hello hitesh bhai, have you tracked the paper before ?
for e.g. JK Paper, West Coast paper, Intl Paper APPM, TNPL, Seshasayee, Satia, N R Agarwal, Emami, Astron, Pudumjee, Nath Industries, Ganga, Rainbow etc
I understand from my sources that raw material prices have really trended low in Q4-2019 and that has resulted in these guys buying large amount of paper which will land in india in Q1-2020 and they expect a good margin in 2020 moving forward. Do you have any views ?
sir,please give your view about excel crop care and its merger with sumitimo chemical ltd .Are you think there would be any synergy after merger.
Hi @ram1984, Would like to suggest you to start a new thread pls. Otherwise, this thread would unnecessarily get cluttered with comments on your PF and then your responses and so onâŚ
Rgds.
As suggested in earlier post, please start a seperate thread of your portfolio wherein you can benefit from valuable opinion of other boarders besides me in a properly chronicled manner.
I dont track excel crop too closely but came across a presentation by sumitomo chemical india ltd. I have yet to look at it closely but you might have a look at it to get a better idea about the business and its prospects.
@ameydesai I dont track the paper segment so not much idea about it. I think there are too many variables affecting the business and things change fast in the space so its for the nimble footed.
Hi Hitesh Sir, would like to know your fundamental views on #AdaniGreen.
This is not to buy/ sell, want to know your analysis about the company to understand itâs current UC from past few days/ weeks. Thanks in advance
I dont know about the exact business of Adani green. But the name suggests it might have something to do with green energy.
A look at screener shows it has been making consistent losses since past many quarters and only in recent quarter has it been profitable and that too part of profit is due to negative depreciation.
These kind of stocks are like riding a tiger. While the journey is a whirlwind one, its often difficult to get off. I personally prefer to stay away from companies where I dont have any insights on the companyâs business or levers of profitability.
Hi Hitesh bhai ,
1Theres a view that large cap stocks cant easily become a multibagger due to higher base or a stock with high value cant multiply fast . But some like page, Nestle , 3m India , Titan multiplied (Many quietly doubled in 2 ) last despite higher base while some couldnt . Request your views on the same as to how does one differentiate between two such categories of stocks .
2 Also FMCG stocks rises more than proportionately to increase in earnings as compared to other stocks with relation to their earnings . Whats the reason for the same ? Is this normal or is it due to PE expansion that was experienced due to small cap issues in past year and whether it would face a time correction or can still appreciate if the growth continues ? Theres a view that high pe was earlier also . But isnt it way too high for fmcg where growth is not high like other compounders.
3 Hitesh bhai, what amazes me is that you have a great ability to simply cut through the clutter and look out for only relevant factors . How to develop such thinking to simplify without unnecessarily complicating factors that arent of high importance? This , to me , is true art of investing. This skill would not only be useful in investing but life in general. Pls suggest way to develop such thinking with an example of stock . It would be a great help for all amateur investors like me as what to overlook is most important in this high information world as also how to simplify
Many thanks for lots of learnings shared by you .
Hi Hitesh Bhai,
Could you please share you views on PNB Housing Finance as their profits are growing, but it is not reflecting in the stock price.
Multibaggers are usually stocks that go up many times. The ones that make a real difference in being rich and being wealthy are the ones that go up 10-20 times in 3-5 years. Atleast that has been my experience. And of course one has to have decent allocation in the first place or else keep adding on the way up. The large caps u mentioned usually do nothing or very little for a span of few years and then suddenly move up. There are others like hdfc bank which goes up like clockwork. So in large caps also there are different types of winners. The triggers in all these different types of companies are different and hence difficult to put a finger to them and generalise.
Since past 2 years, FMCG stocks were considered to be safe havens amidst all the volatility. Since most of them were domestic focussed, they were least likely to be affected by too many factors. Hence investors flocked to these names and their stock prices went up despite sluggish growth. Now picture seems to have changed and a lot of small and midcaps previously ignored have started catching market fancy and I reiterate that these pockets might be a good place to be going forward.
