Things I Love in Stock Picking

I’ve realised over time that the things I love most in life are surprisingly simple.

A good cup of coffee to start my day with. Generally, I love drinking cold brew and you might find me at some Starbucks in Delhi someday. Silently sitting and enjoying the coffee while I read about different industries on my laptop.

Moments with family and friends, and especially with my nephew who has started aping whatever I do. He has become a Manchester United Fan, and has in his inquisitive way started asking me questions about what stocks are and why do I explain different businesses on Youtube?

Teaching SOIC students on Sundays. I must have taught about different mental models and about nearly 50+ industries over the last 5 years. Now, I am working on distilling all my key teaching in a checklist type class, TVGP framework, which will be announced soon.

Finally, playing football or paddle with friends and working out at the gym. There is something therapeutic in exercise. I have been tracking all my body vitals and signs of fitness using Whoop. It has become an addiction lately to check my sleep consistency, recovery, and VO2 max. As a wise man once said, you can only improve what you measure.

Life at its best, is rhythm and a deep focus that comes by doing what you love. On a side note, I will highly suggest you read books like Flow and Ikigai. :)

Stock picking, too, has a rhythm — when you’re in sync, it feels effortless and joyful. Developing a set up and principles that you will operate with becomes really important.  But before I get to the part I love, let’s talk about something we rarely speak about openly: the things I hate in stock picking.

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1. Industries where everything is too cyclical to matter

Some businesses are so tied to cycles that your research barely moves the needle. You can spend weeks building a model and still end up being hostage to forces way outside the company’s control.

I’m talking about things like:

• Domestic agrochemicals, where one bad monsoon, or pricing pressure destroys an entire year, and entire sales happen in a quarter or two.
• Paper, which is basically a demand–supply lottery.
• Commodity chemicals, where margins swing like a pendulum depending on global spreads.
• And of course, the classic sugar story — where politics and weather decide returns more than management does.

These are industries where everyone sells the same thing, competes on price, and is constantly being whiplashed by cycles. There’s no joy there, and very little compounding.

2. When the competitor across the border decides to behave irrationally

Some industries look fine on paper until irrational competition from China enters the chat. Chinese businesses are incentivised on the basis of production and not profitability. Their only goal is to gain market share and drive away competition.

Ask anyone in the PVC space. Chemplast Sanmar experienced exactly this — Chinese players dumping products at prices that don’t even make sense.

How do you build a long-term thesis when the guy on the other side is playing a different game entirely?

China was mentioned more than 20 times in their last few concalls. Just check the profitability over the last couple of quarters for the business.

3. Businesses that don’t know who they are

This is the instant red flag for me. A company that lacks a clear strategy, or worse, tries to be everything to everyone — is usually headed for pain.

Remember Shemaroo randomly entering the restaurant business around 2017–2018 or Quess corp buying Mohan Bagan football club or Amtec Auto going on a crazy debt binge by acquiring companies outside India?

Confusion at the top always shows up in the stock price. A lot of FMCG companies today are at a similar juncture. They aren’t willing to sacrifice the fat margins they make to launch new products and innovate. Business strategy is flawed in my opinion, and makes the sector an "avoid" for me at least till they get their act together.

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The Things I Love About Stock Picking

After all the things I hate to see in a set up, here’s the part I actually enjoy — the reason I get excited about teaching about stocks and stock market in general. Because when you strip away the noise, stock picking is ultimately about understanding businesses — that’s where the real magic lies.

1. Companies That Have a Clear, Defined Strategy

For me, this is the biggest love of all.

A stock is not a ticker. It’s not a chart. It’s not a P/E multiple.
A stock is a piece of a business as Ben Graham said, and the real joy comes from studying what that business is trying to do and whether the strategy makes sense.

I have noticed over the years that the difference between people who compound faster in life vs the ones who do it slower purely lies in certainty and clarity of thoughts. Better clarity and certainty lead to better actions, which helps one in getting to their destination earlier.

Some examples where I saw this clarity over the last few years. Many more such examples exist, but the idea is to teach you through case studies.

• Interarch knows exactly who it is: a focused pre-engineered building (PEB) company. This reflects in the concalls of the company where they call PEB industry the four legged animal focused on design, engineering, project discussion and execution. This focus reflects in a net cash balance sheet at the end.
  
  
• IMFA via its recent acquisition of TATA’s ferrochrome has recently become the 6th largest ferrochrome manufacturer in the world.
  
  
• Neuland and Acutaas Chemicals are two brilliant examples of strategy discipline — shifting from lower-value generics to the higher-value CDMO space. They understood where the profit pools were moving and aligned their businesses there.

When a company has clarity, research becomes joyful. You’re not guessing the future — you’re simply watching the strategy play out.

Two books I often recommend for this:

1. Understanding Michael Porter by Joan Magretta
2. Growth IQ by Tiffani Bova

These books teach you one central truth:

Great companies do fewer things — but with more intensity and patience.

2. Business Transitions — The Hardest, Most Beautiful Part of Investing

There’s a line in the Indian Army’s AGNIPATH training philosophy:

“Transformation hurts before it inspires.”

Business transitions are exactly like that. They’re painful, messy, slow, and uncomfortable. But when they work, they completely re-rate the company.

This is one part of stock picking I absolutely love — spotting the transition before the P&L shows it.

Some examples:

• Shaily Engineering shifted from just an injection-moulded plastics supplier to manufacturing pen injectors for the global GLP-1 wave.
  That transition took years — building capabilities, certifications, compliance, and trust. But when the payoff comes, it comes big. They are now even working with innovators where they have the potential to be partners in GLP space.
  
