Hitesh portfolio

Q&A: Questions & Answers Portfolio Q&A
2309

Hi Hitesh,

Hope you are doing well…!!

I have been tracking stock market since a long time. And I am pretty fascinate, about how equities move and vanish in this market. Since my early days, I kept on listening from my father about some of the great companies like Asian Paint , HDFC twins , Gruh Finance, Infy , Shree Cement and many more. He made some handsome money in this market, by investing in high quality stock with transparent and effective management and kept time horizon of 5 , 10 or 15 Years.

Now I am staring ,my innings of investment, in this beautiful growth story of India. I need some guidance form you and experienced members on this portal on below mentioned areas.

1> How we can figure out sector which can perform well in future or high growth sectors.

From my understand its FMCG, Housing Finance, NBFC , Insurance , IT(Cloud Computing) , Infrastructure and Port business. Please correct me if I am wrong.

2> How we can check about transparent and effective management.

3> What type of investing strategy shall I follow while investing in market. Shall I go with big names like Asian Paint, HDFC Twins, Bajaj Fiance to have decent growth or shall I go for value picking like Avanti feed , Astral Poly and Kitex Garment.

4> Consumer facing companies with excellent management can create great value for investors ( As this worked in case of Mr Buffett - American Express, Coca-Cola , Apple )

Please mentor me on these point, I will grateful to you if can provide some good web-links or document about examining an effective and transparent management.

Vivek Vikram Singh

6 Likes
2313

Sir
How do you see the carnage in micro finance sector.
Your view on rel capital
In shilpa medicare focussed on oncology and everybody else also focussing on oncology how do you see shilpa
Thanks

2 Likes
2314

@vivek,

When one is looking at multi year investment options as you seem to be doing, it makes sense to look at the opportunity size versus market cap scenario. Any company that has a huge opportunity size and which can execute flawlessly and utilise the opportunities presented, would be a big winner. I think going ahead, finance, insurance, hospitals, fmcg and consumer durables, etc would be the winners. (they already have created a lot of wealth till now but I think the trend may continue)

About how to gauge the management pedigree and effectiveness I think going through annual reports, concalls, presentations made by the company provide an insight into the management quality and integrity. If they appear to walk the talk then it is a great sign. Other things like good balance sheet, high return ratios, div payouts, timely expansions and results out of those expansions etc are some other pointers.

Which investment strategy to follow — an ideal mix would be a combination of established companies like asian paints, hdfc bank, bajaj finance, etc and the emerging companies like pi, astral, avanti etc. In these emerging companies it would be slightly more difficult to figure out the winners as there can be some lumpiness in earnings or initial teething problems associated with the business.

About point 4, regarding consumer facing businesses creating great wealth, I agree but one has to be mindful of the kind of valuation one pays. A great business bought at exhorbitant price would take a long time to pay back.

If u have not read investment books u can read up on some basic books like One Up on wall street by Peter Lynch, Five Rules for successful stock investing by Pat dorsey among others. These should answer a lot of the questions prevalent in your mind.

rgds
hitesh.

41 Likes
2315

@sta, Micro finance would be one sector which would always be vulnerable to govt interference and hence one has to be nimble to get off the bus at opportune moments when there is a lot of froth.

I dont track reliance capital.

Shilpa remains one of the better choices in pharma space. A lot has been discussed on the relevant thread and u can read up and get an idea about the company and its prospects.

8 Likes
2316

Hi @hitesh2710, I am surprised at the strength shown by shilpa in this carnage. Also, I understand that this can be one of those cases where taking decision based on TTM pe can be wrong. I have some questions.

  1. How does an investor conclude about the possible disproportionate future earnings. Is it based on the management guidance or the investor homework done based on filings and market size?
  2. Why is market ignoring threats like a) FDA import ban b) price erosion ? ( especially considering the TTM PE of about 50). Is it because a) they have already had inspection which is valid for n years b) the products are too complex to replicate?. Is shilpa immune to these threats?
  3. What if the disproportionate earnings a one off (like natco, torrent, alembic etc) due to exclusivity?.
    Although I asked these in the context of shilpa, you can answer it without being shilpa specific. I want to take this as a case study. ( ie high PE with average recent performance, plus anticipation of future earnings). I just want to understand the thought process of legends like you.
2 Likes
2317

@gautham1

coming to your queries, I will try to answer to the best of my knowledge, (which may be incomplete)

  1. Disproportionate earnings would be based on the kind of pipeline the company has in terms of products. How complex the products are. The more complex, products, the lesser competition and hence less price erosion. Most of it is done from homework and some pointers from AGM speech.

