Most will say: “It was right in front of me but but I still missed it”

Book your Seat

Tickets: ₹1,499

Use code ‘FBR’ at checkout → ₹999

Here’s what I mean:

India just crossed a threshold that almost no country in the world has reached.

The FBR - India’s Fast Breeder Reactor - achieved criticality.

A reactor that produces more fissile material than it consumes.

This means that Stage 2 of India’s 3-stage nuclear strategy is now live.

This isn’t the endpoint, rather the beginning.

A 100 GW nuclear buildout by 2047 comes next.

Reactors. Fuel. Engineering. Components. Across two decades.

The companies in this supply chain are not yet widely followed. Yet.

The opportunity is early - which means it’s also confusing.

Most investors will wait until it’s obvious.

But by then, it usually isn’t early anymore.

Tomorrow at 11:00 am we are running a structured workshop on Nuclear Energy

No hype, no stock tips.

Just a clear mental model for understanding this sector before it becomes the next big narrative:

We discuss:

→ How nuclear power actually works (from scratch)

→ The 3 types of reactor technologies

→ Who makes what - India’s expansion roadmap, mapped out

→ Full nuclear stock universe — India (Component wise)

→ Deep-Dives

Book your seat

Tickets: ₹1,499

Use code FBR at checkout → ₹999

FBR = Fast Breeder Reactor. The same breakthrough that makes this session worth having.

Recording will be available in case you can’t make it LIVE.

The window to understand this sector early is still open.

For now.

Yours sincerely,

Rahul Rao, CFA

Everyone has an opinion. Nobody has a system.

Your WhatsApp group is split. One guy says buy the dip. Another says cash is king.

The third one sent a YouTube video titled “MARKET CRASH 2026 — SELL EVERYTHING?”

All of them are Ghajini. 18-month memory. Reacting to the last thing that happened.

No framework. No map. Jus vibes.

Dhurandhar didn’t operate on vibes :)

He read the terrain. Understood the system from the inside. Played the long game while everyone else was running scared. He didn’t ask “what’s going to happen next?”

He knew where he was. And he positioned accordingly.

This Saturday, you become the Dhurandhar of market cycles.

Registere here

We’re running a workshop: Mastering the Market Cycle, built from the ground up to give you a system for reading where we are in the cycle and positioning your portfolio accordingly.

Not predictions. Not tips. A repeatable process.

Here’s what you’ll walk away with:

𝟲 𝗠𝗮𝗿𝗸𝗲𝘁 𝗖𝘆𝗰𝗹𝗲𝘀. 𝟲 𝗦𝘁𝗼𝗿𝗶𝗲𝘀.

We go back to 1995 and walk through every major cycle the Indian market has seen. Not as a data dump, each one gets a story. Real companies. Real outcomes.

The Lost Decade where names like DSQ Software and Pentamedia vanished.

The 2008 crash where HDFC Bank recovered and DLF never did.

The 2018-2020 massacre that created the next decade’s multibaggers.

The post-COVID euphoria where everyone became a genius.

You’ll see the same human behaviour repeat across 30 years.

Once you see it, you can’t unsee it.

𝗔 3-𝗧𝗼𝗼𝗹 𝗖𝘆𝗰𝗹𝗲 𝗗𝗮𝘀𝗵𝗯𝗼𝗮𝗿𝗱

Most investors use one lens: PE ratios. That’s navigating with just a compass. We’ll give you four instruments:

→ Valuations — PE, Market Cap to GDP, Earnings yield. And how to use them.

→ Sentiment — including an indicator with a near-perfect 19-year track record of calling tops and bottoms.

→ Credit Cycle — Credit growth lead the market by a few quarters. We’ll show you how to read it.

Three tools. Together they triangulate where we are. You’ll never guess again.

𝗦𝗲𝗰𝘁𝗼𝗿 𝗥𝗼𝘁𝗮𝘁𝗶𝗼𝗻

The market isn’t one thing. Different sectors lead at different phases of the cycle.

We’ll show you the full rotation from 2020 to today — how leadership moved from metals to capital goods to defence to pharma. Where it’s going next.

