Indian pharmaceutical industry contributes to 20% of overall generic medicines manufactured globally. It has 22% of US FDA approved plants in the world. Over last decade it has consistently grown in size and offerings. As per industry reports, in generic medicines, one in every three in US and one in every fourth in UK is manufactured in India. Generic medicines contributes to over 70% of revenue for Indian pharma companies. Truly, Indian companies are the global factories when it comes to generic medicines owing to the availability of cheaper resources in India. However, over last three years pharma stocks have been struggling because buyers gaining more bargaining power and many countries joining this model. With Covid-19 pandemic, pharma stocks are back in focus. However this segment if not easy to crack because of complicated science, supply side disruptions, export dynamics, US FDA bans etc. There exists value traps as well as growth options. Due to corona induced pharma rally, investors are making the mistake of blindly buying anything. We have done a sector roundup analysis to come up with certain recommendations in our portfolios (both small cap & multi cap portfolios). This time we have also consulted medical professionals as part of our research. They have far more medical insights than we can have as an equity analyst into how corona virus may transform the pharma industry both in long & short terms. We are sharing part of our analysis for the benefit of ace readers via AI post.

It has been a roller coaster ride for new investors who started investment into equities within last few years. First many were lured by the gains coming from small caps. However, it kept falling over 2018 & 2019. In year 2020, many have decided to give up stock investment or move to large caps since they have done well over last two years. The idea of today’s article was triggered after our interactions with many investors who are not sure if equity is the way for their wealth creation. Should they remain invested in small caps or invest in Gold. Should they buy real estate or should they shun equities and go for old favorite fixed deposits. There are just so many things brewing in their mind which can make them miss out on making money opportunities in future.

There is no exact science which way one should invest but it is a process which needs to be developed after considering all possible investment options available before oneself. Since the basics remain the same, we can provide you some framework to create your own model. Remember everyone is different and your own investment model has to be the one which suits you. Always try to have a clear approach and a simple to execute investment plan. Let’s go through the basics once again to clear up our mind (5-7 minutes read).

Today’s article on AI Post is focusing on a niche segment of stocks within stock market. These are stocks listed on special platform of stock exchanges called as BSE-SME & NSE Emerge. The purpose of such platform is to enable entrepreneurs and small companies to raise capital from stock market and fund their next leg of growth. You will be surprised to know that this segment of stocks have given stunning results to investors. Over last three years, BSE SME IPO index itself has given an annualized return of 31% as compared to BSE Sensex’s 16%. Almost double.

Index NameAnnualized Return
BSE SME IPO31%
BSE Sensex16%
As of 14 April 2019

Going down to individual stock level within SME space, we have many multibaggers even in a bad year like 2018. Within 2018, stocks like Mittal Lifestyle gave 478%, Mac hotels gave 283% & Gautam Gems returned 247% just to name a few.

Please note that these stocks are NOT recommendations but just an example to showcase that SME stocks can be very rewarding. For return generated by our service, please look at performance section in Emerging CAPS page. Moreover, many of these examples are no long active on SME exchanges. This article was written in April 2019

If we extend our horizon up to 5 years time-frame, we have more than 25 multibagger stocks emerging from this segment. Now consider this – Till 2017, there were hardly 100 odd stocks listed on BSE SME platform. This implies a very high strike-rate of finding a multibagger from this segment. Theorically, 1 out of 4. Since 2014, Suyog Telematics gave 1700%, Kushal Tradelink gave 1740% & SRG Housing Finance 1553% returns to quote a few. All of them have now graduated to the main platform of BSE & NSE. With this migration, liquidity has improved and certain restrictions on their trade has gone away. Please note these stocks are our preferred picks nor we ever recommended these stocks in the past. This is just an illustration to showcase the power of SME stocks. This analysis was done in April 2019 and things may change in future. We will cover all of this at a later stage in the article.

