Genus Power has come out with a decent set of numbers. The bounce might have a longer leg.
It can be tracked closely.
~Supratik
Adding to this_Short Term Opportunistic portfolio_bit.We ValuePickrs are really richer for this dual approach.
This is a specific learning from Ayush I have_haltingly_tried to pick up (greatly admire him for this). Move CASH form long term bets (overachieved targets and low visibility on further 25% CAGR) to newer, much-undervalued higher-growth, strong BS promising bets with low downsides. If I have to generate more CASH anytime (for Core Holdings), I would have no hesitation selling these, as you said, these are Non-Core.
The challenge is to keep looking all the time, without lowering standards. Most folks have forgotten Indag Rubber its seems, but looks good to me for more allocations. Lumax Autotech looks good, but how far is the growth trigger? Others like Caplin Pharma or MPS donāt look suitably undervalued to me.
Under-valued, high growth, strong BS candidates?? Ayush, Hitesh, Omprakash kuch Tips do bhai
)
Let me copy this discussion to the Opportunistic Portfolio thread, to take forward.
-Donald
Another important learning from the crash of 2008 is to have a core & satellite strategy. Have some core stocks (long term 3+ year horizon) and some shorter term opportunistic stocks (6 months - 1 year horizon). Cash may be a part (although a fairly small one) if the satellite portfolio. The only exception is when the index PE starts moving over 20-22. Then getting out slowly is more prudent.
Hi Donald,
Great thread to be revived now!
MPS with a dividend payout of Rs 5 each in last 2 quarters looks undervalued atleast in dividend yield terms. In the concall, in which Ayush participated, management mentioned they look forward to increase the dividend once the revenues pickup. And I understand some of the prime real-estate will be sold, so cash for further dividend is almost assured.
Management also mentioned that they were focusing on cost-cutting so far and will now focus on increasing revenue which sounds quite believable considering the re-structuring they have done so far and increase in margins. McMillanās existing relations can get leveraged now. They mentioned that 25% OPM is what they are looking at going forward.
Apart from that the way this promoter had developed a similar company and sold it off (Now known as Glyph) and how consolidation is happening in this industry, he could just happily sell off the excess land, pay hearty dividends, set-up the business and exit at a premium.
Cheers
Vinod
I think after the correction canfin homes looks quite attractive. What one is getting at cmp of around 150-155 is a company likely to grow 25-30% cagr for next 2-3 years in a highly fancied sector with nil Net NPAs at below book value.
Even gic hsg looks interesting close to book value at a good div yield.
Good time to revive this thread people!
Could any co from the troika of asbestos sheets be considered as short-term mispriced bet?: Everest Ind, Hydbad Ind, Sahyadri Ind. Iāve missed out earlier on these due to lack of funds and price was out of my reach. Havenāt heard anything fundamentally wrong with either of them and they are all down ~25% from last peak. Any thoughts?
Hi Donald,
With regards to Indag I had noted that they have a com by name Uniptach Rubber with same promotershttp://www.unipatch.com/
The plants are mentioned to be in the same location and some of the product names sound similar. Actually Unipatch has a better website and it also has a foreign collaborator.
Ayush did answer this concern but I am notcomfortablewith this. Would like to know your views.
Also have a look at Canfin, for me as Hitesh mentioned, this is looking like a great bet for next 6-12 months. Infact the March results itself should augur well with excess expenses shown in last quarter being normalised as they had done last year.
Kamikazi,
Visaka Industries was looking good with Yarn division coming out with great nos. But building material segment for all players have shown declining trends.
Cheers
Vinod
How about Unichem Lab? Looks like a possible 50% in the next 6 months and 100% in 1-1.5 year timeframe. Zero debt. Improving NPM. Improving profit growth. Getting into newer categories.
Hitesh,
You seems to have a midas touch. This stock has also moved. By the way do you consider this as a undervaluation play or it could be a compounder as well when the undervaluation phase is over?
raj,
there is no midas touch.
I think stock moved bcos of market sentiments improving.
Canfin can be an attractive bet if it can maintain the growth that we expect.
If that happens there could be rerating which could add to the returns.
Currently there seems to be low investor fancy bcos it is being perceived as a PSU entity and hence it needs to prove itself.
GRUH seems to be correcting nicely and looks ripe for picking. Usually it doesnt correct too much beyond 20% from the top and its correction is more of a time correction as earnings try to catch up. I think there could be strong upmove if stock moves above 215 (plus or minus 2 Rs) levels as there seems to be short term resistance around that zone.
I picked up some @154 looking at you note. Found quite cheap compared to others(Gruh, HDFC and even LIC HF). One or two years of consistent earning can double this one very easily, but I am not sure if it can be great compounder for long term.
Gruh is costly by all coventional wisdom. Probably, the long term visibility of growth has made it costly. Are you accumulating it at cmp?
There are some queries on Canfin Homes from a friend of mine well versed in financial sectors.Views Invited.
1). Does it have capital to grow that fast? Minimun CAR should be 12% and 6/7% of that should be Tier I capital.
2). If ROE is going to be sub 20, then answer is it will fall short on capital.
3). How much leverage are you comfortable with your company taking. Personally, I would not like if Tier I ratio goes below 9%.
4). So it comes to either more leverage or capital raising to continue growth.
5). Equity capital raising, is only benificial for financials if itās done at PBV of more than 2.Canfincurrently is below PBV 1. And I see little chance of it getting rerated above PBV 2.
Even if it could grow fast, how do you think that growth is going to be supported? All PSBās face this issue. Ever heard of a PSB bank growing at 25-30% for years? Capital is the reason. And if leverage goes up, the risks increase a lot. e have to be very careful with leveraged financials.