And the one rule that can save you from the most expensive mistake retail investors make: last cycle’s winners almost never lead the next one.

𝗛𝗼𝘄 𝘁𝗼 𝗣𝗼𝘀𝗶𝘁𝗶𝗼𝗻

Three operating modes: Aggressive, Neutral, Conservative. With clear triggers for when to switch between them. Not “keep some dry powder.”

An actual decision-making system.

𝗦𝘁𝗼𝗰𝗸 𝗜𝗱𝗲𝗮𝘀 𝗧𝗵𝗮𝘁 𝗙𝗹𝗼𝘄 𝗙𝗿𝗼𝗺 𝘁𝗵𝗲 𝗙𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸

Every name is linked to a sector thesis, which is linked to a cycle reading. You’ll see the full chain: Indices → Sectors → Stocks.

And we’ll teach you how to find these yourself using Screener.in, so you can run this process quarterly without us.

You leave with a system. Not tips. Never tips.

📅 SUNDAY, 29th March

⏰ 11:00 AM

Use code DHURANDHAR for 30% off. Offer ends today.

100% money-back guarantee if it sucks. No questions asked.

Register here

Stop predicting. Start preparing.

Become the Dhurandhar of Market Cycles.

See you on Sunday !

Rahul Rao, CFA

Subscribe now

Note: We have relied on data from www.Screener.in and www.tijorifinance.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.

Rahul Rao has been Investing since 2014. He has helped conduct financial literacy programs for over 1,50,000 investors. He helped start a family office for a 50-year-old conglomerate and worked at an AIF, focusing on small and mid-cap opportunities. He evaluates stocks using an evidence-based, first-principles approach as opposed to comforting narratives.

Disclosure: The writer or his dependents Hold shares in the securities/stocks/bonds discussed in the article.

The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.

The thumb rule is :

Be more aggressive when valuations/odds are in your favour - Bottom/Troughs.

Be less aggressive when valuations/odds are NOT in your favour - Peak.

This applies equally & unfailingly to :

1. Indices - NIFTY, NEXT 50, SMALLCAP 250 etc

2. Sectors

3. Individual Stocks

The game plan, however, is different for each.

The challenging part is you don’t know when its a “bottom” & when its a “peak”.

C’est la Vie (such is life).

The second best alternative - being “kind of right” is ACTUALLY A VERY EFFECTIVE STRATEGY.

If that alone does NOT get excited to learn about Market cycles…

HERE ARE 3 MORE REASONS EVERY INVESTOR MUST STUDY MARKET CYCLES:

1. You believe Valuations matter i.e - How much you pay determines your returns.

2. When to be Aggressive vs Conservative !!

3. Your “Macro predictions skills” are crap (believe it or not).

We discuss the HOWS & WHYS this SATURDAY

Click here to Secure your spot

✅Date: 7th February 2026 - SATURDAY

✅Time: AM onwards

Click here to Secure your spot

➡️ 💯 100% Money Back Guarantee…

➡️ IF YOU ATTEND & STILL DON’T FIND the Session valuable.

➡️ Recordings are available within 24 hrs of Session.

Yours sincerely

Rahul Rao, CFA

Note: We have relied on data from www.Screener.in and www.tijorifinance.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.

Rahul Rao has been Investing since 2014. He has helped conduct financial literacy programs for over 1,50,000 investors. He helped start a family office for a 50-year-old conglomerate and worked at an AIF, focusing on small and mid-cap opportunities. He evaluates stocks using an evidence-based, first-principles approach as opposed to comforting narratives.

Disclosure: The writer or his dependents Hold shares in the securities/stocks/bonds discussed in the article.

The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.

This means 4 LIVE sessions of approximately 4 hours each.

Dedicated to “applying” Investing frameworks that work.

How is this any different from other “courses”

Firstly, this is NOT a “recorded courses” (although recordings will be available).

Secondly, we’ll (YOU) be working on LIVE case studies.

Stocks that are potential Investments RIGHT NOW !

At the end of each session, you will be required to work on stocks and apply the framework we’re learning to LIVE situations.

It’s one thing to LEARN & Almost another to actually apply it.

This program focused on actually applying the skill-set. And you don’t have to do it all alone.

