SIR have u thought on no deal brexit ? how bad it can be to indian company and world economy ? please share ur idea .recently tata motor gave some serious warning on it…
Bandhan Gruh merger could be good for Bandhan Bank. They get a high quality business in housing finance whose expertise they can use in growing the HFC business by cross selling the HFC business to their own customers. Besides by itself Bandhan has till now been doing quite well and has been reporting consistent good numbers.
What valuation is ideal to pay for such a business is an individual call. I am currently in observation mode as far as Bandhan bank is concerned.
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FDC is all about betting on domestic pharma sector. The company and its management has been sleepy till now and there has hardly been any noteworthy growth. It is a company with good balance sheet and healthy cash flows. But it can provide decent returns only if it can manage to show sustainable growth. The other possibility and rumour doing the rounds since many years is of the company being sold off but nothing of the sort has happened till now.
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All this stuff about what would happen to macros once brexit happens or doesnt happen is beyond my comprehension.
Peter Lynch had this to say about macros.
*** Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.**
I think that says it all.
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Sir these quotes in books from legends made me concentrate on individual companies…but still good companies fall terribly in bad macros is what i have seen. We don’t know what will happen to interest rates but we know the mood…i feel my big mistake in investing has been on only concentrating in individual stocks…what do you think? For eg. Bad macros also results in defaults which may or may not be systemic…it can affect our otherwise good companies…i feel macros are as important as my good stocks if i have any chance to beat mutual funds over long run…what are your thoughts and advice? Also, I wanted to thank you for once simply presenting existence of good and great companies…in 2018 learning …your wisdom and my experience…this line of yours is engraved in my mind and shall remain with me just like those of the legends like peter lynch…“there are good companies and there are great companies…and only great ones are worth holding for long”
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Hello hitesh bhai are you tracking idfc first bank how are prospects looking
I myself was nervous about investing in small-midcap space since Jan 2018 when I felt that there was a lot of froth in the space. Subsequently there has been a meltdown in the space and even if index has posted all time highs the small midcaps space has never really recovered.
Inspite of this if you watch closely quite a few companies like aarti inds, gmm pfaudler, alkyl amines, vinati organics, iol chemicals, etc have posted all time highs. This was based on the improvments in fundamentals playing out.
Currently the mood of the markets is such that not many investors have the guts or conviction to buy even companies posting superb numbers. There is the odd one or two days bounce which largely fizzles out within a few days and stock price becomes range bound.
Agreed that the index is at elevated levels but if one has the courage and conviction to buy fundamentally sound companies at extremely attractive valuations, I feel risk reward can be very favourable. Not all companies are still available at extremely attractive levels but some definitely are. In these companies atleast some nibbling can be done and gradually over next few weeks and months positions can be built. If the stock prices of these companies too fall in line with market corrections then so be it and maybe we can get a chance to load up some more. Trick is to keep some dry gunpowder ready and buy in a calibrated disciplined manner.
If one sees the results of these investments after 2-3 years it would be really satisfying. Atleast thats my view. I feel there was a similar situation somewhere in 2013-14 when a lot of very good companies were available at throwaway valuations. Currently we are not in exactly similar situation but some companies do look in that kind of valuation zone.
Another thing to note is that market cycles have turned very short over the years because of excessive dissemination of information. Hence bulls and bear cycles tend to be over within short periods of time. This small and midcap correction has been going on since more than 12 months now and I think it may get over once the outcome of the elections are out of the way. Lets see how it plays out.
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No idea about galaxy surfectants.
@SOHAN We have a very well populated thread on idfc bank on VP where you can get a lot of views. I like what Vaidyanathan did with CAPF but how he performs at IDFC bank needs to be seen. Growth would be easy but controlling an disposing off NPA would be difficult. Plus how much garbage in terms of NPA and toxic assets he inherits from the erstwhile IDFC bank into IDFC First bank also needs to be seen.
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Dear Hitesh Bhai,
I know it is hard to do but I hope to have your view on the general market valuation.
What I am finding is that although there is no doubt the market is cheaper now as compared to a year back, however, good companies with strong ROEs, which are non cyclical which continue to post strong results are not correcting by big margins be it mid or small cap. On the other hand, any company whether mid or small with the slightest sign of degrowth is getting hammered.
