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Hello friends, in this chapter we are going to talk about many exciting things. Here we will talk about that stock which is still in their portfolio, so what was their philosophy, what challenges did they face and yet they still hold this stock, so what are the reasons behind it etc. So we are going to discuss many of these things in this video, so let's start.
Before starting generally here, the author has discussed two things, one is that there is a course in proximally, an issue comes up proximally, it can be either company specific or market specific or it can be industry specific, but if there is such a cause or issue which is temporary then we call it proximally, whereas if in a company, in the recent past, some such policy of the government comes and if there is some such change in such an industry, due to which the question directly depends on the business model of the company.
We have to look at these two things, let's start. Here in the book, we have mainly discussed proximally. The ultimate cost has not been discussed in much detail. So, here we are going to present before you here the four major proximities given by the author and what are our learnings from them. So, the first proximative cause is macroeconomic.
Here, from the time hdfcfund.com got listed till today, it has grown by around 81%. Meaning, the data in the book may be a little old. Similar thing is there in III Bank as well as Nestle, that the stocks which have become multi-baggers since they got listed till today. So, that means, some cycle of almost three decades has been discussed here.
So, in these three decades, it has happened many times that the interest rates have peaked and then come down from there, have reached the bottom. In between, many wars have also taken place, so this is a lot. All these things have happened, but still, if you look at the reason, it is not that people will stop eating Maggi or reduce it, there is nothing like that, we have to see all these things, what is there in general in the macro economy, people discuss so much, in such a fundamentally strong company, then you should use the macro economy for your advantage, so this is the first point, then what was the second point that generally sometimes it also happens that some market related cause also comes up, that is, again, those are temporary causes, so here in the book, there is another person about whom it has been given, how he used to make forecasts etc.
Here we will discuss about Michael Burry, for example, Michael Burry, he had successfully predicted the housing bubble that happened in 2008 and he also made a lot of money from it, but even now, I mean, we see that there are many media houses, and if there is any position of Michael Burry, then If there is a short or they do some treatment, then they do a lot of analysis about that too and say that brother, this will happen, Michael Burin has taken a short position here, so it might go down, a lot of such forecasting goes on, so here ultimately, if we understand in short and sweet language, then Pulak Prasad ji wants to tell us that even if there is the best person who has predicted a lot and if many of those things have been correct, then also his chances are very less that if there is a crisis, if there is one, he will be able to predict it successfully, that means no one can see the future, here his point is that you should not think much about forecasting related, whether it is about crisis or anything, that means his plain and simple point is that you have to focus on the fundamentals of the company, so this is it, secondly, then thirdly, there is cause here, that means cause means thematic kind of investing, that means investors here too They lose a lot of their own money.
Here, he has given the example of EVs. EVs means electric vehicles, which are currently in a lot of discussion. We can see a good participation of retail investors in this segment. Here, he says that when the pandemic situation came, the demand for electric vehicles increased a lot. The case given in the book is from the US, where many IPOs were lined up at that time, those who dealt specifically in the electric vehicle segment.
Here, it was like this that the company started one or two years ago, three years ago, four years ago, and they are not even making profits yet. These companies were loss-making companies in the auto to auto segment and those who worked in EVs, still they launched IPOs and the valuation of billions of dollars was what they did at that time.
Demand made, here he has said that whenever you do thematic investing, you do not know who will be the exact winner 5 years or 10 years from now, meaning there are many players, for example, if we know here that the stock price of Chalo has crashed a lot and what is the reason for it, you can search that also online, we will discuss that some other day, so here he has said that we cannot know who will be the clear winner here, many more issues can come there, so this thematic investing is very risky according to Pulak Prasad ji and the second thing is that the tum which I have written here, tum means total addressable market from lets, that if any company is an FMCG company, like Nestle, then one of the products of Nestle is from lets, that is, chocolates etc., so their addressable market in chocolates is very huge, meaning that Chocolate is such a thing that everyone from children to adults can consume it, so the total addressable market has become very big, so the same thing happened here that when its IPOs etc.
were coming, what were the loss making companies doing, that is, the demand, what were they doing, the valuation they were demanding, that is, $ billion, $10 billion, $2 billion, so to justify that valuation, they always used to say that our total addressable market is very high, that is, we can do a lot of sales, our growth can be very high and ultimately our profitability can also be very good and because of this our valuation is justified, but here Pulak Prasad ji has also put a counter argument here that for example, all the footwear companies, their total addressable market, that is, the total addressable market, is very large.
