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Dan Tennebaum

lines on the record: 108
first: 2024-05-23
most recent: 2024-05-23
sittings or episodes: 1
sources: podcast

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“That it is okay to have unusual goals and taken a typical path to get there and that it's worth having some confidence that that's going to work out.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“was the founder of India life, spent money he barely had on a plane ticket for me to come to India when he had no reason to think I had anything to offer. And I'm incredibly grateful for that because it started me on a path that I've loved and found really rewarded. John Thorne, who founded India Capitol, also welcomed me in without any obvious reason to do so and treated me like a partner before I really. At some point, in part handed over the keys to me. And that's a favor I can't really repay, but hope to pass forward. And hopefully the next generation of leadership is already toiling away somewhere, honing their craft at India Capital.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“In investing selective memory in myself and others, perfect recall for successes, inability to remember failures. I think it's inimical to learning.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was in 1997 credentialed on the Anti-Doping Commission of the Copa America Soccer Tournament in Bolivia where my responsibilities included transporting a sealed bag of urine samples from competing players from Santa Cruz de la Sierra Fichile,”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm a longtime runner in an India because that's exploded in popularity. It allows me to run alongside people from all walks of life, from industrialists to people who work with their hands for a living. And that's pretty neat.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“So for that level of growth to continue, the ask in some ways is not to go to the moon and we all have the GDP of per capita of Liechtenstein. It's over two and a half decades to hit the level of Peru and Ecuador and Botswana. And that's something a lot of countries have done over the last half century. And I think probably India can do too. And fortunately, in the Indian context, businesses have managed to translate that pretty efficiently to earnings and share prices. 90% of the time we're just trying to earn an economic return for our investors, but every so often it's fun to think of that process of being along for the ride in India's emergence.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“In large measure continuing to do what we've done, it's a hard business, but it is a pleasure that we are able to focus on being participants in good companies for long period of time. And that is a little bit because the process we've built in a lot because of the type of investors. We've been lucky to have. And I wouldn't want to radically change either of those things. But it's also really neat to be able to ride along with India's growth. And just by continuing to do what we always have, that is a scaling opportunity. And when I think about what is the what you have to believe about India, it's growing today at six, seven, seven and a half percent. It's a larger economy now than Japan, but GDP per capita still on par with Congo.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Are really interesting as well in its selective, the best cement company is not necessarily the one with the deepest pockets or that's affiliated with a global major. It's the cement company that's figured out how to sell it as a branded good and earns the higher price. And the best bank isn't necessarily the biggest or the one that's growing fastest this year. It's the one with the best credit quality that through cycle can be really capital efficient. So it's not always who you think, but things that address those themes. There's a lot that's really interesting to choose from.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Life insurance policy. There's no equivalent of social security, so that's important. They're investing in the equity markets. They're building bank deposits, and we're in all those areas as well. So somewhat higher ticket consumption of the kind that grew manifold in China when incomes reached that level. The other side of it is the build out of credit in business investment, where credit penetration, which historically had been so low, and then through the COVID years had seized up is now growing again. And on the opposite side of the ledger, there are borrowers now with Indian companies have their lightest debt to equity in decade and a half. So they have the capacity to borrow and they're seeing end demand. So they have the incentive and capacity utilizations are pretty high. So participants in that ecosystem, I think.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“In India, it's almost entirely the domestic economy, and that's where most of our positions are focused. The growth is just so good there. And there are a lot of areas we are looking at closely and interested in, but they fall within two buckets. Some of it's in the consumption basket with income per capita now at $2,500. You're going from a place where two-thirds of that was consumed by food and shelter and housing to a place where people really have disposable income. $300 million Indians are entering what in the Indian context is the lower middle class. And they're looking at buying their first car. They're spending a little bit of money on cosmetics because they can their first home. And we're in all of those spaces. And in terms of their savings, they now have some and they're buying their first.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Huge renewable component and its business quality is great and it's cheap. In some way they're finding themselves much more central, but that we did not underwrite. It just kind of happened.