Haphazard Linkages

During dreary journeys across the market landscape scouring for interesting opportunities, the investor occasionally stumbles upon an oasis. Of extreme anomaly. The sighting is generally a mirage, a ray of false hope; but in some instances, the manifestation is very real and extremely intriguing, especially so when the anomaly manifests across companies operating in the same business. The anomaly was first highlighted here (' Over-priced anomalies in bear markets '), when discussing One Life Capital Advisors (Bloomberg: OCAP IN) . Extreme pricing is generally either an outcome of mass euphoria/fear, or a flock of informed market participant presence. OCAP IN seemed to be in the latter category. The post also highlighted the case of peer, Brescon Corporate Advisors (Bloomberg: BFS IN) , as an example of under-appreciation.  For brevity, the scheme of things as on the date of writing (Dec '11) is reproduced: Such cases of extreme pricing always pique my inte...

Event-specific circumstances, sometimes, create interesting situations for deploying capital. The Indian Natural Gas sector presented one such instance; in Equities and Implied Volatility, this week.  Background note here .  IVs popped across the board, principally manifesting in Indraprastha Gas (Bloomberg: IGL IN, NSE: IGL), which was the chief victim in the melee. Reacting to the adverse regulatory pronouncement, other companies in the Natural Gas space too came under fire from investors, IVs spiked as stock prices swooned. IGL stock fell over 40% within minutes and other companies shed double digit percent. Petronet LNG (Bloomberg: PLNG IN, NSE: PETRONET ), however, should have escaped relatively unscathed, as the ruling is expected to have little impact on its earnings power. But fear is a pervasive force, which divorces with rationality in time of duress. Time eventually acts as an arbiter in the estrangement but the process is gradual and fraught with roadbloc...

The catalyst that turns fantasies into realities came in the form of this SEBI order for OneLife Capital Advisors (covered here ).  SEBI (Indian market watchdog) barred this company, several others and the merchant bankers to these initial public issues from accessing the securities markets. SEBI accused them of diverting IPO proceeds, performing shoddy due diligence and aiding promoters to prop up prices post-listing. Unsurprisingly, in the beginning of the end scene, OCAP IN is down 15% as of this writing. A pummelling, rightly deserved. The end would be interesting.  HaLin rued their inability to initiate Shorts on such cases, in the previous post.   The Shorts are common whipping lads when markets and companies come under fire. The chorus against Shorts is inversely related to (1) market levels/stock prices, and (2) the acceleration of the fall from grace. Shorts are blamed for disrupting markets, for acting on misplaced rumours, for cornering poor and gentee...

One of the alluring things about investing is the prospect of rare sightings of anomalies. In a torrid market, typically, the universe of value Longs tends to expand relative to bull times. The opposite - an anomalous over-pricing in certain pockets - is rarer. One such example is OneLife Capital Advisors Ltd ( Bloomberg: OCAP IN; "OCAL" or "Company"), a recently listed Indian  company engaged in providing  financial intermediary services, an  aspiring equity broking franchise and portfolio management services company.  'Aspiring' is the operative word, as OCAL was incorporated in 2007 and commenced business in September 2009. As the Company admitted, there is little to look at in their limited operating history. Nevertheless, market participants enthusiastically bought into the Company's prospective story. Overall IPO was subscribed 1.53x, with retail participation at 2.5x allotted portion and Institutional interest at 1.02x.   ...

US$1 million =  रु.5 Crore Country: India Home currency: INR This post focuses on Karuturi Global ("the Company"), the world's largest producer of cut roses and an aspiring agriculture company with a presence across India, Kenya and Ethiopia. Before getting acquainted with the Company, it is worthwhile to get introduced, briefly, to the business of rose production.  The Business: A thorny process to a rosy end The birth of a rose involves the following: Land and Equipment : The major fixed-cost components. The quantity of roses produced is a function of yield, which tends to vary depending on a slew of factors Planting Harvesting and Picking : It takes about a year for full production, from the time of planting. Picking is a critical activity that influences rose quality and prices. Trained personnel are a critical requirement here Packing and Transport : Once the roses are picked, off they go into a bucket of bacteria-enhanced water for preserva...

A lazy afternoon opened my eyes to the perils of inaction in the investments business. When going through some of my old files, I came across a company that I had identified about a year ago (October 06). I had done all the hard work, done the numbers, saw the opportunity…and did not do anything. I share some valuable lessons in this post with the company as the protagonist. This story is about Gujarat Narmada Valley Fertilizers Company (GNFC) Inefficiency manifests itself GNFC is engaged in the Fertilizers business. What was so special about a company operating in a regulated, commodity business where no one player seemed to enjoy a strong ‘moat’? There were better investment opportunities elsewhere in other industries. I don’t disagree. As a Buffett follower, I wouldn’t have touched this company, never mind the price…But as a part believer in Benjamin Graham’s ‘cigar butt’ type stocks, I couldn’t pass this company over after what I saw… Cigar Butt stocks: A discarded cigar b...