About
India Stock Research (ISR) is a newsletter that publishes research on companies that trade on Indian stock exchanges and whose success or failure is dictated by the internal or indigenous economic activity of the country. For example, companies like Wipro and Infosys despite being located in India until now generate much of their revenues and profits from the large developed economies of the world. As long they are focused on these geographies, they are not representative of the growth in the Indian economy. On the other hand, companies like Reliance Industries, State Bank of India, ICICI Bank, Mahindra and Mahindra are companies whose success or failure are dictated by growth in India. Our goal is to cover these companies.
The underlying philosophy and strategy of ISR’s investment process is to unearth companies that are good businesses which we define as those that generate at minimum a 10% return on capital measured over a minimum of 5 - 7 years.
Market history in well developed markets like the US tells us that these levels of long-term returns are associated with businesses that we would classify as long-life cycle companies. A long-life cycle company by ISR’s definition are companies whose products and services are critical to the functioning of a modern economy. The company’s businesses consequently are less susceptible to technological obsolescence or shifts in consumer preferences.
Another set of companies that also meet the criteria for inclusion in ISR’s process are companies that have certain qualitative advantages such as a well recognized brand name, or one that participates in a monopolistic or oligopolistic industry or the continued involvement of the enterprising founder.
The kinds of companies we like are often considered dull, boring and simple. The companies business can be explained in a few sentences if needed. Examples of such companies can be found among infrastructure companies in the transportation, electrical utilities, energy companies, certain consumer goods, insurance, banking sectors of the economy.
ISR’s focus on long-life cycle companies eliminates the biggest risk for long-term investors, which is the death of a company, and loss of principal by the investor because the product or service provided is no longer desired by its customers. Our focus on qualitative factors such as brand names, monopoly or oligopolistic industry participation and the involvement of a striving founder identify companies that are capable of earning excess returns consistently over time.
Volatility from the perspective of ISR in our view is not a primary risk, but rather an opportunity, and should be considered as the entry price for participating in financial markets.
The success of our strategy is predicated on the success of the business operations of the companies we choose to cover. ISR has no ability to time markets or determine the perfect time to buy or sell securities. In our view, if you can find a good business that makes a reasonable return, investors will do best by simply owning it through the ups and downs that come with stock market investing and limit turnover to the bare minimum.
India Stock Research is publication of The Capuchin Group LLC. The material published on this site may not be distributed or re-published without explicit permission of The Capuchin Group LLC. India Stock Research and Indian Stock Research and Intelligent Research for the Indian Investor are Trademarks owned by The Capuchin Group LLC.