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Delivering high and accelerating return on equity, non performing loans that went from seven. Just building a good relationship and saying, hey, how about you tend to conference? And maybe instead of holding an earnings call that you don't always invite your investors to, there were times where the only people on the call, what if you just once a year you do it in person and you bring a video that explains what you do and that increase in visibility has been helpful and then sometimes you just get lucky. This company, a lot of the loans they're making now are to renewable energy projects. And surprisingly, I think most people's perception of India is they are being dragged kicking and screaming to fulfilling their Paris climate commitments in reality 80% of new generating capacity in India is renewable suddenly it's hitting people screens for let's say as a sovereign fund or one with an ESG bent that it's got a”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“In the past, one of the hard things about India is you could be absolutely right about the operating performance trajectory in the transmission to share prices could be incredibly slow. You would see company deliver exactly the numbers you had hoped for, and it was just crickets. And in the case of this investment, that was absolutely the case for three years. Five times earnings when we first invested went to less than three times earnings for a while. In the end, that process has become probably a little bit faster and more reliable in India because there are more domestic participants, whereas a typical foreign investor lease historically, government-owned company, no thank you. I don't even want to know about the earnings or how the asset quality is resolving itself. In this company, it probably took two or three years of them consistently.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“A situation like that, how do you think about the path from having done that research and understanding where there may be a variant perception of the information to the market or other buyers understanding that these problem assets really probably aren't as troubled as it seems?”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“But if you've got a lot of time and interest, those are things you can plumb over. And eight times out of 10, there's a reason not to own them. But every so often there's something pretty exciting.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“At the correct duration with implicit sovereign guarantee so as cheap, and then in turn they could lend into this uncrowded market where they could get a premium and who are the borrowers? Well, in a lot of instances they were affiliated with a government too as these quasi-governmental entities that if you're a private sector bank, how do I ever get my money back? But if you are effectively an arm of the central government, you always get your money back. And with a 30-year track record, they'd always gotten their money back and they'd always prioritized earnings and returns and dividends over public policy objectives. So that is not a typical or something on the surface looks exciting but problematic. And if you are outside the country or if you have limited research capacity, you kind of have to leave those things untouched.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Its entirety was a non performing loan. So by doing that granular level of work, it was possible to ascertain with a pretty high level of confidence that the asset quality was actually okay in the resolutions would happen. That was one aspect of this company. The other one that was majority owned by the Indian government, which for a lot of folks is a non-starter and you can sort of see why. But in this instance, the more we got to know the company, its borrowers, its prospective competitors, what we came to understand was this time around it was actually a positive benefit. Typically the issue with power project finance is these are long duration loans. And if you have short tenor liabilities as a lender, you can't necessarily make them. But with government backing, this company could go to the global capital markets and borrow.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Not easily. It might be a 12 hour drive from Mumbai, but they're there. And what we found oftentimes with the time and the appetite to do that work is in a lot of instances they're almost completely finished, even if there was an equity wipeout in the project sponsor was displaced, that there was going to be a lot of salvage value to these projects that were treated as if there were going to be complete write-offs. In some situations, the situation was even better than that, that these were borrowers who had never missed a payment. But because of the peculiarities of Indian project accounting, if commissioning was delayed by more than a certain amount that they were deemed non-performing, irrespective, and you could see we've got two units of this power plant, and one of them's already been turned on and the other's finished, and there's a long-term purchasing agreement, but we're not going to commission it for another two months. All of that.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of their financial statements appended with these comments and sort of a baffling array of colors and fonts. And it just was designed to repel market participants and investors. But there were two things about the company that were in need of diligencing if you wanted to invest. The first of them is notwithstanding this high growth, this high return on equity they'd seen a surge in bad assets. If you were going to put money and you had to have some degree of comfort that this was going to get resolved and it wasn't going to continue to grow. But from a research standpoint, what's great about project finance is you're not lending to million small borrowers, you're lending to a few dozen large ones. And in the event, what we found is there were 15 borrowers that accounted for 70% of the bad assets. And these were power projects that you could actually go and see.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“We ended up looking at the power sector to sort of pick up that thread again. We found our way to power transmission finance. And optically, you would say if you did the work we did, you would say this is the company you should love. Indefinitely be invested in. But there were a couple reasons why even though it was already a $3 billion market cap company and should have been reasonably visible, there was almost no one there in it. None of our pure foreign institutional investors, very little domestic institutional investment, very little research coverage. And some of it was just kind of how the company was managed. They had never attended an analyst conference. They were pretty sporadic in terms of quarterly earnings calls. If you got their investor presentations, they would just be scanned copies.