Line to be read and remembered always, thanks Hitesh sir
Hi Hitesh Sir
Can I please ask your views on Manappuram finance .They are growing at 20% cagr and available at 11 Pe with high Roe and nil asset liability issue.Their non gold finance portfolio is growing rapidly.Gold price is also looking good.The risks are geopolitical risks ,rising interest rate ,possible NPA s in future ,sudden change in regulations ,poor perception by general people for gold finance sector .But the positives are low PE ,excellent management and good dividend yield .
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Hello Hitesh Bhai,
Wanted to know your view on Jagran Prakashan.
Can we say that even Hindi newspaper terminal decline has started.
Thanks
Hi Hitesh bhai,
Investment truly is more an art than a science as you have rightly keep saying . Over analysis leads to paralysis of analysis .
Have always found your insights precise and am simply amazed by crystal clarity and way in which you can cut right through the clutter of information ignoring unwanted information . In this age of excess information, it becomes tough for an amateur investors to cut the crap as the more one digs , sometimes inspite of the information becoming clear , the more confusing it becomes . I have lost few opportunities by digging more than required and making mountain of a molee hill in my mind in case of mgmt mistake or market reaction of a stock .
Sometimes overdigging leads to avoiding quality stocks as every company will have some flaws .
1 how do you decide which information/factors is useful ?
2 how do you decide what flaws to overlook in a stock or management ?
3 How do you judge whether the mgmt walks the talk and when you decide as to whether they can be given a long rope for some time?
It would be great if you could provide few examples for clarity on the above queries
Request you to pls throw some light on the above questions which seem highly complex for me and for which no books obviously provide answers .
Thanks so much for always answering in a very practical manner the queries which cant be found in any investment book
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Equitas and Ujjivan both have been weaker as compared to other stronger NBFCs like MAS, Bajaj Fin, Chola etc. Even comparable peer like AU Small finance bank seems to be showing unusual strength.
Fundamentally I have stopped tracking them so not much idea whats wrong with them but charts seem to tell that markets feel (rightly or wrongly) that something is indeed wrong with them.
Better to look at franchises with strong parentage/managements rather than try to do bottom fishing. Even if you look at the recent past, a lot of guys who thought DHFL and Yes Bank and Ibulls Hsg and bought near their 52 week lows found that stock kept forming new 52 week lows every now and then. This of course will stop at some time but we dont know for sure when that will happen. e.g People were excited by buying Yes Bank at below 100 at around 90-95 giving all kinds of arguments. And the stock price kept going down and made lows near 30s before having the nearly 35% bounceback. But that same guy might have lost conviction around precisely the low levels of 30 and lost a lot of capital.
In fact I would suggest you to go through the threads of DHFL, Yes Bank in particular to see how investor psychology changes with change in prices.
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Manappuram seems to have got its act together and now is posting very good numbers and all this positive news is shown in stock price. The main concern investors have nowadays is about asset quality and with strong gold prices, most of the loan book of both Manappuram and Muthoot looks safe in terms of asset quality.
Only risks are crash in gold prices and govt regulatory headwinds affecting gold loan segmentā¦
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As you rightly mention, we are bombarded on a daily basis by newsflow most of which is useless. Its always better to focus on facts which can be verified rather than opinions which dont carry any weight.
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Information which has a direct bearing on the business of a company is most useful. This includes the most important variables affecting a business. For a consumer company its often the demand scenario, competition, raw material price fluctuations etc. For financials its assset quality and loan book growth. If the company is good, it wont have much problem in raising funds. If its pharma, its more to do with product launches and response to them, in case of US facing business, ANDA approvals and launches and subsequent price erosion and competition. This list can go on for different businesses. Pat Dorsey explains a lot of variables to look out for specific businesses in his book Five rules for successful investing. A recent example that comes to mind is JB chemicals. Post the rantac imbroglio, there was a lot of newsflow about safety of ranitidine and how its going to affect JB Chem. In reality, rantac formed only 10% of overall revenues for JB Chem. And there too management had made an announcement to the effect that their vendorsā Ranitidine was found be safe in terms of levels of NDMA. If you looked at the thread on JB Chem you will find views on both sides for and against Rantac. But one only had to remember that the business of JB Chem was much more than rantac and in fact the fastest growing portfolio in domestic market was cardiac group with the Cilacar portfolio growing very well and profitably too. Plus the company stood to gain in terms of tax benefits as it used to pay high taxes. And to top it all, the buyback announcement was something unexpected. I also looked at details in the growth of domestic portfolio which seems to be growing consistenly and has grown even in q2 fy 20 and that probably has been the single most important factor in improving margins. Domestic portfolio business for JB Chem has a lot of operating leverage at play.
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Flaws to overlook in a stock or a management ā This is mostly related to point 1. What is non ignorable is cheating minority investors, making false promises and failing to live up to them. While it may happen that management may not deliver what they promise, if they are guilty of this trait on a consistent basis, its better to give the company a miss. Instead its better to focus on companies which under promise and over deliver. In fact only today I was listening to a concall (company I wont name) where an analyst specifically mentioned to the management that āyou always underpromise and over deliverā. It was music to my ears.