Stop working like a lone-wolf and come benefit from the experience of other Investors who have been in the game for decades.

Here are the details :

Click here to signup

If you have any questions, drop a whatsapp by clicking on the button below:

Chat with us

Regards

Rahul Rao, CFA

Most of my dear readers wanted to learn more about what this FPI scan™️ scan is.

So, firstly here’s the context for WHY FPI scan™️ can be a game changer for you.

A. I need to feel deeply motivated - Gut level “Greed” - to go all in on researching a business. Good ideas that were once a luxury, are now fairly abundant.

B. Combine this with the fact that I would rather have a big position (my definition of big = 10%+) in a relatively lower number of companies than have a 3-5% cap limit etc. Of course, this is subject to change.

C. The “conviction” to build larger positions come from “deep research”, which is time & energy expensive.

D. To be deeply motivated to do the “deep research” on a business, an idea needs to literally “show me the money”.

E. To “see the money”, I usually end up scanning a LOT of companies that get dumped in my “core checklists” from all sorts of sources - friends, scans, newspapers, dreams etc etc. This is a high volume, low depth approach.

This “scan” is what I’m cheekily referring to the “FPI scan™️”, which has been developed over the years. A lot of it is copied from other great investors, some of it is my own.

This format is given below is standard and is pasted in the notes section of www.screener.in.

BMV - Business, Management, Valuation

<paste the text below in the notes section>

*You could also create a prompt for screener.ai using this format to get a good gist, although I prefer manual note taking because THAT’S the POINT OF NOTE TAKING - doing it manually so recall is high.

Business:

• Segment

• Leadership

• Growth

IS -

BS -

CF -

Management:

• shady? Compensation? RPT?

Valuation:

<paste the text above in the notes section>

IS* - Income statement.

BS* - Balance Sheet.

CF* - Cash Flow Statement.

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The gyaan is all good. Here’s how to really apply it.

# John Cockerill.

Now that you’re done watching the entire video, I look forward to hearing your views/questions in the comments section below.

Rahul Rao, CFA

DISCLAIMER:

Disclosure: The writer or his dependents MAY HOLD shares in the company/stock discussed in the article.

Note: We have relied on data from www.Screener.in, www.tijorifinance.com and company released documents throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.

Rahul Rao has been Investing since 2014. He has helped conduct financial literacy programs for over 1,50,000 investors. He helped start a family office for a 50-year-old conglomerate and worked at an AIF, focusing on small and mid-cap opportunities. He evaluates stocks using an evidence-based, first-principles approach as opposed to comforting narratives.

Disclosure: The writer or his dependents MAY HOLD shares in the company/stock discussed in the article.

The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.

We discussed an entire framework for finding/analysing contrarian bets. However, a key feedback was that few sections could’ve been more specific (i.e - step by step).

So here goes…

A Super-dumb but effective, 4-step framework for finding contrarian stock ideas.

The goal is NOT to find beaten down stocks, the goal is to make money.

The contrarian style of investing naturally gravitates towards ignored, beaten down and make-you-want-to-puke-kind of sectors because that’s where the bargains are. And frankly…

I’m NOT necessarily looking to find something worth buying TODAY. I’m looking for an investment that can start start performing (at least business wise) 3 to 12 months down the line so when it does I’m ready to pounce.

THE “FRAMEWORK”

Step 1: Type NIFTY 500 in the www.screener.in

Step 2: Sort by 3 year price returns. Worst on top.

Why? : The worst performing stocks in 3 years basically turn off most sane people, leaving potentially juicy opportunities for weirdos like us.

When I did this exercise very recently (19th August 2025) there were 48 companies that had a No 3-year returns history meaning either they were de-merged or recently listed without a 3-year price history.

I left them out for this exercise. If you like you may go ahead and scan these too.

Here’s a list of Worst 30 (Excluding 48 companies with no 3 year price history) of the NIFTY 500 companies.

Step 3: I run a FPI scan™️ (<10 mins per company) on each one of these companies.

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Why? I basically want to get hit by a bat on my face while going through the FPI scan™️. Something should grab ME.

I lay emphasis on the words ME because a different set of companies might grab YOU.