Regarding the development of simplicity in thinking I think a lot of it is natural and I cannot guide any one how to do so as I cannot figure out how my thinking has developed. But a large part has come from observing things around me and things people have done around me and the outcomes of their actions. And then trying to internalise these things.
Just to give u an example, you can refer to JB chem. It had all the ingredients of a good company and the trigger started when a previously conservative company did a big capex in 2016-17 as articulated in the annual report. And on top of that, they increased MR strength to almost more than double in next 2 years. For me this was a very easy thing to latch on to. And then came the ranitidine fiasco. But if you looked at the data points, ranitidine contributed only 10% of revenues and maybe 15% of profits. Against that, the tax break due to reduction in corporate tax was a bigger benefit to the company. And even ranitidine issue was blown out of proportion. And it was not as if we were paying too much for the company. With cash on books it was quite cheap. (this was an example in Lynchâs one up on wall street with I think some car company). So the faith remained unshaken and in fact I ended up adding more to my position on dips to 350 and below. And now with positive newsflow and market sentiments changing, the stock price seems pretty strong. Even quarterly nos for domestic sales for the company point to 15% growth in sales which should augur well for q3 numbers.
If you read the newsflow at the time it was very easy to get carried away and sell out. But the data points were pretty clear to someone who though with a cool head.
@akumar_saini I dont track pnb hf anymore.
Thanks so much Hitesh bhai for the crystal clear explanation as always .
Hitesh bhai , Which sectors or stocks can one have a look at at this time when mid caps are set for recovery ? Thanks
Hi Hitesh,
do you have any view on Multibase India? I know you were tracking this earlier. I could not find much information about what is changed in company.
Thanks,
Milind
Someone suggested me around 50 Rs, but I stayed away purely due to the fact that, they have got big % of shares in pledgeâŚ
I think in the current scenario of fancy for small and midcaps, one should make a list of companies which have delivered good results in past few quarters but have not been rewarded by upmoves. These will move strongly going ahead. The other bucket is obviously the value buys which would include companies quoting below replacement cost or those which are cheap on PE Basis or on P/BV basis etc. But my guess is these would go only up to a certain point and stagnate whereas the first group of companies will provide much better returns.
@malthankar Multibase is like a bad dream I would like to forget. 
Not tracking it anymore.
Hello Hitesh bhai. Are you tracking Micro finance companies like CreditAccess Grameen or Spandana spoorthy? These are recently listed companies but have gained a lot of interest among market participants.
Hitesh sir, whenever i have tried to identify such stocks, either i burnt fingers badly (initial years of my journey) or saw them move ahead while I kept tracking ( had the original idea well in time but not the conviction to buy significantlyâŚprobably due to 1. Previous bad experience 2. Lack of skills and understanding to be sure). So i simply stuck to some well discovered mid size names. It has become my mindset now. How do i change it in right manner to again try to look for multibaggers? Somehow I have developed a block to refrain from such thoughts. I know itâs funny and somewhat strange but one one hand i want to have multibagger returns and sometimes identify right stocks but end up buying same old discovered names. What must i change to be able to think and act in most beneficial manner.
As investors we have to find out which investment style fits in perfectly to our temperament. This remains the most important trick in investing. Trying to follow others and changing our own style of investment is likely to lead to poor outcomes.
Those who enjoy investing in compounders should stick to that particular style of investment. If at all they want to learn new tricks it has to be done by investing a very small sum of money as a starting point and can be taken to the next level if enough confidence is there to adopt the new style.
Personally speaking I have had to go on a journey exactly reverse to yours. I have always found comfort in investing in small-midcaps space and have by and large shunned the large cap space. But last 2 years have forced me to adapt to investing in well discovered names where downsides were limited and stock prices collapsing was not a high probability event. But having said that, I am back to my original style once I have seen the broad based rally starting.
