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How to pick the next Stock Market GOLDMINE? (includes Green Energy Case Study) - YouTube
Channel: Think School
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On 24 June 2021, Mr. Mukesh Ambani made a grand announcement
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that Reliance Industries will invest 75,000 crores in the
next 3 years
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into the green energy space.
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Tata Power is considering IPO for its renewable energy arm.
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And for the first time since the Paris agreement came into
effect
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investments in the renewable projects have overshadowed
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the traditional fuel powered projects.
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And not just that
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We have leaders from all across the world including
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President Biden and our Prime Minister Modi Ji
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who have already set very ambitious targets to shift to
renewable energy.
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And to get to net zero emissions in the next few decades.
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If you haven't realized it yet,
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we are witnessing the rise of another technological
revolution in the form of
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green energy revolution.
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And just like any other revolution in its initial stages,
this is going to open up
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a huge scope of opportunities for both, entrepreneurs and
investors.
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So, if you're someone who wants to participate in this
revolution
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as an investor or as an entrepreneur
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then this episode is for you.
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Because by the end of this episode you will have 2
incredible superpowers.
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From an investor's standpoint, you will learn about a
powerful framework using which
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you can spot the hidden gems of the stock market
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which 99% of the people fail to see.
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And from a startup standpoint, you will learn about
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what exactly is happening is the green energy sector
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and what kind of business opportunities or threat
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do you have to look out for
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while you participate in the green energy revolution.
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This is a story that dates back to 24 January 1848,
California
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when a carpenter called James Marshall noticed some shiny
flakes in the channel bed
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while he was building a mill.
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After a bit of examination, he realized
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that those shiny flakes were nothing but the finest quality
of gold
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which was at least 23 Karat.
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But when he informed the owner of the mill,
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the owner assumed it to be just some pieces of gold lying
around here and there.
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And was more concerned about the completion of the mill.
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But meanwhile
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he gave the workers the permission to dig for gold during
free time.
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But you know what guys?
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Little did he know that what his carpenter had found were
not just a few pieces of gold
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but a freakin' gold mine with more than 340 tonnes of gold!
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And when the workers realized this, they went rogue
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left all their work and started digging for gold
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as the news of this gold spread like wild fire.
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And what followed next was nothing short of madness.
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The same California, which was once a rural place
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had more than 300,000 people rushing in to dig for gold
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making it one of the largest migrations in the American
history.
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People from all across the country, in fact, all across the
world
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left everything they had, including doctors, engineers and
lawyers
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and bought horses to go look for gold.
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And this gold rush, ladies and gentlemen,
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lasted for about 7 years and during these 7 years
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there were several groups of miners who succeded and many
failed.
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The rush was so bad
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that several men died because their horses fell down from
the hill
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because they were over loaded with gold.
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While many others died in accidents
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and some even got murdered in their fight for gold.
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But inspite of that, during this gold rush, there were
hundreds of people who got rich.
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Now, if I asked you who exactly got rich in the California
gold rush
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what would your answer be?
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Who else? Obviously, the successful gold miners right. The
ones
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who walked away with a ton of gold
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or the workers who first discovered the gold mine, isn't it?
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Well, not really?
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The real winners who got rich during the gold rush were this
special group of people
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who never went to the gold mine.
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In fact, they never got a single piece of gold from the gold
mine.
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Then the question is- How did these people get rich?
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As it turns out guys,
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This group of people that I'm talking about
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were the entrepreneurs who instead of going for the gold
mine
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build businesses that would cater to the gold miners.
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Because when the gold miners flocked towards California
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these people realized that the demand for certain materials
would skyrocket
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and would create a business opportunity for them.
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So, you know what?
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Instead of going for the gold mine
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these people sold shovels and horses to the gold miners.
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Cherry on the cake,
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they sold these items at an extravagant price of as much as
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50 times the original price.
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WHY?
