Rather than trying to catch the bottom, it may be better to accumulate them in small chunks every month.
May be this import duty hike will give us another good opportunity to accumulate titan.
Will be interested to hear your views about how to about accumulating the stocks that you mentioned. I have taken a approach of investing in 1-2 of them almost every month, depending on which is doing not so well at that time.
hi raj,
i donât think this hike in import duty would have much impact on titan in the long run as the prices are passthrough for them because of the lease-based business model. i believe all these 4 stocks are leaders in the bull market because all of them are either directly or indirectly consumption stories and this bull market in india for the last 4 years has been consumption-driven. leadership stocks from time to time give you good oppurtunities to accumulate them when once in a few years they show time correction or correct to their 100/200 dmas.
page has been showing time correction for a while now and should be ready for the next leg up once growth returns back to 30%+. plan with this should be to accumulate in the 3200-3400 range slowly with purchases staggered in small amounts every week.
titan is testing its 100 dma currently with 200 dma placed at 250. i believe 250-275 is a good base and should be used for accumulation in small installments.
gruhis very expensive and would remain so because of the huge oopurtunity in front of it, prudent risk management and consistent growth. ideally one should do an SIP on this every month rather than trying to time it.
hdfc bank is a no-nonsense, no need to think kind of 25%+ compounding machine. it is close to its 100 dma and 200 dma is placed at 600. 600-650 is a good accumulation zone. mistimed entry only has oppurtunity costs involved here and no loss of capital.
i am getting more inclined towards page and gruh for now because of the long run visibility in front of them.
there are several options to do this
1). look at the charts and wait for near support levels and then buy.
2). systematic investment plan. most brokers are offering equity SIP. i have my equity SIP every week. else you can keep buying at market rates on a specific day of week. dont try to time the market
3). wait for news. like rbi meeting on 29th , if repo rate is not cut, bank stocks may correct. hdfc bank gave Q3 numbers and thereâs slight increase in gross npa. titan after gold import rate hike. good company in temparory troubles
hemant and others,
anybody thinks that these consumer stocks are in bubble territory? quoting at 30-35 times PE and possibility of them showing less than 30-35% growth very strong due to various factors? esp page, titan etc.
argument against this would be that 30-35 PE is not bubble territory as in past we have seen stocks at 80-100 PE in bubble stocks.
I think there will be some who will argue that PE is not the only way to look at valuations of stocks. agree with that too but what is easily available and what markets looks at first is PE ratio.
Would be interesting to see how boarders think about the issue.
Personally I dont have too much by way of views as I dont hold any of these consumer companies but watching them with a lot of interest.
hi hitesh,
i understand what you mean. i have been looking at these stocks from a distance for the last 5-6 years. they have rarely been cheap. even in the peak of the crisis in 2008, page traded at 15 PE. i always stayed out of them thinking of extremely high valuations but that has not stopped most of them from multiplying many times over the last 4-5 years. indian markets(with all their issues with corporate mgmt and accounting irregularities) seem to pay a big quality premium to companies run by honest mgmts who can navigate the companies through tough times and have proven track record of generating wealth for minority shareholders over a long period of time. these companies have good free cash flows, pay hefty dividends, have grown at 20%+ through peaks and troughs. i am starting to change my thinking now and want to allocate certain chunk of my capital to such businesses where âreturn of capitalâ is also assuredalong with âreturn on capitalâ. i would keep them in a separate long-term buy and hold portfolio where performance of these companies would be reviewed only every year instead of every quarter as for other companies. these would act as alternatives to my allocations to bank FDs or property investments and i hope to make 20%+ cagr on this portfolio for long periods. i would not touch any stock in this portfolio unless the demand drivers and business environments for any of these is under threat.
as far as the consumption bubble is concerned, india has always been a consumption-driven economy unlike china. given all the transformations we are seeing in lifestyles, affluence levels etc in the ever growing middle class population in India, i believe this consumption these has a long way to go. consumer stocks have been the leaders of this bull market since 09 and i would expect that to remain so until this bull market is over.
