Hbj capital ventures llp   monthly newsletter [december 2012]
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Hbj capital ventures llp monthly newsletter [december 2012]

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Hbj capital ventures llp   monthly newsletter [december 2012] Hbj capital ventures llp monthly newsletter [december 2012] Document Transcript

  • DEC’12 HBJ CAPITAL VENTURES LLP Annual Newsletter: HBJ Capital Ventures LLP To The Partners & Co-founders, HBJ Capital Ventures LLP, #912, 1F Main, Girinagar, BSK 3rd Stage, Bangalore – 85, Karnataka, India Dear Partners, The Month of December has been pretty listless and hopes of a strong Santa rally has not materialized. The broader markets reflected by SENSEX has been in a tight range for quite a while and this continued into this Month. But all Technical indicators points to bullishness in the days to come. While Market pundits have already started predicted about next Year's close, we still continue to Buy on Dips in these Markets. One of the important news flow for the month has been the legislative activity in Parliament after several sessions. Government was able to pass Companies Bill and Banking Regulations bill which has inspired confidence in Markets about the Government's ability to move on other important Financial bills like Pension and Insurance. While future of a Country is difficult to predict in Short term, the long Term attractiveness of India as a developing country is only strengthening by the day. A Bright future for this country can be seen everywhere, from increased peaceful youth led agitations demanding better governance from their politicians to Development oriented politicians like Modi getting a thumping mandate and a Central Government pressurized to act on a number of difficult steps to turnaround the economy in the Short Term. While Reforms have picked up considerably, one of the most important is the implementation of Goods and Services Tax (GST) which is a game changer for several companies. We believe Tax reforms like GST will level the playing field between Organized and Un-Organized players in several sectors and lead to opportunities for buying certain business which will deliver stupendous returns. Non Reform decisions like Aadhaar, Cash transfer are also significant steps in moving this country towards a Higher Growth orbit. These will not only ensure better Governance but also inclusive development in this country. Internet connectivity which is now being rolled out across the nation is a significant leveler which many are missing out on. From increasing mobility devices like Tablets, Laptops, Mobiles #912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85 Page 1
  • DEC’12 HBJ CAPITAL VENTURES - there is potential for a significant data revolution in India which can create LLP enormous value. Government to large Conglomerates like Reliance Industries are on a mission to get India avail full broadband facility within the next 3-4 years which will change life's of several Indians just like what initially Internet and Telephony did to industries like IT and to the nation as a whole. Last Year SENSEX has delivered fantastic results and we believe the cycle of Equities underperforming all other Asset classes has turned around. This could be the start of a New Bull run, if the earnings momentum picks up going forward. With the Huge Consolidation in Markets for the past 5 years behind us, Markets are ready for a Take-Off which will result in lot of money making ideas. Our understanding of Market cycles clearly says that we are in starting stages of Recovery phase. This phase usually has lower Interest rates and we believe that the rates will continue to trend lower over the next year. While it will take some time for Investors to remove suspicion on the Markets, we believe that by that time - Investors would have lost significant amount of wealth creating opportunity. We continue to believe that by the end of next few years, Markets would be trading at much Higher levels in spite of Political issues in India, Global economic problems, Euro crisis etc. To understand the complete Market Cycle, you can click on this Link. #912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85 Page 2
  • DEC’12 HBJ CAPITAL VENTURES While a broad based Bull Markets requires a lot of ingredients, a Bull Market LLP on Quality stocks is definitely in the offing. Even Sector specific bull markets like the ones which has occurred in the past has a high probability. One of the chief ingredient for this rally has been the very low Investor participation in the rally. Indian retail public is completely un-invested and when their money starts coming into the markets, the limited supply will push up share prices strongly. While the Markets have done well in the past year, we have bettered Markets performance. We have outperformed the Markets quite decisively and it is even better when we find that in our 2 year history for this LLP fund, there has been a Down year and Up year for the broader markets, but in both these years we have been able to beat the Markets quite convincingly. This kind of outperformance is the result of disciplined Investing. While Markets have on an average delivered CAGR returns of around 17% including dividends over the long term, we believe that with consistent outperformance we would be able to deliver returns around 25% which is a wonderful rate to compound your wealth. This means doubling your wealth every three years and there are very few asset classes which allows you to do it. Considering the fact that most our Investments are in high quality Mid-Caps, where there is little additional risk - we will be able to generate Higher returns in every Up market and also over any 3-year rolling period. We believe while Markets will focus a lot more on Elections and related volatility in the next year, while we will continue to focus on Business fundamentals and buying stocks cheaper compare with their Intrinsic value. This simple model of Investment will help us hold our Portfolio in good stead. While a few of our Stocks have delivered strong results, there are still a quite a few stocks in our Portfolio which have huge potential but have not delivered returns in terms of Price performance over the past year. We expect these to help us beat markets by a decent Margin next year and again I would like to re-iterate the point that with a Good Investment framework, we are supremely confident of earnings better returns on your capital than any of the other Equity market instruments over a 3-year period. We will also continue to re-iterate the point that - India is in a very unique position and Investors who invest in Indian equities will be able to generate significant amounts of wealth over the next decade compared to any other Geography and Asset class. Happy Investing and a Prosperous New Year to all our Partners !! Regards, #912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85 Page 3
  • HBJ CAPITAL VENTURES LLP DEC’12 [Principal Fund Manager, HBJ Capital Venture LLP] Date: December 31st 2012, Place: Bangalore, India #912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85 Page 4