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Because the demand was too high
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and a man would not think twice to pay more for a shovel
that's going to give him gold, right?
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Guess what?
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This gave rise to some of the most succesful companies in
America
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that had nothing to do with the gold mine
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but merely cater to the requirements of the gold miners.
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For example, in 1853, that is 5 years after the gold rush
began
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a German-American businessman understood
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that although there were a lot of horse vendors
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there wasn't a garment maker who could make
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rugged garments specifically for the miners.
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So, he started making rugged pants for the miners
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and this man was none other than Levi Strauss.
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And the rugged garment that he designed
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was the jeans pant which then went on to redefine American
fashion forever.
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Another New York butcher decided one day to walk to
California
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eventually, he opened up a meat market
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to serve food to the hungry miners.
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And later, he took the profits to Milwaukee to set up a meat
processing plant.
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This man was none other than Philip Armour
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and the company that he founded was the Armour meat
packaging company
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that went on to become one of America's largest meat
packaging firms.
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You see these two gentlemen?
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They looked at the unsettled atmosphere of California
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and started a company to offer what miners desparately
wanted and that was stability.
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So, they offered secure and honest banking, transportation
and even mail delivery service.
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These two men were none other than Henry Wells and William
Fargo and their company
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Wells Fargo became a Fortune 500 company worth 19 billion
dollars as of 2019.
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Now, my question to you is
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What is the business lesson that you learnt from this story?
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If you take a step back, you will realize
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that when the gold rush happened, while everybody had their
eyes on the gold
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and thought that the miners would become successful.
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the actual winners were the ones who actually built the
supply chain for the miners.
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And regardless of who got the gold and who did not
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these entities of the supply chain won, by default.
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This is what you call
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'second order thinking' or in the stock market world
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when you invest into such companies, it's called pick and
shovel strategy
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that while everybody has this herd mentality
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and goes towards a supposedly lucrative opportunity.
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Some people take a step back and look at the repurcussions
of the herd mentality
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and find opportunities
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which will be created due to the existence of the herd
mentality.
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And this is what happens everytime in the stock market and
the business world.
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And surprisingly
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every time the gold rush happens, majority of the people end
up going for the gold.
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And this is coming from the legend Warren Buffet himself
that
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when the automobile revolution started, the rush was so bad
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that in the early 1900s there were about 2000 car companies
in America.
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But by the end of the century there were only 3 companies
left.
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But during this time, who do you think made money
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regardless of the success and failure of these automobile
companies.
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They were the spare part manufacturers
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the companies that build factories for these companies and
most importantly
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the oil companies who did not manufacture a single car
during the automobile revolution.
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So, if this is very very clear to you
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let's have a look at the evolution of the green energy
industry.
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and see how you could be a strategic investor or an
entrepreneur
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during this upcoming gold rush.
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Now, there are 3 super strong forces
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that are going to catalyse the rise of green energy
companies in the world.
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Number one,
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President Biden has set an ambitious goal to create a
carbon-free power sector by 2035.
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And net zero emission economy by no later than 2050.
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Number two, in India, our Prime Minister has announced
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our renewable energy target to be
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450 GW by 2030.
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But as of February 2021,
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the installed renewable energy capacity of India stands at
only 94.3 GW.
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And among that 450 GW target
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about 280 GW is expected to come from solar.
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And lastly, as a result of these conducive political
conditions
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we've got giant companies rising up
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like Reliance, like Tata Power and Adani Green.
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Now, let's talk about the most important part of the video,
that is,
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what is the framework that you are supposed to use
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to build your business or
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to look for the hidden gems in the stock market.
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Step 1, read through the news
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and if you're choosing a particular sector, look for every
single emerging player in the market.
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And if you find it too tedious to go through the Internet
and look for the headlines
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I would highly recommend you to use our knowledge partners-
Smallcase website for doing your research.
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All you have to do is choose which sector you want to know
the news about. For example
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in this case if you want to know
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all the major updates about the EV sector.
