20241008 Going all-in on (very) expensive Indian things
DKK INR NOK AND SEK portfolio trades for October 2024
Hi all, and welcome to the Two Crows Week#2 portfolio picks for October 2024, in which we list stock picks for DDK, INR, NOK and SEK currencies.
So what’s new in markets?
Chinese stock markets shot up massively this month as the Chinese government announced stimulus and several famous Western investors — publicly, enthusiastically — announced that they were buying *Chinese everything* . The ensuing joy lasted all of a few days, fading as fickle investors apparently decided the stimulus wasn’t sufficiently stimulating, and various Chinese-related indices dropped 5-10% again overnight. Still up a lot, but yeah, the wild euphoria was short-lived.
I don’t invest in Chinese stocks, not personally nor via a Two Crows Systematic portfolio, but I suspect that if your investment thesis relies on the gentle, steady hand of the Chinese government to succeed, you might be playing with fire1.
It will be interesting to see whether the stimulus will target construction and industry or pivot more to services, especially as I’m an Australian and much of the Australian mining sector and economic success is tied to China’s historically epic appetite for raw materials. That said, it matters not a whit to our Two Crows portfolios, so Chinese stimulus will remain a side-curiosity at most.
Monthly trade commentary
Despite not particularly caring about Chinese government stimulus, I do have some rather dramatic changes to announce in the Two Crows portfolios, the Indian INR portfolio in particular.
Increasingly, my investment philosophy is evolving towards a seeking-rapid-growth approach. More and more I find myself convinced that in a world of many options, it is very rapid company growth (in terms of revenue, accompanied by excellent profitability) which is by far the biggest predictor of long-term investment success. Regardless of industry, product, management team, interest rate environment, government intervention, whatever — I suspect that truly great investments are made by small companies rapidly turning into big companies, and those same big companies rapidly growing into bigger companies. Why mess about investing in anything else?
By first considering what a “successful” investment looks like, then working backward to consider the starting point(s), I increasingly believe:
long-term, the most successful companies (and presumably, investments) have been those that are both big AND rapidly growing (and with a history of being profitable)
given the choice between investing in a fast growing big company or a fast growing small company, I would actually take the larger (contrary to much conventional thought) as larger companies can often negotiate better deals, do not depend on few customers as points of failure, attract better financing deals with banks, etc — they are more resilient
small companies are more likely to become BIG companies and achieve truly great investment returns only if they are rapidly-growing
small, rapidly growing companies can produce truly incredible gains if correctly identified and held long-term
a consistently rapidly-growing company will rarely trade at low, or even objectively “reasonable” price-to-value multiples. and indeed will often trade at what are considered to be very HIGH price-to-value multiples for years at a time. As a result, we might often be forced to pay up higher P/E and P/S levels that we would typically otherwise like, to catch that long wave rather than sit idly by on the sideline as a winner keeps growing beyond our grasp.
Enter India
This renewed focus on extreme (revenue/profit) growth made me go back and review our existing holdings. This process is ongoing, but means that this month I sell out of some some positions that look increasingly unlikely to deliver great performance, when comparing current economic performance vs historic and their corresponding historic share price returns. In addition, the Indian portfolio sees a large number of entirely new names introduced.
The Indian market — more than any other market in my analysis — contains many very small but very rapidly growing companies: companies growing revenues 20-30% annually for multiple years in a row, with very high Returns on Invested Capital and Operating Margins also. They are growing very rapidly, and very profitable. Many of these companies are so small that I would historically exclude them from my backtests and portfolio selections, or they are priced at such high ratios that they are dragged lower in ranking as they look relatively “expensive”. Many, especially, are now at positively nose-bleed-levels… several have rocketed up in price, moving from 1-2x Price-to-Sales multiples to 8-10x or even higher, within the past couple years. Rapid, extreme price-multiple expansion, which would normally mean that our risk of overpaying is high, and our future portfolio performance would suffer as a result of purchasing at these elevated levels.
I want a playground to experiment in realtime and see — what if we DO allow ourselves to pay up, to *really pay up* for quality, what is the outcome? What if we spread our bets across many stocks, accepting some losers but expecting2 to catch some spectacular winners? Do these rapid growers offer good opportunities for investors with a high risk tolerance and able to stomach a few inevitable disappointments, or do we end up with empty wallets and egg on our faces? One way to tell… and our INR portfolio will be our playground.
Indian markets are effectively closed to foreign investors such as myself, so regardless of outcomes, I — and most of my readers — will never be able to actually trade based on this model portfolio. If the strategy of pay-extreme-amounts-for-extreme-quality makes a tonne of money, great — perhaps we can adopt this thinking into our other portfolios where the opportunity presents itself. On the other hand, if the approach produces spectacular losses, that too will provide a valuable lesson.
With that in mind, on to this month’s stock selections for the Two Crows Systematic DKK, INR, NOK and SEK “Week#2” portfolios.