In summary, the high quality secular names which continue to show bottom line growth be it mid or small or large are still not available at below long term average valuations despite the carnage in the market as people are just fleeing to safety more or more.
To get good quality stocks cheap (cheap defined as being available at PE ratio below its own 10 year average as opposed to cheaper than jan 2018) one might need to invest in a company that historically has great ROEs and continues to have good ROEs but might be going through a period of minor degrowth hoping growth will bounce back. This is very much unlike 2013 when good quality companies were available cheap even when they were showing good consistent growth.
It’s not like good companies which are growing are not available at reasonable valuations but it’s still not that easy if you are not willing, in simple terms, to pay PE’s more than 8-10 year average. There are examples such as HDFC bank but not that many as was the case in 2013.
Great example is Page, which seems to have slowed down (temporarily or permanently is anyone’s guess) and corrected by 35 percent but still available well above average at 65 times trailing PE. Granted the ROEs are better today than 5 years back but despite the correction still doesn’t seem “cheap”
What is your view on this overall observation?
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Sir,
You are right in investing in small cap. I am in market since more then 30 yrs and made all my wealth in small cap and mid cap company only. But since last year I don’t know structure of market looks completely changed , previous in 2013 or before buying was from many diff diff players of market and not just domestic mutual fund. So support was coming from many quarters and prices had gone up. Now their buying is just one sided. All money chasing few stocks only. So valuation going up and up in few stocks. And slightest degrowth big selling starts.
My worries will the perception of mutual fund change . ? And how and when . . ? One market guy used to say us “ Jaha shadi hoti hei Wahi khana milta hei and Udhar hi dance karna chahiye “
So I some times think this time I am totally wrong in my investment in small and mid cap.
so I Just have hope “ APNA TIME AAYEGA “
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Very Interesting discussion and very insightful thoughts by Hitesh Sir !
Currently , small Caps / Mid Caps are still under pressure while the large caps indices are near highs or very less affected. I think Markets want to make people move towards Large Caps and want to portray large caps as safe heaven in volatile times. There is also a lot of consensus building towards ICICI , Axis bank & few large cap stocks which are not correcting and trading at extremely high valuations. I personally believe that if this shift happens and people start bending towards Large Caps as a safe bets , these large caps will go under price or time correction. In that time , very much possible of Mid/Small Caps showing up moves. Majority who have shifted towards Large Caps will again see Correction in their stocks (Large Caps) and appreciation in Small/Mid Caps and they will again try to shift towards Mid/Small Caps and i think the cycle will repeat !
It may sound weird but this is what i think of current situation. My experience is less than a year in markets and thus above point may sound immature too !
I too believe that lots of good companies in Mid/Small Caps are available at attractive valuations and showing decent growths. It is better to build position in SIP Manner over next 4-5 Months till election Outcomes. If outcomes are favorable , markets may see a rally and if outcomes does not look favorable , markets may correct for some more additional time before bounce giving ample opportunities to add businesses one likes.
In the long run , no matter which government is there at Center , it is the company fundamentals that drive the share prices. It is better to focus on finding Good companies and building a diversified portfolio rather than worrying on election outcomes. Buying in a staggered manner is also necessary as it is extremely tough to find a bottom. Equally important is to have a deep conviction on the companies which one is buying so that one can welcome the corrections with open heart and smile.
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What u said about cycle shifting from large cap to small and mid cap was true before . But since more then year it’s totally not happening. More small and mid cap going down and down even after good result.
For shares to go down selling in shares not only instrumental.mere lack of buying in any script also can take air out of any script and script goes down.
When we have seen small and mid cap not performing why we should invest in it ? Either big large cap goes down very much Then ? But then also people will think why not to buy page at very distressed rate then some mid cap .? Just an example.
So I am just waiting how and when this changes and big investor and mutual fund comes back to small and mid cap
I don’t know I am right or wrong but this is my observation from trading screen…
A majority of stocks i track in Mid/Small Cap space have not corrected more than 30% from highs of 2018 which i think is normal. We should understand the discretion between Cyclic/Commodity stocks and secular growth stocks. Anyway such fall should be welcomed as it provides good opportunity to add more at lower levels.
It is all on the individual to choose between Mid and Large Cap at distressed rates. It is all a risk reward game. Even after huge corrections , Some Large Caps remains expensive. I would like to buy a HDFC Bank somewhere around 1350-1400 per share , Bajaj Finance around 1500 or a page around 17000 per share. If the prices comes near those levels , i would like to add otherwise i think there are plenty of good businesses available at decent valuations.
