Dear Surya, I have been following your observations very keenly and I have found it very practical. What are your views on Accelya and Repco for fresh entry at the cmp? Technically both seem to be on the up.I have a 2 to 3 years plan for investment. Saji
Accelya : I have no Idea on business. But I know that there is good momentum in the stock. In the IT services space, as I am software engineer, I knew that there is a big trend in GRC applications and analytics. Two companies Metricstream and MuSigma are considered leaders in the space respectively. (In one of the Interviews, I read Dhiraj Rajaram head of Mu Sigma wants to See Mu SIgma in every business. The business is super-fast growing.).Mu Sigma is worth watching for an IPO. MetricStream the leader in GRC, is where I work and they are nowhere near to IPO.
Repco: Repco is good for fresh entry. You can buy at CMP. and Buy more in dips.
Thanks,
Surya.
Thanks surya I appreciate your comments
Thanks Surya, you are making things simple to understand.
Reg. your portfolio, donât see any allocation to bullish sectors like Pharma and Agri Companies where earnings are growing steadily. Any reason ?
**Because my style of thematic investing doesnât work in pharma. **I think in pharma when there are many companies and huge scope they fight for similar ROEâs. You donât get a stock there with 40ROE and improving and 40 PE and expanding. I think pharma companies should be bought at lower PE ratios and the most important thing is you need to do lot of groundwork
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In case of Agri, I am unsure. The rural theme is good. But I like the rural consumption stories. Atul Auto vs Kaveri is a good case to discuss. I did lot of groundwork on Atul Auto to understand their marketing mantra. The whole gist of Atul is they are working in untapped markets. I cantâs say points against kaveri anyway though i feel there is significant upside in Atul Auto.
Atul Auto does not have any niche or long term competitive advantage or for that matter any per se brand, pricing power etc etc - its a case of valuation catching up till the growth is there
On other hand in India where there is so much underpenetration of hybrid seeds / GM crops and not many many players - agri stocks wld be long term suited for portfolios as they have huge gestation period advantage, entry barrier
Hi
I just read you are a software engineer. Any thoughts on 8k miles software. I am invested in it.
Yes. That is true. Its a case of valuation catching up with growth. But I think that is the only way to play auto stocks. Catch them young and play the Volume and price growth. Even the best brands are cyclical. Large caps are very dangerous in sectors related to Industrial growth. Large caps are generally good in Banking, Pharma and FMCG.
Scalability, Long-term etc etc⌠are a kind of false promise in non-consumption related sectors. When a person buys a product for his profit he can buy only as much he needs. And he prefers to buy a low cost high quality and high flexibility product. So in such stocks what happens is as the company gets higher market share, vulnerability increases and there will be less scope for PE Re-rating. So I am not comfortable in getting into stocks with higher market shares in such sectors. This is very much contrary to my own strategy of playing with market leaders but thatâs the way it should be.
I understand and appreciate your point. I was just replying to your post wherein you compared Atul auto with agri stocks. I have a belief that Agri stocks like Rallis and Bayer though market leaders but only have a market share of 10% or so. They have a long way to go and with arable land remaining flat or being reduced and more food required these business are still in nascent stages In India.
No idea at all.
Surya - Thanks for becoming conscious of space economy.
Varun - make sure, you donât include nested quotes - completely unncessary. We are receiving complaints from seniors - that âreadabilityâ is becoming extremely poor with concatenated-neted quotes - who is saying what becomes difficult to make out in longer communications.
We will become more & more strict with space economy. Everyone please help in becoming self-moderated and reduce admin job of moderators/administrators.
surya, your views on ashiana housing and godrej properties ?
Ashiana is a good business. Sanjay Bakshi is on it. You can track ashiana housing with him. I also commented there. But one comment was extra-ordinary, It was given by anish jobalia:**
**
The difference here is that Ashianaâs allocation into land (Major Value driver) will throw cash once while Thomas Cookâs allocation into Ikya will throw cash perpetually.
Bakshi sir gave a valuation there which frankly I didnât bother to understand, but the nature of the business is proven by anishâs comment.
No idea on GodrejâŚ**
**
Arenât we confusing here between land which is a raw material to the Ikya which is a business in itself.
If Ashiana does not hoard large land bank, and once current land bank is exhausted they can always buy more land although maybe at a higher price. But what matters to them is whether they would be maintain 30% ROE in any new projects
Regards,
Dinesh
Land is an asset (inventory) not an expense (raw material). In case of Ashiana, all the operating cashflows should be ploughed back into working capital for growth. That is ok. But till when is the question. Forever is the answer. That means growth is challenged by earnings. They can create a brand, they can have the best marketers, and even they might be living in an environment of low-asset prices still they cannot grow beyond what they can buy.
These kind of businesses are as I wrote there are not valued on ROE but on the growth of projects. But it is not high-growth high-ROE kind of business where you can buy high and sell higher.I felt that this is a kind of business where you buy low and sell high. Here Margin of safety is in Price not in growth.
Lots of real estate companies have gone down spiral treating land bank as asset. Ashiana does not hoard land and treats land bank as raw material for producing affordable housing (finished product)
Although I agree growth is limited to amount of cash flow Ashiana can plough back but they can grow for a very long time.
For Ikya even if it can grow very fast for sometime, it can soon taper down due to number of people they have to employ (currently more than 70000)
Make it simple. High growth for Long time or Constrained growth for long-time, What do you choose? I choose high growth for long-time.
On Ikya, I just reproduced Anish jobalia, I didnât know Ikyas business also.
Fair Enough, growth for Ashiana is constrained to 20%-30% over the long term.
Hi Surya
Please provide your views on the businesses VST Tillers,Repco Home,Page Industries and Mayur Uniquoters and buying them at the current level with a view of 2 -3 year holding.
Also how do you see the current market momentum. Will it be sustainable as i feel its a sentiment rally (hoping Namo) thanearnings rally.
-Pavan
VST Tillers: I would like to give it a pass. I am giving pass to all agri stocks. Because somehow I am worried about the external variables which are not in our control. And When GRUH finance which is 23% of my portfolio went up 50% in one year why is it necessary to be uncomfortable. But this is my opinion. For true analysis you should ask someone who did the groundwork!!!
Page and Repco: I think both Page and Repco are set to move beyond 40% a year on both earnings and stock wise. Somehow Repco is forming base around 320 but that is a good chance to buy.
Mayur uniquoters: I entered it recently and it moved up superbly. I generally donât like supplier stocks. But this is a big one in a small market. There will be a phase for any company where it becomes a market leader and rides it till it becomes large and then matures. I call it âThe Phase of least resistance.â . Mayur and Kajaria are exactly in that phase.
I love the current market. I donât know whether it is sustainable but My Stocks Can Perform in Bear markets So no worries. But if it sustains I will be making 70% returns COMPOUNDED. Hope it happens.