extreme.

Singhi used to be much more concentrated. Now has 12 to 15 positions, and sometimes might have a basket of 7 or 8 stocks. He mostly holds stocks with single digit P/Es ratios. He does not like finance companies and does do not like to pay for growth.

In general Singhi does not like large caps. He likes the quality of some of the companies. However, valuation is a big concern.

Closing remarks: India very resilient 30 years no electricity, crazy tax laws and we survived. Resilience with low expectations are a good combination.


Disclosure: No positions

About the author:

Jacob Wolinsky
My investment ideas have been inspired by many of value investors including Benjamin Graham, Charles Royce, John Neff, Joel Greenblatt, Peter Lynch, Seth Klarman,Martin Whitman and Bruce Greenwald. .I live with my wife and daughter in Monsey, NY. I can be contacted jacobwolinsky(AT)gmail.com and my blog is www.valuewalk.com

Visit Jacob Wolinsky's Website

Rating: 4.5/5 (17 votes)


Raj123456789 - 9 years ago    Report SPAM
I am afraid of 'Satyam' like situations to invest in India. But there are Enron, Authur Andersen and Madoffs for US. I am not sure if we can compare India and US but I have more confidence (illusion? may be) in US company financial statements.
Supratik - 9 years ago    Report SPAM
Fear of the unknown is natural.

I am afraid of 'Satyam' like situations to invest in India. But there are Enron, Authur Andersen and Madoffs for US. I am not sure if we can compare India and US but I have more confidence (illusion? may be) in US company financial statements.

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