Pat Dorsey book itself is full of science and merits multiple readings so that the full concept of the book can be digested properly and can be easily implemented.
You can also go through Ralph Vanger’s Zebra in a Lion country. There are some Motley Fools books which you can google and find out the details.
But after reading and rereading these books there is no alternative to getting down to doing things ourselves and applying knowledge directly.
Ideal thing is to go through these books and develop one’s own methodology which works practically, and is easily applicable.
I track ujjivan and equitas though not too closely. I like the concept of MFI which have turned into small finance banks. There the liability side of the equation is partly taken care of due to deposits and CASA and this is reflected in the relevant numbers of both equitas and ujjivan.
But if you go through the history of MFIs every few years they end up with some unforeseen problems and it seems its difficult to consider them as really long term investments.
Instead of them some of the good private banks like DCB bank etc seem interesting. Though as of now I am not too excited by the financials space to allocate big chunks of portfolio to it.
When a sector which has given stellar returns previously goes out of favour the usual story is a sharp correction in stock prices followed by prolonged range bound/downward moves. During all this time the valuations of these stocks keep appearing attractive and become more so as the stock prices correct. There are the infrequent rallies to keep the investor interest going but the multibagger kind of returns remain distant.
After a few months and quarters once these stocks dont go anywhere the investor interest also wanes and very few people talk about them. If u want to see definite example of the same then go through the fate of pharma sector stocks. You can even see the same kind of story playing out in the threads (on VP) of stocks of pharma sector if u want any validation.
In financials space we are only a few months into the financials going out of favour. If at all the stocks from the sector make a comeback it will be in some specific niche segment out of the whole sector.
Hi @hitesh2710 ,
As far as my brain signals - Financials have been in a perpetual bull run. When was a time when you couldn’t find financials for your portfolio. Only thing is you have to be selective. So an HDFC Bank vs Karnataka Bank Or Satin Credit vs Bajaj Finance is hell and heaven difference in management. And as they say we should buy companies with “best” management only- leads to one conclusion for me - Financials with great management are highly scalable , and will remain in a perpetual bull run. Don’t you feel they are more scalable than other businesses and only tech and consumer are similar in terms of scalability?
Do you track Godfrey Phillips India Ltd? It has got own established brands + contract mfg of the world’s largest and best know brand - Marlboro. Add to that the confectionery & Pan Vilas business coupled with recent expansion of 24SEVEN retail stores. The risks are negligble growth in past 3-4 years and usual risks associated with Tobacco business.
Also would like to know if you track Associated Alcohols & Breweries. There also a story seems to be building up in terms of expansion in ENA mfg, contract mfg for USL & Pernod as well as Franchise business of USL’s premium brands for MP.
Gruh-Bandhan marriage seems like an event where both the bride and groom’s families seem to be unhappy if one were to go by price moves.
With the merger HDFC would be holding some stake in Bandhan Bank. It cannot hold more than 5% according to rules so if its stake exceeds 5% then there would be overhang of hdfc selling on the bandhan counter. Plus bandhan promoters themselves have to find a way to reduce their stake as per regulatory requirement.
I dont know who gains out of the whole situation but shareholders of gruh seem to be the losers. They are losing a great business which now becomes a small part of a bigger bank. I think the selling in gruh is also probably due to the long term holders of gruh who were holding gruh as a core part of their portfolio since many years and now dont want to be holders of bandhan as they may not see the same business and or management quality in bandhan.
I dont track godfrey or associated alcohols so not much idea about it. I am watching united spirits itself as I feel if new management can bring the business on track it can be a good core long term holding.
You conveyed sentiments of many like me in very clear manner. Gruh Finance was buy & forget kind of stock for me due to long runway in their business, steady growth, great management quality, a balance sheet with no equity dilutions, high ROE etc etc. It was a rare gem. No longer…I am out… Rest In Peace, Gruh Finance.
Agree to ur comments just a thought…Pharma faced issue of FDA etc and could not deal with it over long term. Financials have to show which ones able to deal with liability challenge…FDA challenge was majorly out of a company Control while liability challenge is very much real since inception of any lender and management can control it…what r ur thoughts ?
Regarding pharma problems coming to the fore and not being in a company’s control, well passing USFDA audits is by and large in a company’s own hands. If u look at companies like torrent pharma, alembic, barring a few observations, these companies have hardly any problems with usfda.
Regarding problems arising in financial companies, the oft repeated argument is that in a credit hungry country like India there will always be demand for credit and business would continue at good growth clip. While some companies might grow at fast clip, the valuations accorded to these companies (which previously were market darlings) may not be the same as most of the smart and momentum money has moved out of the sector and into some other sector where people see a rising sun like situation.
