I don’t understand why I have to believe that Goodyear India will show strong short term movements. Isn’t the crux of value investing buying great companies at a good price? Goodyear India is a great company. According to my valuation, it was available at a good price and hence I bought it. As far as holding it for the long term is concerned, I believe that there is a lot room for mechanization in Indian farming industry (Especially wrt Tractors). Research reports suggest that only about 20% of the demand for tractors have materialized and as such, there’s a long road ahead. Goodyear India is poised to fulfill a major part of that demand, being the leader in the tractor tyres segment. That’s really how I go about identifying investment opportunities in stocks, as I have already mentioned (1. Identify economic need - Mechanization of Indian Agriculture, 2. Identify Industry - Tyre, 3. Identify Companies - MRF, Ceat, Goodyear India, JK Tyres, TVS Srichakara etc., 4. Identify investment opportunity - Goodyear India).
True, but isn’t it folly to try and predict which stock will be laggards and how long they will stay down? All we can do is assign a price to the stock and buy/sell based on our research. I guess I’m simply trying to ask, if a company is great and the value you assign to it is far greater than the market price, shouldn’t you accumulate it, regardless of what type of market it is (And isn’t such accumulation much more logical to do in a bear market anyway)?
I have a few friends whose parents work on family farms. I’d be lying if I said they only prefer Goodyear tyres for their tractors, but they all seem to have a similar opinion in stating that Goodyear is one of the biggest names in the tractor segment. I have no insights into the innovations in the tyre segment. However, as a matter of practice, I regress a company’s raw material prices to their Operating Profits. Goodyear India seems to effectively handle price fluctuation in rubber and has been able to maintain its OPM regardless. I don’t have the regressed chart with me, but I guess you can look at them side by side: