New agriculture Bill passed in Both the houses
Last week, Lok Sabha passed three bills to reform and liberalize the production, trade, and pricing of agriculture produce in the country. These are heavy pieces of legislature but let’s under what they are in nutshell –
- Farmers’ Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 – Farmers are now free to sell their produce outside the regulated Mandi (APMC). The bill gives freedom of choice to farmers in sale and purchase of agri-produce.
- Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Bill, 2020 – The bill provides a framework for farmers to enter supply contract with larger buyers. The target is to provide farmers with remunerative prices for their produce in fair and transparent manner.
- Essential Commodities (Amendment) Bill 2020 – The bill allows large business consumers to maintain stock of agriculture commodities (list of commodities finalised given by the law).
There are many concepts and thoughts through which one can see commodity businesses. They are termed as cyclical, low PE deserving companies and generally have restricted weightage in one’s portfolio.
Right Definition: We believe that any business or trade where goods are sold without any value addition or without any differentiation can be referred as commodity businesses. Here word “Value addition” has vital meaning and impact. Generally, metals, cement and agro stocks are considered as commodity business. We believe if company has capacity to resist to volatility in base commodity price due to scale, stock or other natural advantage it can be considered as different company from pure commodity play.
Buy and Hold? or Buy and Forget?
Let’s start with a famous saying “You Should Never Outsource Your Eyes”
We now produce an illustrative conversation between a client and a portfolio Manager:
Portfolio Manager: Our investment philosophy which says ‘Buy and Hold’, to further clarify the concept internally we think it should be ‘Buy and Forget’.
Client: So, once you are invested what you do?
Portfolio Manager: We search for other better option and we keep monitoring existing investments.
Mindset to invest in equity
Want to make a quick buck? – Equity may not be the right place
Confused…..Let us explain
A group of people had together decided to put money in a single stock based on some so-called ‘hot tips’. They were assured that the stock price will double in few months. What an incredible and an easy way to make quick buck, isn’t it?