  2. Shilpa is not immune to the threats of FDA ban. But since the approval has been granted only a few months back I think it will have some more time before re inspection.

  3. The disproportionate earnings in Shilpa do not appear one off looking at the kind of product list they have got. Besides Shilpa also supplies products to Europe too.

Personally I feel that the stock price in Shilpa had run up much ahead of fundamentals and hence as always happens in such cases, there is likely to be a period of lacklustre movement in stock price.

13 Likes
2318

Hitesh Sir, How you look at Page Industries. I am holding it from BM days. But getting confused now a days. It is in a range for many many days. As per me it have a long way ahead but not understanding how the valuations will play out? For a long term investment of 3-5 years how you look at it.

2319

@Hrishi

May1, 2017

1 Like
2320

Hello Hitesh,
I am long term investor. I do basic fundamental analysis. Mostly go through screener and read quarterly financial reports /research reports etc. Though I am in the equity Market for few years , I haven’t done deep dive study on Companies yet.
My question is how important technical analysis for a long term investor ?
Your views on this is helpful.So far I have not done any technical analysis.
My knowledge on technical analysis is NIL.

Thanks,
Chandra

2321

@chandra,

Technical analysis is not all that important for long term investors. There are lots of big names like WB, Peter Lynch who have made tons of money and have acknowledged that they dont use technical analysis.

Technical analysis is for those who have been bitten by the bug of TA. And even for them its always a good idea to combine fundamental analysis with TA.

10 Likes
2323

@hitesh2710

Hi Hitesh,

Would love to hear your views on cement sector where i am personally very bullish because of govt affordable housing + infra push. Any feedback on these stocks - Ultratech, Deccan cement, Sagar cement, Orient Cement? any preference?

Appreciate your feedback

2324

@hitesh2710 Thanks for your response Hiteshji. Considering the carnage in pharma stocks can we look for value investing at the current levels or should we wait for more correction

2325

@hitesh2710, Would like to know your opinion on Repo’s Books-on-Demand business model and how do you see this playing out for next couple of years. Per management they don’t have a competitor for this model yet and they say they got a two year lead. Would this be enough for them to get a sizable market share in this space ?. (my views are recently updated under Repro thread).

2326

@jagjit,

I dont follow the cement companies closely so not much idea about the companies you have discussed. But interaction with some fellow investors seems to suggest good times ahead for the cement sector. I dont hold position in any cement stocks.

@drgjk1976 Pharma might appear to be a contra bet but I would still wait some more time for the dust to settle in the sector before venturing out a buy.

@sivakkri, I went through the presentation of Repro and also the concall of the co but couldnt figure out much about the company’s prospects. So its still a work in progress for me.

2327

Hitesh Bhai have you had a chance to look at the molecular diagnostics business of Kilpest India? Any views? the company is making handsome margins in the JV with the spanish company.

2328

Hi Hitesh Bhai,
Since pharma sector is going under consolidation and of course pharma sector is not going to die, I want to track some good players in pharma sector in order to take advantage of breakout whenever it takes place.
I can hold stocks in loss for long periods like upto 2-3 years also as I am planning to put only excess money in pharma which I don’t need now.

What are top 3/5 pharma stocks to track (to take advantage of pharma sector breakout whenever it takes place) in following three categories(top 3/5 stocks per category):

  1. Pure domestic plays(or major revenue from domestics)
  2. Pure international plays(or major international revenue)
  3. Mixed plays
2329

Hiteshji are you still holding zensar tech?

2330

@Gaurav152 I dont have any idea about kilpest or its business.

@trilok, Regarding your queries,

  1. Pure domestic plays – very difficult to find good pure domestic plays. maybe fdc. and unichem to some extent though it also exports. MNC companies in pharma space would probably qualify for this slot and would include abbott, merck, pfizer, sanofi etc but one would have to verify the export component in these companies.

  2. Pure international plays would be companies like divis, shilpa, natco and I guess aurobindo.

  3. Mixed plays offers a better playground with more options which should include most top pharma companies like sun, lupin, cadila, cipla, etc.

@jstocks I dont hold zensar tech.

1 Like
2331

@trilok Have a look at Eris Life Sciences. IPO opening tomorrow. This would be the best pure domestic play in the Indian market at this time. However, IPO is very very expensive, so one needs to wait for a good entry point.

2332

Hi Rudra, since you mentioned life sciences, what do you think of the future prospects of Take Solutions?