Global Economic Landscape: Industrial Policy Takes Center Stage
Welcome back, fellow investors! Today we’re diving into some fascinating shifts in the global economic landscape that every savvy investor should understand. The world of industrial policy has undergone a dramatic transformation since the 2008 financial crisis, and these changes are reshaping how countries compete and how companies operate.
What’s driving this shift? Since the Great Financial Crisis, we’ve seen widespread adoption of industrial policies across both advanced and emerging market economies. But here’s where it gets really interesting – around 2020, there was a structural break that accelerated policy activity dramatically. The “new industrial policies” emerging now are motivated by supply chain resilience, national security concerns, and geopolitical tensions rather than traditional economic development goals.
These policies are targeting dual-use and advanced technology sectors, along with critical raw materials and minerals. The geopolitical risk factor has become a major driver, with tit-for-tat retaliation playing a greater role in shaping industrial policy decisions. This represents a fundamental shift from the past and has significant implications for global trade patterns and investment opportunities.
Stock Spotlight: Analyzing Key Players in Today’s Market
PhysicsWallah IPO – Opportunity or Speculation?
The edtech unicorn PhysicsWallah has set its IPO price band at Rs 103-109 per share, aiming to raise Rs 3,480 crore. The company plans to use these funds for expansion, including new offline and hybrid centers. While the company has narrowed its losses significantly – from Rs 1,131 crore to Rs 243 crore in the latest year – and grown revenue to Rs 2,887 crore, we need to apply our investment principles carefully.
Remember our principles about new offerings: “Avoid new common-stock offerings (IPOs) during bull markets; the long-run outcome is almost certain to be losses.” This doesn’t mean all IPOs are bad, but it does mean we should approach them with extreme caution. The key question is whether PhysicsWallah offers a true margin of safety at its IPO price, or whether this represents speculative enthusiasm for the edtech sector.
Meta and WhatsApp – Regulatory Headwinds and Business Quality
The recent NCLAT ruling provides partial relief to Meta and WhatsApp, staying a data-sharing ban while upholding a Rs 213.14 crore penalty. This four-year regulatory battle highlights the increasing scrutiny tech giants face globally.
When analyzing companies like Meta, we should consider the four dimensions of quality assessment: functional excellence, people factor, business characteristics, and price. While Meta demonstrates strong functional excellence and business characteristics (network effects, scale), the regulatory headwinds and management decisions around privacy policies raise questions about the people factor dimension. The key question for investors is whether the current price adequately discounts these regulatory risks.
Saregama India – Mixed Performance in Entertainment
Saregama reported a 2% decline in consolidated net profit to Rs 43.8 crore, with revenue falling 5% to Rs 230 crore. The company shows interesting divergence across segments – music revenue grew 12% while video content dropped 70%, and live events surged dramatically.
This mixed performance illustrates why we need to look beyond headline numbers. The company’s ability to grow its music segment while managing the volatility in video content suggests some operational strength. However, we should apply our conservative financing principles – does the company maintain adequate financial strength to weather segment volatility?
Portfolio Strategy: Navigating the New Industrial Policy Era
So what should investors do in this environment of shifting industrial policies and regulatory scrutiny?
First, recognize that industrial policy shifts create both risks and opportunities. Companies operating in targeted sectors (advanced technology, critical materials) may benefit from government support, but they also face increased geopolitical risk. Diversification becomes even more important in this environment.
Second, maintain discipline around valuation. The excitement around sectors like edtech or the regulatory pressures on tech giants can create pricing dislocations. Use our valuation frameworks – the blended multiplier check (P/E × Price-to-Book ≤ 22.5) and the Lynch Ratio – to ensure you’re not overpaying for growth or ignoring regulatory risks.
Third, focus on companies with durable competitive advantages. In an environment of increasing industrial policy and regulation, companies with strong moats, conservative financing, and quality management will be better positioned to navigate uncertainty.
Remember our core principle: “The investor’s primary interest is acquiring and holding suitable securities at suitable prices.” Don’t let the noise of industrial policy shifts or regulatory battles distract you from this fundamental focus. Stick to your checklist, maintain your margin of safety, and let the market’s pendulum swings create opportunities rather than cause panic.
Happy investing!