In investment there is no single holy grail. One can achieve success through different approaches be it small caps, midcaps, large caps by using fundamental style or by going through the technical analysis route or better still by combining the two approaches. So there is no need to change a successful formula in search of a style that doesnât suit our temperament.
@arpitjain512 I dont track either credit access or spandana. I track MAS fin but it has run up recently and valuationwise seems expensive.
Hi Hitesh Sir, First of all I would like to say Thank you for going through our post(some of them are very detailed) and providing guidance to new investors like us. We all appreciate the time and effort that you spend in replying to our post.
This post might be big as I want to ask few questions which might help other investors like me. These are on stock selection, conviction, temperament, avoiding mistakes. Some of them are interrelated.
What are your thoughts on how new investors should screen the stocks? If I ask you on top 4-5 parameters on how you filter the stocks, what would be they? Also where/how do you find stocks which could be further analyzed for next level of research?
How do you suggest we can build conviction to buy stocks in good quantity? How can one build more knowledge about a business? Please feel free to take example of any company from this list or any other stock.
How do we avoid or limit these type of mistakes? e.g. stop loss could be applied. But sometime even good stocks might come down due to temporary reasons.
Investment style - I know you replied in above post. I would completely agree with you that one should have its own style and shouldnât copy other style. e.g. in 2 years, I found that I canât get high level of conviction in mid and small caps. So i decided to have 50-60% in large cap like HDFC,SBI,ITC,Maruti etc. 20-30% in mid caps like Avanti Feeds,Dilip Buildcon and 10-20% in experiments like Oriental Carbon and Chemical, Vinati Organics,PI Industries etc. Reason is that I dont need to research in detail on large cap and just need to keep updated through the news on company. I know large cap will not give returns like Mid and Small cap. But until I build good conviction on mid/small cap, I would not be able to allocate good portion of my portfolio in mid and small cap. I dont have any question on it. I just thought of mentioning this point.
Sell - So far I havenât come up with sell criteria. I am just buying for last 2 years and sold only few stocks like Mirza international(realizing it mistake), M&M(dont think it will grow), some quantity of Avanti Feeds(2 weeks back assuming Iran/US thing might go in bad shape and wanted some cash for buying opportunity). My thoughts on sell criteria is that one should sell if business is changing its fundamentals like Mirza did or you realize your mistakes(very difficult to accept like I am not able to accept Yes Bank and Multibase and sitting on 60% loss in each). These two are easy in theory. But difficult to implement.
Apart from these two, when do you suggest we should start thinking of selling on valuations? e.g. I have very small quantity of HDFC Life and IRCTC(less than .5%) which are on very high valuation. How do one decide on whether to sell them or keep? These might keep going. Another example is Jindal Steel and Power, I bought at 170 and it went till 280 and came back to 100. I didnât sell it. Not sure when I should have sold it and what should be the criteria to take sell decision.
Thanks in advance for what you are doing and helping other investors in building their style/conviction/temperament.
Hi Hitesh sir
Whatâs your view on Manappuram finance .Its moving toward full fledged nbfc .Given the bull run in gold its future looks good .Still available at less than 15 PE.Trustworthy management ,good dividend yield ,under penetrated sector and long tailwind .Nil asset liability issues .
Thanks a lot
If I were to try to find growth stocks, then the screener I would use would be something like
Sales growth more than 15% for 3 yrs, 5 yrs, 10 years depending upon the kind of company I want to buy.
Same goes for operating profit growth. (net profit can be affected by some extraordinaries and hence better stick to op profit)
ROE/ROCE more than either 15 or 20%
D/E less than 1 (sometimes growth companies will have higher D/E)
Working cap to sales less than 0.25
One can add PEG, profit growth for shorter periods etc and see the results.
I am not too much of a tech savvy guy and hence not too keen on these screens. Basically ideas come from various sources including fellow investors, VP forum, brokerage/research reports etc.