Agree with you, Hemant Bhai. Just an example, when I was considering to buy Page in mid 2010, I read a lot of articles/arguments about how expensive it is and one should be careful. Every time I visited market, I saw how strong Page products are and selling like hot-cakes. Ultimately, I took good exposure at 1190 price and kept my ear closed to such arguments. I am not arguing that it will continue growing like this or canât correct or one should buy blindly but still think for the next few years, it should maintain the growth momentum barring some quarters of bumping results which should give us opportunity to add more. This winter I visited many stores in Gurgaon and most of the times, found store owners complaining inadequate supply from Page. Itâs not about Page not supplying them, its about products were selling too fast. Anyhow, coupled with 7% price increase in Novâ12, I expect them to deliver good results this quarter compared to earlier one. Quality never comes cheap.
hi jagbir,
i can relate to that. i am a satisfied customer myself :). there is nothing better than a personal scuttlebutt 
Thanks Hemant, Bala, Hitesh for your inputs.
i think the key assumption that we are taking on these names is:
)- The past growth rate will continue for a long period (atleast 5-10 years) in future
and that itself provides the margin of safety. Am quoting Mr. Sanjoy Bhattacharya here. check the below link at 20-22 mins. section.
My thought process is by selecting around 5-8 such names we can insulate ourselves against any 1-2 of them going wrong. I agree with you guys, that any short term bad results followed by a price correction can be used to load significant amount. Hoping those quarterâs are only aberrations and not thebeginning,of the end of the growth story
@Jagbir, This article explain the capacity issue and the future plan.
Hi Hemant,
Safety and steady returns is all fine. But the whole point of diversifying in midcap basket is protect yourself against one off cases like Arshiya. Remember even RJ had series of failures, and the maximum you can lose is 100% of capital. While lifetimeâs wealth is created by letting your winners run along for a fairly long time (Peter Lynch).
No doubt stocks like Page/Titan are wonderful businesses and their earnings will continue to grow for next decade or two. However the significant downside arises not from earnings concern but from P/E de-rating. Why not as active investors try for a potential basket of stocks where earnings growth is visible along with a possibility of re-rating.
A very high P/E stock looking at a P/E de-rating is a far bigger risk than a potential P/E re-rating candidate not getting re-rated.
In cases like Bharti/Pantaloon we have seen the kind of wealth destroyed in great businesses by sheer pace of P/E downgrade.
Welcome your inputs on this.
rudra
I tend to agree that the risk of PE contraction looms over the very high PE stocks.
When that happens is a matter of conjecture.
One has to learn to dance till the music lasts.
I think what rudra says makes sense â we are good at finding out companies with low or acceptable PE where chances of PE rerating are high â so why not keep on following that strategy? Till date that strategy has rewarded us handsomely â so why not go for more of the same?
regards
hitesh.
When buying a stock PE should not be the only consideration. One of the most important factors is Sector performance. If the sector is affected, then all stocks in that sector are affected. Sector rotation should receive the most attention. Factors like market outlook, corporate governance too play a part in the price of a stock.
Another point to be noted is that fundamental analysis is not the sole consideration. It tells us what to buy. When to buy is guided by technical analysis. If the timing is wrong then the waiting period will be long too. To give an example, Ador Fontech. This share was put in the buy list of Forbes India last year. One year has gone bye but there is hardly any price change. The opportunity cost of capital has to be considered too. Therefore if we can have a judicious mix of both fundamental and technical analysis then one can have a winner in the hand.
At this point since the markets are at an all time high, let us all put our heads together and make a list of stocks which can be on our buy list. Mr. Market is bound to give us an opportunity to buy them. When the opportunity comes knocking, one should not be found wanting as to what stocks to buy.
