Of course, we all love Howard Marks. How does he define ‘variant perception’? – He defines it as follows – “To be able to take advantage of such divergences, you have to think in a way that departs from the consensus; you have to think different and better. This goal can be described as “second-level thinking” or “variant perception.”” There is no variant perception in liking Howard Marks.
However, in the Indian markets, we all love to abuse, disabuse, misabuse and tetra-abuse any good concept. In Indian markets then, what is variant perception? In Indian markets, ‘variant perception’ is any perception variant that makes money. If it makes money, you can retrospectively determine that you had a variant perception and write detailed articles about it (or make podcasts, because that’s the fancy these days). If it doesn’t make money, well, nobody cares about your any perception, much less the variant perception.
If it makes money, your variant perception can be called coffee can (literally don’t know what this phrase means), else it will be trash can. For example, you can argue that you bought a stock (say, Merck or Abbott) at 40PE and your variant perception is (apart from all the fancy thesis which spans atleast 15 slides, if not 30) that it will go to 70PE (because, MNC something, something). If it makes money (like it has), people will call you a visionary. If it doesn’t, people are anyway ready to sell at 20% from top. If it’s a highly liquid stock, people will not even bother calling the bullshit on you. The variant perception being, ‘liquid hai to acha hai, chala to returns, nahi chala to exit’.
Anyway, with this being the case, sharing some of the ‘variant perception’ in 2019 for some of the stocks that I bought/hold (none of the stocks are a recommendation – it’s almost a guarantee that you will lose money on all my stocks mentioned below – so don’t try to buy them and you can’t short them because none are in F&O. So, please definitely consult your advisor before acting on any of the below. I am NOT a registered investment advisor). Most of the insights below are from multiple discussions with my friend ‘O’ – in that sense, they are our joint insights and I can’t claim sole credit for any of these (and hence ‘we’ reference below):
1) Alkyl Amines: The biggest consensus pick of 2019 in the mid/small cap space. The general thesis around this is that the management is fabulous, they are doing large capex (of Rs. 100 cr every year) after a very long time, they got into methyl amines (traditionally being the stronghold of their oligopoly competition ‘Balaji Amines’) and grabbing market share, large-ish capex from their customer base of pharma and agrochem etc. Of course, with continuous growth in earnings quarter on quarter, the frenzy feeds itself. We bought it much before this insight because of the above, but what really kicked in the adding to the position this year is the ‘variant perception’.
So, what’s really the variant perception in it? The insight around Acetonitrile – everybody wonders that Acetonitrile prices are volatile and we need to contact somebody to know the price of acetonitrile etc. But do you really know that this is a counter-auto-cyclical thingy? As in, if the auto cycle slows down, acetonitrile prices go up. In that sense, you can play this theme as a counter-cyclical to Auto slowdown. But why is this really so? This is because of the following:
- In the acrylonitrile and acetonitrile relationship, acrylonitrile is the economic driver primarily due to storage constraints as well. Approximately fifteen gallons of acetonitrile are produced for every 270 gallons of acrylonitrile; if the producer doesn’t have room to store the acrylonitrile, production of acetonitrile is reduced. This creates an inverse pricing relationship.
- So, what drives the acrylonitrile demand? The primary downstream consumer for acrylonitrile is ABS (acrylonitrile-butadiene-styrene) resins. ABS is used to produce polymer shells used in products such as luggage and canoes. But, its primary use is for shock absorbing materials like automotive bumpers. Because there is typically a greater demand for vehicles compared to luggage and canoes, auto production has a greater impact on acrylonitrile and acetonitrile availability.
- Therefore, auto cycle slowdown -> lower acrylonitrile production -> storage constraints kick in and oligopoly structure in this market -> lower acetonitrile production -> constant demand for acetonitrile -> higher prices for acetonitrile
Of course, the price has gone up because of stellar earnings, no less contributed by acetonitrile prices. If auto cycle picks up in FY21, expect acetonitrile prices to go down. Expected anywhere between 130-150 cr PAT in FY20 and FY21.
2) Swiss Glascoat (or HLE Glascoat as it is called nowadays): Given these days of high visibility to high liquid, large cap stocks, obviously no one cares about low liquid and small cap stocks. So, what does HLE Glascoat do? HLE Glascoat Equipments specializes in two distinct segments: 1) design and manufacturing of carbon steel glass lined equipment [GLE] (reactors, receivers / storage tanks, columns, valves, pipes & fittings) with 25-30% market share (majority being held by GMM) and 2) ANFD/RVD centrifuges (> 50% market share).
If you ignore the jargon, these are products are sold to Pharmaceutical / API, Specialty Chemicals, Dyes/ Colours, Agro Chemicals, Food Processing and allied industries. Of course, China tailwinds is an integral part to the investing thesis goes without saying. Essentially, an Oligopoly business (GMM being its main competitor, currently at 50PE) with a visible China shift resulting in strong tailwinds in a relatively margin-proof capital goods equipment company serving this tailwind of large ongoing capex in the chemical, pharma and agrochemical space is the general thesis for investing in HLE.
So, what’s the variant perception in this?
- First of all, low liquid and small cap itself is death these days
- Swiss Glascoat was run by Mr. Sudarshan Amin and due to succession issues, was sold to HLE Engineers. Swiss is the 2nd largest player in GLE (with 25-30% market share), but HLE is a market leader in centrifuges (ANFD/RVD). Post NCLT approvals in October, the merged entity financials would start being reflected from Q2 FY20. With the increase in capex by all its customers (chemical, agrochem and pharma) , our estimate was that – the tri-criteria of lower sales, lower margins, lower multiple (due to being the 2nd largest player in one of the segments) and a de-motivated management will move to higher sales, higher margins (oligopoly, increasing demand, classic cap goods of higher prices), aggressive and SITG management and higher multiple (being the market leader in one of the segments)
- So, what if all this capex stops all of a sudden? Of course, it can stop anytime. But here’s where our ‘2nd level variant perception’ comes in (haha, when price of the stock goes up, all this can be said – advantages galore! for such ‘variant perceptions’ like I said). NGT approvals. NGT (National Green Tribunal) goes around the country and keeps raising one issue or another. Environmental clearances are not easy to come by, more so because of NGT. Here’s the real deal – China shift is not slowing down, environmental clearances have not completely stopped, but the clearances are coming in slowly and steadily – which is an amazing advantage to players like HLE – because the growth (of ~15% in sales) will continue for 2-3 years atleast instead of a single year of exponential growth (40%). Market has that much more time to stabilize and understand prospects than just move it up and kill on craziness
We expect SGEL (GLE) to clock a 30% CAGR growth for the next 2-3 years with increasing margins (~op margins of 15% are achievable). and expect HLE Engineers (ANFD/RVD) to clock a 15% CAGR growth for the next 2-3 years with increasing margins. We expect a combined turnover of ~500 cr in FY21/FY22) and expect about 45-50 cr PAT in FY21 and 55-60 cr PAT in FY22
3) Too long a post already I think (or in reality, those were the set of ‘variant perception’ winners in 2019). The other substantial 2 bets that we added to existing holdings in 2019 are Hikal (price didn’t go up, it actually went down by 30%, so nobody cares about our variant perception and no use writing thesis about it on the blog) and Axtel Industries (price didn’t go anywhere and yet again nobody cares about our variant perception and hence no details – but in general, low liquid, small cap, cap goods, aggressive management, food industry, large MNC clients, substantial exports traction is the general overview. If price moves in 2020, I will come back to write our ‘variant’ perception’ on this one).