One needs to see the history of sectoral bull runs to get an idea about how these things pan out. And the tell tale signs of froth in the sector and the subsequent bursting of the bubble. Most of the times in the early phase when the bull run starts there is often disbelief and the early investors are often laughed at and ridiculed. People dont believe the story/theme. Once the price momentum starts people start boarding the train and in the last phase there are the tell tale signs of froth. These stocks are the most talked about on various media and investor meets, and are market favorites. Valuations reach sky high levels esp for sector leaders and there is an aura of invincibility about them and investors also start feeling that the growth shown in the past will keep going on for a long time or for ever. And then suddenly the whole story gets punctured initially with a couple of reasons and then as time goes more and more reasons come to the fore later on. And even if there are rallies they are short lived and usually there is a long time before stock prices go above their previous highs.
I think financial companies have had their dose of bad news and there could be more going forward. Even if nothing else happens these stocks are likely to remain sideways with intermittent rallies and/or corrections. The usual behaviour of most investors is to chase these stocks on deep corrections thinking that the bull run in the sector would continue but its very rare to see such an event happen. (there can be exceptions but they are exceptions only and the rule is always different.)
Hi @hitesh2710 sir, what are your views about Sterlite Technologies? There’s a lot of talk about data boom and rise of 5G, and the company is guiding towards a solid growth in the next 3-4 years with a strong order book and decent global market share. The stock has corrected ~25% in the recent past and looks like it is in a consolidation mode. Although one striking point is that promoters have pledged almost 97% of their holdings which makes me a bit uncomfortable about thinking of this as an investment.
Would like to know your comments on this, thank you!
Considering Pharma space MNC pharma companies have been substantially good returns in last 1 year. Merck, Abbot, Astrazeneca, Pfizer etc have given excellent returns out of which Merck is topping with 150% jump. Any views on the stocks mentioned above ?
Sterlite Tech seems well placed to ride the data boom that is going on and will continue in near future. And since its the biggest player its likely to benefit. Plus it has capex lined up to cater to increasing incremental demand. I had a look at it and liked most things about the company except the pledging of shares. Valuations are not too cheap but then in companies with clear visibility of growth thats usually the case.
Along with Sterlite Tech I looked at KEI Inds and really liked the company. It also seems to be well placed to ride the capex goods revival boom and can be an ancillary play to that theme. Results since 2014 have been great with topline growing from 1600 crores to current 3800 crores (likely to cross 4000 crores in FY 19 as per management commentary) and net profits growing from 12 crores to 145 crores in FY 19 and likely to grow another 20-30% in FY 19. Balance sheet seems okay in line with ongoing capex. The higher contribution from extra high voltage cables and retail sales are likely to sustain or improve margins going forward. So instead of Sterlite Tech I invested in KEI Inds. For a company with market cap under 3000 crores the opportunity size seems good looking at its business segments. (I am not a sebi registered advisor and above should not be construed as a recommendation).
Most of MNC pharma companies have delivered great returns over the past year and more. There could still be more juice left but it seems the domestic based pharma companies are also in the phase of base formation which may last a few months but once they start their upmoves, there could be good returns. Some like Torrent pharma, Divis have already started posting all time highs. Currently I am in an observation mode only.
Hi @hitesh2710 Bhai
What type of competitive advantage does KEI / Sterlite so that it can protect its earning growth from other competitor ? Is this sector Secular or Cyclical ?
Gold does seem interestingly poised currently. The gold loan companies have started moving with muthoot finance hitting all time highs. Buying gold loan companies could be one way of playing a boom in gold prices. But its not very accurate way of doing so. These companies will grow to the tune of demand in gold loans and higher gold prices will provide comfort on the NPA front. Benefit these companies have now is that a lot of small fly by night operators type NBFC companies which were also lending against gold now seem to have folded up with drying up of liquidity and hence these companies will have lesser competition from that front. But there are other players like iifl, some banks etc which are there in the field.
Another way to play the theme more accurately is to buy gold etfs listed on the exchanges. Like kotak gold, reliance gold etf etc. One needs to look at entry exit loads in these cases and expense ratios to find out the best options in these etf.
As such there are no competitive advantages the companies like kei, sterlite possess which can be termed as moats. But these companies have big running capacities besides established clients and the necessary certification from their clients.
Its not easy for a new player to get access to clients if they dont have necessary certifications from clients.
One needs to go through the annual reports and listen to concalls before taking a call on these companies whether these are commodity companies or something more than that.
