ValuePickr Forum

Hitesh portfolio

(A shah) #3435

Hitesh bhai, what are some good quality growth stocks that one can consider for investment after doing analysis ? Hows cholamandalam finance compared to bajaj finance ? Thanks so much

(skg) #3436

Hi @hitesh2710 What are your thoughts of Mayur Uniquote and Multibase India? Since auto sector is not doing well, do you see major impact on Mayur Uniquote too? My thoughts are that auto sector might not be down for long time since car is becoming a need and not a luxury. What are your thoughts on these two companies?

(ramanhp) #3438

@hitesh2710 - I guess the stock pledging of Sterlite Technologies was discussed before. However, given the weak mid-caps and market completely ruthless on any indication on corporate issues, request your views. The stock is beaten down despite a stellar quarter. Do we need to see stock pledging as a red flag? Thanks.

(Bharat) #3439

Hi ,

I had tracked Sterlite Tech some time back and thought to share my views. Though Hitesh Sir may better clear the air with his more profound thoughts.

The Vedanta Group companies are always used to help each other businesses. Here in Sterlite , the reason behind pledge is to delist one of promoter group company from LSE. That should not be a big worry looking at the entire group. But i prefer companies with no pledge or only a short time pledge and that too not done repeatedly. There is also another factor.

My father comes from non finance background and had very less belief in stock markets. Somewhere around 2008 , there was lot of hype around R Power IPO. Everyone was talking about that only. He also got in and applied for that (which was his first and the last investment in markets). He was allotted 1 lot (27 shares) around Rs 450 i guess. Recently around a year back , i had found his Demat account details where those shares were lying. Had sold those at around Rs 40 after 10 years.

The learning was that if a lot of hype is created around a story , it is better to stay aside and keep watching from a distance till those things settle. Had burnt my fingers in MOIL in my initial journey a year back where a lot of talk was going on Manganese (that it will be used in Electric Vehicle and it is the future). The stock has corrected around 40% from there. That does not mean that the company is bad or the story is false but that surely means that the right time to buy is little far and a deep study is required before any purchase.

Till last year , every other guy was behind Graphite twins. Even lot of analysts claimed that it is not a cyclic change but a structural and graphite is the future (Transition towards EAF Route). Many bought the graphite stories and suffering now. My learning helped me to stay away this time.
Interestingly I found a company Orient Refractories which uses to make Refractory material used for making steel through EAF Route. No one was talking about it. The past record was excellent despite being in cyclical sector. I picked that up and that gave satisfactory 20% returns in last one year. Recently i heard many talking about Orient Refractory and had reduced some exposure.

Similar hype was created around Sterlite Tech when it was near 350+ that 5G will be there and it is the future. I looked at it and thought to give a miss. The past record and capital allocation in combined Sterlite Power and Tech was also not that good. Personally I prefer missing a multibagger than having sleepless Nights

I am not saying that business is good or bad. They have a good order book in hand. At around 350 , it was trading at 35X earnings and arguments behind the valuations were that it is factoring lot of future growth. Currently it is around 20X earnings which still is not cheap for a commodity business. ICICI Sec has come up with a report and target price of 350 few days back. It is better to analyse a report that why they want you to purchase the story. Making money is not that easy. I believe the stock to move down further till 170-180 levels (may or may not come) and that is my individual study and should not be taken as target as the forum is not for price related discussions.

Disc: My experience in markets is only of 1 year and that too without any finance background. So my thoughts may be immature and of no use. Had shared my limited understandings.

Regards

28 Likes
(Hitesh Patel) #3441

@kumars1672

I remain invested in multibase but in the short to medium term there remain headwinds in terms of slowdown in auto sector. Same goes for mayur though I dont track it too closely.

Regarding how long the auto sector slowdown is going to persist its anybody’s guess. The sector has had a great run till now but I think it could take a bit of rest for now. Difficult to predict when the cycle will turn. I think very few anticipated that the cycle will slow down so fast.

2 Likes
(Hitesh Patel) #3442

@ramanhp

Sterlite Tech has kept posting very strong numbers. But in the kind of market we are in, pledging is currently considered to be a very risky parameter in any company esp after the fallout of Zee.

Plus the Anil Agarwal group has not got the best reputation in the markets after their dealings in Sesa Goa and Cairn etc. Using one company’s cash for other company’s expansions or acquisitions and so on.

Besides that, the stock earlier was quoting at valuations which were discounting 2-3 years of forwards earnings. So a correction was warranted and usually these kind of swings dont stop where they should stop at. So I guess it might swing in the direction of pessimism before it normalises.

6 Likes
My Portfolio_Homemaker
(Sujay Ghosh) #3443

Hiteshbhai, regarding Pledging, I have the following question:

I have been reading about Bajaj Consumer for the last few days. In my opinion, its financial performance (mergin, ROCE, dividend etc.) and also the act of the management so far indicates that they are conservative, transparent and shareholder friendly. But the only turn off is share pledging, which the promoter is doing to fund his other infra/sugar business. Bajaj Consumer is financially stable and needs no such money.

Now what happens if the promoter’s investment in the infra/sugar doesn’t give returns or make losses? He will need to sell his stake to return the money and eventually promoters stake will decrease in Bajaj Consumer.

