@babu44b HDFC Ltd is one of the largest home loan player in the country and will continue to do well till housing demand chugs along. Plus it is a holding company for hdfc bank (though there will be some holding co discount), besides holding other subsidiaries.
I think as long as the company itself and its subsidiaries keep growing, it remains a good high quality investment.
@diva12b South India trades at multi year low for a reason and its for that particular reason that it should be avoided.
@saurabhshares Idea of parking spaces is to invest into some stable large cap companies where downside in current situation is limited and there are chances of making atleast some returns. As and when a good opportunity occurs, idea should be to switch from these parking spaces to the former opportunities.
I think in the current scenario, familiar names like hdfc bank, hdfc ltd, asian paints, hul etc look steady and could qualify for such parking spaces.
But a risk that has to be kept in mind is that markets have a mind of their own and hence even these so called steady names may correct.
Paper industry is plagued with multiple variables that affect its business model. Besides demand, it is exposed to raw material price fluctuations, fuel costs, dumping as you mentioned, etc. That doesnt make it for a great sector to invest for the long term.
If one is good at playing cycles be it through understanding of the business segment or through charts it can provide good returns providing the call is right. But in cyclicals, its difficult to be right consistently and hence idea should be to switch back to quality growth companies once one makes a killing in cyclicals.
This is my second query to you. Thank you for responding to everyone.
Avanti is favorite Valuepickr company. I am invested in it from 2016 (Thanks to Valuepickr). Looking at the progress made by company in last 3 quarters, I want to average up. However last quarter results and coronavirus scare has turned it into a falling knife (45% down from 52 week high made in January). This looks like a golden opportunity to me but I am not sure how much US import of shrimps is going to fall due to this virus which may impact whole industry.
Do you have any view on its current valuation? do you think it is better to wait for stock price and news flow to settle?
hi @hitesh2710
As we know, the markets have been very volatile in the last weeks. (More so in the US where the swing is very wild)
Could you tell if technical analysis is of any help in such a market condition? I see that people give some number as resistance. Then they keep giving new numbers if its broken.
Asking you since you know technically very well.
One of the first things we should know about investing is the difference between a structural story and a cyclical story. Most new investors falter in this.
Structural stories are businesses where consistent predictable growth is present and variables affecting the business are few. Examples are banks, nbfc, fmcg, consumer durables, etc. Earlier pharma was also considered a structural story but with US FDA and US market dynamics changing the pitch for pharma business became tricky. In these kind of businesses especially in those with leadership status and good managements, one can afford to remain invested for long periods of time.
The cyclical stories are those where there are temporary tailwinds for the businesses which take the market by storm. Earnings explosions occur for brief periods of time and investors get caught up in the frenzy often mistaking these cyclical stories for structural stories, and project earnings for many years to justify valuations not feasible for such stories. Almost every year this kind of phenomenon happens in the markets if one observes closely. Avanti is one such company. Although it is not as bad as the typical cyclicals like steel, polyfilms, sugar etc, there are a lot of variables affecting the business like volatility in shrimp prices, disease outbreak, anti dumping duties, so on and so forth. Beauty about this business is that it tends to create 2X or multiple X returns within a short period of time if one knows how to play the story. Conversely, if one gets in at the top, there is a lot of heartburn. Recently due to Corona fears , the perception is that shrimp consumption would go down and hence stock price corrected from 700 plus to levels closer to 400. Crux of the message is not to confuse this as a buy and forget kind of company.
Main purpose of technical analysis is to identify and ride the trend and find out any change in trend. The specific levels people provide for support/resistances are based on some time tested parameters like specific moving averages, retracement levels, previous bottoms/tops, consolidation zones and so on and so forth.
Once a trend changes usually markets tend to go to extremes and hence targets are often only lamp posts on a road. The actual destinations usually are way off what people think. Providing short to medium term targets based on certain patterns like flag, cup and handle, inverted head and shoulders etc is possible. But these are minimum targets if patterns play out and actual targets can be different.
Ideal thing to do is to consider a confluence of different patterns/parameters and come to conclusion. And even then things might be not too accurate. Idea is to be approximately right than precisely wrong.
Sir,
This Corona outbreak seems to be now much more than a scare and looks to be becoming more than manageble. And the way the markets are bleeding, it looks like the cut is going to be much more than my initial calculation. Cut the loosers/ non-performers in the portfolio and increased allocation to performers. Now they are also tanking very badly. How do you view this situation? Is a 50-60% decline on the cards? Delete if the question is inappropriate.
Howard Marks says in âThe most Important thingâ â⌠skepticism is not only to ask your self is it worse than it looks ? it is also to ask yourself is it really as bad as it looks ?â
My 2 cents on the issues :
i am just thinking if the pendulum is swinging towards âextreme panicâ levels without much substance ?
even if someone gets covid. the mortality rate is just about 2-3%. A lot of people are getting well and cured. Media is more focused on reporting new cases.