At this point the sole objective is to create a shorter list of stocks where I would like to spend 2-4 hours on.

For this exercise I conducted the FPI scan™️ on 15 of the worst companies filtered by 3 year price returns.

The companies that grabbed ME are boldened in the list above. These were :

1. AWL Agri business (Adani sold ‘Fortune’ brand to a singapore based company)

2. Zee Entertainment (Shareholders rejected preferential to promoters)

3. Aarti Industries (Strong balance sheet in a downturn)

4. PVR Inox (A turnaround candidate?)

For whatever reason (except that its balance sheet looked the strongest), I went ahead and dug deeper into on Aarti Industries (Disclaimer: No Holding) and guess what, I wrote an article in The Indian Express.

In the article I outline the challenges the company is undergoing on an industry level (china saala) and company specific level (huge capex, low utilisations etc) and “triggers” that can unlock value.

Step 4: Add or don’t add to your watchlist.

Subscribe now

A few questions arise :

Q1. What is the FPI scan™️ you mentioned Rahul? How can I use it to quickly size up ideas?

Q2. How do I develop my style so I can judge what GRABS ME?

Well, that’s personal. As far as how to analyse stocks & spotting alpha generating “patterns” are concerned, we’re working on that and will keep you updated.

In a more immediate effort to help elevate your understanding with regards to specific sectors, we’ve been conducting some online sessions recently - Housing finance, power sector (T&D) & Contrarian Investing Workshop.

Similarly, we have an upcoming session on the DEFENCE sector.

Join us? Find out what the hype is about and get a balanced view on the topic by signing up for the session.

Signup link: https://rzp.io/rzp/AlphawealthDefence

Hope the step-by-step is useful. Let me know if you have questions.

Rahul Rao, CFA

DISCLAIMER:

Note: We have relied on data from www.Screener.in, www.tijorifinance.com and company released documents throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.

Rahul Rao has been Investing since 2014. He has helped conduct financial literacy programs for over 1,50,000 investors. He helped start a family office for a 50-year-old conglomerate and worked at an AIF, focusing on small and mid-cap opportunities. He evaluates stocks using an evidence-based, first-principles approach as opposed to comforting narratives.

Disclosure: The writer or his dependents MAY HOLD shares in the company/stock discussed in the article.

The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.

I almost never buy stuff at the market price.

Since I got married in December 2024, this behavioural inclination has grown into a way of life because my wife is the ultimate bargain hunter.

We buy movie tickets on 50% off & groceries in bulk every 2 months - AT DISCOUNT from DMART.

We order from either depending on where the delivery fee is lower (Too much?)

We bought our car when the auto slowdown had become obvious and dealer inventory was high (bought insurance & car accessories separately).

Hell, we bought our wedding wear from Ambala, especially driving 4-5 hrs on three separate occasions to get a deal so good It makes me happy.

And you know what, I’ll confess something personal: One of my primary motivations to quit smoking (3 years+ free) was the opportunity cost of 2-3 cigarettes/day is HUGE !! (Health & Wealth wise)

Just not worth it.

While in our personal lives we sometimes let go of the strict value buying standards, this is rarely the case when it comes to picking stocks.

“Buy stocks like you buy groceries, not like you buy perfume”

-Benjamin Graham

For example,

Micro-finance is a deeply hurt, deep bargain sector right now. I’m invested (Not a recommendation please).

Paper has been hurting so bad the big 5 players had to go complaining to the government. The thought of investing in paper companies makes people puke. I’m invested.

KRBL, the market leader in basmati rice exports was hurting badly and the stock has gone nowhere in the last 10 years but recently has announced massive value unlocking measures. We’re evaluating it.

India’s largest PAN - Pthalic Anhydride player (Intermediate chemical for paints etc) is going through a rough patch. No sales growth in last 3 years. Capacity has increased meaningfully but pricing is bad. I’m invested.

Sigachi Industries - Market leader in MCC (powder that goes into a tablet) had a fire incident that killed 55 people at its plant in Hyderabad. We’re evaluating it.

I’m so crazy about finding good “deals” that we found Mr. Karan Rajpal who has been investing in hated, ignored (often spat on) sectors for more than 20 years !

