Before you read ahead, we would like you to know that now you can save time and unlock valuable insights with our free summarized notes on 95 tracked companies. Don’t miss out on this incredible opportunity to enhance your investment decision-making process. Check out the Link here.
Reading concall transcripts is ‘the best way’ to learn about any business or industry..period.
Here are our Top learnings from making notes of 90 plus businesses in #Q4FY23Concall notes:
1) Learn from the Best
Concall involves questioning the management about the business & its performance. These calls often involve famous investors & analysts asking some exceptional questions, & sometimes even giving suggestions to the people running the business!
This not only helps one understand the key positives/negative of the business, but learn the clarity & technicality with which- great investors think!
From this extract, we learnt the importance of maintaining sustainable financial leverage as that is a crucial determinant for an NBFC.
Here, we learnt the growing importance of technology in lending.
This exchange helped us understand the strengths of the company’s business model & why it is a class above its peers.
This advice from @madhukela helped us understand the importance of judging a company’s return on capital profile excluding goodwill as that will help us understand the true capital productivity of the business since Goodwill inflates the real capital employed in the balance sheet.
2) Judging the Quality of Management
– for a person doing desk-based research (Vs. scuttlebutt form of investing) concalls notes become the paramount source of learning management quality as:
A) It gives an idea of how management thinks about the business & its future prospects.
B) The humility with which management reacts with the analysts. After all, individual shareholders are nothing but partners in the business:)
C) helps in analyzing the qualitative aspects like how we’ll be versed & confident the management team is, & lastly
D)See if management walks the talk as often the market gives higher valuations to companies that deliver on their growth projections.
3) Learn How to Analyze any Industry
We at @SmartSyncServ have a tradition of giving our new interns the task of analyzing & making notes of concalls. Why? Well, any person starting research on any company ( let alone an industry ) won’t have any idea regarding how the industry operates, the fragmented/ consolidated nature of the industry’s competition, the company’s key competitors, key parameters based on which a company in an industry should be ranked vs peers ( after all choosing one company Vs other in the same industry can have a huge opportunity cost). Again listening to these points as well as other questions of stalwarts can help any person understand the intricacies of the industry & help in improving analytical thinking.
For eg-
From Persistent Systems’ concall, we understood that the 3 key drivers of profitability in IT companies are: 1)Sales Mix 2) Utilization Rate of Employees & 3) Mix between freshers & experienced employees.
From Manapuram’s concall we learned that it earlier lent gold loans for 3-month tenure to reduce the risk by auctioning off gold in the 3-month timeframe in case the loan is not repaid & still ensure no capital erosion as the company expected that the gold prices won’t fluctuate a lot in a 3 month period & this shorter-term loans also helped ensure higher yields.
However, we learnt that due to the recent increase in competition mainly from Banks, the company had to opt for 6-month tenure loans to ensure growth in the disbursements even though this will lead to lower yields, which perfectly describes the current competitive scenario in the gold lending space.
Similarly from Aavas’s concall we learned that it can be encouraging if an NBFC takes reasonably high financial leverage ( though it can take a big toll beyond a point if the risk is not managed properly) while for manufacturing & other related companies, one ideally looks for lower financial borrowings.
4) Build One’s Own Thesis & Fix Psychological Errors
We all would have heard the quote “Buy pessimism & sell on optimism”, however, we often do the opposite.
Similarly, we often see people saying “Hum jab stock bechte hai tabh hi stock bhaagta hai!”
Well, both of these things show that we as individuals show a lack of patience & discipline in holding onto the businesses & understanding the inherent cyclicality of businesses.
And both these things often happen due to a lack of conviction in one’s understanding of the ‘long-term fundamentals’ of the business.
Similarly, we as humans often get enamoured by the lofty projections of management & are first to exit the stock when projections are not met. This is where reading concalls regularly helps fix one’s behavioural mistakes by learning the importance of giving leeway to certain management even when they don’t meet the dreaded ‘quarterly numbers’ & at the same time build one’s own understanding & projections of the company’s business Vs blindly following management’s estimates ..simply because their projections can starkly influence our decision making!
Thus reading chronologically a company’s concall & reading the participants’ questions during a tough/ great period of the company can help improve one’s market cycle & psychological understanding by a long way (even though the actual investing experience might be shorter).
5) Enlarge One’s Circle of Competence
Circle of competence ( famously coined by Warren Buffet) is a jargon often used in the stock market which means studying & investing in companies & industries that one understands clearly. The concept is very sound as any investor should ideally invest only when he/she has sound clarity of the investment made. But this is often misconstrued as narrowing down one’s investable universe & tracking only those stocks, while this does make sense at first but there’s a catch, big investors like Buffet can afford to ignore the tech boom cycle of 1990-2000 because of their sheer net worth, small investors like us should often be on the lookout for a new investment opportunity & this can happen only if we continuously enlarge our existing ‘circle’.
Again the answer to increasing our circle is….- read as many concalls of as many industries as possible. This is beneficial as not only are concalls 10 times smaller than an Annual Report of the company, but it also provides a better analytical understanding of businesses especially those who lack a past track record in the stock exchanges(i.e. the IPOs), have migrated from SME board to the Mainboard or have seen a change in the management.
But again due to everyone’s busy life, reading or listening to a 1-hour long concall can be a herculean task! & that’s why we at @Smartsyncserv, have made it our mission to enlighten our community by publishing our crisp notes of concalls( for the last 10 quarters!) of several interesting companies in our watchlist.
Once again, we would like to remind you that, don’t miss out on this incredible opportunity to enhance your investment decision-making process. Check out the Link here.