Coming back to the article’s heading, so there is a serious amount of money to be made from SME platform that is for sure. Surprisingly, we have not heard much about them in media reports. Possible reason is because there are very limited set of investors interested in SME stocks. Media mostly reports to the interests of general investors and not to the taste of specific set of investors. This can also be a reason that there is hardly any stock advisory service catering to this segment. Market supplies services which is in high demand. This concept is also very new to Indian investors while it is quite popular abroad. This means early movers will get the advantage.

At AI, we have observed this gap and that is why we are publishing about them so our ace readers are aware of this relatively new concept in equities. SME stocks are open to everyone and there is no reason why it should remain confined to a limited set of investors. May be lack of awareness & expertise is restricting wide participation in SMEs. There is no denying that it is highly rewarding but also a very risky segment to operate. Sensing this, we are launching a new stock advisory service, called as Emerging CAPS to fill this gap and enable small cap enthusiasts to benefit from these new opportunities. Ok, enough introduction. Let’s go into the details of SME stocks and how to deal with them.

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It been tough for equity investors. Market has tanked. Impact is more aggravated at individual stock levels. This is in sharp contrast to 2016 or 2017, where money was easily made over free sms tips or television news channels. Unfortunately, this is the true face of stock market which will keep on popping up at regular intervals. You need a strategy to tackle it otherwise all your gains made during bull years will vanish in thin air. If you don’t have enough time or expertise, it is a wise decision to buy a professional subscription.

Once you decide to approach a professional help, the issue arises in choosing the right stock advisor. If you search on google, you will find tons of websites claiming to be the number one.

5G is a much talked about upcoming technology. At Ace Equity Investor, we continue to bring you the latest industry trends via free for life newsletter service, AI Post. A few weeks back, we wrote a primer article on 5G in which we familiarized you with what and how of 5G in a simple language. Before you continue on today’s article, it is recommended to go through our earlier post by clicking here.

5G will change the way we communicate with technology and it will usher in many new business applications. Needless to say, this will have a profound impact on our day to day life. 5G is not just one network but a network of networks. In today’s article, we will explore various scenarios where 5G can benefit human beings. These scenarios are being explored at various places across the world by technology companies (like AT&T, Docomo, Qualcomm, etc). We skimmed through various research reports from Siemens, PWC, Huawei, Accenture, etc & white papers from Mobile Congress, 5GPP Europe, TechUK, Research Gate, etc to understand and summarize probable impact on sectors & stocks in Indian context. Some of the illustrations have been borrowed from them to simplify the context.

Please be patient as it is going to be a bit lengthy article but it will not bore you as the language is kept simple. Let’s find out more details about it.

Investors are spooked by the uncertainty arising from various state elections and general elections in next five months. There is a common belief that if ruling party comes to power it will be good for the stock market. Any adverse result may put stock market into the tailspin. In today’s post, we are trying to analyse from two angles, one from what historic data tells us starting from 1980s and another from what common sense tells us. Let’s find more details about it.

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Technology has time and again created many disruptive patterns in the economy. For people who identified and saw it coming, were able to benefit from it. If we just go back a decade, things were very different from today. One such disruption was roll out of 4G which helped emergence of various new businesses like Uber, Ola, Food Panda, Flipkart & Airbnb. These new generation companies are wiping out old business models like Meru Cab, Local Taxi Agency, Grocery stores and what not. People and businesses which saw them coming either refused to believe and got out of business, the smarter one realigned themselves with new business models to sustain in new & dynamic marketplace. All powered by speed of internet which is connecting customers & suppliers at lightening speed.

Technology however, keeps moving forward and this time disruption has found a new name called 5G. It is not just a faster version of 4G, in fact faster internet speed is only one aspect of it. The aim of 5G is to galvanize whole device ecosystem in an interconnected mesh of devices called IoT (Internet of Things). This will have very profound impact on the way market place is running. It will become a network of networks. We will surely look back after a decade and might say that things have changed so much from 2018.