Another company I am invested in as a trading bet is Astra micro wave, with a small position. During q4 fy 19 concall management gave a guidance of 450 crores of turnover for fy 20 and delivered only 30 odd crores revenues in q1 fy 20. And listening to concall post results, the management re iterated that they will stick to their guidance and deliver from q2 onwards. True to their word, they gave turnover of 110 crores in q2 with good profitability too. And they still stick to their total guidance and I would have atleast some faith in them. Besides defence etc as a business is lumpy and there are high chances of order spillover from one quarter to the other. -
Judging how management walks the talk nowadays is relatively easy, If the company does concalls, listen to concalls a quarter or two back and see how they have delivered on their promises. Some managements dont do concalls but often articulate in annual report what they expect going forward and if they live up to their promises it increases my faith in them. I have invested in Birla Corp where in the annual report of FY 19, management has clearly outlined their strategy for cost controls and it seems these measures are playing out in terms of improving margins.
@sarthakkumar19_ Jagran now seems to be a dying business if not dead. I dont know whether its worth the effort to keep a track of these companies.
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Thanks so much Hitesh bhai for the crystal clear explanation with examples .
Also in case growth of a company stops, how many quarters should one wait before selling as many a times the sell off and pe derating is swift and in some cases not so swift. Eg page industries halved from its peak . I am puzzled that some companies are given a long rope eg Hawkins and page etc are not given a long rope by the market . So how to decipher this , as I believe this is very critical especially in growth stocks with high pe ?
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@Hitesh bhai - loving your responses filled with pearls of wisdom! 
Iāve been following this thread for last 3 years and have learnt a lot by reading your responses. I want to thank you for being so generous in sharing your years of market experience and wisdom very candidly through this thread.
I want to also give credit to the folks who are regularly picking your brain by asking excellent questions. 
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I completely agree @rupaniamit . In fact reading this thread itself provides great practical insights more than any book . My come back to reference material Is always reading 3 sources - one up on wall street , Charlie Munger and Hitesh bhais thread . And best part that I find is his insights are always practical ( with live current examples ) and cuts right across the clutter which is the true art of investing that I havenāt found in any book . And always has been kind enough to warn against low corporate governance stocks to which amateurs like me would be more susceptible . Only one thing that everyone keeps requesting is that he write a book and that request I hope he fulfills some day 
Thanks so much once again on behalf of all of us here for taking the time out and answering the queries .
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This thread itself is much much more than a book. 
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Yes agreed absolutely
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Hi @hitesh2710 sir, indeed, we are all smitten by your info, humble and always helping nature to investors in their maturity journey.
I have a question, which is very common these days and have both left and right views: about the valuation of quality companies(in Consumption and finance bucket).
While I understand and agree to an extent that the current levels might not be that value in adding more now, what is your advice to the investors who have been long in these stocks, thinking with a further horizon of 5+ yrs( 10 is too much ) and that these 5-10 names have already been 2 to 5x of their investments, would you recommended profit booking or stay put?
What I feel is that their expensiveness was always there if we check past history compared to their competition and overall Sensex PE as a whole.So, was this same commentary still there earlier as well, or that now it has gone above the roof?
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it would be great if someone can compile top comments on this thread. I tried doing and have some of his writings (2-3 pages), which i feel i would refer in future
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competely agree @rupaniamit . this thread is far greater than a best investment bookā¦ the thought process and clarity with @hitesh2710 sir answer show the depth of his knowledge and wisdomā¦ And all examples within indian perspective is sone pe suhagaā¦
now its query timeā¦
In his book Mr bharat shah writes " Markets take cue from management intent. When intnt is not trusted, the value put on the numbers will diminish and thus systemically undervaluing such a biz & Mgmt, for a long period till, if at all, the creditability is resored.'
by reading this, first name come in mind in Hikal. so can we expect a long time underperformance from Hikal even if numbers come great.
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Thanks guys for your love and affection. I love to interact on topics related to investment and hence this thread. While starting it I had not realised I was going to enjoy writing and interacting as much as I did all these years. Besides writing things out clearly tends to clear things in our own minds which may not be so clear before writing. So as much as it helps everyone, it helps me too. And I believe that spreading knowledge is the best form of philanthrophy.
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Hi @hitesh2710 bhai, Can you please provide your view on Tata Exlsi. Is the worst over for this company ? Since tata motors seems to turn around ( so as auto sector ), also the company is now planning to get more revenue from Non automotive sector. Is this a good price to enter for 3 to 5 years horizon ? Your views are highly appreciated.
Regarding valuation of quality companies, one has to be observant of the fact that markets move in cycles. There will be times when quality outperforms. And thats been the case since Jan 2018 when the outperformance of the momentum and lesser quality kind of companies (chor bane mor, kachra etc are names heard on street in relation to these companies) . And along with these poorly perceived companies, the whole small and midcap space took a beating. If we observe, since Jan 2018, even with good results the stocks in small-midcap space did not move much and that lasted till some time back. The subtle change I see since past few weeks is that now with good numbers where markets perceive that there will be consistency going ahead and there are no balance sheet/promoter issues, stock prices do move up though they may not move up as much as we might have liked.
Once the outperformance of these quality companies reaches its final stages (as all things including life must reach someday) who knows there will again be a small-midcap mania, but we have to be smart enough to be in the right sectors.
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@hitesh2710 what is your view on ITC - valuation wise it is trading at multi year low. Growth is low but does not compare well with other players. Is it due to low ROE FMCG business
Dear Hitesh,
At times, we see an entire sector go through very bullish cycle and almost all the stocks in that sector keep going up. Some of them were IT, Pharma and then NBFC / HFC.
Do you see such pattern happening in new sectors like Insurance & AMC businesses (al though not many listed companies are there now)?