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All you have to do is go to the news section of the EV
sector smallcase
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and all the major headlines have been stated in that news
section.
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And not just that. The best thing is that
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the impact on the stock after the news came out has also
been stated
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which makes it very very insightful.
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So, this way you can even spot the negative effect on the
market
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which is, perhaps the most fantastic things about this
website.
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Step 2, when you go through this news
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identify the major classifications of the players in that
particular industry.
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In case of green energy
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you've roughly go 4 types of players and this is where
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if you want to build a company, you can look to contribute
to the value chain of
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either one of these players.
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The first type of companies are the ones
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that will be the forefront players who will
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transition from non-renewable energy to renewable energy.
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For example, for this type, we've got Toyota and Volvo
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who plan to shift to renewable energy completely in the next
few decades.
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The second type of companies will be the companies that will
support these companies
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using their infrastructure or their finances.
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And here's where we have companies like Panasonic who has
now entered
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into a partnership with Toyota to make batteries.
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And it China you've got the EV manufacturer BYD who has also
partnered with Toyota
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to design EV batteries in China.
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And this type also includes the banks that are supporting
these companies.
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The third type of companies will be the ones who will be the
essential entities of the supply chain
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of companies like BYD and Panasonic. For example,
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With the rise of demand of solar energy
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we might see several small and medium scale companies
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that are a part of the value chain of the solar industry
like
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the solar cell manufacturer or the solar glass manufacturer.
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And these two types, that is, the second type and the thrid
type are the companies
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that are the shovel sellers in the green energy industry and
here's where
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you will find the hidden gems of the stock market.
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And the last type are the companies that are building end to
end supply chain.
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For example, Reliance is planning to build 4 giga factories
to manufacture and integrate
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all critical components of the new energy ecosystem
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with the ambition of making an end to end system.
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With that we move on to the third step, that is,
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based on the insights that you've gathered
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you can then choose to diversify your investments into all
these 4 types of players
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depending on your risk appetite.
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But if you're someone who's too busy or still in the
learning phase
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you can opt in for a smallcase from that particular sector.
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And you know what is the best thing I found about them,
guys?
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Smallcase investors, specifically for the green Energy
Portfolio
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use the second order thinking approach
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to diversify your investments into the categories that I
just mentioned.
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So, while the world rushes to get the gold mine
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your investments will be strategically invested into the
shovel sellers
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at the right time, just so that
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you can get the best returns possible.
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So, if you love their idea, use the link below to download
the Smallcase app
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and even if you don't want to make investments
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just download the app and keep an eye on the news section
because that itself
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is enough to give you some extraordinary insights about the
market.
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With that we move onto step 4.
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After you've invested your money into a selected bunch of
companies
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regardless of how you've done it, whether you've done it
through smallcase
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whether you've gone through an FA or by yourself
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do not sit back and get complacent.
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Keep an eye on what's happening in the market
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and read every single news headline that appears in the news
section.
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and constantly keep an eye on how the tragectory of the
industry is shaping up.
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This way, you will know where exactly your money is going
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why is it being invested in a particular company and most
importantly
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what are the risks involved in a particular sector.
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In case of green energy
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you've got low margins, rising interest rates or it could be
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a change of government in India or in the US
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or a calamity like the pandemic which could slow down the
growth of the companies
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in this particular sector.
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And always remember guys
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regardless of how much money you make
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if you don't know where your money is going
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your money will be gone in no time.
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And before I say goodbye, I just wanna tell you one thing
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keep an eye on Ola Electric and read this book called 'The
Third Industrial Revolution'
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WHY?
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I'll tell you that in sometime.
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That's all from my side for today guys. If you learnt
something valuable
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LIKE KARO! TO MAKE YOUTUBE BABA HAPPY
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And for more such insightful business and political case
studies
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please subscribe to our channel.
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Thank you so much for watching. I'll see you on Friday.
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Bye-Bye.
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