AND he’s going to teach us more about how finds deep bargains.

If you’re someone who resonates with the above YOU MUST ATTEND THIS SESSION ! (at a discount price of INR 599/- ;))

You can signup by clicking here (or scanning QR code on the flyer above)

Yours truly

Rahul Rao, CFA

DISCLAIMER:

Note: We have relied on data from www.Screener.in, www.tijorifinance.com and company released documents throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.

Rahul Rao has been Investing since 2014. He has helped conduct financial literacy programs for over 1,50,000 investors. He helped start a family office for a 50-year-old conglomerate and worked at an AIF, focusing on small and mid-cap opportunities. He evaluates stocks using an evidence-based, first-principles approach as opposed to comforting narratives.

Disclosure: The writer or his dependents MAY HOLD shares in the company/stock discussed in the article.

The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.

I’m officially at a point where I have more ideas than I have capital, time, or energy to juice each one of them out.

so, If you’re struggling to find high quality ideas in these Choppy markets, this is how you can go from not enough high quality ideas to TOO MANY of them.

Ready?

Step 1: Open Screener.in

Step 2: Go to Market Pulse — Announcements — click ‘Important’

Step 3: Start reading each filing and go deeper into ones that jump out.

What will jump out to you, might not be what will jump out to me so THAT’s something you have to get a handle on.

For example, in yesterday’s scan I came across the following leads:

Comment: How will they finance it? Equity on balance sheet is 689 cr so possibly through issuance of shares, debt etc. Newsworthy, but I’m not interested in digging further.

Comment: Housing finance is my sweet spot but I had never heard of this company. On a Mcap of 1200 cr, a 266 cr divestment is material and also reflective of good (improving) capital allocation because the housing finance space, especially affordable housing, is becoming increasingly becoming crowded.

comment: Preferential allotment can be a lead indicator for big winners, under the right context. In this case Utpal Seth of Rare Enterprises has been allocated 30% of the pref. The CEO, CFO, Executive Directors etc are also participating. Had heard something about this from a friend so this jumped out for me.

Comment: Market cap 250 cr, Property sold for 480 cr. Enough to get me REALLY JUICED.

Comment: 447 cr Market cap got a major order of 392 cr (executable over what time frame?). A closer look revealed some very bullish commentary. Promoter has been buying from open market (after selling 10% between December 23 & December 24).

Comment: HZML acquired Quippo Oil & Gas Infrastructure for INR 57 Lacs in August (how?), got an order from Oil India for INR 280 cr just weeks later.

This was just from scanning the announcements on 12th August 2025 for 30 mins.

Drop me a comment if you’d like to share your POV.

Rahul Rao, CFA

🚦Support my work by contributing to UPI: rk4g10@okhdfcbank or scan the QR code at the bottom of this article. ☺️

DISCLAIMER:

Note: We have relied on data from www.Screener.in, www.tijorifinance.com and company released documents throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.

Rahul Rao has been Investing since 2014. He has helped conduct financial literacy programs for over 1,50,000 investors. He helped start a family office for a 50-year-old conglomerate and worked at an AIF, focusing on small and mid-cap opportunities. He evaluates stocks using an evidence-based, first-principles approach as opposed to comforting narratives.

Disclosure: The writer or his dependents MAY HOLD shares in the company/stock discussed in the article.

The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.

Instead, attend our workshop on housing finance sector :)

This “Ek lakh crore ki kahani” might has gone through a rough patch since 2018 and as the sector turns around, Let’s make sure we don’t get it as horribly wrong as the investor above.

To access RECORDING of the above LIVE session, please scan the code below and drop us a DM on substack with your email ID (for access) and we’ll share the recording asap.

Looking forward to getting your questions/feedback.

Rahul Rao, CFA

If there’s something you need to let me know, feel free to comment below.

Thanks

Rahul

When the guest highlighted the robustness of the strategy by saying that it worked : “across counties and across timeframes”, I decided to look into it.

I read 2 white papers on the PEAD Strategy (link at bottom of post) and based on the learnings, I will try to break-down the concept of PEAD - Post Earnings Announcement drift.