4) There were multiple small positions (2-3%) in 2019 which worked out quite well / didn’t go nowhere – Suven, JM Fin etc. But they don’t affect the overall portfolio by much given their position sizes. So, really, who cares.
Blogposts (or podcasts these days) are never complete without general market gyaan, about which, like literally, nobody cares. But hey, we have come this far, so why not be indulgent in the final days of the decade. It’s an increasingly tough market with substantial flows into the market (due to Nifty not correcting perception and obviously TINA followed by FOMO). I expect FY20 to be even tougher because we are not a leveraged market at all post the NBFC crisis and therefore, very few players will go out of the market. I don’t expect the broader midcap and smallcap to bounce back (except select stocks) because of some weird idea called mean reversion (mean reversion can take years and not just because you had a tough last 2-3 years). There is a substantial, but little spoken about fact that has emerged in 2019 around export data for multiple stocks being shared widely (from authentic and not-so-authentic data sources) – it’s a bit of weird thing going on in the 2019 market because everybody thinks that they are the only ones who know about this data, and hence don’t talk about it in WA groups- but almost everybody knows about it these days so it’s become a commodity. A general pointer being, if anybody is pitching you a long forgotten idea and/or some sudden bullishness in an existing idea after 16th of every month, you can safely assume that good export data has been released, and people are attaching their own thesis (without quoting export data) to look like a visionary once the quarter results are out. Of course, we all take a good idea too far in India and therefore, this will come back to bite us very badly some day.
The End. Cheers to 2019. End of a decade (yes, for me 2020 is the start of a new decade – the number literally is a visionary year number). And what a decade it’s been in financial markets and personal net worths! The world has been kind in terms of bestowing so many fantastic and close friends in the past decade whom I can call upon for advise at any point in time – thank you one and all – and in no particular order – Om, Anant, Tirumal, Vivek, Dhruvesh, Ankit, Rahul, Dhwanil, Viraj, Prabhakar, Gordon, Puneet, Saurabh, Digant, Ashwini, Siddharth, Nooresh, Sandeep, Donald, Alokeji, Jagvir, Ayush, Deepak, Prashanth, Neeraj, Tejus, Rohit, Rajat, Bhagwan, Jatin, Abhimanyu, Anand, Dhaval and many more – my life and knowledge is 10x richer because of all of you. Our basis of friendship is investing, but we have shared many other aspects of life that all of this investing is now a side-show. Thank you one and all. It’s been my privilege.
Here’s to welcoming the next big decade (whatever that means!).
P.S: Best books read in 2019: Factfulness, Alchemy, Modern Monopolies, Anti-fragile (re-read), Man for all markets (re-read)
P.P.S: Best movies in 2019: Unfortunately, 2019 was not a rich set in Hindi/English stable. Telugu was outstanding. Andhadhun (Hindi), Uri (Hindi), Gully Boy (Hindi), Avengers: The End Game (English), Knives Out (English), Ford vs Ferrari (English), Agent Sai Srinivas Athreya (Telugu), Oh Baby (Telugu), Brochevarevarura (Telugu), Gang Leader (Telugu), Evaru (Telugu), Jersey (Telugu), Sye Ra (Telugu), C/o Kancharlapalem (Telugu), Goodachari (Telugu)
An inordinate amount of material exists on ‘what to buy’, ‘when to buy’, ‘how to buy’ etc. but very little material is written on ‘when/how/what to sell’. Research indicates (rather ‘pro-forma’ research or in plain English, ‘completely made-up’ research) indicates that the act of Selling rather than buying generates most of the returns (unless of course you are the chosen and select few to only buy HDFC Bank, Asian Paints in your portfolio for a long time).
Of course, this is not a blog post on ‘when/how/what to sell’. This blogpost is about the reasons often quoted on ‘when/how/what to sell’.
1) ‘Sell when your thesis is wrong’: This is the mother (in these income tax days, we can also say grandfather) of all reasons. The first reason that’s quoted in most articles – from fool.com to hedge fund letters.
Here’s what’s wrong with it. Our thesis are generally partially and most times completely bull and very very flaky. They are either earnings momentum driven or price driven. We are of the firm belief that if the prices of the stocks we buy go up, then our thesis is right. Else, management something something. Many examples that come flying to land on this point.
• Avanti Feeds was bought on ‘shrimp expansion/global market share gaining/TUF investing’ etc. The real returns of Avanti Feeds came in because raw material prices dropped precipitously and investors extrapolated that to infinity. The thesis of ‘shrimp expansion/global market share gaining/TUF investing’ still holds true, but is anyone interested in buying Avanti Feeds now? Not really.
• All chemical stories – from Excel Industries to Excel Crop Care to Vinati/Aarti (nowadays). Our thesis is right as long as the price is moving up and to the right. Once the price hits a 20% circuit down, our thesis falls off and we sell (or more critically, we hold and become a long term investor)
• All NBFCs. ‘ours is a credit-hungry nation, you know’, ‘millenial something something’. Large opportunity. Earnings momentum slows / price drops – all of this thesis is out of the window. ‘Earnings momentum’ is the justification given for others. For now. Till the price drops or momentum slows that is.