But how does that affect Bajaj Consumer’s financial performance? I agree that the stock price can nosedive if this happens, but I can find no reason how Bajaj Consumer’s turnover/profit/cashflow detoriate because of promoter’s stake decrease!

Am I missing something?

Can you please put some light on this?

1 Like
(rkatikam) #3444

what if the promoters stake decreases such that they become minority shareholders? They can be a target of a hostile takeover. Even if it doesn’t happen, the board and the owners may not be in sync with the decisions for e.g. should they do a capex, pay a dividend etc . Lets say the promoter is a very talented guy, but having lost his control, do you think it is easy to run the business? will he be as motivated as earlier?

(ramanhp) #3446

Thanks @bharat19. I agree the conglomerate is now well known for is corporate governance. I think it commodity nature of the business is lesser talked drawback amidst the hype around 5G and IOT. Thanks for butting in with your views. Appreciated.

(Sujay Ghosh) #3447

Hostile takeover is an issue I’ve considered but India have seen only a handful of these. But it’s a possibility.
https://www.lawteacher.net/free-law-essays/business-law/india-has-experienced-only-a-handful-of-hostile-takeover-attempts-business-law-essay.php
Moreover, several well known companies have very low promoter holding. For example: Persistent (30%), Cyient (22%), Mindtree (13%), India Cements (28%), Satin Creditcare (27%), Astra Microwave (13%). So, I wonder if ease or motivation of running the company by the promoter is linked with his % holding. On a different perspective, in my opinion, if the promoter is a good guy, he will become more motivated to prove the investor’s perception about the company wrong.

(rkatikam) #3448

So, I wonder if ease or motivation of running the company by the promoter is linked with his % holding.

In my limited understanding that would be more of an exceptional case. I would generally prefer to invest with those who have their skin in the game. And though not all pledges are bad, what I have seen is that it becomes more of a habit (where they pledge release pledge release) especially in the Indian context and then when will it blow up is anybody’s guess.

1 Like
(Sujay Ghosh) #3449

In fact, many of these companies (I have mentioned only a few) have created huge investor wealth over time. So, these are not exceptions I guess.

But yes, I also tend to avoid companies where promoter holding is this much less.

(Hitesh Patel) #3450

@sujay85

About the question of what happens to promoter pledge if the money derived out of pledge doesnt achieve the desired results etc… Dont you think this is too complex to fathom? And in the current markets when we should be looking out for no brainers these kind of companies should be brushed off at the first look itself. Why should we waste time on these kind of complex situations? (This is my personal view and you and many others might have a different view but I usually dont go too deep when I find things complex to understand or project)

Investment thesis should be simplified to a few lines on a page. If the thesis put up in one page in a few lines doesnt make sense then its not worth following.

24 Likes
(Sujay Ghosh) #3451

Aptly put Hiteshbhai. My mind is clearer now. :slight_smile:

(1.5cr) #3452

Dear Hiteshji,

I would like your views on Orient refractories valuation at current levels of ~200 per share.

I think the business is great and very strong. They are also in a good industry.

My only question is on the valuations. they seemed to be fairly priced at 150-170 prior to the merger.

Now with the merger being done, how would you value the company?

Thanks!

(A shah) #3453

Hi hitesh bhai ,
1 How to determine a turnaround in a sector early? What factors can one check to determine turnaround in auto sector at early stages?

2 Also can quality cyclical stocks make good long term bet if one stays through the troughs in the cycle i.e would it make up for the lean cycle period or should one get off when the cycle seems coming to an end ? As cyclical stocks i find bit difficult to estimate and hence request you to kindly explain the same .

3Also secular stocks generally are well discovered by the market and its very difficult to find a quality underpriced secular stock as even if one discovers , theres lesser information available in the market about corporate governance of new companies as against well established companies . So does cyclical offer a better bet or please correct if i am wrong. I would love to add a secular stock in my portfolio but find valuations too high and seem discovered.
Many thanks

(Bhaskar Bora) #3454

What are your views on Bharat rasayan

#3455

Hi Hitesh,
What’s your opinion on Ajanta Pharma now? It has come up with a poor result in Q3. While it’s showing decent growth in Indian market, it seems to have slowed down in global markets.

(Hitesh Patel) #3456

@1.5cr

Orient refractories is a fantastic company but there seems to be margin pressure in Jun and Sep quarter looking at OPM as shown in screener. These kind of companies are typical steady compounders and returns often are magnified if bought during downswings.

7 Likes
(Hitesh Patel) #3457

@respondvignesh

Ajanta has come out with poor results with degrowth in topline and bottomline during q3 fy 19. For any company which has shown scorching growth for many years a few quarters of stagnation or degrowth is usually the norm and during these times the stock prices tend to go sideways.

Chart shows a head and shoulders top with neckline at 1120 odd levels. After breaching it during May 2018 it went down to 900 and tried to rally. Sometimes after these breakdowns stock prices tend to go up and reach or slightly exceed the neckline only to fall down again. Same thing happened here where the stock price reached 1200 and weakened and now after weak q3 fy 19 results seems downtrend has again resumed. How low it goes is a thing that needs to be watched but in view of chart pattern combined with poor results its prudent to stand aside and watch patiently till either charts or preferably the fundamentals improve. (growth returns)

5 Likes