Portfolio Re-Structuring/25% CAGR quality-growth for next 2-3 years


(kanvgarg123) #42

In the complete discussion I did not see the name of PVR cinemas in there. It is the biggest cinema chain in India with solid brand. It’s market cap is just 3.5K cr and with the ever increasing appetite of Indians to go watch movies in Cinemas, I think it can be an interesting play. I agree that it is a capital intensive business but with more and more blockbusters releasing(English,Hindi and regional) in short durations, their occupancy rate is bound to rise. Would love to hear few negatives.


(vyasln14) #43

Hi
couple of days back i have expressed my view on contrarian investment about one particular sector. In sequel to this i put forth pros and cons of investment about the company which is the market leader of that particular sector. My write up was removed without any intimation. If it is against the principles of this forum, or if there is any mistake on the information provided, the same should be recorded so that i can correct myself. At least you could have communicated through my mail.


#44

First of All, Doanld a big thank you for starting this discussion.

Basant Maheshwari in this interview from MoneyControl hints at US facing Pharma companies, NBFCs, HFCs as long term themes. All of these are well-known to people here. I am a big fan of him and closely follow his interviews.

Few very interesting comments he made:

Going for the themes the old favourites, dull and boring housing finance, consumer finance remains there. The midcap pharmaceuticals, where you sell mostly to the US and business-to-business (B2B) space - that is the theme. One theme which I have been looking of-late is the internet of things concept. I think this concept should be very big over this next five to seven years. If I just can take you around there is a report which has about 30 billion devices with unique IP address would be connected by 2020 and about half a trillion online business transactions would happen in the B2B space and business-to-consumer (B2C) space. Two days back Jio was launched and I remember 2003 there was a tagline which used to ‘Karlo Duniya Mutthi Mein’, I think with the smart phone around, in five years the smart phone will become the apt representation of how you can take the world in your hand and do the ‘Karlo Duniya Mutthi Mein’. So, internet of things could be a big thing to watch out both in the private as well as the public space.

‘‘Midcap IT is good enough but the point is if you wanting to make 15-20 percent return that is okay. However, the days of IT of making big returns are behind us. I think internet of things is the new things which we have to see. Not too many listed companies there, few in the private space as such but that is the theme which is just evolving and over the next two-three-four years that should be exponentially huge.’’

He repeats the same here.

Now the BIG question is: Which are those companies he is referring to?

Thank you all in advance.


(kailasp4u) #45

Good thread admin!
I see good possibility of electric vehicles & gas based vehicles coming up! As such for a growing economy, there would be huge demand for clean transportation, and with technology changes over the world, this would hit India soon. Tata had its way in hydrogen based car testing, Mahindra has Reva, Maruti can easily make few changes to sell their best passenger cars. And since government intends to take older cars off the road, there would be huge replacement market as well.
If Govt pushes for increasing public transport use, it may affect the passenger car to some extent though. At the same time, it would benefit truck & bus makers, Tata, Ashok Leyland, Eicher!
In both cases, Tata motors would be beneficiary, though with different gradient! At present valuations and with further corrections, it will be good stock to accumulate for 3-5yr.
Lets see things happening, and decide accordingly.


(Anupam) #47

Hi,

Emerging Sector Identification is quite a challenging task. Needs insight, experience, knowledge & common sense. Nevertheless discussion going on is extremely value adding. Keep up the good work.

I have summarised sectoral fundamental score card just to have an understanding of the past & present- as we place our bets going forward !


(Kritharth) #48

Hi Everyone,

This is my first post on ValuePickr and I am glad to be writing this. I have simply been soaking in all knowledge on the forum and hope with this post I am able to add something meaningful to this discussion. Seniors / Admins / all my fellow boarders are welcome to provide feedback on my ideas below.

  1. Insurance - Our country is extremely under insured and with rising income levels, better education and rising medical costs, I believe this is one sector i will be watching closing. There are direct plays in the market now with listed companies and with more IPO in the offing (ICICI and HDFC are rumoured to list their businesses), this is a sector I would be willing to bet my money on. Most importantly insurance companies have “Free Float”.
    Proof / Validation of my idea - Geico playing a huge role in Berkshire’s success.

  2. Renewable Power / Energy - With the current solar bidding done in Telengana with per unit prices matching thermal producers cost, I see this sector has long term potential. The usual risks will continue such as Govt policy interventions, bureaucratic opaqueness, pricing controls etc; but assuming the government’s thrust on power generation, it will be interesting to see how this sector plays out. This is a disruptive sector and its impact will be felt on thermal producers. Near term risk - Currently many power projects are running at low plant utilization (read this in ET) due to less off take of power by the utilities and their bad financial health. Challenges exist but will be watching this sector closely for future developments.