  
• Pearl Global was one of the only companies that wasn’t impacted by Trump Tariffs as it doubled down on a diversified manufacturing strategy across countries.
  That single strategic call probably saved them from the massive margin destruction many other apparel exporters suffered.

When you find a company in the middle of a transition and the management knows what it’s doing — it's one of the most rewarding things in stock picking if you stick throughout this journey.
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3. Hard-to-Replicate Assets — My Favourite Type of Moat

Some businesses aren’t just “good companies,” they’re impossible-to-recreate companies.

I love them because markets often underestimate how powerful time, capital intensity, regulation, and geography can be as moats.

Think about:

• Ports like Adani Ports
• Airports like GMR Airports
• Telecom networks like Bharti Airtel or even companies like ALPHABET which aren’t asset light in nature but are integrated both upstream and downstream when it comes to data centres to their own chips to consumer apps like Youtube, Gmail, etc.

These are assets you simply cannot rebuild today. Not at the current cost structures. Not with today’s regulatory hurdles. Not with the inflation we’re dealing with. Definitely not with the patience required to see a long-cycle project through.

These businesses are so asset-heavy and capital-intensive that the entry barrier itself becomes the moat. Over time, this leads to:

• Strong, visible pricing power
• Stable return ratios in the 15–20% range
• Natural decline in competitive intensity
• Compounding that happens quietly in the background

People often underestimate what happens when a company owns an asset the world needs but nobody else can afford to replicate at current cost structures. That’s when time becomes your biggest ally as an investor.

4. Supply-Side Dominance — When the Business Is the One Holding the Pen

Another thing I love deeply about stock picking is finding companies where the supplier, not the customer, has the power.

These are the businesses that:

• Have enormous switching costs
• Operate in mission-critical categories
• Serve customers who value reliability above price
• And take decades to build credibility

One of my favourite examples is TDPS and the way they broke into the elite group of global gas turbine genset suppliers.

To put this into context:

There are only four major gas turbine manufacturers in the world:

1. Solar Turbines
2. GE Vernova
3. Siemens
4. Mitsubishi

Getting approvals from them is a multi-year, reputation-driven process. You don’t enter this industry by building a factory. You enter it by getting approvals from the customers.

Another brilliant example is CCL Products, which is another business that possesses supply side dominance when it comes to coffee processing. They have:

• 10% global market share in coffee processing
• More than 1,000+ custom blends
• Deep B2B relationships built over 30+ years
• Consistency, reliability, and the same taste profile delivered across continents

You cannot replicate this with capex. You can only replicate it with decades of learning and customer stickiness. This is what gives them supply side dominance.

How to Identify Businesses With Supply-Side Dominance

When I’m analysing a company in this category, I look for four simple markers:

1. Market share
   If someone owns 10–40% of a global niche, that tells you everything.
   
   
2. Margin stability
   Dominance shows up in stable margins even in volatile environments.
   
   
3. End customers
   Are they selling to mission-critical industries? Are approvals or certifications required?
   
   
4. Number of competitors
   The fewer the players, the more valuable each one becomes.

When these four things come together, you get businesses that compound quietly in the background — without needing hype or headlines.

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5. Proxy Investing — Favourite mental model learnt from Peter Lynch‍

Who makes money when there is a war?

The guys who sell bullets and guns. That is the definition of proxy. In modern day world it could be the guys who sell missiles and drones. :)

One of the most underrated joys of stock picking is finding the proxy — the company that benefits from a big trend without being the one standing in the spotlight.

Peter Lynch often spoke about the California Gold Rush, where the real money wasn’t made by the miners It was made by the guys selling shovels, axes, and tents. Everyone chased the gold but the toolmakers built empires.

Proxy investing is exactly that mindset — look for the companies that quietly enable mega trends rather than the ones trying to claim all the glory.

Some modern examples:

• SJS Enterprises — everyone talks about premiumisation in autos, but rarely about the companies supplying the decorative components that make premium feel premium. SJS is the shovel-maker in that story.
• Cummins — data centres are booming globally, but the safer opportunity sits in the gensets powering them. Cummins becomes a picks-and-shovels play on the hyperscaler wave.
• Vertiv — while data centre operators burn billions building capacity, Vertiv quietly sells the cooling, power systems, and racks that make them functional.

These are businesses where you don’t have to take upstream risk, regulatory risk, or hyper-competitive risk — but you still ride the same secular tailwind. Another big trend of proxy investing is financialisation of savings. :) Many proxies from Exchanges to AMCs to investment bankers to custodians, etc. exist here.

How to Find Proxy Plays — The SOIC Checklist

If you want to get good at identifying proxies, there are three habits worth developing:

1. Study the value chain end-to-end

Every industry has adjacencies. Some of the safest compounders live in the middle of the chain. DRHP’s or our YT channel can help you study different industries and value chains.

2. Look for businesses that benefit from the megatrend without being the hero

Instead of betting on who wins the data centre capex game, ask: “Who wins no matter who builds the data centre?”

That’s where the proxy ideas hide.

3. Find companies that benefit when bigger, upstream players grow

Proxies often grow because someone else is spending heavily. They ride the wave without needing to create it.

That’s the elegance of it.

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I will conclude this article by sharing the above set ups I absolutely love. I will ask you, the reader, which one is your favourite set up of the 5 above and why in the comments below. 🙂

I will see you soon in the TVGP Stock Picking Checklist class that will be held on 30th November!