Since 5G is a big topic and we want to write a comprehensive post covering major aspects that investors need to know, we will be publishing it as a two part series. Today, we will discuss about the features & layout of a 5G system, pros and cons of this technology and latest updates happening in 5G around the world. As usual, we will keep the language simple to understand so that you can easily understand the concepts. One does not need to be a communication engineer to understand 5G. However, this article is written by a communication engineer turned stock market analyst 🙂

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Ever wondered why many famous companies never really generate returns for the shareholders. There are plenty of examples like GMR or Jet Airways. Both belong to India’s rising aviation industry. GMR owns IPL cricket team Delhi DareDevils, it also built Delhi airport. At a high level, it seems GMR should have been a great wealth creator but that is not the case. Same goes for Jet Airways, it has been in aviation industry since 1995 and once it was India’s best private airlines. In the same period, India’s air traffic has grown by leaps & bounds. Starting from just 16 million passengers two decades ago, it has grown 8 times by now & expected to grow another 3-4 times in next two decades. Still Jet Airways continue to struggle for survival.

Same is true for Apollo or Fortis Hospitals. They operate in India’s ever growing healthcare sector. All of us must have queued in OPD of these hospitals at some point in time, depicting healthy demand. Alas, they have also not created healthy returns for shareholders. Same is true for Airtel or Vodafone. This can be perplexing as in why these companies operating in forefront sectors have not grown at all.

The answer lies in the way these businesses are operated. In his 1992 & 2007 annual letters, Warren Buffet spoke about it and he classified three types of businesses. The great, the good & the gruesome. He advised investors to stay away from gruesome and stick to the great & good businesses only. The question is how to identify which business is great & which is not. Today in AI post, we are discussing these three types of business models which can cover almost every type of business. You can apply it to instantly assess the quality of underlying business of a stock.

mind the gap

This concept was originally published as part of our Tiny CAPS report on 18 Nov’18. To suit AI post, certain portions have been modified for easy understanding.

Today’s AI post focuses on the behavioral aspect of investment. Emotions play a far larger role in wealth creation than any high end analytical or robotic capabilities. In equity, your EQ (Emotional Quotient) matter more than your IQ (Intelligence quotient). There is a famous saying from Warren Buffet that “Buy when there is blood on wall street and sell when there is euphoria”. I know you have read it several times all over the internet but are we able to implement it when time is right? Currently, there is blood on at least dalal street which means we should be buying Indian stocks right now but how many of us have that courage to do it?

If this question was asked last year, I am sure many would have said, “Surely, I can implement what Mr Buffet is saying during next stock correction”. Knowing the path is one thing, walking down that path is another. Do you know why this happens? Fear, of course is one short answer but we are looking in-depth here. What induces this fear? How come last year’s confident & aggressive investor has transformed into unsure & risk-averse investor. This is what we are trying to answer in today’s AI Post. We have coined this phenomenon into a term “Bear Market Brainwash”. Let’s read about it.

Robo Human.jpegAs a regular reader of AI Post, we aim to keep you abreast with the latest developments across the financial world. Keeping up the ante, today we have Damien Kopp on AI post.  Damien is based in Singapore, working as product head with a fintech organization. He is also board member of a Non profit organization – Live with AI.  Fintech space is rapidly evolving. Over next few years, it will have a very profound impact on the way we do banking transactions. In India, we have seen emergence of digital payment solutions from Paytm to UPI to WhatsApp. In this article, we try to understand how fintech is shaping or rather re-shaping robo-advisory with the help of augmented intelligence.

Over to Damien!

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During our conversation with clients, we were surprised to learn that most of them had no clue about FIFO (First In First Out) rule which is applicable on all demat accounts as per IT Ruling Section 25(2A). If you are looking for selling some portion of your shares (lets say 100 out of 200 shares) then FIFO rule can impact your average purchase price for remaining shares. Let’s try to understand where it applies and how it can be used to our advantage as well.