It is high, meaning almost everyone will have to wear some form of footwear. Here he has also said that there are many such companies, meaning a lot. Let's say that Crocs is also listed, I think Crocs is also listed, I think it is listed somewhere in the US or Sweden. If you go and see there, Crocs has not created much wealth.
So basically, he is saying that if all these companies only tell you that our time is very high and because of that our valuation is justified, then it is absolutely wrong because on its basis you cannot decide whether this company will be able to generate good returns for its shareholders or not. So, this is what we have to see that if any company says that our product is universal, meaning everyone can use it, and because of that we command such a high valuation, then That would be wrong, so you always have to keep this in mind whenever you're specifically focusing on a theme.
There are many investors who say, "I want to invest only in EVs," then some say, " I only want to invest in the renewables sector, I wo n't invest in oil companies." So, here you have to learn that thematic investing is a little risky, not just a little, but very risky. So, you have to understand this here.
Next, we'll talk about Vaibhav Global. We'll talk about company-specific causes, or even temporary causes. Vaibhav Global generally sells low-priced jewelry to retailers in markets like the US and the UK. Here, it also sells through retail and online. So, Vaibhav Global generally sells its jewelry through two channels in this market.
So, here, Pulak Prasad. Yes, he had invested in this company in 2007, so this is his personal case, which he has completely described how company specific causes can impact. Since he invested in 2007, his price was 48, as we have written here, and that means he invested and after that, the housing bubble crisis of around 2008 happened and after that, after a few years, something good happened within that stock of the company and the stock touched a high of 174, but then from there the stock kept on correcting continuously and continuously, a time came when the price of the stock reached ₹4 in around 2016 or 17, that means you can imagine that it went from 48 to 174 and then from there it came back to 54 and almost if we count from 2016, then also the summer became around 8 to 9 years, right, so 8 to For 9 years, almost no returns were generated, which means inflation was not even beaten.
We can also say that Pulak Prasad ji, when your huge holding did not perform at all for three years, then there would be problems, which means investors can also ask questions, if not something like this, then here, there was an internal discussion among Pulak Prasad ji's team as to whether or not to keep Vaibhav Global in the portfolio, which means there were many challenges, what were the challenges, so the biggest challenge, that is, three challenges have been discussed here, that since Vaibhav Global, that is, what happened in the US, that the retailers there, all the small retailers, what did they start that if someone came to purchase jewellery from Lets, then they were giving them the option of making payment in EMI type, that is, installment mode, which were offline retailers, but Vaibhav Global did not like this strategy, that is, they did not accept this thing, so what happened because of that, that many of Vaibhav Global's The customers went to other offline retailers who were offering EMI options there, which means that the business of Vaibhav Global decreased, this was the first thing, then the second thing that happened was that their design, that is, their tech platform, as we said that they sell through offline retailers as well as online, so their online technology platform from where the customer can buy jewellery was not that good, which means here the website of Vaibhav Global and their tech platform was very weak in comparison to the competitors of Vaibhav Global, so because of this, many customers, that is, they also have a preference to buy from a good place, so this means that this platform was not right and because of this, the customers who were buying online also switched and then the third reason was that many senior managers who were there in Vaibhav Global also left the company, which means that at some place the CEO of the company had fired and Somewhere, the senior managers left their companies, meaning they joined competitors, etc.
for better salaries. Due to these three main things, the entire structure of the company kept changing. Meaning, the company could not grow as it used to. Because of this, their ROC number also got compressed, meaning it reached something around 15 at one point. So, these were many issues. Because of this, Pulak Prasad, who is so intelligent and has so much knowledge about business and investing, came across a case of Vaibhav Global where he was unable to decide what to do.
So, Prasad says that this is a very headache-prone job, where even he himself cannot decide. That is why he also finally said that there is no foolproof method to deal with such a situation. Meaning, you must be confused. You might feel that the business is fine. The driving force behind the company is the CEO, everything is fine, so what is the problem?
So, all these things mean, and let's see, if you have a problem, then Identification ji has taken a call that he will not do anything, and the holding he has made in PBO Global, he will keep it as it is, there will be no change in it, and ultimately, if you see, if you look at the chart of PBO Global right now, the stock price has appreciated quite well, that is, from their buying price of 8, that also means Pulak Prasad ji also says the same thing that whatever the price is now, that is, from 48, if we take 10x the price now, then the current price has become 10x, then he says the same thing that whatever was there, that share is lucky, that means they got lucky, it worked, there were chances that this business would have also gone bankrupt, so these are many things which were discussed in these chapters and the crux of it is We have already discussed the main points here. I hope you liked the video. Thank you.
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