• Some classic stories – Mayur Uniquoters, Poly Medicure, PI Industries (till the price moved up recently) – some fantastic managements, large opportunity. Every thesis stays. But if the price doesn’t move up, we exit
• Graphite stocks. Haha. The next big commodity. Needle coke. Electric cars. Something something.
And many others. I am sure the market of Jan 2018 – Aug 2018 has given enough experience to know most of our returns have been lucky (80%) and thesis driven (20%). So this ‘sell when your thesis is wrong’ is so nuts – it confounds me.
2) ‘Sell when you find a better idea’ – We are under so many notions of our investing prowess, there is no limit to our ignorance. What’s the basis for a better idea? What constitutes a better idea? Do we even know and understand our current portfolio stocks enough to determine what a ‘better idea’ is? (see point 1). A ‘better idea’ for most of us means that ‘my stock is stagnant, that stock can give me better returns as the price is/may move up more than mine’. We all laugh at ‘bhala, uska kameez mere kameez se safed kaise’. We do this everyday.
All of us make mistakes (well, again pro-forma/completely made-up research indicates Buffett has only 60% hit ratio, so we are mere mortals). But this ‘better idea; concept is drilled into our heads (remember, ‘move your portfolio quality upwards in every market’). Portfolio quality is a sign of the times. Say, consumer stocks were and are of high quality (cashflows, ‘large opportunity’, good dividend payouts, something something…which indicates quality). But if you had invested in ‘consumer stocks’ in 2002-2008, your neighbor would have laughed so hard at you, even ex-LS MP couldn’t match it if she tried. If you have invested in capital goods in 2013-2018, well, my neighbours are still laughing at me. And evidence indicates most of our top quality capital goods companies are not very cyclical as they are made out to be.
So, what is a better idea? Flawed again.
3) ‘Sell when you need to rebalance your portfolio’: Hahaha! Rebalance, you said? You mean, I need to sell Vinati Organics and Aarti Industries which are going great guns and constitute 30% of my portfolio to invest in what? Capital goods? NBFCs? Didn’t you see there were a lot of defaults in NBFCs? Haven’t you heard the capex cycle will not take off for the next 2-3 years given most of our Banks (shh..PSBs) are under water? You say NMDC which is cheap, great dividend yield, lowest cost producer and something something? Are you nuts – haven’t you heard that the Govt. is wiping all the cash clean from all PSBs? I don’t want to take any such risks. Aarti/Vinati for life.
Rebalance it seems. This is like Bangladesh cricket team being called Tigers. Absolute bonkers you are. I am happy with my 30% of portfolio – who knows – can become like RJ’s CRISIL and Titan. Haven’t you heard of the maxim…only 2-4 stocks in your lifetime will give pushto-pushto returns? Rebalance my portfolio it seems. Rebalance your life dude.
4) ‘Sell when you need the money’: One of the better reasons to sell actually. The hitch though is, outside of emergencies, I need money all the time man! I have a Facebook account and an Instagram account. I can’t post photos about eating vada-pav at Agarwal-ji’s dabba. 2 foreign vacations a year, 1 new mobile a year. I also hear there is a real estate boom that’s about to take off magically in many parts of India – (don’t ask why man…still you ask..ok ok…demographics, more nuclear families, higher employment by selling samosas, something something). So, I need money all the time.
But you say opportunity cost? Now, what is this bloody thing called ‘opportunity cost’. Do we even know and understand what’s opportunity cost? Well, opportunity cost is 15% because historically Indian stock markets have given these returns..because something something. Well, you change the start period and end period, and voila, that can become 5% returns. Every asset class – gold, land, real estate, stocks, bonds – irrespective of asset class – you can change the start period and end period and one can argue endlessly about which asset class generates more returns.
I am Stanley Druckenmiller-like you say? I can invest and timely shift my portfolios across asset classes you say? Maybe ‘arts & painting’ is a higher opportunity cost bet you say? Of course. So, why do you need money for anything at all? Also, you should be on Twitter – there are many Stanley Druckenmillers out there who can get in the bottom, and get out at the top..in every single asset class…asset class no bar. You will need to hit the bar everytime you read their tweets.
5) ‘If the stock is overvalued, then one needs to sell’: If point 1 is grandfather, point 5 is grandmother (also can be mother sister, if you get the drift). First of all, what is overvalued?
• Is Symphony and Page at 100PE over-valued? Of course, you’d say. One must be crazy to buy even consumer stories at 100PE. Why? See their price action over the last couple of years.
• Is DMart over-valued at 80PE? Are you kidding? Did you see their earnings momentum? We are still in the infancy of the retail boom for lower capital people and look at demographics something something. But but, Walmart (‘every day low prices since 1975’ – yes that one!) had earnings growth for 25 years and stock hasn’t moved by much because of over-valuation back in the day, you say? Ah. Oh. Well, America old country, Trump, Bush, you know.
• Is Bajaj Finance at 100PE over-valued? Of course, not. Are you out of your mind? Look at the earnings growth. Look at Sanjiv Bajaj’s profile pic and prophetic statements around data science, data lake and data ocean. Look at the beauty of the balance sheet. Look at something something. Look at the earnings momentum and with a 30% growth (nah, let’s make that 40% because according to pro-forma research, millennials something something, with increased per capital something something, the pace of credit will only accelerate) over next 5 years, it is quoting at just 18.59PE. One must be nuts selling Bajaj Finance at 100PE.
• Is Aarti Industries/Vinati Organics overvalued at 35-40PE? Is Divis Laboratories overvalued at 50PE? Man, you are not following me. I just justified 80-100PE above. And now you are asking me about a cheaper PE. Follow me, listen to me. Carefully. These are the next big stocks – (why? because China something something) – they will get into Index. I will buy a Pali hill bungalow by selling these shares and then give an interview 10 years later regretting selling these shares. Have the vision to buy, courage to hold and goti to not sell etc.
• All these growth stocks give ‘plenty of time’ to exit, you know. One quarter bad result, I will trim. Once the earning momentum slows for 2 quarters, then I will exit. Plenty of time. Well, ask Pantaloon. Also, too many behavioral problems with that. Also, convergence of this idea has bad implications.
Every bull market, you’ll hear ‘zyaada khareedna tha’, ‘should have concentrated more’. Every bear market, you’ll hear ‘should have sold at the top’ etc. Given this post is about selling, and every investor has become wise post this bear market – these days, every investor is like ‘bech dunga, 15-20% neeche from top is my stop loss, will completely sell, will never make the mistake of holding on if it corrects by more than 15-20% etc. something something so that I protect my returns’. As if, every other investor is not thinking the same (and its race to the bottom). But boss, I just told you I am a smart investor..not like the retail something panic something dumb investor.
