For Face2Face With Vivek Bajaj & Naresh Katariya

Some examples of
Stock Ideation
Naresh Katariya
1
Using Macros to
identify sectoral
and stock
winners:
Shipping
2
One beneficiary of Ukraine War: Tanker Shipping
• Blasting of Nord Stream

pipeline meant that
Russian Oil exports to
Europe had to be routed
to India/China/others
• This increased the ton-

mile demand of Oil
Tankers
3
Background to Nord Stream pipeline sabotage
4
Another tailwind for Shipping: Decadal low orderbook at
Shipyards
• This, coupled with multi-decade lows of
Tankers on order (at Yards) meant that
Tanker rates would remain high for much
longer
• GE shipping gets about half its business

from Tankers (Crude, Petrol/Diesel/ATF
etc)
• Charter rates for Tankers shot up, and

almost all of that goes to bottom line
• GE Ship, which had about 3000 Cr net debt

in FY20, is now 3000 Cr net Cash!
This is after Buyback in 2022 and generous

dividends
5
Using Macros to
identify sectoral
and stock winners:
Oil Capex
6
Using macros to identify sectoral tailwinds: Oil capex
• Gross underinvestment in Oil

and Gas capex globally
• One could have played that via

Pipes, Rigs etc
• GE Shipping, which has a

offshore subsidiary chartering
Rigs/Offshore Support Vehicles
etc, was one beneficiary. That
division, since then, has come
from loss to profits
7
Using macros to identify sectoral tailwinds: Refining
• Sanctions on Russia in 2022

• Shortage of Refining
capacity in world ex-Russia
• Refining Cracks shot up
• Standalone Refiners made a
windfall
• GOI then slapped a Export
duty, but still, earnings
sustained at significantly
higher levels
8
Using Google
Search Volume
to identify shift
in consumer
behaviour
9
Another example of
Google Search
Volumes, forecasting
robust consumer
demand, post-Covid
@KhivrajNaresh_status link
10
Another example of
Google Search
robust consumer
demand, post-Covid
11
Another example of
Google Search
robust consumer
demand, post-Covid
12
Google Search Volume for Jewelers (for Tamil Nadu)
Source; Google Trends

13
Some thoughts on
tailwinds for Power
Financing PSUs were
in 2022/2023
14
DISCOMs were notorious for high outstanding payments to
Gencos
15
DISCOMs were notorious for high outstanding payments to
Gencos
• This led to the cascading
of payment delays from
Gencos to PFC/REC
• LPSS scheme in 2022 (by

Power ministry) was a
game changer
• With good balance of

Carrots and Sticks for
Gencos
16
As a result, DISCOM
over dues started
reducing dramatically
17
As a result, DISCOM over dues started reducing dramatically
• PFC and REC were

trading at abysmally
cheap valuations, as
market did not believe
that the Loans they
had made, would
come back to them
(fear of high defaults,
and evergreening)
18
PFC was trading at about 0.4 times 1-year forward price to
book
• Once markets saw the
over dues dropping,
confidence grew in
the integrity of the
book
• And also, PFC/REC

themselves became
confident of lending
more aggresively
19
Using macros
to identify
Sectoral Tailwinds
20
Focus on health/fitness in post-Covid era: Demand for
Textiles shot up
• Increased demand for

athleisure, natural fiber-based
garments
• This led to solid increase in
Yarn and Cotton prices
21
Focus on health/fitness in post-Covid era: Demand for
Textiles shot up
• What mattered most was the

Spread of Yarn-to-Cotton
• Which was a indicator for Yarn
companies’ profitability
22
Russia-Ukraine War in 2022 had impacts on multiple
industries
23
Russia-Ukraine War had massive impact on energy-intensive
industries of Europe
• One sector where EU

competed with India
(and which was
energy intensive)
was Paper
24
• War in Ukraine led to drop in Energy imports from
Russia to Europe
• This led to shooting up of Energy costs in Europe
• One commodity in which Europe was competing

with India (via imports into India) was Paper sector
(and also had high energy input)
• Pulp prices (and resultantly, Paper prices also) shot

up in Europe and also, the landed cost Paper/Pulp
shot up in India
Indian Paper Mills almost fully covered via captive
Pulp production, so no headwind from rise in Pulp
prices. While the benefit from reduced competition
from cheaper Paper imports
25
Global Pulp prices shot up post the war in
Ukraine
26
Gold and current
macroeconomic
setup
27
• This was a
tailwind for Gold
as other Central
Banks globally
have started
moving to Gold
(increasing Gold
as a share of their
FX Reserves)
28
• Freezing of Russian FX
Reserves by US, led to
fears of other Central
Banks
• This prompted them to

increase share of Gold in
FX Reserves
29
• Another view of
solid buying in
Gold by Central
Banks
30
• Surprisingly, Retail interest
has been very muted in Gold
(as measured by flows in
Gold ETFs globally)
• Positive contrarian sign
31
Some aspects of
Investment
Strategy
32
Importance of Dividends
• It is generally believed that high Dividend payouts
are not supportive of overall returns for investors
• As investors believe that reinvested dividends are

better than dividends distributed
• However, anecdotal evidence from US shows that the

8ᵗʰ highest decile (71 percentile to 80 percentile) of
dividend yields has given highest investor returns.
• This has helped me pick great winners (PSUs, for

example)
• Several of my earlier winners also fitted well with

this strategy (Manappuram in 2015/16, Hawkins in
2009/2010, PFC/REC in 2022/2023, Oil India in
2022 etc)
33
Importance of high valuations in portfolio returns
• High valuations do not have

any meaningful relation to
portfolio returns of
subsequent 1 year
• However, 5-year and 10-year

returns have a meaningful
bearing on entry valuation of
the markets!
34
Thank You
35

For Face2Face With Vivek Bajaj & Naresh Katariya

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Some examples of

• Blasting of Nord Stream

• This increased the ton-

• GE shipping gets about half its business

• Charter rates for Tankers shot up, and

• GE Ship, which had about 3000 Cr net debt

This is after Buyback in 2022 and generous

• Gross underinvestment in Oil

• One could have played that via

• GE Shipping, which has a

• Sanctions on Russia in 2022

Source; Google Trends

• LPSS scheme in 2022 (by

• With good balance of

• PFC and REC were

• And also, PFC/REC

• Increased demand for

• What mattered most was the

• One sector where EU

• This led to shooting up of Energy costs in Europe

• One commodity in which Europe was competing

• Pulp prices (and resultantly, Paper prices also) shot

• This prompted them to

• Positive contrarian sign

• As investors believe that reinvested dividends are

• However, anecdotal evidence from US shows that the

• This has helped me pick great winners (PSUs, for

• Several of my earlier winners also fitted well with

• High valuations do not have

• However, 5-year and 10-year

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