Good morning dear readers,

To be honest, it's quite scary how fast every Friday is coming. We need to make the most of our time 🤝.

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Today, I am going to keep it very short and to the point.

Bet on the sector and don't be at risk of owning brands alone:

We all know that the EV sector will grow over the next 10yrs. But do we know which player will for sure prosper over these 10yrs?

Same goes for the Food/QSR sector, for sure, the size of the industry will be much larger over the next 10yrs, but we cannot be so certain on which particular players will be the biggest wealth creators..

(More burgers will be consumed, but it may not necessarily be our Burger chain that grows).

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This is because, while industries grow, competition is a factor for us to consider too.

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Hence, it's also very important to have ancillary service/product providers in our portfolio for diversification.

The ancillary players provide us a holistic option to play and participate in a sector's growth!

And that's because they supply to many brands in the growing sector, they are significantly more derisked than owning just a brand and betting on its future.

(I'm not asking you to sell all your brands. No, owning top brands is very important).

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Now, if you want to bet on the Asset Management space, then it's my personal opinion that it would make better sense to own an ancillary service provider like a Custodian/Trustee, Depository, Wealth manager instead of the Asset Management company directly.

(Asset management co has a tough task to compete and show good results and a poor run for few years may not bode well for them, but the Custodian/Depository for example, he has a huge client base of many asset management companies. One asset manager not performing won't affect them. They would be a more 'derisked' bet on the sector).

Disclaimer being that we should own brands we like, sure. But also we must understand that the ancillary players are equally important investment options.

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As I promised, I won't take too much of your precious Friday morning.

Enjoy your coffee my friends.

Ps- Diwali is here and my wife is on a cleaning spree. Any suggestions on how to escape the chores?

My Best,

Neil Bahal

Founder

Negen Capital

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.

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