Yes dude. You are Stanley Druckenmiller. You should definitely be on Twitter.
P.S: Summary: Sab bhaav ke khiladi hai. Courtesy: Manu Manek. Unless of course, you are one of the select few to invest in HDFC Bank/Asian Paints for double-digit years (base rate of such stocks is really low) and have held them tight. Or more attractively, you were someone who invested Rs.10,000 in Wipro in 1980 and held on to become multi-crorepati in something something years (I was not even born then, so I am not that lucky).
Sometimes, or maybe most times, you need to revisit history and see how different you saw it vs how it actually turned out.
So is the case with stock analysis and our ‘creations’ and ‘fantasies’. ISGEC being one of them. I wrote about ISGEC here – https://kiraninvestsandlearns.files.wordpress.com/2015/01/isgec_stock-story1.pdf back in January 2015 with all kinds of bold statements and how the market was wrong.
Haha. Well, let’s see.
Marketcap in January 2015: 4100 cr
Marketcap in April 2019: 4100 cr
4+ years of 0 returns on the money one invested in the stock. Let’s take it slow, else it will hurt too much (innuendo alert!) – quotes from the pdf link above:
1) “The traction in its entire business is reasonably good with strong demand from exports and potential revival of domestic economy” – The order book then was 4000 cr. The order book (as of Dec’18) is 8275 cr. True story. Order book doubled, but no change in marketcap. And we assume order book drives marketcap most of the time.
2) “some segments of ISGEC had large under-utilized capacities and improving business climate can thereby lead reasonable operational leverage” –
Sales in FY15: 3900 cr, Sales in FY18: 3800 cr.
PAT in FY15: 117 cr, PAT in FY18: 157 cr
No change in market cap.
3) “Massive Operating Leverage still to come” – ROFL and offered with no comment!
4) “Consolidated results will have a kicker from: Saraswati Sugar Mills ISGEC – Hitachi Zosen JV (51:49)“: Sugar…well being Sugar didn’t end sweet. IHZL faced a massive Oil&Gas headwind (oil prices have dipped or gone nowhere in the last 4 years) and never scaled up to its potential due to cutback in investments.
5) “The fruits of the debottlenecking task taken by the new government may
start to show up anytime in the next 1-2 years. All in all, the opportunities from domestic market revival are quite big. With increase in demand, comes an increase in margins. On a massive sales base, even a 1% uptick in operating margins can give a
huge kicker to net profits” – I was just flying to the moon, wasn’t I? That’s what they say…aim for the stars and atleast reach the moon or something. Shahrukh Khan would be proud to take me onboard his company, Dreamz Unlimited.
6) “ISGEC Hitachi Zosen JV (We think this aspect is severely under-estimated by the markets)” – Haha, not really. Markets, as they mostly are, right this time.
6) I would say that this take the cherry on the piece of cake. “Investors investing at these levels might incur some opportunity cost. But management capability along with operating leverage makes this an attractive buy for any investor thinking 3-5 years” – I mean, really? What was I thinking? I ate the pudding alright. Massive opportunity cost. Attractive buy for 3-5 years view? This was a worse joke than RCB’s tag line of ‘ee sala cup namde’ (this time the cup is ours). What a prediction sirjee 🙂
a) It’s not just the growth of the order book, but composition of the order book that determines marketcap (as Market sees the future)
b) Even if you are right on order book, profits etc., Market’s mood may change and never give you the multiple you think it deserves
c) Don’t predict massive upturns or downturns.
d) Don’t depend on government.
e) Stop predicting in general, or altogether.
f) Stop writing stock stories. I mean, embarrassing really.
Given the nature of the season and with no reason, here are the quick lessons from 2018:
a) The Dumb Speculator: I used to think this as a very apocryphal story and always used to chuckle how silly the story is:
“Ben Graham told a story forty years ago that illustrates why investment professionals behave as they do. An oil prospector, moving to his heavenly reward, was met by St. Peter with bad news. “You’re qualified for residence,” said St. Peter, “but, as you can see, the compound reserved for oil men is packed. There’s no way to squeeze you in.” After thinking a moment, the prospector asked if he might say just four words to the present occupants. That seemed harmless to St. Peter, so the prospector cupped his hands and yelled, “Oil discovered in hell.” Immediately, the gate to the compound opened and all of the oil men marched out to head for the nether regions. Impressed, St. Peter invited the prospector to move in and make himself comfortable. The prospector paused. “No,” he said, “I think I’ll go along with the rest of the boys. There might be some truth to that rumor after all.”
Well, I am chuckling no more. Truer than ever, I believed the entire fantasy for one story in 2018 and had to sell 30% from the top instead of selling near the top. I had all justifications and calculations for why the top was ‘THE top’ given it was ridiculously overpriced, but then I thought, why not…maybe there is truth to all those fantasies after all. Ultimately, it boils down to whether you clicked ‘Buy’/’Sell’ than all the million justifications and calculations you do within your head.
b) The Aggressive Investor: I almost always take concentrated positions (8-10% atleast) and there was this one concall from a capital goods company that I thought had cracked it all. Of course, I built a serious position in it (8%) – justified with ‘backed with conviction’, ‘motivated management’, ‘diversified revenue’, ‘normally valued’ etc.
Obviously, not just me but the entire market thought that the company had cracked it all. And then disappointment. The position corrected 50% and now is 40% below my buying price. The market – as simple as it sounds – doesn’t care about your conviction or management stories. It cares about earnings and the earnings disappointed big time.
c) The Sheepish Investor: Given the burns of the aggressive position, I course corrected and then said to myself – maybe, just maybe this isn’t a market to build concentrated positions and went the other way…building ‘2%-3%’ positions in 4-5 stocks. As such, there is no fault in building 2-3% positions. However, when your inherent investing nature is to think and build concentrated positions, these small positions are the first ones to be cut out off the portfolio when you have conviction in other stocks where you can build a position.
So, unless these small positions turn out to be massive multi-baggers (atleast 4-5x), they tend to be a waste of time and energy given there is neither conviction nor position to sustain and eventually reap those returns.
d) Take the Gains and Bear the Losses: After a longish period of 6 years, I took substantial money off the table in a number of stocks. Was in 20-25% cash most of the year. And that enabled me to bear losses from a few stocks (mostly the 2-4% positions).