  3. Defence - Huge opportunities exist and with private sector companies moving in, efficiencies will be created which will be hard to ignore. Once a vendor is selected I believe this business would provide a huge moat as moving/changing to another weapon systems / platform by the armed forces would not be frequent due to cost / effort involved. Post this you also have the ancillaries kick in such as maintenance contracts and upgrades. I am bullish on L&T in this regard. I believe its a value play and with its inherent strengths in ship building along with its expertise in Infra projects, the company has bright prospects and will be in a sweet spot in the coming years. Challenges exist here as well with Govt policy interventions, bureaucratic opaqueness etc but this will be overcome as India cannot continue to export all its defense requirements and even a small pie of the exports; if manufactured locally will create huge revenue streams for Indian companies.

Note - I am invested in L&T hence biased.


(Kitam Ranka) #49

Hi guys,

Firstly I am a big fan of this forum, hats-off to all the senior vps and contributors to make this the best forum to discuss stocks and gain knowledge.

Being involved in the real-estate industry and closely monitoring the developments in tier 2/3 cities since many years, I strongly believe the real beneficiaries from big govt spending on infrastructure/ railways/ power/ swacch bharat/ smart cities would be the tier 2/tier 3 cities.

This in turn should benefit the cement industry, affordable housing companies and hfcs.

I would like to listen to contrarian views/ theories on this, if any.

Regards,


(Nishant Kandoi) #50

I think to gear up in next 2-3 years for the next bull market to start, Textile and Pharma should be the two sectors which should be the dominating themes. NBFCs and AgroChems should perform well too, however they might get overlooked by the stock investors because the investors might be busy buying Pharmas and Textiles stock. However, I have a gut feeling that the Textile sector although might give super returns but one needs to be cautious as they belong to the cyclic sector, so once the next bull phase ends, textile sector stocks might nosedive from its peak tremendously.
So if someone wants to have an aggressive and concentrated approach, they should stick to mid-cap pharmas. However, if one wants to diversify and be lesser aggressive, one might consider adding NBFCs as well as Agrochems.
If one knows how to time the market which I think very few people do, textile should be a sector which might give supernormal returns. But personally I would avoid it.


(Anupam) #51

To have 25% + cagr, stocks alone will not fire. Sector tailwind has to be there. While pharma can be next IT, but valuations might be high. Still it’s a knowledge based business with R&D, patients etc.

However on HFC, agro chem and textile space , I am still not convinced. What macro changes will create the bull strong and sustained, in these sectors. Actually if you see 3 sectors belong to roti, kapda aur makan. Is this great Indian consumption story or is it that not many tech, infra, knowledge driven themes are left.


(Nishant Kandoi) #52

I think given the value migration phenomenon in pharma sector, the quality Midcap pharma have the ability to scale up to the large cap level. I am not a poll analyst but given the way Bernie Sanders is slowly getting popular here in America , it is highly probable that he becomes the next president. Reducing the prices of the drugs would be one of his main agenda. Now one as Indian pharma investor might think of it as a bad news but actually it should be a positive trigger as volumes of sales would increase tremendously as reduced prices of drugs should make it an easy access to a common American. Given the aggressive capacity ramp ups being done in near future by Midcap pharma to gear up for the requirements, they should be getting a significant share of those additional demand created by lowered prices.
I kind of disagree with the valuation concerns as during a bull phase, the dominating stocks of a dominating sector usually have a PE ratio of 2x-4x times that of Nifty P/E. Given that in the history, the PE ratio of Nifty has gone up to 26, I won’t be surprised if some of the mid cap pharma which are currently available at 30 PE, expand to 60-70 or even 80 if they show an eps growth of 30-35%
I also don’t think AgroChem could be classified under “Roti” entirely as there is a lot of R&D component involved where many of the products are patented. Thus it could be classified under knowledge driven theme. The same concept of Value migration could be applied to agrochem, although it might not be as strong as the pharma industry should experience in the next bull-bear cycle.


(Beginner) #53

We do not consume two tablets instead of one tablet just because price is dropped. Medicines are not consumer durables where decrease in price can increase in sale volumes. Most Americans are covered under Healthcare program/Insurance. So I see very little change in the demand. May be I am wrong? proivde your thoughts.


(Nishant Kandoi) #54

Good point. I don’t have solid data source to show but your assumption about most Americans being covered under a similar health insurance is flat wrong. I am an international student here, who is paying 6000$ year to get one of the best health insurance package. My package ensures that I just pay 20% of any treatment expenses I incur. I belong to a richer strata who can afford this insurance. Most Americans have a basic health insurance where they generally have to pay up to 50% of the treatment expenses. Now the medicines constitute a significant chunk of those expenses. So, although the insurance covers 50% of their cost, they still can’t afford the prescription as they can’t pay up the rest 50% from their pocket. Also, there exist a hierarchy of medicines for a same treatment. Based on the insurance type and paying capacity , doctors try to prescribe the medicine although this is not possible for every case. In a nutshell, the demand of medicines is elastic in America unlike your assumption that the demand is inelastic.


