Hello Hitesh Bhai, one stock which I have been tracking last few days is Fine Organic Industries Limited. Its a newly listed stock, which is doing very well in terms of stock price and performance as well. Made new 52wk high couple of days back. Oleochemical based company. Niche segment, Leader, High Entry Barrier due to Very high Regulations, experienced and professional Management. Looks good for longterm bet. Would like to know your views?
Is not Havells trading at astronomical valuation wrt growth of business
No doubt Havells is more like Pidilite n Asian Paints which always traded at extreme valuation.
As you say Havells is quoting at astronomical valuations. That doesnt mean we have to buy it tomorrow. But if it is kept in watchlist and we can decide a level at which we are comfortable buying it sometimes we do get opportunities to load up these companies due to market corrections or due to a quarter or two of what is perceived to be weak performance by the company. In Jan -Feb 2018 I think during the market meltdown it was available at around 450-500 as compared to current 750 plus. But during those times one feels paralysed by fear to buy such companies.
@arpitjain512 I dont track fine organics ltd. But overall chemical companies operating in niche segments and who dont have too much dependence on Chinese raw materials should do very well as the speciality chemicals story still seems to be having some legs due to recent Chinese supply disruptions due to series of fires and subsequent closure of a lot of facilities.
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Hi Hiteshbhai,
1 Can one look to buy companies like Havells even at current valuations as i lost the oppurtunity to buy in 2018 as you stated ? Would the plan to buy now at current levels make a significant impact on return if the plan of holding is for 5 years ? And it has a long runway considering the electrification scheme and when one compares market capitalisation with the oppurtunities in electrification.
2 Can Havells be treated better than Asian paints considering that Asian paints has slowed down and is now looking to diversify into home decor ? Does the act of diversification imply that its not expecting significant growth from paints industry or from smart cities ? Even the smart cities has unabled to bring good growth in Asian paints IMHO while berger has grown more than Asian Paints . I tried analysing with my very limited knowledge but couldnt find the reason for astronomical valuations of Asian paints inspite of no growth period as generally market gives high pe for growth . Please guide me if i am wrong in assuming that . Does it mean expectations for growth override actual growth ?
3 What percentage of stable compounders/secular should have in ones portfolio as generally stable compounders generally give lesser return ?
4 Does company like Bajaj Finance considered to be overvalued considering that peg ratio ( as per lynch ) is not high . Is the growth sustainable ?
Thanks so much Hitesh bhai for the simplified and elaborate explanations always to my amateur queries
Hi Hitesh,
do you track SJVN or GNA Axle?
- Be it Havells or any other company the most we can do is buy wonderful companies at FAIR prices. The emphasis is on fair prices. Not exhorbitant prices. Any company bought at the wrong price would bring a lot of grief even if holding period is for long time. e.g Wipro all time high in 2000 was 388 (adjusted for splits and bonuses). Till date its profits must have grown multifold but stock price is yet to reach that level.
If you are buying a company for next 5 years then it may be a good idea to stagger the purchases over the next 5-7 months.
.2 About comparing havells and asian paints, its not an apple to apple comparision. Havells may not enjoy the kind of market dominance enjoyed by asian paints. And Asian paints is not so prone to disruptions.
- Regarding the percentage of compounders to have in a portfolio its largely a subjective aspect. I myself have not held too many compounders over the years as I have been pretty aggressive in portfolio allocations. But overall I think for steadiness of portfolio it is advisable to hold 50% or more of compounders.
In these kind of queries there are no clearcut right or wrong answers as it depends a lot on the mindset of investor concerned. There are some guys who have done phenomenally well buying and holding compounders and have beaten most other investors hands down. So it all depends upon the mindset.
- Regarding Bajaj Finance, it is a company that is a class apart. Growth definitely is sustainable but the rate of growth may vary according to state of economy and demand of consumer durable products.
While considering valuations to be paid for buying a business it is very crucial to consider the consistency, predictability and longevity of growth besides cash flow generation (esp in non financial companies). If all these fall in place in a single company then it will command very high valuations for long periods of time.
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Thank you so much Hiteshbhai for clearing the confusion besides clarifying valuation concepts and stable compounder allocations .
Thanks so much Hiteshbhai for valuable guidance that prevented me from buying at overvalued prices . I was having the "fear of missing out " feeling after missing out the 2018 low of Havells till i read the above .