Given that one makes the biggest mistakes in bull markets (greed, staying on till the last minute or beyond for max gains, thinking you can ride momentum, inability to find ideas and yet find it painful to sit on more than 25% cash etc.), taking those losses is still painful. One can find solace that some of these losses will be offset against gains and thereby tax incidence will be lower – but that’s a false solace that we try to find comfort in. The real truth of making mistakes lurks in the background (and really, no way to get around the fact of making mistakes, other than try to reduce incidence).
e) Saying Thank You: So many family and friends to say Thank You to. Family has no option but to stick to you through thick and thin, but friends have zero obligation to bear all the mindless chatter. Thank You to multiple friends – O, V, C, A, D, V. Each one of those names have taught me more than I can ever learn through a myriad books and mistakes. So, Thank You. I broke even this year (0% returns basically on the portfolio) and largely thanks to all of you and your sagely advice (kudos to O though, who has been a rock).
f) Saying One more Thank You: One landmark reached and crossed in my professional career of Management Consulting as well (became a Principal at my Firm). I absolutely love Consulting and Investing, and thankful to God that he has given me opportunities in both these fields to strive and ability to try to excel (excelling or not is a different matter). The rush that I get in the first week of any client situation (this year was in Singapore) and the rush to find an unique angle (s) to stocks which the market might have missed is something that can’t be explained, and only can be experienced.
Investing as such is complex, but when compared to vagaries of Life itself (in terms of health, happiness, laughter, family, friends, tears, sickness and death), Investing is probably the simplest of the lot. The worst you can do is 7% in a FD. The major lesson of 2018 is to not fret a lot and just live life being aware of mortality.
So, Thank You for this opportunity – it’s been a pleasure to see you off 2018. Welcome 2019. Let the fun and frolic begin.
P.S: Best books read this year – ‘How I lost a Million Dollars’, ‘Anti-fragile’ (again), ‘Factfulness’, ‘The Art of Learning’ (again), ‘A man for all markets’, ‘Letters from a Stoic’, ‘Markets Never Forget, but People Do’ are a few of them.
It’s been a long time, close to 2.5 years since a post was written on this blog. Anyhoo.
Nobody has a doubt these days that it’s a bull market. Whether it’s in the mature bull market stage or the euphoric bull market stage, only time will tell (my personal opinion being, still in mature bull market stage). On the investing scale of Novice to Professional, am still on the Novice stage, so pardon my conclusions/prognosis in my first extended bull market:
a) Re-rating mania: Lesser and lesser percentage of folks want to talk about business economics and earnings. More and more of them want to bet on re-rating – ‘arey boss, sabko pata hai re-ratings se hi paisa jaldi banta hai’. Letting the tape decide (as re-rating is entirely that) your investing actions is a bit fraught with danger (unless of course you are a trader – of whom I have many good friends – and their risk management, trade management is top notch). But hey, all of us have made good money in the past few years only on re-rating, very few on real earnings growth – so yeah – don’t complain.
b) Books: I have read some stellar books in the past few years – and in no particular order – ‘Markets don’t forget, people do’, ‘The Bull’, ‘Lessons from History’, ‘Sapiens’, ‘Short history of financial euphoria’ etc. and it’s been enlightening to say the least. What I am surprised by, is this access to information is so easy these days. If I can take you back to 1990s, I could not get a Tinkle easily and today, we get the best of the books with a single click. What this does to investors/traders knowledge and psychology today in a market is beyond comprehension – given that this investing/trading in India (and mostly abroad) – was a closed circle phenomenon. I am not talking of the incessant ‘guile of insights’ that float around in various Whatsapp groups where you can’t remember what someone posted 1 day ago, much less a month ago. This knowledge of these books – distilled wisdom really – has had a profound impact on my thinking, and hopefully many other thousands of investors who have entered the bull market in the last few years. Greed and fear will continue – as it has for thousands of years – but I am kind of expecting that the % of people (as a total of investing population) who will get hammered will be much reduced. Learnings will be faster. Whipsaws will be faster. Opportunities will be lesser.
c) 3 pillars: If you believe that 3 pillars will continue to stay – capitalism, entrepreneurship and democracy – for any country/industry, I believe that one can make money in the long term. Entry price is definitely a determinant of stellar returns, but these 3 pillars are more important to make steady returns over the long term (better than fixed deposit, that is).
d) SIP mania: The whole mania around SIPs will continue for much longer than people think. We many move across sectors, small/mid to large caps etc., but TINA or no TINA, these SIPs will continue (the avg. or the median SIP amount has not changed by much in the last decade – but incomes have gone up – and therefore the % SIP amount does not pinch anymore for other discretionary or big budget items). I think it will take a massive crash, and not a demonetization or a 2011 crash to take these people out of the market.
e) On the investing front, I only bought a couple of stocks in the last year as I couldn’t find much else/could not understand some sectors. I don’t believe markets are crazily valued in some sectors at this stage. As I said earlier, I don’t believe we are in the euphoric stage yet.
And, in conclusion, I believe what I wrote in Sep 2014 (This time it’s different) still holds true, especially this part –
The fallacy of selling 20% below the top: Which brings me to my next and favorite topic. Nobody wants to leave the party that is going on. Value investors are very famous and take great pride in laughing at the stupid statement of former executive of Citibank saying “”As long as the music is playing, you’ve got to get up and dance.” We laugh and laugh at that stupidity. We quote Buffett. We quote Munger. Why, these days, we have become more exotic and even quote Daniel Kahneman and his super book ‘Thinking, Fast and Slow’. But almost no-one wants to exit the party. These days, the hypothesis is even better. These days, investors say that ‘let the market reach the top and then correct…we’ll all get out 15%-20% from the top’. Let me explain this fallacy through a famous picture:
That’s the chart of the IT bubble – starting from 1996, all the way till 2001. All those investors who say ‘let the market reach the top and then correct……’, would they get out at all the points marked ‘Red’ in color – then they would have missed all the returns. ALl of the them plan to get out at the ‘Orange’ market – how would they know in advance? Conversely, in reality, wouldn’t most investors get out at all the points marked ‘Green’ in color – throwing in the towel? Every investor worth his salt wants to get out at the point marked in ‘Orange’. How many can do it? I seriously doubt if it would be in high single digits.
