Dear Hitesh,
I would like to hear your views on these two stocks-
KIRI INDUSTRIES -
Firstly i must admit the bulk of my portfolio is Kiri. I have been bullish for over a year, since the china pollution issues started, and since kiri case started singappore hearing. Now with victory in sing court, the valuation of dystar and kiri stake is said to run into thousands of crores. Would love to hear your views for this stock over thje long term (2-3 year view).
STRIDES SHASUN
A darling of the previous pharma bull run which ended in 2015, now stands with a huge debt pile. Promoter gave a one time divident when he sold mylan which was generous at the time. Can he bring it back to old glory? Professor Mankekar had a good holding in strides, and sequent. However he offlaoded recently at very low prices, incurring huge losses. Very important to stress here that readers make their own decisions, and not copy other marquee investors. Professor Mankekar other investments also turned out to be duds in the last few years- including laxmi vilas bank, MT educare, Talwalkars, Galaxy Entertainment.
Valuation is largely a function of market perception (often may be right or wrong) about a company. If a company like a Bajaj Finance has grown its profits at a CAGR of 40% consistently for many years then markets tend to develop an unshakeable faith in the company’s ability to deliver and the future prospects. And this translates into much higher valuations as compared to other peers. Plus valuation also depends upon other parameters like ROA, ROE, NPA etc esp in financial companies. And esp in the lending business, promoter and management. These companies have very few variables affecting their businesses. For Bajaj finance all boxes are ticked and hence the high valuations.
L&T finance has had a checkered past which doesnt inspire same confidence as in a Bajaj Finance. You can compare the above mentioned factors in case of both companies in question and therein probably you will find the answer.
Besides the above, valuations will also depend upon largely on market phase. In the current phase, the valuations of sureshots are elevated because investors have more than normal faith in these companies and this often induces people to overpay. Besides since prices of these companeis dont fall even in the face of nervous markets investors tend to flock to these companies, till (if and when ) these too start correcting.
When large caps also start correcting these sureshots also crack to some extent and thats the time to look at them. Feb was a great time to latch on to Bajaj Finance.
I havent studied either Kiri or Strides. But a look at the charts of the two companies provides opposite picture. Just saw that Kiri has been more than a 100 bagger since 2013.
Thanks Hitesh for your thoughts. Can you also let me know how to evaluate when to sell L&T finance?
Its ROE is constantly increasing, almost doubled in last 1 year from 7% to 15% now and management target to take it to 20% in an year. Also, they are targetting to increase their retail part of portfolio. All past mistakes are being worked upon and they are now focussing on selected areas. Point what I want to convey is that management is doing right things and results are showing…on what aspect should i keep tap of or focus that should give me signs that its time to sell?
Why I ask this is because I feel in NBFC, the loss can be huge if we miss such triggers. I can understand triggers to buy but unable to understand triggers to sell. Can you pls let us know when to sell…
@Investor_No_1, Selling is a difficult decision to make while investing.
For me selling is induced if I get my thesis wrong and I have to cut my losses and exit. In other scenarios, if I feel that the current valuations has reached frothy levels and is difficult to sustain then I exit. The latter is especially applicable to companies which are good but not great. For the truly great companies sometimes it makes sense to ride through periods of overvaluations and hope growth helps to cushion the valuations.
In case of LT finance I dont track the company closely but as for all financials its important to monitor the growth in loan book, quality of loan book, NPA, ROA and so on. Besides its important to see if management walks the talk. If all things fall in place it might make sense to hold or even buy more if valuations are attractive.
Manpasand currently remains a stock either in upper or lower circuit. Fundamentally a lot has been discussed on the relevant thread. I usually dont bother with these stocks as I am more concerned with peaceful sleep rather than risky returns.
Indeed words of wisdom, difficult to practice as we get carried away. Good companies are meant to be sold and not held for very long term is what I have slowly started to feel. Earlier I used to be a big believer of very long term hold. But in this one line you have validated what I was thinking!
Still tracking Jagran Prakashan ?
Newspaper / media stocks tend to do well in election year. Growths in 2014 as compared to 2013 atleast supports that. Any views on the same ?
Most of these newspaper companies have belied investor expectations. Topline growth has been tepid while bottomline has often suffered from.margin pressures. This sector doesnt seem to be a great long term wealth creator. If bought and sold at the right price it can offer returns but it doesnt seem to throw up long term winners.
I think there are better options in other sectors like financials, agrochem, manufacturing and other sectors.
I am a long term investor and am holding Avanti from a long time.
I saw this fall from 3000 to 2500…and from there am seeing this one fall to the current levels…with each fall was hopeful that now this will consolidate or reverse…but that does not happen.
How do we decide whether to continue holding or move out?
My experience in taking decisions in such situations has been bad. In the past, I had similar thing in Yes Bank when the family feud was at peak and Yes Bank fell from 900 to 600…I moved out and the stock took a U turn…in Avanti I did not want the same thing to happen and kept on holding and this one keeps on falling…may be waiting for me to move out for it to take a U turn…
So repeating my question for your guidance on
How do we decide whether to continue holding or move out?
@malthankar, The explosion at JB Chem is an unfortunate event. I dont know the impact it will have on the company’s financials but as you mentioned it contributed around 9% to overall revenues. I think the management will come out with further details once they assess the expected damage caused by the event. After the fall from 300 odd to 250 levels the news of the explosion seems to have been priced in at current price. I remain invested but would monitor situation as and when we get clarification from management regarding the damage and what they intend to do about it.
