Autoancillariesneed timing…Rane Madras made a low of less than 30 rupees in 2009. It subsequently made a high of 190+ in 2011. So, even if somebody would have bought it at even 50 rupees would have made almost made a four-bagger, ignoring dividends. And dividend yield would have neared 15 p.c. at the acquisition cost.
Please note, I am not saying against the companies you have mentioned. But I surely prefer companies with a big turnover, say, at least 200-300 crores. Then, if the company does a 2 p.c operating margin gain, it fetches about 5 -odd crores. So, if the equity size is small, the resultant change in EPS is big enough to allow a spurt in stock prices. So, generally I look at stocks with a sales to market cap in that ratio of least 2 to 3 times. Thats when I merit a stock to be cheap enough for accumulation.
Coming back to Garware, I think its not a stock that will hog the limelight anytime. Its not a company whose product is visible. But, at the cureent levels, given that it is consistently jacking up its turnover, I think it will do better than the broader markets, considering that at current price it is fetching a neat 5 p.c So, all it would need to do better than the market is a brief 10 p.c. kind of CAGR in prices.
I do however, appreciate the ‘unscientific’ bias of yours towards stocks which deliver a consistent performance. So, even though I hardly look at past price behaviour for determining my current purchases, I do feel, using this yardstick would give you decent returns. But then, the market, as you yourself said, has all kind of stocks. I hunt for bargains, not the past best performers. My stocks would generally never carry any kind of tag. The only qualitative thing that I generally look for iscommitment of the company towards its business. I want consistent rise in turnover. A company which fails to do so, in my opinion, is at the mature lever of its life-cycle. There’s nothing more annoying than to see a drop of turnover, irrespective of the reasons being subscribed for the same, except if the drop is on account of planned shut-down.
Anyways, I will surely like to have a deeper understanding of your picks, namely Indag Rubber and Gujarat Automotive.