What is important is how you go about analysing the company. And thatâs where annual reports, concalls, VP forum (again) etc comes in handy. And with so many VP guys spread over India providing a valuable network, if a company is located in a particular city and if I have a friend there, I take his help in getting idea about promoters reputation if he has a view on it.
If enough homework is done before buying then conviction is not a big problem. Conviction usually is directly related to movement of stock price. Problem happens once stock price goes down. The question to ask then is, is the stock price going down in tandem with markets or specific market segments? Or is it due to some specific issue related to the company? If so then we have to try to figure out whether it is a serious issue and whether it is temporary in nature or more of a permanent nature. Try to avoid reading too much of opinions and newsflow or googling for the reason. Most of the times we are bombarded with unnecessary news and opinions and these are better avoided. If at all you are seeking an opinion on a forum like VP, try to have a balanced view after reading different opinions.
The best source of getting information about a company is annual reports, concalls, attending AGMs, visiting plants (if possible), doing scuttlebutt by talking to competitors, suppliers, customers etc.
An example about conviction was recently when for a few days most cement stocks went down due to some newsflow that there was a correction in cement prices per bag by around Rs 20-30 per bag. This was less manifest in North-Central markets. Now I am invested in 2 cement companies, namely Birla Corp and Digvijay cement. My theme for both was turnaround in performance which has been coming through since past 2 quarters and subsequent under valuation. So I was not too bothered by these gyrations Example of JB chem was already quoted earlier.
Its difficult to avoid these altogether. Idea should be to minimise them. It again boils down to the homework done earlier. Best thing to do I think is to write down an investment hypothesis at the time of buying with relevant details and put in the possible reasons to buy and sell. And use this document to check how the story progresses as time goes on. That should provide a sort of impartial baseline document to look up from time to time to see how progresses. And if the reason to sell does materialise due to whatever reason, then one has to act swiftly and take appropriate action. In my case I have found that sometimes I am found wanting in case of swift action in terms of either buying or selling. So now I have some excel sheets written down with details about stocks where I anticipate to take action. (my portfolio usually consists of nearly 30-40% short to medium term bets and rest long term and hence this. For those with coffee can portfolio, one doesnt need to worry too much about selling unless the story goes sour)
I think as you mentioned I have put up a post on it earlier and no use repeating it.
I dont know whether I am well qualified to give any views on how to sell as over the years selling has been my weakest part.
But I think one has to have a philosophy on selling and hence its better to have some criteria laid down on reasons to sell. The first and most obvious is of course investment thesis not playing out even after sufficient time. Second is if we have a better alternative which we feel is going to provide higher returns. (all this after doing enough homework) Sometimes I feel one has to have a mental stop loss of specific percentage point drop and evaluate the investment if stock price goes there. Usually 20-30% drops in a stockâs price is nothing to be worried about but if the drop goes beyond these levels and there is no quick recovery, its time to be bold and even maybe get out. 8-9 times out of 10, a drastic fall in stock price is a harbinger of a line of cockroaches likely to come out of the closet and hence prompt action saves the day and the portfolio.
Another thing to keep in mind is to be absolutely clear about long term stories and cyclical bets. Cyclicals move very fast either way and if we have a position in it we tend to get caught up in the sway when stock price goes up and try to project higher and higher things. Here if one is not too confident of selling then its better to sell in parts on the way up.
The most tricky part of selling is about selling on valuations. There is no single correct answer on that. I am of the camp that believes that once a peak in valuations reaches, reasons to gum up the story come up by themselves and cause a drop or a sideways move for a prolonged period especially if the run up has been very sharp. It has been seen umpteen number of times with market darlings like Page Inds, Kitex, Avanti etc. So for me there is a definite sell price.
These are my thoughts but dont take them to heart. I have been wrong a number of times very frequently and hence one needs to keep thinking and try to evolve as a better investor.