Compared to this, look at Gruh. It manages 36-38% ROE. Even with 30% payout ratio, itcaneasily manage 25+% growth without equity dilution. Repcocurrently has more than 10% Tier I. With raising of 270 Cr. It will be able to more than double itās loan book without Tier I going below 10%.
Sir financial stocks ka game alag haiā¦ Never look at Net profit growth in financial alone. It has to be clubbed with ROE and payout and equity dilution. My assumptions could be all wrong and market may prove me wrong. ButCanfineven if doing well might not yield 30% CAGR for investors. So itās your call of how much % of portfolio you want it to be. Itcanbe 5-7% of folio but not more. For concentrated folioās like me, that allocation is as good as not having. So I am staying away.
Heard about a beautiful experience a Canara Bank Customer had with Canfin Homes recounted by a Canfin executive.
THis guy who had come in late 90s to make a FD with the bank for 2 lacs in a state capital but was advised to buy Canfin Homes instead with that amount . The price of
Canfin was around 14-15 rs n dividend of Rs 2- 2.5 was being given.
The lucky guy who has retired by now followed the advice & never sold the scrip till date. When Canfin executive visited the capital recently the customer came specially to meet him and thank him for his sage advice saying you have made him a rich man.l
the assumptions of vivek gautamās friend are quite fair in my view.
One should not mistake an undervalued opportunity with a long term investment bet.
Basic assumption for canfin is that at some time it can quote at around 1.4-1.5 times book if it catches investor fancy and if that happens it can give 50% returns.
I wont consider it as a steady compounder. GRUH is one of the best bets in the steady compounders category along with HDFC bank. Both are expensive on conventional valuation parameters but both have remained so for a long time and will in all likelihood remain so. Returns in short term may pale in comparision with other stocks which will bounce back due to the drubbing they have received but in long term both are compounding machines.
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Hi Vivek,
Yes, a high growth NBFC will have to go for equity dilution. For Canfin the CAR is at 15.4 as on Q-2 end. This should enable it to grow till FY 14-15 without more equity. 12% is the stipulation.
With its own highly rated FDs and term loans from Canara Bank the debt fund raising is not as risky as others for Canfin. Since 40% of the loans fall under priority sector, NHB refinance is readily available. The opportunity size being large, I do not see much risk here. An auto loan com would have risks associated with sales decline and high interest outgo.
Currently Canfin looks like a solid short term bet.
Cheers
Vinod
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Vinod, thanks for your views.
Thanks guys for bringing back focus to this important thread. Sorry for the delay in reverting, tied up in a few things.
As mentioned before in the opening post - **this thread is dedicated to -Opportunistic Bets - that can play out over 6-9 months to a year. Sheer undervaluation exists -but steady performance is not a given. **This is not a thread for comparing steady compounders. In these cases, the downsides should be pretty pretty low. And the upshot is that if the company performs, as per expectations, they can move on to playing at a higher next level - just like say Atul Auto, Indag Rubber have done consistently, and so we have been glad to hold on, over and above the (less than 1 year) post the initial timeframe.
Given the above filters, I am finding quite a few companies qualifying to become interesting opportunistic bets. Thanks for all your suggestions/pointers.
Hitesh & Vinod MS - Agree. Can Fin Homes is very interesting;)
Other names - MPS, Caplin Point, Lumax Auto & Indag Rubber are also pretty interesting. Most of them have also corrected from earlier levels, making them more interesting now.
Time for me to dig deeper into each of these. Will revert in individual threads after study.
-Donald
Donald,
My feeling is that time has come to stick to the quality names as the slowdown is visible. The mis-priced bets can further get mis-priced and will be available much cheaper after some time.
Let me know your views.
Regards,
Raj
We need to be choosy for sure. These are mis-priced bets but with strong BS, good growth visibility, and sheer undervaluation.
For me Capital Allocation is a product of 2 things. Conviction Rating (CR) x Valuation Rating (VR). Top Quality names will usually come with high CR but low to medium VR. (Unless when you catch them early in un-discovered stage like we did a Mayur, Ajanta, Astral,etc, but these are not that easy to find on a continual basis).
On the other hand, there are always enough opportunities where CR can be Medium, but VR is High (sheer screaming undervaluation). More so at times like this. The choice is to bet on strong BS, good growth, highly undervalued - after extensive homework - so the downsides are very minimal. My experience (over last 3 years) has been very positive on these kind of picks - check ValuePickr Opportunistic Portfolio track. And guys like Ayush, Hitesh and Omprakash have a much better record over longer timeframes. They have always made more money in these middling kind of companies - going onto better times, than in top quality names:)
Idea is to be OPEN - there are many ways of making good money -safely - in the market. This is a great time to be doing extensive homework, be real choosy, and have the Conviction to know - where the ODDS lie.
Hi,
Good to see revival here.
With a sharp decline in the small/mid cap space, I think lot of mis-pricings will stand up but it may be a time to also focus on high quality stocks going through temporary pains. These will be the real multibaggers.
On the short term opportunities (with good long term fundamentals), we are working on Lumax Auto Tech, MPS, Kovai Medical, Canfin Homes, Indag etc.
Views Invited
Ayush
Hi Ayush,
Few more which come into my minds are (In addition to the ones that you have described below) : Caplin Point Lab, RS Software, Aarti Drugs, Granules, Orbit Exports, Somany Ceramics.
At 5% divident yield and big spikes in delivery volumes Gujarat automative gears also seems good to be. This has all the nice characteristics that you will find in quant based fundamental analysis (i.e low PE, high dividend yield, high ROE, good 1-2 year price performance)
Regards,
-Subash