Await to views of my fellow readers
Quoting from the article:
âStrong demand and utilisation levels, increasing volumes, low**leverage** Link: http://economictimes.indiatimes.com/topic/leverage and consistent dividend paying record would continue to drive sales ofPage Industries Link: http://economictimes.indiatimes.com/page-industries-ltd/stocks/companyid-762.cms in the coming quarters as the company embarks on the plan to add capacities.â
Can anyone explain⌠How do factors like leverage, consistent dividend payment record drive sales?
This is a crap article.
Guys,
Those who feels highe PE stocks are expensive, please go through the âFinancial equivalence of optical illusionâ video (One of the best financial video as per Ayush Bhai)
The idea is very simple. If you use DCF method to value a stock, then a stock with higher dividend payout ratio will have more calculated price than a stock with lower dividend payout ratio, even with the same growth rate.
This implies stocks/companies which doesnât require to keep much of earning to generate a given growth rate will have a higher PE than the ones which requires to keep majority of earning to generate the same growth rate.
This is why Rating/FMCG/Consumer focused company, which usually are less capital intensive, and usually gives majority of the earning as dividend to the shareholder tends to have very high PE, and cpaital intensive companies like Mayur, Astral have low PE even with similar growth rate.
The bottomline is, it is useless looking at just PE to decide whether a stock is expensive or not. You need to look at capital structure, dividend payout rate, ROE, ROCE, DE ratio, Cash flow, consistency of earning, moat to find out whether a PE is expensive or not.
If a company get maximum mark in all these parameters, it deserve to get a high PE.
Hi Akbar,
you rightly caught the wrong conclusion. Even i had noticed it. Thatâs really a crap sentence. Anyways there is nothing new in the article, thatâ's not already known from AR and conf calls of the company.
low**leverage** Link: http://economictimes.indiatimes.com/topic/leverage and consistent dividend paying record ofPage Industries Link: http://economictimes.indiatimes.com/page-industries-ltd/stocks/companyid-762.cms in
guys,
i do understand that at valuepickr we are good at identifying small cap companies which are undervalued or great growth stories and i personally have benefitted a lot from the discussions here. my portfolio has done very well but now i am at a stage where my portfolio size has become fairly big and i canât afford to put more than 5% in any of the smallcaps because it involves a lot of entry and exit costs and liquidity issues arise when market conditions are not good. Also, many of the stories we discuss here need to be monitored on a quarterly basis because either the growth story is not secular or very long term or valuations reach a level(approx 15 PE) where we start getting uncomfortable.
To be able to grow my portfolio, i need to think of ideas where i can put some money away for 5-10 years and not think about valuations/quarterly results regularly. ofcourse stories need to be monitored to see if the growth drivers are still in place but these would be stocks where we have visibility for atleast 3-4 years. these would also be stocks which because of their FCF generation, high div payout, high ROE/ROCE would always command a premium and one doesnât need to worry about debt/capex because of enough internal accruals being generated by the business.
I would always continue to have a large portfolio of aggressive small/mid caps of the kind we discuss at valuepickr where i expect to make35%+per annumbut i would also like to have a portfolio of proven mid/large caps which cancompound their way nicely at 20-25% cagr and act as a pillar to my investment journey. this way i donât need to have any allocations to bank FDs or fixed income instruments as an HDFC bank or ITC would beat bank FDs hands down over 5-10 years.
exited 50% of granules today at 146 in line with my note in the technical updates section. deployed that cash to make a small entry in page and add to poly medicure and atul auto
booked partial profits in ajanta at 595. 50% profit in a week. reached my first target of 600 as per the technical updates post. i think stock may cool off a bit here
good idea. i think there was buying panic. round figures usually offer resistance so i think from levels of 600 odd it should cool off. fingers crossed.
ajanta has often surprised me both on upside and downside.
hi hitesh,
ajanta continues to surprise me as well but mostly on the upside. i have this as core bet for long term but todayâs profit booking is more of a tactical sell to get in again around low 500âs.