I bought Sun TV when Maran was forced to quit the cabinet and the stock nosedived irrationaly i thought. My reason was based on

1. It being a premeir channel in southern india.

2. Loads of FCF.

3. Tata Sky CEO complained in an interview when Sun TV refused to give access to their content. etc etc.

 

I felt like Einstein when the stock zoomed after that and refused to sell.

 

Now, i realize that it's no more a given that Sun TV wil ride out the bear market as the number 1 player. Basically it's possible for a channel to just get a few reality shows correct and to draw a lot of eye ba*ls away from established channels.

 

While Sun TV remains a player to be feared (witness how hard the DMK backed cable distribution business is trying to get it onboard) it's not a no brainer that Sun TV will be THE Number 1 as i had thought. Add to it, the high salaries, exec jet place etc and i'll now wait for a very low valuation to average.

 

BTW...it turns out the market might have been right to think Sun TV will not do so well after Maran was forced out of the cabinet. ET reports that Maran was arm twisting Tata Sky to give Sun TV a stake. That's why Ratan Tata went out of his way and wrote a letter praising Mr. raja (Maran's replacement on the cabinet, who is in the news now a days).

 

On similar lines is GAIL. Very strong netwrok, hard to replicate. ONGC is my mind is also has similar streghts because of their scale and because of govt backing. But more than scale, I think its govt backing that will keep them in business. ONGC is not just another oil company - it is India's flag bearing oil company.

 

Castrol also looks strong due to strong brand recall. Any other lube company will have to labor for decades and spend zillions on ads and product quality to get that type of brand recall, in my opinion. Pidilite also fits the bill here.

 

Also, I have been trying to locate moat from financials (not just by understanding biz models) since I figured that if I could discover a financial method to identify moats, I would have a far more objective way. If I were to follow Concor's financials, the theme I can see there is very high double digit profit margins, very high return on equity and zero/low debt.  These three metrics, in my mind, show a sedate competitive environment. The moat is wide, fort is strong, and there are no enemies in sight!! A double digit margin shows low competitive pressure. High ROE shows that the business doesnt have to constantly add equity to survive. Low debt shows that there is no pressure to expand crazily by using dangerous levels of leverage.  All the above mentioned companies fit this from a financials standpoint. Locating moat from financials appears a much more objective way than evaluating business models. Thoughts from any one on this would be most appreciated.

 

Actually a very high RoCE over sustainable periods of time 5 years and above is the surest financial signal for a moat. The catch word is longer periods of time that is bvecause in the past 5 years all commodity stocks had a high ROE but that was more because of commodity prices going up then any other factor.

 

In this case if the forward or backwords linkeages in an industry is cyclical then it should be considered as a cyclical also.