Then again, the lure and the logic is too irresistible. Combine that fallacious logic of immediately getting out at the right moment with your neighbor (rather, twitter/whatsapp friends) making more money than you everyday – and you have got a dynamite waiting to blow up. We all want to dance till the last minute, irrespective of how many times we read Buffett pleading ‘the clock has no hands’.
Let’s enjoy the bull market till it lasts. I am still cautiously optimistically bullish – or whatever hell that means.
‘Recent History’ – an oxymoron, as history is typically measured in decades if not more.
However, given that most PMS funds, hedge funds and all kinds of investors proclaiming their vision and CAGR all over the place by choosing a very convenient 2009-2011 start dates/years to calculate their CAGR, I think ‘recent history’ would serve as a good reminder for all of us that mortality (in investing, as in life) is a good idea to revisit now and then.
Take a look at this snapshot and spend some time reading through the image:
An emerging STAR fund. Or you can call it by any other name. Portfolio as of Jan 2008. The name of ICICI is not even relevant here, as most mid-cap and small cap funds (and other funds masquerading as value funds) ended up in a similar fate in the great crash of 2008.
Look at the holdings of this fund in detail and ponder. Ponder for a moment, and especially on these lines:
a) The holdings in the portfolio were THE emerging names – with ‘quality’, ‘management integrity’, ‘scale of opportunity’ written all over them – back in 2008. Like we have many names now. With all three adjectives being attached to many of the names.
b) Access to Investing wisdom is not new (already available in 2008). Even the fund managers of ICICI STAR fund had access to a lot of investing books and Buffett’s letters.
c) Scuttlebutt is not new. Fund managers have had access to managements for as long as one can remember.
d) Access to networking is not new. Fund managers have always been widely networked. Only that networking has got more democratic because of technology (and especially whatsapp). Previously, there might have been panics in bursts. These days, there is a panic every day because of costless distribution of any written word.
d) Asset heavy businesses got massacred. Oh, well. We “know” about this now – we never invest in asset heavy businesses, right? Wait till the replacement cost bull market takes over.
d) Asset light businesses also got massacred. Either because the management turned out to be fraud or their industry turned out to be irrelevant.
e) What you don’t see in the snapshot is the price multiples one might have paid for those businesses. Given that ‘infra’ was all the rage back then, the P/E multiples were also high, pretty much with similar explanations that we are attributing to some sectors these days.
There are many more points to ponder just by looking at this image, which is basically a snapshot of the investing theme/rage back then.
i) Why do you think your portfolio of 2015 is not like the STAR fund portfolio of ICICI of 2008?
ii) What makes you ultra-confident (dare I say, cocky)? [I pretty much assume all of us are going to say ‘nope’ to i) above]
iii) What are the steps one might want to take/plug your learnings to not repeat i) and ii) above? [Hint: Whatsapp/Investing forums is definitely not the answer]
George Bernard Shaw made an epic statement when he said – “We learn from history that we learn nothing from history”. The history of markets is replete with same mistakes repeated over and over again, each time with a different twist (mostly unimaginable/black swan).
Given the proliferation and access to information, let us atleast attempt to learn from history this time? I started with an oxymoron, and I think I ended with one 🙂
P.S: Post inspired by a conversation with a friend who chooses to be anonymous, but is bloody brilliant.
P.P.S: If you think ICICI STAR fund didn’t really tickle your senses, and you are craving for more, here is a more elaborate chart on an assortment of businesses – more varieties than you can find in a Walmart store – quality, scale of opportunity, management integrity, vision, mission, goal, rags-to-riches, first generation promoter – choose your poison – and the current market value is not even 1/10th of what it was.
I admit. This is my first bull market with a substantial percentage of networth in equities. Maybe that’s why there is a lot of confusion in this chaos.
a) Prices are going up faster than you can say ‘What’s the EPS’? (Cashflow is, let’s just say, not on anybody’s mind right now). Folks are bidding up known stories, and more so the unknown. The more unknown, the better. The more known, the worse. Everybody is out there to unearth hidden diamonds, even from stones who haven’t reported profits in years. There is always an angle in the bull market.
b) Markets always rhyme, never repeat. We all ‘know’ how this will end. What we don’t know is when it will end. As they say, being too early is as good as being wrong. So, of course, we can quote Buffett for every single investing phenomenon and bring up Munger for every bit of behavioral science. We are too knowledge-able these days. Adding to the confusion. Now, there are always two angles to the story. And then there is quality. ‘Margin of Safety’, you say. Can you just hold this glass of water for me, while I laugh the shit out of you?
c) The advent of instant message technology (read: whatsapp) along with its widespread usage has obviously made this bull market different from the others. There is nothing that you write anywhere – and I mean, anywhere – that will not go viral. You actually have to expect that it will go viral. Even if it’s your colleague who has worked on common investing stories. Tremendous social proof at play. You send one message. I will send it to someone else to verify if what you said was true. And then it goes on and on, till you get back the message yourself. Not far from reality. Couple of weeks back, someone forwarded me a set of insights/questions that were supposed to be secretive (with an added masala of ‘bilkul kisi ko mat bol’). In about 4 hours, I got that message from 4 other folks and lo and behold, it was also on a forum. Social proof out of the window. This is social incest.
d) And obviously, because of all the above, the resultant price moves in stories are also very swift (upwards/downwards). But hey, you keep saying “volatility is your friend”. LOL. I meant that only if I had cash to invest. Not when I am fully invested like now.
e) A special phenomenon of this bull market, along with instant messages/whatsapp, is scuttlebutt. Fisher, who propagated scuttlebutt would probably be very happy (or be turning in his grave) because of the number of people who do scuttlebutt these days. And the kind of scuttlebutt. And the type of scuttlebutt. And how they tie in one shop/one retailer/one distributor’s conclusion to the entire story and weave a fantastic hypothesis which cannot be refuted. The butt has been scuttled in so much variety over the past 2-3 years, that it would put Arvind Kejriwal’s political gimmicks to shame.
f) These days, any and every story should atleast be 20 P/E. If it is not, it is seemingly undervalued. And best of all, this P/E thinking kicks in even more because earnings are increasing almost across the board. But you say – hey, global economy has slowed down, domestic economy hasn’t picked up – so why are the earnings increasing?. But, my question to you is, who the hell cares about sales growth anymore? It doesn’t matter if the growth in EPS has come through lower raw material costs (commodity prices at lows), or lower fuel costs (did you see the fuel expenses in P&L statements these days – thanks Piyush Goyal) or slightly better operating leverage? Who cares if it is sustainable or not? Why don’t I care about sustainability?
g) Hey boss, by now, you would have got the drift. I am not in the business of long term investing. I am in the business of giving gyaan on long term investing but actually invest based on triggers/news flow/get into the next best story and flip it in a quarter, maybe a year (if I am really in the mood). I don’t have time for any stocks who don’t perform magnificently quarter on quarter. Flip. Flip. And f’in Flip. There are charts and there are tools and there is momentum and then there are earnings. We are in the business, eventually, of finding the greater fool.
