What is resilience?
The Finnish people have a concept called 'Sisu'. I have read that it cannot be translated to English. The root of the word comes from 'inner'. Many words are used to describe this concept of Sisu. Finnish people look for their 'own' Sisu at times of despair. Words such as grit, determination, drive, inner strength, tenacity, stoic determination and so on are multi facets of this concept.
There is no way to learn it. One has to develop his own individual philosophy.
Coming back to markets as outlined before these are trying times. The speed of the collapse has shaken up most investors. And these are times when one has to dig deep down inside & introspect about the decisions made years ago. And how he should proceed from here on.
Business resilience stems from the balance sheet, flows into the cash flow statements and shows later in the profit and loss statement. It is the balance sheet which is the foundation. And this foundation needs to be firm, very firm.
In the recent fall, perhaps only the first leg of correction we have seen many companies go as much as 70% - 80% down in price but there have been a few which are only 7%-15% down as against the Nifty's 30%+ fall. Why?
The core concept of value creation stems from a very simple chart as below.
We need to have more free cash flow than the cost of capital. Cash flows are dependent on top line growth and returns to invested capital.
We looked at all non finance companies in the listed space with 5000 Crs or more market cap.
What we find that the most resilient are the ones with the highest ROCEs & Sales growth.
Not surprising.
We must focus on building resilient portfolios.
There is no way to learn it. One has to develop his own individual philosophy.
Coming back to markets as outlined before these are trying times. The speed of the collapse has shaken up most investors. And these are times when one has to dig deep down inside & introspect about the decisions made years ago. And how he should proceed from here on.
Business resilience stems from the balance sheet, flows into the cash flow statements and shows later in the profit and loss statement. It is the balance sheet which is the foundation. And this foundation needs to be firm, very firm.
In the recent fall, perhaps only the first leg of correction we have seen many companies go as much as 70% - 80% down in price but there have been a few which are only 7%-15% down as against the Nifty's 30%+ fall. Why?
The core concept of value creation stems from a very simple chart as below.
We need to have more free cash flow than the cost of capital. Cash flows are dependent on top line growth and returns to invested capital.
We looked at all non finance companies in the listed space with 5000 Crs or more market cap.
What we find that the most resilient are the ones with the highest ROCEs & Sales growth.
Not surprising.
This is nice to see in action. Thanks for your article.
ReplyDeleteThanks for your reply.
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