Aurum Newsletter – Aurum Capital

January 2, 2020

Aurum Capital new year note and current view: Jan 2020

The new year note and current view on the market sent to our subscribers.

Aurum Capital New Year note: Jan 2020

Dear Subscribers,
Market View and Analysis:
We are going through a tough time in the economy, and outside of a handful of stocks, in equity markets too. The index is just not giving the true picture of the markets. This kind of polarization has not been seen in the Indian markets. If we categorize the stocks by market capitalization, in the last 2 years, only the first 20 stocks as a group have given positive returns. Rest all the stocks have given negative returns. As we go down beyond 500 stocks, the return of the rest of the stocks is -53%. This covers almost 90% of the number of listed stocks. Another study shows that “A” group shares command 94% of the market capitalization of the Indian markets and the rest including “B” group and others command a mere 6% of the market capitalization. This is extreme polarization and again has never been witnessed in the past.

The Indian markets and economy had a big slowdown and that does affect the broader markets. The reasons are many. We do have a global slowdown, and the Indian economy is formalizing, so it will also have cyclical upturns and downturns. Whenever there is a slowdown, there is a flight to safety, and we are seeing this. Making “quality names” very expensive. As investors in equity, we have no option but to tide out these times, stay invested in the companies where we have our conviction.

The silver lining is that in the last few days broader markets have started to outperform. We expect this to continue. Valuations are favourable in this space. It’s time to reap the seeds of our patience.

We believe the worst of the slowdown in the economy is over. The reason, we think this can happen is

Monsoon effect: We have had a good monsoon, albeit a delayed one. The effect of good monsoon should start playing out now. Agriculture is a big part of the economy. We see some uptick in rural spend. Due to delayed monsoon, many industries like mining, cement had an extended downturn. Electricity demand was also down due to this, apart from the general slowdown. These should move up. Auto demand should also pick up and we are already seeing some green shoots.
Policy steps: The government has woken up, albeit in a delayed manner, to the problem in the economy. And have taken a number of steps, the biggest being corporate tax cut. And we are hearing that there can be changes in income tax slabs, putting more money in the hands of taxpayers. These can help in reviving demand.
Transmission of interest rate cuts: We have still been able to transmit only 30% of the interest cuts. We think as liquidity increases and NBFC crisis gets resolved, further transmission of interest rate cuts can be seen in the next 6 months
Our portfolio:
We have been invested majorly in the small and midcap universe. As you would recall, we have been extremely cautious with our investments. We remained conservative to the extent that till today we are invested only 70%. We remained very conservative during 2018 as well and invested only 32% at the end of 2018. We were criticised and questioned too for this extreme cautious approach. But in hindsight, we know that it helped us in controlling the damage.

Our performance measurement criterion remains conservative and does not consider any returns from liquid/debt funds for the un-invested money. However, we include any loss booked in any of our investments.

We have to understand that returns are also cyclical and follow market cycles. The segment we are in has had a tough 2 years. We believe this is likely to change. Most of the companies we have invested in have value, and it’s a question of time when this value will be realized. We are constantly reviewing each company we are invested in. We just have to ingrain the trait of “PATIENCE”, and we are confident that we will be rewarded in the due course of time.

Subscription:
We have given a limited-period offer of a 20% discount. We thank you for the overwhelming response to renewals. The members, who have not renewed may avail of this.

We are thankful to each one of you for your continued support and confidence in us.

We will end this message with a quote.
“People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.” – Peter Lynch

We wish you all a happy new year.

Happy investing

Regards,
Aurum Capital
SEBI registration No: INA000011024
Website: https://aurumcapital.in

January 3, 2019

Aurum Capital performance note: 2nd Jan 2019

This note is sent to our paid subscribers on 2nd Jan 2019.

Dear Subscribers,

First of all, wishing you a very happy new year.

We launched our services in the mid of 2018. As you would see below, we did fairly well during this short window of 5 months. It is too early to evaluate our performance when equity investment is to be seen from a long-term perspective.

One of the founding principles of Aurum is “transparency and interest of subscribers first”. The early subscribers will recall our cautionary notes when we launched our services. Keeping in mind the market valuations and expectations of more correction, we decided to defer our first recommendation. We did not recommend any stocks for several weeks and instead asked those early subscribers to have patience.

When we delayed the first recommendation, we also decided that the subscription period for our first batch of subscribers will not start until they receive our first recommendation. None from our subscriber family had asked for this. But as we mentioned that for us the interest of our subscribers is always paramount even if it means a loss of few weeks of subscription fee.

Let’s have a quick glance of Aurum Capital performance during last 5 months.

But before we do that please note
1) We include all exits to arrive at our performance
2) We take the weighted average price of the recommendation. We do not and will never take the lower price of the band while calculating buy. Similarly, we do not and will not take the upper price of the band while calculating gains for the exit. This, we believe, avoids any bias for artificial gains. It rather reflects performance close to the reality.
3) This outperformance is despite our exiting one of the stocks at a loss where we were the one who discovered a serious corporate governance issue in that company.
4) Out of five recommendations in Current Recommendation section, two are still in buy range.
5) Please always follow our detailed research and subsequent updates on the company provided under Current Recommendation section.
6) If you have any questions then you can raise them in Investor Forum section for paid subscribers. These are always responded by the founder and not outsourced to any executive.

3rd Aug our launch of recommendation
Our current list of stocks is in the small-cap category. As you would notice that our conservative and cautious approach paid a significant dividend. We could outperform the market during this turbulent period.

-> Small cap index down by -11.91%
-> Aurum Capital down by -2.22%

We are thankful to each one of you for your continued support and confidence in us. 2018 was a tough year. There are domestic political and some global economic risk in 2019. But on the domestic economic front, we believe that our corporate performance will start improving. If we get a stable government or a government that is not against the policy of liberalization we should be fine. Considering this, 2019 is expected to be a better year. In today’s time, we do not believe that anyone will go against these policies. The degree of implementation can vary. The stock market performance in long-term is more aligned to the corporate performance than the political and we should stay focused. We believe that the valuations of stocks of our sphere are much favorable than what they were a year ago. We will continue to hunt and pick the stocks that suit our criteria of investment.

We are almost ready with the new Current Recommendation page and there will be search feature in the Investor Forum. This should be launched in the next few days and we will inform you. We will continue to make more changes at the back end to enhance the subscribers’ experience and security of the system.

Happy investing 🙂

Regards,
Aurum Capital
Website: https://aurumcapital.in/services
SEBI registration No: INA000011024

The founders’ contribution to equity investing is chronicled here.
(these are not recommendations)

https://aurumcapital.in/blogs/category/knowledge-series/