The best times to buy stocks in my view is when majority is bearish on it or very few are interested. Once it starts gaining traction , prices rises and we end up paying higher prices. It is not possible to catch up then. Though everyone has their own strategies. Some like momentum stocks , some like to play with cyclical
I will restrict this discussions here as i don’t want to pollute this thread with my immature understandings and inexperienced views !
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Hitesh Bhai,
@hitesh2710,
Your balanced reply above on Small/mid cap stocks being out of favor at present,and taking a sharp knocking, is very much valid in this range bound market. The big elephant in the room is,of course, the looming general elections, and while general elections may be a short-lived phenomenon,for stock markets, yet their long shadow will continue to overshadow other events,until the results are announced. An interesting interview on CNBC 18,with Ruchir Sharma, the well-known author, about his forthcoming book “Democracy on the Road”, yielded some penetrating insights about the voter keeping his opinions to himself,and about the swing votes likely to be a decisive factor. This factor about “swing votes” likely to influence the general election, squarely fitted in with the discussion about "Clusters’ and the “Pareto Principle”, with 20% of a population influencing 80% of the results,whether about the concentration of billionaires in a population,or the Nifty 50 chart exhibiting a similar trend,over a period of time.
Hence,in this poll-season, the markets will swing from one day to the other,without any definite direction,as the multiple poll-surveys start popping up. We shall have to wait for the background noise to subside.Because speaking for myself, I have found it almost impossible to blank out this background chatter, since most of the time, I am caught up in the excitement of the event.
And @HIMSHAH, there was an interesting interview with the Big Bull Rakesh Jhunjunwallah,on ET Now, 2 days ago,and it was eye-opening,because though he is self-confessed Bull, yet he was humble enough to acknowledge that he,along with others,had fallen into the trap of extrapolating 2-3 years stellar returns from small-cap stocks, mainly on growth curves,into the next 5-10 years,without taking into account other factors like the quality of corporate governance,and moderating expectations.
And finally, we may be entering into an era of slower growth,with trade wars and isolationist trade barriers coming up,in USA,European countries.India may continue to buck the trend,but a cautious stance may be in order.
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@hitesh2710 Bhai ur views on CCL products India Ltd ? Looks good on financial parameters and capex is undergoing to increase capacity. And the best is this hasn’t fallen much in recent carnage of small cap.
@hitesh2710 , you were holding M&M if I remember correctly. Any thoughts? It has corrected a lot beyond what performance would warrant. Anything which investors may be missing.
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@hitesh2710 please share your current portfolio and major churns, if any, you made in portfolio…
Anything you bought in this carnage??
How ur portfolio performed in 2018, because many have seen 30% to 60% erosion in portfolio from highs of 2017…
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Hi Hiteshji,
I would like your views on the following scrips if any.
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Abbott India - Horizon of 5 years plus as a compounder?
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ITC - As a long term compounder
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APL Apollo Tubes - A play on capex revival. Good management and a brand in the making it seems like.
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CCL Products - A moat can be seen. After recent correction, valuations look alright. Capex coming in as well.
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AIA Engineering - Entry into mining. High volume growth guidance by mgmt. FMIG sort of a non-cyclical in a cyclical space?
Thank you for your time!
I agree about the observations put up by you. Things are not as cheap as they were in 2013. Back then it was a plethora of no brainer opportunities. Currently things are not as easy as it was back then.
Coming to companies with good ROE available cheap, I think the thing to do would be to figure out which companies are going to improve their ROEs as they keep growing and thats where serious money can be made. All those companies with consistent good ROEs and decent growth would obviously remain expensive and at best be compounders.
I dont strictly adhere to the PE valuation while looking at companies. I have been looking at some companies like Shoppers Stop and United Spirits. In both the cases there have been changes in financials which the management have been harping about since a long time in their concalls. Now the results are just about coming through but there are some temporary clouds on the horizon. I havent yet bought these companies but in both cases improving margins with even a modest growth rate can be an interesting thing to watch out for. I remember Dhwanil had a theory about something similar in Jubilant Foodworks and it played out quite well. I am on the lookout for something similar playing out here. But as said before its only in watchlist.
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