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“In rings faster than the rest of them, that it is one or two car companies that are generating all the earnings in the industry. You can see in some cases why that would play out for a long time investors in banks. And it used to be absolutely that small could be beautiful, just like in the US, if you ran a really well managed regional bank, you could do great. And then you flash forward to today where three quarters of transactions won't even have to come into a branch. And it's your investment of technology that matters in your national brand, in the trust you have among depositors, and it's very different companies that are poised to thrive in that environment. And you can see it beginning to play out. There are reasonably large banks that are growing faster than system and fairly small banks that are struggling to find their footing. But it is remarkably early in that evolution. The system itself is small India's largest bank is smaller than”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Good in our portfolio top two positions. One of them I mentioned is at eight times earnings, one of them is in its first band valuation multiple. We trade three or four turns cheaper than the index in aggregate we are finding opportunities that are appropriately valued, sometimes that even feel cheap. But it's an interesting thing seeing smaller companies being so much more expensive in a different context you could sort of construct a case why that should be, that the best of them are growing really well off a small base. They're the scrappy insurgents. They'll grow into their valuations. And there's an element of truth in that. But in India, sometimes it's the larger companies that are growing faster, that it is the top banks that are growing assets.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Very much in line with historical averages, certainly for the large cap index. Very small companies are actually unusually expensive right now where there are small cap indexes trading at a three or four or five term premium to the larger cap index even as the market has grown and there are more participants. There are as I see it enduring pockets of really striking pricing inefficiency in both directions”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Unfortunately, it's pretty representative, so you don't have a situation where one company has an absolutely outlier share of it or one index. So you have within the index consumer staples and automotive and banks and technology, it's pretty eclectic. Having said that, with $5,000 stocks, there's going to be something that's not captured in the performance may be very different from the rest of the market. Sometimes that's meant that much like the US, there have been periods usually where the tide is going out in terms of enthusiasm for India, where there will be a handful of companies that account for all of the index performance. And that can make life difficult as an active fundamental investor, much like it has in the US. Sometimes it runs the other way. So right now in India, most of the market is valuable.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“You look at the US and the SP 500 is dominated by the MAG 7, which has certain implications of what that means for the valuation of the S&P 500. What is the composition of the most popular indexes in India relative to the types of companies that dominate it in the concentration?”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“More expensive, pretty much the entirety of my investment career. So that may be a persistent, enduring feature that when you have companies in the Indian index and we don't own them, but they 100% return on equity, they're just always going to trade at a higher multiple than a nickel mine. An Indian companies and aggregate equally are less leveraged, higher return on equity, faster growing. So just probably always going to be a gap. But because the earnings performance has been strong, India's premium to the world index has actually come down. It may not be exactly what people perceive.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“A little. So I think that's one misperception you've missed the bus. The other is that valuations must be expensive. And because India has had a relatively decent run, that too feels like it should be the case. But when you decompose it, yes, returns have been okay. But because earnings growth has been pretty strong for the large cap index at 75 or 80 percent EPS driven in about 20 or 25 percent multiple expansion driven, whereas for the United States, it's exactly the opposite. And free M index, it's 100% multiple expansion driven. India is more expensive on a price to earnings basis than, let's say, the EM index. And some of that is a function of India and a large part of that is a function of China just dragging things down and what's going on in both countries. It's been”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“There are two I hear a lot right now. One of them is that everyone else has already done it, so I'm late to the party, so why should I bother? That feels like it should be true. There are a bunch of articles now in mainstream publications about India. It seems like there must have already been a lot of foreign portfolio flows. And the reality is over the last few years, there's been money in, there's money back out, there's been money in. Net flows from foreign allocators are functionally zero. to India. What's been fueling the market is domestic investment, which over that same period is something like $55 billion. And there are 75 million new mutual fund investors, which even the Indian context is a big number. And pension exposure to India has gone from zero to a few billion, but that's out of $300 billion of pension assets that historically weren't inequities at all.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“After passing around the hat for two years, that's all the money we could find. And half of that was from Soros. It's in the public domain. And it was really only people like that that were willing to take on. What was that perceived level of risk? I think in recent times, we've seen the addressable market has probably expanded where there's a realization not only is India just mechanically a larger part of the world in emerging markets index, but I think there's an awareness that it's a difficult market to invest in for a manager alongside six other things. It's hard to unearth the really special opportunities. It's hard to avoid the bad ones. And I think that's led to more people who didn't always have sort of contrarian specialist interests in India considering a single country allocation.