But all this sounds as if I am doing all the right things and not fall prey to all these above flaws? Of course I am.
Do I always invest in quality? Check. Do I always invest in stories with large potential and great management integrity? Check. Do I always do scuttlebutt and speak to the right guys in the business? Check. Am I not affected by P/Es and triggers and whatsapp messages? Check.
I am not confused. This is not madness in markets (neither is it Sparta). Of course this isn’t Chaos. I know everything. How, you ask?
Because, I am just as confident as a f’in fresh MBA grad who can spout relentless ‘good’ advice with all the enthusiasm and language. And all you underlings – I mean, all other investors – listen to what I say. You will be wiser for it.
If you already have a million dollars or more, this blogpost is not for you.
For all others, I’ll cut the bullshit and get to the chase. I am just mighty pissed off.
When you have less than a million dollars –
Please don’t listen to any or all the Gurus who are propagating 16% CAGR, 18% CAGR, 20% CAGR. You know the usual spiel. Say, you have 5 Lakh rupees. Gurus recommend that you should be happy be 18% CAGR or 20% CAGR and over a long period of time (40 years), you would be so rich, that even the rich would be ashamed.
For all those studies, where you read that if you had invested in quality at any price, and just held on to them for a long period of time (40 years), you would have made enough money to be proud of yourself.
You really want to know what they DON’T tell you.
By the time you are rich, you will be OLD. You will be very old. Your kids and grand kids, of course, would really appreciate all your journey, effort and all the good things that you have done for them. You will just die as a rich man without all the good things before it. That’s just a tragedy.
Since the readers of this blog are reasonably well versed with numbers, let me illustrate it with numbers.
Let me get the first and the easiest thing out of the way without the numbers. People keep doing these fancy calculations in excel about how much their salary is growing to grow, how health expenses will increase, plug in a sexy inflation number and try to arrive at a figure which they think will be enough for retirement.
Let me solve that for you. You need a million dollars (ex-Mumbai). Unless you want to live the luxurious life of Vijay Mallya ,(well, if you were Mallya, you wouldn’t do all these calculations), a million dollars would let you live and eventually die peacefully.
Ok, now for the numbers bit.
Let’s say you start investing at the age of 27 (well, how better it would be if you could start investing at the age of 15, but try convincing your teenage son or a fresh graduate not to spend on the latest smartphone and you’ll know what I mean). You start with Rs. 5 lakh (You can plug in any arbitary number).
Let’s say you manage to do 18% CAGR over a long period, say 40 years. Do you know how much money you would have by the time you are 67? 37 cr 51 lakh.
Whoa. That’s a lot of amount you say. Definitely it is.
But what would you do with so much amount at 67? You would be old, frail and not really ready to say travel widely or eat whatever you want or whatever shaukh (sic) you have.
Ok. So, how much money would you have by the time you are 57? 7 cr 16 lakh. Did you observe the difference?
Ok. So, how much money would you have by the time you are still fit, healthy and want to do what you want – say at the age of 47? 1 cr 37 lakh.
Did you see the difference? Did you really observe the beauty of compounding? You would not dream to live a reasonably luxurious life, traveling where you want, doing what you want to do with 1 cr 37 lakh.
And that’s my problem with folks preaching ‘my target is 18% cagr because the Gurus said it’, ‘I am ok with 16-20% cagr, but I don’t yet have a million dollars’.
Nobody, or rather, from whatever I have read spells out clearly on this intricate relationship between CAGR and Age. You can be rich, but you are already old.
I would rather die with 10 cr, in the process doing what I want than die with 37 cr to make my children and grand children happy.
And that brings me to my real point.
You should really not be aiming anything less than 35-40% CAGR if you are not already a millionaire. It just sucks not to aim for it.
Why did I say 35-40% at a minimum? That’s because, you can make 100x your money in 15 years with a 36% CAGR. Your 5 lakh will become 5 cr in 15 years (if you start at 27, by the time you are 42 – you are reasonably rich and an almost millionaire). This is not something that I picked up from the now famous 100-to-1 book. That never spoke of age. In fact, he talks very long time frames.
Is this the bull market in me speaking? Definitely. But why not? Look, unless you are outrageously lucky with a stock or timing the depth of a bear market, your BIG returns are going to come only in a bull market. Again, numbers. If a Rs. 20 has to become Rs. 100, you need a 400% return. That same Rs. 100 to come back to Rs. 20 requires just a 80% drop. So, you absolutely need to make killer returns in the bull market to survive the bear market.
People will try to dissaude you by quoting process will get corrupted, people will indulge in speculative stocks etc. My question is – what’s a corrupt process? Just because there is a wave of high quality, high management integrity bull market this time, everybody is on this bandwagon of the right process etc. It’s almost as if investing was just born in 2009.
And speculation. I don’t think speculation is going to net you 35-40% CAGR for 15 years. I have not met anybody yet doing this.
Is this easy? It’s obviously not meant to be easy. Just because you have some internet forums and whatsapp groups these days doesn’t mean investing is easy. There is a lot of hard work, there is a lot of luck and there is a lot of position sizing science involved before you make that million dollars. As Munger says, ‘It’s not meant to be easy. If you think it is easy, you are stupid’.
And speaking of Munger (which, in these days of the current bull market, seem to encapsulate all other Gurus), here’s what he had to say in Snowball – remember, when he was young –
So, for all those people who keep saying 18-20% CAGR, you are either already a millionaire or you are just bullshitting. Aim higher. Work harder. Enjoy the process of investing. And actually enjoy life at the right age. There is no fun in dying rich. And there is a tragedy in dying really rich without having enjoyed or doing what you really wanted to do.
Go for 35-40% CAGR (atleast). Become a millionaire. Live comfortably.
