Good morning my dear readers,

Friday, market ki duty khatam aur biwi ki duty shuru.

On a serious note, IIM Ahmedabad & Pmsaifworld did PMS awards based on 'Risk Adjusted Returns', and I am very happy to inform you that your Negen PMS got the 2nd rank in the 3 year category of 'Mid & Smallcap' segment.

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'Hold Forever' they say, but hold 'What'?

This is a topic which takes years of evolution for every investor and the answer is usually different for different people.

(I am going to keep today's newsletter pretty short, Coffee is getting cold).

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For me, after many years, currently, this is my mental model for stock selection for long term investing.

(Proverbial hold forever - personally I dont think any stock can be bought today with 'hold forever' attitude).

1- I am a firm believer that for me, I must first begin 'Top Down'.

Swim with the Tide, sector wise.

When we Swim with the Tide, even if we are a weak swimmer, we can progress in life.

Hence, if the sector is in a structural up-cycle, then thats the first and biggest important point for me, personally.

2- Good Company

RoIC should ideally be more than 30%. That is a mark of a very strong company.

When RoIC is high, that results in the company's bank balance to increase every year, and thats what we really want.

*Companies with high RoIC never mention EBITDA in their investor presentation.

**Its usually your very low RoIC companies which require heavy capex and maintenance which keep talking about EBITDA all the way.

(Low RoIC mein bhi paisa banta hai, but margin of error is not in favour of investor in the very long run).

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So, that is 1, Great Tailwinds and 2, Great RoIC, oh this is beginning to smell delicious.

But still, something is missing...Salt?

3- Salt, or in other words, LOW VALUATION

Some people argue on this point.

But a simple question must be asked,

Given that all things being equal and same, you would prefer a stock at 10x p/e or 30x p/e?

The answer to this question is self explanatory on the debate on valuation.

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Conclusion:

A lot more goes into investing, but the above three are the core ingredients for me for long term investing.

Any thing that deviates, I look at those more as trades.

Now ofcourse, everyone is wired differently and different things may work for others. The above is only my opinion on the matter.

(I could always be wrong).

Other two super important factors for successful long term investing...

4- Patience.

5- SIP.

6- Good Diversification.

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2nd Conclusion:

Investing should actually be an act of keeping things simple and process driven.

'Over Complications' are done now a days with laser focus on things that do not really matter in the long run.

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Today, even though I do not drink, I feel like making my coffee Irish and going on a long discussion spree with ChatGPT 4 at night.

(Man, this AI is simply incredible).

It can teach us about everything under the sun, right from investing basics to understanding good food habits to even how crack wife jokes without making her angry.

My Best,

Neil Bahal

Founder

Negen Capital

Ps - 12 games to go, close race in the Premier League. Brilliant Football in March awaits..

Go Liverpool.

Disclaimer: This newsletter prepared by Negen Capital Services Pvt. Ltd (Negen) is for educational and information purposes only. Negen is a SEBI registered Portfolio Manager and acting as an Investment Manager to AIFs registered with SEBI.

While the newsletter discusses just general market insights and past case studies, still, the investments in stock market have very high risk which can result in losses including loss of principal. The companies referred (if any) in the newsletter are only for informational purposes. Negen does not recommend to subscribe to the securities of any of the companies referred in the newsletter. The readers are always advised to independently evaluate and/or consult their financial advisors before making any investment.

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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. Negen or its employees or directors are not responsible for any decision taken by the recipient. Again, investing in equity market has very high risk which may also result into loss of principal amount. The recipients shall read respective Fund documents carefully before investing.