Monthly Trades for DKK, INR, NOK and SEK
DKK denominated stocks (500 000 DKK + divs/sales)
BUY CBRAIN.CO - cBrain A/S: 224 shares @ $206
BUY CHEMM.CO - ChemoMetec A/S: 120 shares @ $385.2
BUY DEMANT.CO - Demant A/S: 176 shares @ $261.6
BUY GMAB.CO - Genmab A/S: 29 shares @ $1587.5
BUY NETC.CO - Netcompany Group A/S: 153 shares @ $300.4
BUY NOVO-B.CO - Novo Nordisk A/S: 59 shares @ $778.2
BUY NTG.CO - NTG Nordic Transport Group A/S: 159 shares @ $290
BUY PAAL-B.CO - Per Aarsleff Holding A/S: 118 shares @ $389.5
BUY RILBA.CO - Ringkjøbing Landbobank A/S: 44 shares @ $1044
BUY RBREW.CO - Royal Unibrew A/S: 82 shares @ $562
BUY SKJE.CO - Skjern Bank A/S: 278 shares @ $166
INR denominated stocks (5 000 000 INR + divs + sales)
SELL DIAMINESQ.BO - Diamines and Chemicals Ltd: 2839 shares @ $540.55
SELL GANDHITUBE.BO - Gandhi Special Tubes Ltd: 1903 shares @ $819.55
SELL HINDZINC.BO - Hindustan Zinc Ltd: 3096 shares @ $517.5
BUY ADVAIT.BO - Advait Infratech Ltd: 306 shares @ $1794.05
BUY ANANDRATHI.BO - Anand Rathi Wealth Ltd: 140 shares @ $3911.9
BUY ARIHANTCAP.NS - Arihant Capital Markets Ltd: 4983 shares @ $110.06
BUY AVANTEL.BO - Avantel Ltd: 3074 shares @ $178.4
BUY CNCRD.BO - Concord Control Systems: 296 shares @ $1852.85
BUY DSSL.BO - Dynacons Systems & Solutions Ltd: 409 shares @ $1342.55
BUY EMSLIMITED.BO - EMS Ltd: 703 shares @ $780.4
BUY IRCTC.BO - Indian Railway Catering & Tourism Corp: 628 shares @ $872.75
BUY KPITTECH.BO - KPIT Technologies Ltd: 324 shares @ $1690.4
BUY KSOLVES.BO - Ksolves India Ltd: 540 shares @ $1016.05
BUY LTTS.BO - L&T Technology Services Ltd: 108 shares @ $5078.6
BUY NATCOPHARM.BO - NATCO Pharma Ltd: 405 shares @ $1354.65
BUY NETWEB.BO - Netweb Technologies India Ltd: 218 shares @ $2513.1
BUY NEULANDLAB.BO - Neuland Laboratories Ltd: 45 shares @ $12109.9
BUY NEWGEN.BO - Newgen Software Technologies Ltd: 424 shares @ $1293.85
BUY POLYMED.BO - Poly Medicure Ltd: 234 shares @ $2343.3
BUY PRUDENT.BO - Prudent Corporate Advisory Services Ltd: 222 shares @ $2466.5
BUY SGRL.BO - Shree Ganesh Remedies Ltd: 668 shares @ $820.95
NOK denominated stocks (500 000 NOK + divs/sales)
BUY BRG.OL - Borregaard ASA: 171 shares @ $196
BUY BOUV.OL - Bouvet ASA: 493 shares @ $68
BUY DOFG.OL - DOF Group ASA: 358 shares @ $93.65
BUY HAFNIO.OL - Hafnia Ltd: 420 shares @ $79.65
BUY KIT.OL - Kitron ASA: 1175 shares @ $28.5
BUY KOG.OL - Kongsberg Gruppen ASA: 31 shares @ $1074
BUY MEDI.OL - Medistim ASA: 195 shares @ $172
BUY MULTI.OL - Multiconsult ASA: 186 shares @ $180
BUY NKR.OL - Nekkar ASA: 3578 shares @ $9.36
BUY NORCO.OL - NORCONSULT ASA: 958 shares @ $34.95
BUY PROT.OL - Protector Forsikring ASA: 139 shares @ $240.5
BUY RANA.OL - Rana Gruber ASA: 453 shares @ $74
BUY SALM.OL - SalMar ASA: 59 shares @ $567.5
BUY SMCRT.OL - SmartCraft ASA: 1060 shares @ $31.6
BUY SVEG.OL - Sparebanken Vest: 268 shares @ $124.9
SEK denominated stocks (500 000 SEK + divs/sales)
SELL OGUN-B.ST - Ogunsen AB: 2296 shares @ $34
SELL BEIA-B.ST - Beijer Alma AB: 456 shares @ $184.4
SELL HPOL-B.ST - HEXPOL AB: 1072 shares @ $105.5
BUY BONEX.ST - Bonesupport Holding AB: 161 shares @ $321
BUY FIRE.ST - Firefly AB: 263 shares @ $197
BUY FNOX.ST - Fortnox AB: 854 shares @ $60.7
BUY INVE-B.ST - Investor AB: 169 shares @ $307.4
BUY IVSO.ST - Invisio AB: 225 shares @ $230
BUY LIME.ST - Lime Technologies AB: 148 shares @ $350
BUY OEM-B.ST - OEM International AB: 442 shares @ $117.2
BUY PREV-B.ST - Prevas AB: 401 shares @ $129.4
BUY RVRC.ST - RVRC Holding AB: 1112 shares @ $46.64
BUY SECT-B.ST - Sectra AB: 183 shares @ $283
BUY SINT.ST - SinterCast AB: 467 shares @ $111
BUY TFBANK.ST - TF Bank AB: 189 shares @ $275
As always, thanks for reading, and please feel free to get in touch if you’re interested in systematic investment and modelling.
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