Let’s Go ! 🏁

The Post-Earnings-Announcement Drift (PEAD) is a ‘Market Anomaly’ where stock prices tend to continue moving in the direction of an ‘earnings surprise’ (for 2-3 Quarters) after the earnings announcement has been made.

This suggests that the market does not immediately price in the information contained in earnings announcements, leading to a delayed reaction and subsequent drift.

I believe that that the reaction times has becomes faster but there seems to be enough evidence that this strategy still works ! (Read White Paper on Indian Data (2018), link at bottom)

BUT why does PEAD even exist?

Well, nobody really knows for sure but we have a few possible explanations :

👉🏽 Delayed Response: Investors might not react immediately to earnings surprises, causing a gradual price adjustment.

👉🏽 Information Assimilation: Investors might take time to fully understand and digest the implications of earnings reports.

👉🏽 Investor Behaviour: Behavioural biases like inattention or overreaction can contribute to the delayed response.

However, bear in mind that any strategy that has worked and is used more and more widely is likely to stop working.

I cannot comment on when this is likely to happen with PEAD but its something to bear in mind.

According to Mr. Prabhakar Kudva (Podcast Guest, link at bottom), 3 basic conditions must be present for PEAD to work

Let’s checkout a few examples :

• Karnataka Bank Q2FY2023 YoY Profits Went up 3X, Stock Moved 64% in 2 Months from 24th Oct 2022

• Data Patterns Q4 FY2022 YoY Profit went up 4X, Stock moved up 2X in 60 Days.

• Canara Bank Q2FY2023 YoY Profit went up 2.5X, Stock moved up 60% in 60 Day

• Ujjivan SFB went from being in losses for 3 consecutive quarters to hitting a profit of ~ 128 Cr in March 2022 Quarter. I was not tracking the PEAD signal at the time but I did eventually invested because I picked up other signals such as a depressed valuation and turning banking sector.

I think in addition to examples that worked, it would’ve been useful to have case studies where PEAD failed to work despite blockbuster earnings growth post a period of neglect.

What if we Reverse engineer the Super-Performer Stocks (100% Return in 1 year) and check whether Earnings Growth was indeed a contributing factor?

Would that help us correlated Blockbuster PAT Growth with ‘Super-performance’?

Based on a list of 381 Stocks that gave a 100%+ Return in the last 1 year, we learn that :

⚡ Stocks from 65 Industries doubled in 1 year : It was quite a broad rally in that sense.

⚡ Median Y-O-Y Quarterly PAT Growth is 105% AND Minimum Y-O-Y Quarterly PAT Growth is 25.2% for KFin Technologies

⚡ Median Average 3 Year PE was 24.4X Vs. Current PE of 39.79X : 63% GROWTH in Multiple Expansion

(Median used because outliers skew the average)

Therefore, PAT GROWTH + Multiples Expansion both contributed to outsized gains ! (Not surprising)

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Even the starting Market Cap of this ‘Super-Performer’ group seems to be well distributed with 50% of the companies falling in the 500-2500 Cr Category.

The above data study does NOT strictly seek out for existence of PEAD Strategy in the academic sense but it does highlight a Simple principle :

Earnings growth drive Stock prices !

Blockbuster Earnings Growth drive Blockbuster Stock Returns

Of Course, in any given year despite robust earnings growth PE Multiples could contract and the stocks may end up flat.

So ‘Super-performance’ is a partially God (market) given and partially Earnings Growth driven.

In the last 1 year both combined together to give a super-performance 🚀 Year

381 Stock doubling in 1 year presently an optimistic case for Active Investing, which makes me wonder :

Circling back to PEAD, we can conclude there seems to be evidence of surprising and HIGH PAT growth driving stock prices and that this ‘drift’ may last for 2-3 quarters even more.

Exactly how one would go about building/experimenting with a portfolio around this strategy would be an Interesting next step.

Let me know in the comments if we should explore this together in future posts?

Thank you so much for reading 💛

Rahul

Research :

• Stoic Talks Podcast with Mr. Prabhakar Kudva link :

  PEAD white Papers :

• 50 Year Study on PEAD

• PEAD in the Indian context (2018)

Equity Research is exactly like that.

