Commodity and Cyclical Plays

(Jiten Parmar) #581

I disagree a bit here. Cyclical doesn’t mean low quality. And lot more stocks are cyclical than people think.

Cyclical investing is nothing but value investing.

(vihang) #582

Hi Jiten,

Thanks for sharing your knowledge and experience. it is really helpful.
I just have a question regarding ur position in Ferroalloys
1.) You normally invest during peak pessimism…so would you say the Ferroalloy sector is undergoing that now ? Because from what i read and researched, peak pessimism was somewhere around June 2016 (OPM was negative for IMFA then). right after that price shot up 7x to 780 levels in tandem with ferrochrome prices (which went from $0.60/lb to $1.70/lb). Cycle peaked in April 2017 and since then FC prices have come down from $1.60/lb to $1/lb. A couple of links i have shared below indicates Chinese prices have dropped to $0.85-0.86 levels. Do you think there is still further price decreases on the cards and we should wait for max pessimism to enter or now is a good time ?

Your inputs would be highly appreciated. Thanks.

(kumar abhishek) #583

Congrats Jiten. Very articulate and crisp. Thanks for educating all of us on cyclicals.

(Manohar T. Patil) #584

Nalco aiming for higher revenue this year.

Additionally firm alumina prices going to help…

Disc - Invested in Nalco

(sarangg) #585

Really liked your segment on cyclical value investing.

Have you looked at Selan Oil Exploration? It looks like a good asymmetric bet to me. I think the leverage will really shine through as Brent Crude has risen more in percentage terms than the stock, while the stocks’s PAT will rise more. Additionally, management has been talking about increased production since quite sometime - might finally come through in this year, could be an additional bonus. As for future oil production, they have a decent amount of reserves which they plan on monetizing. Also, they have a cash balance of 110 cr compared to 400cr market cap. Company pays a decent amount as a dividend (trailing 2.5%) - probably higher payout on higher EPS.

(Akshay Kumar) #586

(Manohar T. Patil) #587

Slightly old(10th may) article about captive coal mine for Nalco. Talks about potential reduction in the energy cost probably starting from FY20. Also, plans for reducing raw material cost via initiative on caustic soda and bauxite. Plan appears promising to provide a jump up to bottom line from FY20 and FY21. However execution needs to be seen…

Some additional numbers on mutual fund holdings in past 6 quarters(source-moneycontrol)

Quarter Ending Mutual Fund holding
Dec’16 19.12 mn
Mar’17 20.36 mn
Jun’17 35.33 mn
Sep’17 56.84 mn
Dec’17 119.30 mn
Mar’18 126.760 mn

Disc - Invested

(vihang) #588

Guys, does anyone know where i can track historical ferroalloy prices ? Trying to work on prices of different grades of Ferroalloy and match them with IMFA’s realized price and grade…

(Rajarshi) #589

(Bhavesh) #590 would give you chart of the prices but not absolute prices. Bloomberg will give you international benchmark prices