Sales is not the only growth metrics for valuation as margins are going to increase. The new models seldom have discounts. The higher variants usually have margins in excess of 40% and the spares often have even higher margins. For every vehicle sold today, the sale of spares contribute for the lifetime of the product and often increases with age. This causes multiplier effect.
The growth of cab industry has pushed Dzire to become the new Indica of cabs. The running cycle for these cabs are very high and the service and spares over time will be much higher than personal use.
Altogether I feel we could see bottomline growing much faster than topline. This if you look at PE, the stock is fairly valued, if not undervalued. The capacity constraint is one big hurdle now and it will ease over time. This means they can increase sales growth even further from 2020.
The cab people do not buy original spares and also look to save money if they can by getting service done in private garages. The competition is high and pricing power low balled in the segment you are talking about.
Have you done any study on this data point? I have done a detailed study on Maruti manufactured cabs and over 85% of respondents use genuine spares (MGA) and over 70% use authorized dealers for service.
Thanks Yogesh ji ,
my intent regarding index investing is one should have a sound sleep Well researched with optimum margin of safety hand picked quality stocks are highly effective
could you please enlighten us on your following stocks on light of following factor
First the mutual funds are not as good as you glorify. Second is the fund manager. If the fund manager is good, he gets too much aum and his hands are tied. Also I see that most of the average fund managers are less qualified than many here in this forum. Some of us here have been to tier 1 US business schools and have over 20 years of experience.
Go through my posts. You will understand that you dont need a tier 1 business school for USA to succeed in life. In reality spending that type of money to go abroad and come back to become a full time individual investor makes no sense. Had you taken that money for education and compounded it from a young age even at 12-15%, you would be lecturing at b schools. See the katyals of capacite… I asked a similar question to reputed investor. He laughed and said self study to be a good investor. If you learned everything from a top b school then all the analysts would be worth 50cr plus at the time of retirement…
Prospects of getting a good job etc are possible only if you get a reputed degree, I agree. But to judge your smartness and investment skill on a degree is a not correct for sure. Studying business is a waste. Im 22 today. Ive learned more from my laptop and an internet connection than I would have by getting a formal masters degree. You can check my posts. Its about having the right education not formal education. I still continue to learn and try to not rely on external research, but that is a long term goal and hopefully over time I’m able to be on my own when it comes to ideas and research.
Im 22 today. Ive learned more from my laptop and an internet connection than I would have by getting a formal masters degree.
I like these words. Imagine even if 1 out of 100 uses the internet this way rather than wasting their time on social media or other stuff how far they will go in each of their field.
Internet has democratized the learning. You just need to imagine with a little ambition anyone can succeed.
I have used the internet to my advantage and polished my thoughts.
I agree that B school degree is not required to be successful but certainly is not a waste of money. Look at my post and you will see another factor as ‘experience’. That along with education (bschool or self learn) is vital to avoid common mistakes.
Will you be able to perform complex coronary artery bypass graft surgery without formal education? Very few people could attempt and may be even succeed. But the general public derive knowledge through education. I am one of those average guys who learn from all sources (b school, annual reports, presentations, research thesis, research reports, etc.). The money spent for these activities is not wasted.
Unfortunately if average guys like me skipped education, it would not have been possible to
Get the first million dollars through salary which can be used for investments.
Understand businesses and be able to value companies.
Reduce market risk by having alternate source of income (read it as salary)
Some B schools in Europe and even in India are reasonably priced. In US, some public universities are priced fairly. You believe that education is of no use but my experience has been different. Sitting and taking a class with CEOs and top executives, which is possible in US (and may be in other countries) really gives a broader understanding of business.
Index investing is a good strategy and in fact it is now the most popular strategy in the West going by the inflows into index funds. Your returns will be average, nothing less nothing more. If you are happy with that, there is no better way than index funds. That’s not a low maintenance strategy but a zero maintenance strategy. You can buy the index and forget about it. Someone will take care of maintaining the index and someone else will mange the fund to track the index. Most members on this forum though would like to earn above average returns hence they pick their own stocks. As market become more efficient at pricing stocks, more and more active investors will migrate to index funds.
There are as many strategies as number of members and there is no right or wrong strategy. What I presented is just one such strategy where I pick only 10 stocks from Nifty 50 index so that my universe is limited. Someone has already done the job of shortlisting 50 stocks for me so only have to marrow it down to 10. Idea is to beat the index by picking 10 best stocks from the 50 in the index. This is a low maintenance and not a zero maintenance strategy as annual re-balancing is needed. Reward for that is higher returns than index funds.
UPL is trading at PE of 19 and not 91 as you mentioned. Please check your inputs. Eicher looks expensive based on PE but it is growing at a high rate and has strong products so investors are already paying for future earnings.
Since this portfolio consists of only blue chips (members of Nifty 50), I have not included other stocks outside the index.
“Index Investing”, with little effort, can be made into “Investing in Index stocks”, which is 1.5 times more profitable.
Fund managers have to follow rules, whereas individual investor who can spare an hour a week, can manage a portfolio of Index stocks with better efficiency.
Use of readily available statistical information and common-sense observations will lead to great returns. Much like what Yogesh bhai has charted out in his recent example of a well balanced and a logical portfolio.
It is mass propaganda spread by the MF industry to lure people into thinking that they can become rich via MF route. Several questions need to be answered first:
What are the chances that one would end up investing in a market beating MF? It is rare looking at the number of MFs around.
MFs in general have a poor rep, due to which the investor cannot gather the commitment to invest every month for many years. Only recently I read somewhere that, MFs in India advertise themselves as balanced funds and end up taking risk like pure equity funds investing in Small Caps… Uninformed investor takes the bait in bull markets, and loses big time in bearish markets.
Even if MF genuinely wants to serve the investor, the markets make wide swings, which shakes the commitment of a layman.
Very very few people, out of the strength of their character, hold for decades at end. I don’t know any.
Yogesh, thank you so much for this post. I am greatly influenced by your approach towards Low maintenance portfolio. I have been on the lookout for some of the quality names, but at this stage (and for some time now), they are highly priced, NIFTY has been on elevated levels for some time now with no sign of retrace. How one should approach to build a position in such businesses, I started with a small position with an approach to buying in small chunks over time and by the time you come for next buy prices are up by 10-15% and you start looking for it to come down. Does paying current price make sense? What’s your view in general.
Best way to invest in a mutual fund is to invest in a manager with a good track record not a fund with a good track record. Performance record of a manager is not readily available but not too difficult to compile either. Only reason a fund does well in the long run is because of the skill of the manager and not because of the fund’s strategy or popularity of the fund house. MF houses does not advertise their managers as managers can leave so they try yo advertise their funds hoping that investors won’t see the difference.
Index investing is gaining popularity because it addresses question of adverse selection where one ends up selecting a wrong fund simply because there are too many of them and not all of them are good.
Adverse selection also exists in direct equities and that’s one of the reason I created this thread. Adverse selection in direct equity is more harmful than adverse selection in MF. Because there are thousands of stocks that trade in market, investors can easily choose the wrong one. By limiting your choice to top 50 stocks of good companies spread across important sectors, one eliminates risk of adverse section. May be AMFI should create an index of top 50 MF so investors can choose among them.
Well researched with optimum margin of safety hand picked quality stocks are highly effective