Sid Choraria, an Asian Equities Portfolio Manager, presented his in-depth investment theses on NESCO (India: 505355) and Vinamilk (Vietnam: VNM) at Best Ideas 2018.
NESCO is a ~$600 million market cap company, debt-free, with a valuable 70-acre land asset in Mumbai, recorded at cost of $1 million and bought more than fifty years ago. This land/location provides a wide moat to the growing operating businesses, which are cash cows: IT parks and exhibition businesses. The stock has tripled in the last four years but has a long runway for growth as NESCO embarks on expansion with the new Bombay Convention Center over the next decade. The top managers are conservative and value-oriented capital allocators with “skin in the game” and have been taking steps to professionalize the company from a “family-run” venture. Sid initially present NESCO at Asian Investing Summit 2014, hosted by MOI Global, when NESCO was a $190 million company. NESCO remains an attractive long-term compounding story in India.
Vinamilk is a $13.5 billion market cap Vietnamese company with a wide moat, offering investors a liquid opportunity without constraints on foreign ownership to get long-term exposure to Vietnam. The company has market share of 50+% in key product categories with pricing power, a strong distribution network, a brand favored by locals, and economies of scale. The reproduction costs of this moat are high for foreign players. Although the stock is not “hidden” in the traditional sense, the consensus in Sid’s view underestimates the long-term potential (5-10 years). Vinamilk should be viewed as a combination of great companies, given the diversified product portfolio (probiotics, juices, coffee), which he believes have the long-term potential to become more valuable in the future without meaningful capital deployment, as distribution and brand are in place.
About the instructor:
Sid Choraria is an Asian Equities Portfolio Manager focused on identifying exceptional businesses, cultures and CEOs/management teams to invest like a business owner, preferably for 10 years or longer.
The typical company Sid prefers is a business that can endure the risk of impermanence over decades. His research indicates that over 98% of investable companies fail the test. The culture must be unquestionably superior. Such companies are customer obsessed and have strong non-transactional relationships with constituents. Sid prefers early-stage pricing power that is not discovered. The universe is limited to exceptional Asian businesses and great global companies with significant revenue and cash flow from Asia very material to shareholder value.
In Aug 2013, Sid elicited a rare response from legendary Warren Buffett with a letter and thesis on an under-followed, 135-year-old Japanese company. The company, Kobayashi Pharmaceutical (4967 JP) founded in 1886 is as old as Coca Cola and Wrigley’s chewing gum but with poor coverage when Sid discovered it. He presented the idea on MOI in 2013. Since the letter, business value has quadrupled compounding roughly 26% outperforming the S&P, NASDAQ and respective Asian indices. The inversion lessons influenced Sid’s journey to focus on less followed companies, great cultures and businesses that can endure the test of time.
Sid enjoys mentoring young talent and giving back knowledge by speaking at the world’s top universities like Harvard, Princeton, Columbia Business School, NYU Stern, LBS, USC and Brown. From 2014-2016, he consistently won a few research awards for probing research on Asian companies judged by over 70 judges. His contributions have featured in Goldman Sachs Alumni Network, CNBC, Sydney Morning Herald, Alpha Ideas India, Value Spain, Intel and GIC.
Sid has worked in Asia for 15 years and grew up in the region. Previously, he has served in senior investment roles in Asia, at multi-billion long-only and long-short funds. He worked at Goldman Sachs technology investment banking in Asia. These experiences taught him the significant importance of teams, culture and incentives.
Sid received his MBA from New York University Stern School in 2011 and was recipient of the Harvey Beker Scholarship. During his MBA, Sid worked at Bandera Partners, a fund focused on small mid cap activism, run by Jeff Gramm, Author of “Dear Chairman”, Greg Bylinsky and Andy Shpiz.
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