Any one source of information/perspective is never enough to form an Investment thesis. However, every ‘perspective’ can be vital and Credit Rating Reports offer one such Important ‘perspective’.

In this note, we are going to learn 3 reasons how/why the CRR can serve an Investor like you & I.

#1 - Equity and Credit (loans/borrowing) are two sides of the same coin. That ‘coin’ being the business. An Equity Analyst screens primarily for companies that can provide an upside whilst avoiding a downside.

On the other hand, a Credit Analyst tries exclusively to protect the downside since the upside is limited to the coupon payments because remember that if the bondholders (creditors) don’t get paid, Equity holders are entitled to NOTHING !

In either case, the underlying analysis is very similar.

A high Credit Rating reflects a higher probability that the co’ can meet its obligation (loan payments, coupon payments to bondholders) & therefore survive (remain a ‘Going concern’)

More importantly, because it is used by almost all lenders (#2) CRRs serve as a reliable third-party opinion (like an ‘Auditor’) on a company’s debt and therefore, on the company.

Disclaimer: Credit Rating Agencies are PAID by the very companies on which they must provide an ‘objective’ opinion on. It is no surprise that with such skewed incentives, there have been multiple instances when the CRAs (Credit Rating Agencies) have failed to properly discharge their duties.

Despite these obvious shortcomings, CRRs can be EXTREMELY USEFUL for Investors because frankly, for an equity investor the credit rating itself is the LEAST important part of a CRR.

One of the (3#)MOST Important sections in a CRR is : Key Strengths & Key Weaknesses of a business.

Let’s look at some examples

Recently, I have been working on the Power Cable Industry and we wrote a detailed Quantitative report on 20 Listed Power cable companies. I was researching Universal Cables and unfortunately the management does not interact with shareholders, nor does it release quarterly commentaries and it was getting challenging to get a good sense of the business.

In the CRR, notice how in just 2 paragraphs, the report tells us the products, the source of the company’s revenue, why in the recent quarters performance has fluctuated etc.

furthermore, we learn about the competitive position and entry barriers in the primary segment of the business - EHV cables (Underground).

in Key Weaknesses, because I scanned through the numbers quickly I noticed Receivables / Sales (%) had consistently been on the higher side.

The Key Weakness section in the CRR, tells us why :

Let’s take another example: Coal India.

The Stock burst into life after a long dry spell. I took a small position (Read : Disclaimer) at the price marked on the screen ‘1st tranche bought here’ and I wanted to learn more about the co’.

I knew the co’ was a virtual monopoly and that one of the big fears in 2019 was that the Government had decided to end the monopoly by allowing private players (look at the share price drop).

What I wanted to know was what was driving the large institutional buying in the co’ and broadly, what could be the Investment Thesis for Coal India.

Firstly, in the Key Strengths section we learn that : 85% of Coal mined by the Co’ was supplied to power sector. 78% is sold under FSA’s - Fuel Supply Agreements where prices are lower than market but it offer strong visibility of earnings (also in the CRR)

I also learnt that that co’ is targeting to increase share of e-auctions (not from CRR though) where prices are ~100% higher than FSA prices (CRR).

So, higher the share of E-auction, higher the margins and higher cash flow accretion.

Additionally, Since Power sector is still largely dependent on Coal, and since India is a net importer of Coal and because huge investments are going into the power sector given the rising demand for power/electricity, Coal India is also investing heavily into increasing production (shown below) and intends to raise production by ~50% over next 2 years.

I think it would be safe to say that, just by reading the CRR we have a fairly good starting point for a potential Investment Thesis (What do you think? - Let me know in Comments).

Of course, it is unfair to say that you can so easily connect the dots for every co’ only by reading the CRR but its quite useful right?

For these reasons I urge you to read CRRs very very carefully when you’re analysing stocks.

And with that, Thanks for reading. Talk Soon !

Rahul

Nothing you read here should be construed as investment advice. I do not know your circumstance so please treat the above as nothing more than my personal opinion, which is subject to change without prior notice to you. Please do your work and consult your financial advisor. I may own positions in all stocks, sectors and indices discussed and can exit them without notice