P.S – Cynical folks may obviously point out that 5 lakh is only a starting capital and people will add as and when they grow in life. You know, if people were so disciplined in investing, we’d have a lot more people active in 10 year and 15 year SIPs.
P.P.S – Other folks might point out CAGR is not important but how much, as a % of your networth, is more important to overall gains. Absolutely agree. Convince your friend in a bear market to put 90% of his networth in equities. % of networth is very important, but even with smaller sums of money (and I do think Rs. 5 lakh is a smaller amount of money these days, with freshers from IIMs earning Rs.20 lakh), CAGR at the right levels covers a lot of ground.
Earlier this week, I had the privilege to be a part of an intense, immersive and absolutely enlightening investor conference in Goa. It was an invite-only and unfortunately, I am not at liberty to disclose either the names of participants in the conference, nor the name/theme. Participants were amazing. It was such an intensely collaborative conference that the time spent on the beach in 2.5 days of the conference was about 2.5 hours 🙂 But Goa, being the place it is, relaxes you completely in those 2.5 hours.
Anyway, enough about the background. I think I do have the liberty to compile a list of learning that I had from this conference. This is more like a list that I wrote down on paper, so there might have been a zillion other things that I missed. Papers get lost but Internet is forever (or something like that) and hence this attempt:
1) Owner’s View: Look at every business from the owner’s standpoint. What motivates the owner? What are 1 or 2 key factors that the owner understands that bring value to the business? How will the owner react in adverse conditions? That’s absolutely critical to value the business. (Book recommendation for this point: “Creating Shareholder Value”)
2) Crossing the Chasm. An excellent mental model to think about businesses, especially emerging businesses. There are two critical strategies for listed markets based on this mental model. a) Initially, follow a basket strategy in an emerging theme (bowling alley phase) and b) More critically (and this was the key learning), the leader usually gets a disproportionate share of the market and hence move capital from basket strategy to the leader once data/analysis points to who would be a leader.
3) Invest in Leaders: Try investing in large, proven and addressable markets (companies trying to create a market usually face a lot of headwinds and probably will not be successful). A further refinement would be to always invest in leaders in pull-based (demand) businesses.
4) What’s the DNA?: Understand the company’s DNA. Look for greatness DNA. The strengths and weaknesses of promoter/owner/leadership gets amplified in the company (and thereby earnings).
5) Write it down: Try and write down core investment thesis before investing in any stock (or selling a stock, for that matter). This would serve as a record to check against reality.
6) Sell a bit: Sell a bit of your most favorite/loved stock and check if the love holds (selling will trigger rationality in a much loved stock in your portfolio). Especially, sell a bit if numbers get disappointing to get rational.
7) Growth, growth, growth: The weightage for growth (usually, sales and then profits) in the Indian stock markets is 50%.
8) What’s your insight?: Decent opportunity size, difficult to dislodge and high predictability are critical factors for any business and in all markets (bull and bear). What requires more effort, insight and is more important to returns is the evaluation of a visible gap between performance and perception (especially, in bullish times like these).
9) Successful patterns: Some of the successful patterns in the Indian stock market have been Growth + Deep undervaluation, Operating leverage + reducing debt, maiden dividend, industries with a reform tailwind, demand businesses + oligopoly and small equity + illiquidity
10) Leverage Darwin: Buy shares (in tracking quantity) of all businesses that you like. Else, it’s usually ‘out of sight, out of mind’. And Darwin theory will force you to forget those stocks even though you seem to be hearing good news (since you don’t even own a share)
11) Read, Read, Read: I found that most good investors in that forum read, at a minimum, 500 annual reports a year (may not be 500 different companies; may be 5-7 annual reports of every company that one likes). And as Munger says, it adds up over a lifetime.
12) Psychological Denial: One of the bigger mistakes that bright investors usually make is psychological denial. It’s not that they fail to recognize that the business is deteriorating. It is that they don’t act upon it. There would be plenty of time to recognize deterioration of a business and act upon it (sell). But psychological denial comes into play and these bright investors are left holding the bag.
13) Are you screwed yet?: If you are not screwed by the markets in 2 years (consecutively), then watch out. Screwing is just round the corner (not just a bull to bear, but due to transition from confidence to overconfidence, mistakes are bound to happen)
14) Don’t take the lollipop: Many a bright investor with wonderful track records for 5, 7, 10 years get lulled by the market and their analysis. Market, at some point in time, gives a wonderful, sweet (but dangerously poisonous) lollipop which these investors partook and then got rogered. Sometimes, they don’t recover financially and worse, are broken in confidence too. The key always is to be watchful.
15) My observation/contribution in the conference: Be absolutely obsessive about working capital (and detailed components). Working capital is a leading indicator of competitive advantage. If working capital (days) is increasing for all businesses in your portfolio, either you have a shitty portfolio or the economy is going in a tailspin.
P.S: As I mentioned earlier, these are the ones that I wrote down (the essence as such. Detailed discussions on these points obviously were a killer). Such was the intensity of the conference and discussions that there were a zillion other things which I couldn’t/didn’t note down. My biggest takeaway from this conference was the humility and down-to-earth behavior of these brilliant investors who have seen the ups and downs of the market for more than 10-15 years and also have made a lot of money still looking to learn, still looking to share and in general, being absolutely stellar. Lot to learn. And as Frost lingers on, ‘miles to go before I sleep, miles to go before I sleep’.
ISGEC has been one of the very good winners in 2014 in my portfolio. Due to multiple requests to expand on this story, I have prepared a quick presentation to detail the story.
Contrary to public opinion on twitter and whatsapp, identifying and working on this business was a complete collaborative effort. Om and Dhruvesh – two very good friends of mine worked on this story along with me and were critical in various thought processes, scenario analysis and tons of brainstorming. Due to these two people and two people alone was the reason why I had the confidence to take a bigger position than usual on a Capital Goods story. We traveled to Yamunanagar from Mumbai, Hyderabad and Bangalore for the AGM in August 1st week. It was a fantastic learning experience along with being a super fun trip.
Hope the story becomes more clear with this presentation. Let me know if you have any questions on the business (and not the current price and prospective future price, as I don’t have ANY clue where the price will go in the near or distant future).
Link to the presentation below:
Disclosure: This is NOT a Buy/Sell/Hold recommendation discussion. This blog is only for educational purposes. Om, Dhruvesh or me are neither research analysts nor do we have any fancy sounding certifications. All three of us are still invested in the story. Please contact your financial adviser before taking any decisions.