(RaghavanSrinivasan) #55

This is an article which i read a couple of months back in the Economist which actually is about drug price rise in the U.S and possible impact.


(Nikhil Jain) #56

Hi @Donald,

Excellent topic. Excellent discussion. Every single time I read your posts, you make me realize how one should strive to reach the next level rather than be a lazy, content bum like me.

Coming to the topic at hand, can we consider small businesses like KTIL where things have fallen in place (PFT approval from railways, KMLL phase 1 ready) for more than 25%+ CAGR business growth for the next 2 years?

Or are we only considering larger, more established businesses?

Hoping it is the former as there is more MoS as well as leeway for rerating in businesses which have been well discussed at VP but relatively unknown to the market.

Disclosure :- I am invested in KTIL. My views may be biased. Please take your investment decisions on your own understanding of the business.


#57

@NikhilJain what is KTIL?


(Vivek Kumar) #58

(Nikhil Jain) #59

As Vivek above has answered.

KTIL = kesar terminals & infrastructure Ltd


(Nishant Kandoi) #60

http://m.timesofindia.com/business/india-business/India-is-too-democratic-but-Modi-is-forcing-things-to-be-done-Taleb/articleshow/50800166.cms

In the above link, Nassim Taleb a famous trader expects more volatility in the stock markets in near future due to increased fed interest rates.
More volatility provides more opportunities for an investor to get in at attractive levels. Especially when an investor wants to make an all out switch between stocks, volatility can be a great friend. However one needs to be extremely patient.


(Donald Francis) #61

Hi Guys,

Thanks for taking forward the discussion in very meaningful ways. A diverse set of inputs for us to consider. Had been travelling and could not devote time to the thread.

Re: Agenda 1: Possible Themes/Trend Spotting
{If you happen to know of any other good books on trend-spotting or themes, do let me know}
The only book I have where there is a decent discussion on Trend Spotting is Ralph Wanger’s “A Zebra in Lion Country” - by the way a wonderful (definitive) book on small cap investing. It’s a must read fro small cap lovers. Some excerpts on Trend Spotting from the book.

Ralph says " I concentrate on areas that will benefit from strong economic, social, or technological trends. And I want trends that will last 4 years or longer.
On how does one get to an Unclouded Crystal Ball - identify such trends. He says paraphrasing Sherlock Holmes “Ah! You see, but you do not observe”. The investor has to develop an observing mind set and get in the habit of looking for trends in his reading and experience. You have to train yourself to make generalisations from random particulars, to keep asking yourself. “what does this mean?”

It was interesting going through the diverse inputs thrown up by so many of us in the thread. The one that most resonated with me (and I guess with most readers too) was Roberto’s very well-laid out plot

Another point that was new for me from Roberto’s post

The good part about trend spotting/ or attempting to identify long term themes I found is, almost every senior mature investor/Guru would encourage us to think structurally, think long term about india - economically, socially, technologically. I realised that it has nothing to do with timing the market, or getting market cycles right :). If we extend our thinking to what has inevitably to happen over next 5-10 years in india economically, socially, or technologically, we will inevitably be doing justice to this quest!

The thread has done some justice on this front - already good food for thought for us all to take the quest forward. Thanks. Time to move on to the other more pressing Agenda: 25% CAGR Strong Visibility candidates


(Anupam) #62

Agree on the point that trends are spotted. Its observation , generalisation and asking why so !!

1.) City based young to mid age middle class will more and more embrace investing in equities. It has nothing to do with market timing. Rather I think , awareness, interest, addiction & relevance, of equity investment will grow exponentially. Real Estate, Gold will slowly take a back seat. Intelligent investing, liquidity, analysis will gain strength over site visits, broker meetings & multi lakh cash down payments. Living on rented premise will not be regarded as option for hopeless but smart way of living. **Companies enabling equity investing may grow bigger in times to come.**I have no ready list of names of such stocks

2.) I remember AC was a luxury in 1995 to 2000. It is necessity now. Similarly flight is still for the better off, but in next 5-10 years, I think air traffic is going to go manifold. Though airlines have many more challenges to overcome, but need for speed & comfort will drive aviation traffic crazy.

3.) IOT, Machine to man, machine to machine based communication can be the next big thing. However no green shoot visible at present Few living beings left who dont have a SIM. Next target are inanimate dumb gadgets & a SIM will breathe life into them.

4.) I have doubt on 4 wheeler demand. Somehow feel the Ola, Uber will offer better, cheaper & more convenient travel than owning a car.

5.) Next Level Entertainment: Theme park, amusement park, adventure experience, foreign tours will grow bigger. People will look beyond movie halls & family trip to Nainital :slightly_smiling:

Jotted down random thoughts without specific stocks to watch out for.