I don’t mind paying up for “quality”. But I cannot pay a random 30-50% extra for it. I need to understand what the management is doing differently that increases the value of the company vs a competitor. As I mentioned earlier regarding Growth, it is not ‘Quality over Value’ or ‘Value over Quality’ for me. “Quality”, Growth, everything ultimately contributes to Value (High “Quality” and high Growth companies certainly have more Value). If that Value is well above the Current Market Price, I wouldn’t mind ‘paying up’. I just don’t want to ‘over pay’.
Case in point, VIP Industries is a well-known “Quality” company. I understand their business and like their strategy. But at Rs. 350 or Rs. 400, it was ‘over paying’. Currently, I wouldn’t mind ‘paying up’ Rs. 180-200 to own it (It did touch those levels a month ago, but I did not have Cash).
I would suggest you go through these videos (Look for facts, ignore opinions):
(Generally read the entire Heritage Foods thread in VP - it is amazing)
The bottomline is, the strength of a dairy player is in the procurement, storage and (to a smaller extent) distribution. It takes several years to build trustworthy relationships with farmers or build storage facilities that are able to handle massive volumes. Hatsun and Heritage are far ahead of the other players in these instances.
I have to disclose that I recently moved to London for work (Say, about 2 months ago). Due to the virus, I was stuck in a small Airbnb until a week back. I have just shifted to a new place, which has its own issue with connectivity. Hopefully in a week or two, I should get my wi-fi connection sorted.
I will think about Valuing any company only after I settle down here. So far, I have been sticking with companies I already researched and valued (Not that that’s a bad thing).
