Do it yourself

The stock price of the over-the- top (OTT) streaming major Netflix has fallen ~68% from it's all-time high price of US$695/share in November 2021. The current price is lowest since December 2017. At the current price (US$226/share), the stock discounts trailing twelve months earnings by 32x. The company makes a healthy ~31% return on equity and ~11% return on assets. The revenue, operating margins and net profit margins achieved during the past twelve months are higher than the past 5yr average. The company has been generating healthy operating cash flows, but not yet generated free cash flows. The reason for the latest US$150 fall in Netflix’s share price is the first ever reduction in its subscribers’ base (which may be largely due to Netflix withdrawing its services from Russia). Six months ago, numerous analysts and portfolio managers were jostling with each other to justify a PE multiple of over 100x for the stock, citing the exciting business model and growth prospects fo...

  As I indicated last week ( see here ) to me markets are not looking good, at least for now. And it is definitely not only due to the latest episode of Russia-Ukraine conflict. This conflict has only added to the caution. My primary problem is the lack of adequate growth drivers for the Indian economy. There is a virtual stagflation in the domestic economy, constraining private consumption. The exports have helped in the past couple of years to some extent. However, the higher probability of slowing growth in the western countries due to tightening monetary policies and the spectre of a prolonged geopolitical conflict in Europe and probable reorganization of the global order (political realignment, trade blocks, currency preferences, energy mix etc.) clouds the exports’ growth in FY23. Another key driver of growth in the past few years has been public expenditure. The government made decent cash payments to the poor and farmers to support private consumption. It also accelerat...

In yesterday’s post I had highlighted that the previous two market cycles had not ended well for the broader markets ( see here ). By the time the cycle had ended, a large majority of stocks (smallcap and midcap) had given up much more than what they had gained on their way up. Only a couple of hundred stocks ended the cycle with some gains. This is however not to take away anything from the fact that many stocks like Havells, Escorts, Page Industries, PI Industries, IndiaMart, APL Apollo, L&T Tech, SRF etc. changed their orbit and moved sustainably higher in the previous two market cycles. Also, many stocks either moved to the lower orbit or just vanished as the market cycles were coming to end. JP Associates, ADAG Group stocks, Suzlon, Jet Airways, DHFL, IL&FS, are some of the examples. This is the story of every market cycle and there is nothing unusual about this. This story will inevitably be repeated in the current market cycle also. By the time cows come home, some com...

Thirty years ago, the period between May 1990 and December 1990, was a watershed in global social, political and economic order. In the 7 months, the world changed the most in the post WWII era. For India, in particular that was a defining period in post independence history. In global context, some of the key events that took place in those seven months included the following: (a)    Apartheid ended in South Africa, marking the end of one of the darkest chapter in world history. (b)    The process of USSR dissolution begins. The Supreme Soviet of the Soviet Union grants Gorbachev special powers to secure the Soviet Union's transition to a market economy. (c)     Soviet Union collapse marked the end of a bipolar world that had divided the world in two camps in post WWII era. In the subsequent two decades, USA would reign over the world as the only super power. (d)    End of cold war between USA and USSR with...

As per the Hindu lunar calendar the ancestors' fortnight ( पितृपक्ष ) , will start from tomorrow. As per the ancient Hindu traditions, all Hindus are obligated to serve Brahmins (Scholars) and feed crows during this fortnight. It is widely believed that serving Brahmins and feeding crows in this fortnight pleases souls of the ancestors and thus redeems the person performing this ritual from the debt of ancestors. Hindu religious traditions also mandate that a grand feast must be organized by all Hindus within 3weeks of the death of their parents, spouse or children. In this grand feast Brahmins, Dogs, Crows and the poor are served with delicious food. Brahmins and poor are also given cloths, cash and other gifts. I am not competent enough to comment about the traditions of other religions and cultures, but I am sure similar traditions are practiced by the followers of other religions also. The anecdotal evidence that I have collected from my interactions with...

Suggestions for stimulating the economy The number of people cautioning about a deeper and longer economic slowdown in India is rising by the hour. Tata Motor's management has guided for double digit fall in automobile sales in FY20 ( see here ). Most auto companies have announced shut downs; some have also announced significant reduction in the employed workforce. SBI chairman is insisting on urgent need for some stimulus in almost each of his public presentations ( see here ). Most other senior banks and industrialists have also sounded the caution begul ( see here ) The stock markets have corrected sharply in past one year; though the benchmark indices may not be reflecting the correction as yet. The wealth erosion for investors has been material. The market participants are clamoring hard for a stimulus package to bring the economy and market back on path of high growth. Whereas, most businessmen and market participants have echoed the demand for stimulus...

What do we really want? To accelerate the economic growth in order to generate more employment and improve the quality of life of Indian populace, the country indubitably needs huge amount of fresh capital. Various economists, government agencies and expert committees have suggested that to attain optimum level of employment Indian economy would need to grow 8-10% CAGR for next decade or so. The capital investment required by private sector to create critical infrastructure to support 8-10% GDP growth is pegged in the range of US$10-12trn over next 10yrs. Energy sector alone may need investment of more than US$1trn over next one decade. It is well recognized fact that such kind of long term risk capital may not be available internally. Foreign investment is therefore a pre-requisite for the process of economic planning, development and growth. Any debate on path, trajectory and sustainability of growth should therefore begin with this assumption that adequate...

Some food for thought "When my cats aren't happy, I'm not happy. Not because I care about their mood but because I know they're just sitting there thinking up ways to get even." —Percy Bysshe Shelley (English Poet, 1792-1822) Word for the day Intellection The action or process of understanding; the exercise of the intellect; reasoning.   First thought this morning Home Minister Shri Amit Shah made an emphatic speech in the Parliament in support of government's decision to change the constitutional status of the state of Jammu & Kashmir. It sure is a historic and very brave step. The government, especially the prime minister and the home minister must be commended for this unconditionally. I am sure with this determination, the government will be able to execute this decision as planned paving the way for overall development and growth the region. The reply of the home minister to the debate...