Madhav Marbles - Part II

"I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime." - Jim Rogers in Street Smart

There is no doubt that Jim Rogers is one of the best minds on investing we know as of today. He has authored several books sharing his investment philosophy with millions of readers worldwide. He is there on top of my people-whose-advice-I-follow list, right on top with Warren Buffet and Seth Klarman.

What Jim Rogers is essentially saying is what Warren calls "waiting for a sweet pitch" or time "when you can buy a dollar for forty cents". Seth has elaborated on this concept in his book Margin of Safety. He advices his readers to be patient and wait when Mr. Market throws you a deal too hard to resist. And when it does, you go all in.

"The greater the undervaluation, the greater the margin of safety to investors" - Seth Klarman

I intended to write just an update to my earlier blog post on Madhav Marbles. I attribute this pick (too early?) to Peter Cundill's successful strategy of balance sheet investing and ideas and teachings of legendary investors mentioned above.

Mr. Market in its all glory and excitement sometimes throws up a company which is trading way below its liquidation value. You can easily buy the company, sell off the assets at a discount, pay off all the liabilities in full and still have lot of cash to spare.

Madhav Marbles is one such stock in my view. A stock that is so clearly undervalued in the current market - it is neat money just lying there in the corner to be picked up.

I am attaching the updated tables for FY14 results for my readers to see. It is obvious that the stock - though has gained 50% in last four months, is still trading below its liquidation value.

You can read the first part of the post here: Madhav Marbles - Value Buy or Value Trap

Disclaimer: Invest at your own risk, you can lose money on a misprint :)

Weekly Market Commentary - May 26, 2014 - May 30, 2014

Elections are over. New govt is in place. The country is in midst of (sort of) growth crisis. Time has come for govt to roll up its sleeve.

Asia’s third largest economy grew 4.7% in FY14 vs. estimated 4.9% - second quarter of sub 5% growth. It is estimated that projects worth $105.1bn were shelved last year due to bureaucratic gridlock - highest in the past 18 years. Stressed loans in India amounted to $100bn or about 10% of all loans when debt-equity ratio of Indian firms has hit a two-decade high of 97.9%, according to Nomura.

Add to the mix, slowing global economy that is hemming in the country's exports growth and prospects of bleak monsoon, which might fire up the inflation fury. All these would lead to central bank staying hawkish on interest rates.

Sensex ended this week down by 1.9% while Nifty was down by 1.9% and Midcap down by 3.0%

Monday - Sensex up by 0.1%, Nifty down by 0.1%, Midcap down by 2.0%
Investors booked profits as BSE Sensex and CNX Nifty, two key benchmark indices loses steam. Midcaps declined by 2% after gaining more than 10% previous week. Recovery hopes from Modi govt have kept markets at elevated levels in recent weeks. Sun Pharma and Ranbaxy gained after court lifted a temporary stay on their merger.

Tuesday - Sensex down by 0.7%, Nifty down by 0.6%, Midcap down by 1.0%
Markets continue to tumble as investors continued to book some profits and turned cautious as they wait for new policies to be announced and implemented from PMO. Newly appointed finance minister Arun Jaitley assured investors of stable policy environment.

Wednesday - Sensex flat, Nifty up by 0.2%, Midcap up by 0.6%
Sensex ended the day flat while Nifty went up slightly as some value buying occurred on bourses after recent correction. Shipping corp surged 14% after company reported first net profit after Sept 2012 quarter as bulk shipping and liner businesses improved. ICRA also jumped 18% after Moody’s raised offer price to Rs. 2,400/share from Rs. 2, 000/share.

Thursday - Sensex down by 1.3%, Nifty down by 1.3%, Midcap down by 0.9%
Sensex and Nifty posted their biggest decline in nearly four months on the day of derivative expiry. This goes on to indicate that Modi euphoria might be showing sign of ebbing and investors will focus on actual deliverance now. Losses in blue chips were led by Infosys, which fell by 8% after it saw exit of another top management official from the company.

Friday - Sensex down by 0.1%, Nifty down by 0.1%, Midcap up by 0.3%
Investors continued to stay low as election rally loses momentum. Sensex and Nifty ended the week in red marking the first weekly fall over last one month.

Weekly Market Commentary - May 19, 2014 - May 23, 2014

As dust settles on election results, investors now keenly wait for the formation of new government structure, which PM elect Narendra Modi has indicated would be small and compact. Investors are all excited and the sentiment on the street is quite bullish – midcap gained more than 10% this week, largely due to strong performance from domestics. Also, see this chart.

Modi will take the oath of PM office on Monday along with his cabinet (hopefully) and we may see return of Arun Shourie to mainstream politics. He was widely known for his portfolio of disinvestment minister – when he ushered in slashing govt stakes from key companies in a bid to make them less bureaucratic, less corrupt and more competitive and efficient.

There are huge expectations with new govt, which has won this election on the agenda of development and reforms. A Reuters report cited this week that finance ministry is working on a proposal to cut welfare spending and reining in fiscal deficit to 3.8-3.9% of GDP in its first budget – hopefully will be presented in July. In my view, it is a prudent step – not only it will make govt. more fiscally responsible, it will also have a long-term impact on inflation.

Sensex ended this week up by 2.4% while Nifty was up by 2.3% and Midcap up by 10.2%

Monday - Sensex up by 1.0%, Nifty up by 0.8%, Midcap up by 4.4%
Markets continued their journey upwards, with Sensex and Nifty on their record-breaking spree. The domestics remained the central attraction to investors and sustained their rally. Gains were capped with exporters such as IT majors and pharma falling as rupee strengthened against the dollar.

Tuesday - Sensex up by 0.1%, Nifty up by 0.2%, Midcap up by 1.0%
Strong performance by domestics and midcaps continued as cabinet formation days draws nearer.

Wednesday - Sensex down by 0.3%, Nifty down by 0.3%, Midcap up by 0.7%
Finally, benchmark indices took some breather as blue chips such as L&T retreated from recent strong gains a day after foreign investors turned net sellers for the first time in about a month.

Thursday - Sensex up by 0.3%, Nifty up by 0.3%, Midcap up by 1.7%
Expectations that Coal India might get split into smaller companies, led to a rally in the stock. The Nifty closed at a record high as investors resumed buying stocks of companies expected to benefit from an economic recovery. Titan surged after RBI allowed banks to provide gold loans to jewellery makers.

Friday - Sensex up by 1.3%, Nifty up by 1.2%, Midcap up by 2.0%
Markets rallied after SBI surged 10% after reporting decline in bad loans indicating worse may be over for banking sector in terms of asset quality. There was some rally in power stocks in expectations of reform measure from incoming government.

India vs.The Rest

Reuters recently reported that India is the best performing market in Asia-Pac in 2014. See the link to the story here. Let's see how we are faring in comparison to our developed and emerging market peers.

Hat tip: The Reformed Broker
Click on the chart for bigger version.