Good morning my dear readers,

A real crazy week and month come to an end.

Also, happy to say that your Negen PMS was +5.43% in January.

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Keeping things simple, is quite an under rated strategy.

I am going to quote a story which Joel Greenblatt had shared some time ago. It did not make much sense to me as a young boy in the stock market in my early days..

But as I heard it again after some years of experience, I found it very profound and clear and I hope it adds value to you as well.

**I have ofcourse added some edits to make it relatable.

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A 'couple' regularly go to antique auctions, but in tier 2 cities and beyond.

(Not in places like Mumbai or Delhi where many people are hustling and the auctions are crowded)..

They are quite clear on what they are looking for.

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They always keep historical records, artist wise on what kind of paintings have they sold in recent auctions and at what prices.

(Especially in crowded auctions in Mumbai, Delhi etc).

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And if they find a painting from an Artist who recently went to a big auction and sold a similar painting at a higher price, then thats the kind of painting they will risk their capital on with a view to take advantage of the 'mis pricing' and want a 're rating'.

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They are clear on what they want.

They are NOT searching for the next Picasso or Da Vinci.

They know its far easier to just finding a mis priced painting from a normal artist instead of trying to buy paintings and hope that the artist will become the next Picasso!

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But in the stock market, often, we come across people trying difficult tasks of buying a small IT company and expecting it to be the next Infosys.

People also make the mistake of buying stocks in crowded auctions.

(Basically buying 15% growth at 50x p/e).

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Personally, like the couple from the story above, I too maintain records of 'average p/e ratios' of different sectors.

And when, via Special Situations or Pre-IPO, I see that the target company p/e is well below the 'average p/e ratio' of the whole sector despite being a similar company (similar ratios, growth etc), I prefer buying such stocks and wait for my thesis to play out on Re-Rating and Growth.

Ofcourse, there can always be the odd investment that goes wrong, hence, I always prefer to diversify and create a 20-25 stock portfolio.

(We always need to win on averages).

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Interim disclaimer:

All this is not for part time investors. This kind of investing is only for full time investors.

Definitely take advice from your investment advisor before acting on the contents of this newsletter.

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Conclusion:

Basically, focus on value investing. Always try to value a business and aim to acquire your target company well below fair value.

If you dont understand special situations, then simply just be patient and wait for temporary bearish market conditions.

But always, remember that a good company must be accompanied with an attractive valuation as well.

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On a personal note, since we now have a Category 3 AIF as well where we also aim to do Pre-IPO and Anchor investing, I have been meetings many companies every week.

The feedback from almost everyone is that this Government is doing brilliant work behind the scenes.

There are many schemes for most sectors, which are immensely benefiting Indian companies.

Everyone is just scrambling to secure working capital to tap this huge India opportunity.

Pretty exciting decade ahead.

Lets stay calm. Lets not make silly mistakes like doing F/O, Leverage, Over trading etc.

Save money, Do Value Investing, Do SIP, Repeat.

Take care, see you next week.

My Best,

Neil Bahal

Founder

Negen Capital

Ps - The EPL title race is just extremely exciting this year. Which team are you rooting for?

You know my answer, YNWA.

Disclaimer: This newsletter is for educational purposes only. While the newsletter discusses just general market insights and past case studies, still, the stock market is a very risky place which can result in losses.

Hence, always check with your financial advisor before acting on any contents of this newsletter

No one has paid us to write this newsletter.

No representation or warranty, implied or statutory, is made as to the accuracy, completeness or fairness of the contents and opinion contained herein. The information can be no assurance that future results or events will be consistent with this information. Any decision or action taken by the recipient based on this information shall be solely and entirely at the risk of the recipient

Again, investing in equity market has high risk. You must consult your financial advisor before making any stock market related decisions.

Negen Capital is a SEBI registered PMS & AIF.