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think what has worked well is its result in pretty sticky capital, so we haven't seen the kind of outflows where people are having a knee-jerk reaction to distress. In terms of what leads people to invest, I think it's changed a little over time, that India for so long was a really boutique specialized market where it was one or two percent of all country world index. So when I first joined, I had exactly the wrong idea. I thought, oh, it's a small specialized market. We'll get small investors. And it turned out to be exactly the opposite. It was only the really big ones with a lot of team strength and bandwidth and appetite and ability to stick their necks out there who were really looking at that esoteric process. When the fun was first launched going back all the way in our history, it was launched with all $14 million because”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, what one always hopes for is when things are beat down the most, that's when people will be most eager to invest. And that's unfortunately very difficult to actualize. So that process of saying market's down and AV is down, companies are doing great.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Typically, when you go through those periods, it sounds like you're doing everything you can with communication and more communication, you're still closer to the assets than your investors. So you can see what's happening in the businesses and get some confidence that it's just a price move in the markets if the businesses continue to be strong. What have you seen in other periods of the impact of volatility in your performance at times on fund flows in your business?”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“In those years, not much, very minimal, but no outflows, ton of luck, but also because we were able to communicate people well. They knew we were in liquid companies, so their capital would be there if they wanted it. And that alignment has served us pretty well.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“But in the end, they were able to raise prices by more than the increase input costs. And they're smarts. They didn't announce it. But if you sort of track closely like to like, you saw they were doing absolutely fine. Those are mostly the kind of questions we're asking ourselves. The other side of that is just making sure our investor base understands what it is they own, understands that there's going to be some volatility along the way. So in periods of extreme volatility, we try and communicate even more. And the outcome of that was I was already India Capital during the global financial crisis. And I can recall getting these questionnaires from investors just kind of checking up, are you okay? I think one of the endowment investors sent us a spreadsheet in the field was, please let us know your capital outflows. And it could only be a positive number. And it turned out remarkably we had net inflow.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Surprises. We owned a car company. We thought they've got three times the market share of anyone else in the country. And it took them a minute to raise prices. They did, but there were two or three quarters of margin compression. By comparison, we own real estate developers, and suddenly all their steel and cement was more expensive.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, share price volatility absolutely is a feature of in India in an enduring one. Mostly we're thinking about are the businesses holding up okay. So when Russia had invaded Ukraine and the cost of oil was going up for everyone and India is a net energy importer, inflation was high and rates were rising. share prices went all over the place. But what we were mostly thinking about is how our company is going to do operationally, which are the ones who have any direct exposure to these things and not many of them did. Our portfolio is 90% domestic facing by design. But in an inflationary environment where all of their input costs were going up, which are the ones that have strong pricing power and can raise prices accordingly. And we spend a lot of time thinking about it, and some of it we got mostly right, some of them, there were some negative.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Margin, I think we try and be more patient than not, and not everyone takes that view, but I think in the Indian context, what we found is anything that starts to approach tactical trading in and out of a position for any reason has a pretty limited success rate that I think since 1990, I want to say the index is up 17-fold in dollar terms. If you take out the top 25 trading days, it's up 0.3x in dollar terms, which may be true in other markets as well, but it's an important reminder, I think, for us not to try and be too clever about second guessing those situations.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Incredibly hard, and we don't always get it right. That same company we already own during the global financial crisis, and they'd been entirely India up until then. And then this entrepreneur said, hey, I've got great news. I've bought this company in Europe. It was nearly free. You're going to love it. And we in the few other very long-term investors we knew and respect were in the company were all sort of scratching our heads. This is not a moment to extend your balance sheet to take on debt, to make this acquisition in a market you've never been in. And it was a flip of coin. We could have ended up selling it. There was no real insight. We happened to stick around and the patients was rewarded. He had bought this thing out of a private equity investor that was eager to get out of it. And he ended up within a few quarters earning as much in EBITDA as he paid for it. You just don't know.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“A situation like that with a long term hold that's been very successful. How do you think about when to give them the benefit of the doubt to say, okay, we know this kid's young and he hasn't done it before, but father's still there. This is an adjacency. Maybe it's a bigger market. That decision point of, let's see what happens compared to, you know, we're going to move on.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“A wiring harness, which is a very low end good, and they expanded it to rear end mirrors and dashboards, and it had been wonderful to participate in his journey. And then at a certain point, they let it be known that they were thinking of getting into defense components and that this was going to be a strategy that would be spearheaded by the relatively young child of the entrepreneur who had until then been running, I think, like a music streaming business. And I think they'll do fine. But it's a really different business with a different entrepreneur and it was a good moment to reevaluate where we could deploy capital.