I think first of all while holding a company we have to slot it into what kind of business it is based on the expected opportunity size, variables affecting the business, sectoral tailwinds/headwinds, and the kind of predictability and sustainibility in earnings expected with the company. Besides other parameters we use ourselves in slotting businesses.
If we feel that the business we hold falls into top class i.e A plus kind of business it might make sense to keep holding through minor price drawdowns of 20-25%. Unless there is a major market meltdown these top class companies wont correct more than the above levels from the top. In case of major market drawdowns usually all hell breaks loose and even these correct to a large extent and in that case we cannot do much. When markets recover these make lost ground very quickly.
If we find that the business in question is not top class then it has a definite sell price and that is what we have to decide based on our assessment of business. In my own mind I had fixed an exit multiple of 25-30 PE for avanti as I felt that some or other variable would ultimately come back to haunt the business. These are businesses which one buys at a certain valuations and sells at certain valuations.
We have a whole thread about slotting businesses into different categories. Again from time to time these lists would have to revised based on the sectoral tailwinds/headwinds. Case in point being pharma space where Ajanta was once considered invincible and in A plus category but now with the meltdown in the pharma space has lost its place.
I think in the Indian market context as of now, consumer durables, , B2C good quality businesses, solid private banks, good quality NBFCs, FMCG etc could be considered as A+ businesses.
What happens is that when prices in a not so great business start going up investors and the market as a whole start believing that its a great business and lulls the investor into complacency.
Thanks Hitesh for your views on JB chemical.
I was just going through the charts of magma (last 1 year only) and at a glance i can see roughly its major support level for last 6 months is around 145 to 155 and QIP on 155 for 500cr may give more confidence for support level.
Just wondering if i try to search MAS support level 555 to 570 kind off. But it does not reflect support level like magma. Now just thinking.
How do we decide support level in the absence of 50 day or 200 DMA? (as case of MAS) (460 could be major support as it is IPO price)
let say if stock ranges say 100 to 115 for 6 months then we say its support level is in this range?
let say this stock goes to 90 for 2 days and comes back … do we say now support level is 90 or we can just ignore this 2 days blip (how the volumes are seen for this 2 day blip)
What could be a minimum days stock should be in that range so we say it is support level i.e. equitas is honoring support level of 135 to 140 for last say 2 weeks around so do we say 2 weeks stock prices in the same range tells us this is good support level? just wondering what minimum time frame decides good support level for stocks.
Do you first find out support level of stocks (say first level, second level support) and then start making position in that stock?
Could you please your experience where support level is absence? how someome should deal with such scenario. like KNR came from around 290 to 200 as we can see there is no support level? just thinking how someone should act if say purchase KNR at 300 and (after earning call they say next 3 quarter there would not be growth and you don’t see support level of KNR)?
should sell at it between say 270 to 290 (as there is no support level) or should just ignore as company is good and after 3 quarter things would change?
Does the launch of Pharma funds mean there will be increasing demand esp for big pharma cos like Sun and Cipla. Not looking for buy sell recommendations. Trying to understand how the launch of new funds works in terms of demand for particular stocks. I mean how does a new fund build up its portfolio.
Price getting supported at a particular price zone.
Retracement levels
Moving avgs
Previous tops/bottoms
gaps
trendline supports
Ideally when a few of the above ranges coincide at a particular support zone it assumes a lot of significance. .eg 200 day moving avg coinciding with 50 or 61.8% retracement level and we see stock holding up there and then bouncing with volumes.
Coming pointwise to your queries
In the absence of sufficient data, its very difficult to make out support levels. One way could be to find out retracement levels from bottom or top and find out the support zones at retracement levels.
If a stock remains between 100-115 for 6 months, support is nearer to 100 and resistance nearer to 115.
A breakdown/breakout from a range lasting only a day or two could be ignored as a whipsaw, provided previous range has been established for a lot of days.
Support zones are areas where stock price gets support on declines. In between there would be bounces and stock comes back to test the support zones and if support holds we can conclude that its a strong support. While looking at supports one cannot stick to only one level e.g 135 in case of equitas. It would have to be say 133-135 or so. Regarding time frame, there is no precise rule. The level from where a good bounce with volumes occurs is a good support.
Regarding my buying I usually look at breakouts and then some pullback post that to take a position. This is especially for technofunda bets. For bets where I like the fundamentals and management of the company (e.g MAS) I dont attach too much importance to support etc. If there is a clear picture its well and good otherwise I buy without looking at technicals too much.
Regarding absence of supports this happens if a stock corrects after it has had a parabolic rise. Usually seen at the fag end of a bull run. This happens because buying frenzy/panic had led to the parabolic rise and once the stock starts going down, everyone wants to bail out at the same time and there is a huge selling pressure. Or else it happens in case of negative news/frauds etc. In case of KNR it went up from 200 to 350 levels in around 2 months which is almost 75% gains. So once correction was to set in it can assume such steep cuts. Now its almost at the level from where the whole parabolic rise started. Specifically in case of KNR it would be advisable to wait and see how the stock establishes a range and consolidates. In the near future as there dont seem to be no triggers its better to be patient. Once the stock price shows some strength and comes out of a consolidation zone its ripe for the picking.
I am a new member on this forum and this is my first post.
First of all I would like to thank you for your expert and generous advices Some time back I’ve bought shares of Max India Lts hoping for a growth trajectory in future but it looks like a continuous downspiral for the company for a long time. What is your take on this company, do you expect this company to see a positive turn around in next 1-2 years. Please advice.
Some time back I’ve bought shares of Max India Lts hoping for a growth trajectory in future but it looks like a continuous downspiral for the company for a long time. What is your take on this company, do you expect this company to see a positive turn around in next 1-2 years. Please advice.