TRADING Vs INVESTING - PART 3 - LOGICAL INVESTINGIn continuation of the series, even though I am moving from the IPO subject, I am not yet out of Zomato. The reason being that it actually made me think of a new variant of Investing, that I would like to call as Logical Investing.
Please note that you may/may not find such an investment in the books available on the subject - so if you already think this is being practiced by you, please be good enough to share your experiences for the benefit of the greater good.
So what is Logical Investing as I call it?
When you think of let us say, Zomato, what are the first 2 thoughts that you come across?
I will think of -
A restaurant or take away outlet from where I would be ordering
&
How soon will it get delivered?
Affordability/pricing are the other components but they do not have to invest related linkage so I am not considering those in the post.
So what do these 2 thoughts have to do with Investing?
In my view, here is how they are related -
Whether Zomato IPO hits a bumper listing or not, its source of business growth depends on the quality as well as the number of restaurants or outlets or groups of restaurants/hotels . So I need to check my holdings and see if I have any exposure to - Burger King / Westlife Development / Jubilant Foodworks / ITC ? These are the names of the listed companies that I can think of.
For a few lines, I am venturing into the overseas territory. During the pandemic, one of the worst-hit sectors is the airline industry which is still reeling under pressure. So what some of the airlines did was to come out with a novel idea - I recollect having read about Finnair, the national airline of Finland. It seems that it was well known for its Business Class cuisine. So they came up with a smart idea. During the lockdown periods, they sought approval from the local authorities and started offering business class meals to be delivered to the discerning travelers who were missing its meal service! Soon, many airlines followed suit.
Let us now get back to India.
I hope the reader is now able to appreciate what I am referring to. If in India, the Indian carriers would have thought of such a move , the share prices of IndiGo and SpiceJet, the two listed companies would have seen some upward movement.
So if Zomato business has to blossom, the businesses of some of the restaurants or business partners with whom they are dealing have to blossom first and if any of them is a unit of a listed entity, that is where the first signs of growth would be seen. And as a forward-looking investor, I am interested in buying the shares of those listed entities.
I hope you are in sync with me till now. I am not finished yet so please read on.
My next thought is ---
How would Zomato ensure that they deliver the food of my liking to my dining table?
The answer would be -- it will be delivered by a delivery boy. Correct, but not fully. What mode of transport the delivery boy would use? Motorbike, Scooter or Bicycle? So what are the companies who manufacture these vehicles? What would happen if the business of Zomato roars post IPO? They would need additional partners, additional manpower and those delivery boys/girls would need a vehicle!
So, as an investor, I would like to be invested in --
--the listed companies who offer Food & Beverage Services. as well as the manpower service provider or job hunting sites.
-- So Info Edge or Naukri is the name that rings the bell which is also a lead investor in Zomato.
--Zomato itself as they are the middlemen sort of whose income would also rise with every incremental order delivered and so will the net profit rise.
--Bajaj Auto, Hero motors and TVS Motors whose bikes would be used. I am not sure if Eicher produces affordable bikes and if they do, then I would like to own its shares as well.
Frankly, I had not even thought about this variant of investment till 16-7 evening. I thought about it as my son did a video on Zomato IPO and in 24 hours it received 3000 views so that got me thinking that there is something that is gaining traction and I started thinking logically and tweeted immediately about it and the tweet is given here for your reference.
I thought of restaurants or takeaway outlets when I started writing this article. So I thank all of you for having opened my eyes to a new breed of investible companies!
I am now going to focus my attention on how I can benefit from these companies and would leave you as well with these initial seeds of Logical Investing for you to mull over.
Stay safe, healthy and Happy Investing!
Umesh