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“The bar is pretty high. We have to be pretty excited about something on the way in, and equally so, we're generally not exiting because the share price didn't do what we thought it would over a period of time. Every so often there are really pleasant surprises. We have a share price target for everything, not as a binding matter, but just to trigger a conversation every so often things hit their five-year or three-year share price target in six months and they're in and out of the portfolio a lot sooner than we thought. But usually a position is exited because something changes in the approach. We had a 15-year position in the auto component sector that had done really, really well. It had been a fantastic entrepreneur who had found ways to increase the scale and the breadth of his business. He was doing just something.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“About 60 percentage points of excess earnings growth versus the index. And you don't always get paid for that immediately. Sometimes you don't get paid for it at all for a while. But over time, we find that the catch-up happens in lumpy and unpredictable ways and it tracks share prices pretty well.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“Evaluation metrics we traded about seventeen times forward earnings versus an index that today trades at about 21 times forward earnings and that really runs the gamut. There are things that are small and fast growing and optically expensive and you've got the eight times earnings company, you have a large position that is trading in its first percentile valuation band that's traded more expensively 99% of the time It's a 16 position portfolio so we are pretty concentrated we don't churn it much there are five-year positions and eight-year positions and there's a 22 year position in the portfolio and we're happy to hang on to stuff as long as it's delivering the kind of underlying business performance that we want it's pretty distributed by sector but the overlap with the index is not high. And then, in terms of”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you roll all this up, if you took a static look at your portfolio today, I'd love to hear some of the metrics, this basic valuation metrics, basic business characteristic metrics of growth in that portfolio as a whole.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“They have to do with expectations, especially a foreign portfolio investors, of which there are now a few more that are sometimes interpreted as letter of the law that isn't actually going to be enforced in spirit, that these requirements that you can't actually raise capital from India if you're a foreign portfolio investor, the expectation that you can't actually sit in India and make your investment decisions, the regulators will sit quiet on these things for a long time and then every few years they'll take an interest. And you have these situations where good investors suddenly have to have an asterisk in their NAV because they say we have an unquantifiable contingent liability because of this issue. And I think most of those get resolved in a reasonable way that they sort of wind their way through appeals and eventually.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“The big, sort of more visible effort was we're going to build this fantastic research function, hire bright, thoughtful people with all these skills, but the less visible but equally important part if you want to sustain as a firm for three decades as you can is that we're going to make sure that we are always executing efficiently and that the compliance is sound.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“That we were first investing, and for many years thereafter, most shares were held in physical form, in share certificates of 100 shares. So if you were buying and transacting at anything like institutional scale, you would have sheafs of share certificates. And there were times that we had to buy an airplane ticket, one for a custodian in a second airplane ticket in the seat next to them for a box full of share certificates so they could be physically delivered to the buyer so the trade would close smoothly. Now today these shares are held notionally settlement is T plus zero but there is an enduring issue that boy you better be attentive to some of the unique compliance requirements because they sort of lie dormant they lie dormant and then they come and bite you if you haven't been following them closely so when we build out India Capital”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“For us as long term investors, it's entirely about permanent loss of capital. And that can be hard to keep an eye on because in the shorter term, there's this massive share price volatility. And it can be a headwind and a challenge or it can be opportunity and being able to buy things that are a little bit beaten down, but it can obscure the fact that over time there are very few companies that have gone under because of oscillating market sentiment. Really, it's about the underlying quality of the business, and that's what we are most attentive to. One that gets less attention than it deserves is compliance and back office risk, which in India is not immaterial, that just executing an investment business takes a lot of care and attention. So at the time,”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“American bank in the 1950s or 60s. They gather deposits, they lend, and not a whole lot else. Accumulate a few fuse along the way. The other thing that can be a little surprising is occasionally a large government role is actually a good thing that there are, I mentioned that only 5% of the companies are government owned, and that works out to be about a couple hundred of them. A lot of the time I don't want to touch it. It's going to skew incentives. It's going to diminish returns. Every so often the role of the government is perfectly fine. They're a great shareholder because they like to keep their companies focused on doing one thing. And they're always happy to have diffidence.”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source
“It is important in the Indian context as it is anywhere. I think there are some sectors where because of policymaking, it's very, very hard for a long term investor, which is not that the policy is bad, but it's unpredictable. So for instance, for oil marketing companies, the government has historically changed policy quickly and without notice about how they get compensated and when and in what form. In other areas, the regulator is a positive boon. In the Indian banking sector, which is small and fast growing, there have been relatively few asset quality collapses in part because the regulator has been fairly strict in what they allow banks to pursue and what they don't. So a typical Indian bank, although it's growing quickly, its business model is pretty similar to a typical”
2024-05-23 · Capital Allocators · Dan Tennebaum - The Case for India at India Capital (EP.387) · IDENTIFIED FROM THE TRANSCRIPT · source