This one is a gem for me and a revealation.
This was so much counterintuitive to me that i generally never considered stable conpounders as a source of great profit and instead considered them as just for balancing portfolio . Kudos to you for giving a fresh perspective always and helping to calibrate our thinking in the right direction . Your explanations shorten the learning horizon which otherwise could taken not only long time but sometimes loss of money too . Certain things that you say arent found in any books and its so practical . At the cost of repeating myself and others , i would request you that it would be awesome if you could write a book .
On a lighter note , since it would be India specific , the book could be titled "one up on dalal street " 
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Hi Hiteshbhai
Which are the stocks that one can consider for investment at current valuations ? Many thanks
I have this thought of compiling all Hitesh sir’s posts in this thread and elsewhere for my own learning. The information, knowledge and wisdom will be more than that of a book, no comparison. But I am afraid it would take me a lot of time to do that as I am yet to grasp, understand and digest all he had shared.
Thank you sir for taking your precious time out to explain in a most lucid way and helping us learn a lot of things.
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Hi Hitesh sir,
Auto sector is facing lower sales and major OEMs like Maruti, Honda already announced cut in their production for coming months…also there is a lot of uncertainty regarding it’s future like BS6 is coming, lot of talks on EV, hybrid…Diesel is phasing out…lot of uncertainty…
So r u seeing any opportunities in this sector…?
My 2nd question regarding liquor sector… it’s a evergreen sector, don’t affect from any disruptuon but in last 2-3 yrs a lot of govt policies we’re changed like highway ban…can u expect a good run in future …(however largest liquor maker USL haven’t given any return since last 5 yrs)…
Thanks
Sandeep
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Auto sector goes through these downturns every few years. Its nothing new. The narrative often changes. Currently the theme is pertaining to the disruption due to EV. But i think the real impact is still a few years.
Some pre requisites for EVs to pick up
EV with good quality engines and batteries at cost effective rates
Charging infrastructure and at cost effective rates
Demonstrable track record to enhance acceptance.
As of now I think EV will take time to gain acceptance.
At end of all these problems who are the guys going to embrace EV technology and launch EVs?
Obviously the existing players with sales and services network.
So at some point of time these auto stocks could make fantastic buys. I am.still waiting and watching.
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Hi Hitesh Bhai,
Which tools /site you use to do technical analysis? Can you tell us which site is best to check the technical indicator like RSI, Doji Candle etc?
Thank you very much sir … ur reply is always crisp & clear and always with in short time…thanks again…
One company which working on many options in this category is Greaves Cotton… Want to know ur view on this if u track it…
And plz sir if u can share ur opinion on my last query’s 2nd portion on Liquor sector …!
Do you think you would have made higher returns if you had held on to these 11 stocks over 6 last years compared to chopping and changing you did ignoring the trading?
I use investing.com to see some charts. Mostly I use metastock software. For indicators, I am not too much into indicators.
RSI I find useful only for the purpose of finding positive/negative divergences near tops/bottoms and that too is often filled with errors.
Candle stick patterns are very useful to spot reversals esp on weekly or monthly charts. If at the end of a decline we find a bullish engulfing or a morning star candlestick pattern it reinforces confidence. Another thing to remember is to spot where these reversal patterns are happening. If these happen near important retracement levels, or trendline supports or region of previous tops or bottoms then it assumes a lot of significance. Candlestick by itself is a big topic but if one can grasp and master few important reversal patterns then it can be very rewarding.
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I have United spirits in my watchlist. Company is doing all the right things like reducing debt, premiumisation of portfolio etc to get on track and raise margins. It could be a case of 10-15% topline growth with improving margins leading to higher profit growth. The results for last few quarters have been encouraging but since valuations are high (and most probably remain high) I want to tread slowly and buy once I get full conviction. As of now it remains only in watchlist.
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Hi Hitesh, Can you please advise the fair valuation which would be more comfortable on United spirits to invest, many thanks.
Rather than valuation in case of united spirits, I would like to see consistent growth and preferably 15% or more and with improving margins. Since the runway in the business is very long valuations will never be very cheap but first we have to be confident about growth.
Valuation parameters will be different for different people.
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hitesh sir, could we compare associated alcohol with united spirits as ASSOALC also improving ??
Thanks Hitesh bhai for your insights, always a pleasure to hear your words of wisdon