I have Chinese colleagues and most of the China is coming back to normal except wuhan.
yes bank was a known case. anyways, it shouldnât take the entire market down with it ?
low crude oil prices is a great boon for a oil-deficit country like India, isnt it ? Let Russia and Saudis fight and India enjoy the low prices.
⌠or may be it is just the eternal optimist in me who is speaking
@hitesh2710 please provide your opinion on what is the right level of panic in these unprecedented circumstances of pandemic spread across the world and how much you expect the indices to fall.
I think that although mortality rate is 3% (which in itself is quiet high with estimated global death of 40 million), 15 out of 100 people require hospitalisation. This will be a huge drain on a countryâs resources. Many people without social health care or health insurance will suffer. Houses with child or old people will take additional care and reduce public exposure which will slow the economy down. Mass closure of social places such as movies, restaurants etc will result in huge job losses and the impending economic shock. Probably it will take at least two more quarters for things to normalise and until then a lot of shock is still left.
Yes, probably that could be premature and not a very reliable estimate. But this is being compared to 1918 Spanish flu which had such high death rate across the world.
But outside of it, where it concerns matters of life and death, we should panic. If panic was not essential for our survival, millions of years of evolution would not have given us this trait.
Donât keep it as business as usual until officially reported numbers spike. Had Wuhan administration panicked early, instead of keeping normalcy, we might have been able to contain the virus within Wuhan itself. Now, containment seems impossible. But the S-curve growth of infected in South Korea shows that panic is effective in slowing down its spread. Our infrastructure cannot handle a steep rise in infected, by flattening the curve we can buy some precious time.
I stopped trading two weeks back, as the risks looked too high, and my trading system is designed for trending bull markets, not the high volatility markets like present. But not only have I kept all of my long term investments intact, I am also adding small quantities on every steep fall. Coronavirus outbreak is huge negative in the short run, but it does not impacts the long term earnings of the underlying businesses much. That said, I am only 50% in equities, with rest mostly in gold, so I have enough reserves to keep buying.
But outside of the investment world, I am taking all precautions against virus, as well as spreading the panic.
Case fatality as initial reports are suggesting is around 2 per hundred but this case fatality is grossly miscalculated. Actual case fatality may be less than 0.01 to 0.1 %. You calculate case fatality from those who have confirmed infections. But more than 90-95 % do even seek medical help since they have mild or no symptoms. So you may not know actual figure of those infected. India has a largely young population compared to European countries and china, so this gives natural immunity together with Indiaâs climate.
Sir View on Inox Wind and JSW Enrg? Inox Wind stay in this bad busineess cycle where almost all player are going bankcrupt , and promble are solving slow . can it become turn around.
Dangerous and complacent thoughts. You have to also look at infection factor. Higher infection rate x low fatality is same as low infection rate x high fatality.
Real risk of corona-virus is High infection rate x high hospitalization.
If precautions and discipline is not in place, whole society can go into a tail-spin in few weeks.
I will try to pen a few thoughts on the current situation of the markets, wherein Corona has become only one of the many variables. This seems like a Lollapalooza effect where things began with a viral epidemic and other negative factors started tumbling out of an unsuspected closet.
The seeds of the correction were planted in the preceding bull run where a lot of excesses were created and stocks of certain companies were quoting at stratospheric levels, with a lot of fancy logic as is usually the case in bubble zones. And as is usually the case, a pin puts up its head to prick the bubble. This time the pin started in form of Corona followed by crude crash and specific to India, the much expected Yes bank imbroglio. The exchanges refused to acknowledge the bank guarantees provided by brokers through Yes bank and little time was given to provide them through other banks.
All these factors have a cascading effect on investor sentiments and the results are there for us to see. Widespread pandemonium and panic.
Question now is how to approach the correction. It basically remains the same. Only thing that changes is the contour and timeline of the correction. This correction has inflicted huge damage on investor confidence and it takes some time for these scars to heal. One has to bite the bullet and get rid of the companies which we feel are not going to get out of the rut quickly. And have a calibrated approach into buying companies which we feel are going to come out of this setback with flying colors.
While selecting companies one has to think about the second and third order effects of factors like Corona, crude and metals crash etc. Usually these kind of situations dont last long but till they are present, they often create severe dents in the portfolios. The prudent approach is to wait on the sidelines till thecdust settles and start buying. The other approach is to buy in small lots at regular frequencies or at different price points and hope for the best.
It is no use speculating on the timeline or effect of things like Corona as no one has a clear picture and its usually shooting in the dark. The factors which have created the correction are not in our control. What is in our control is our own behaviour and temperament and that is what we should focus on. In the immediate future, defensive stocks will be the flavour till the dust settles but later on there will be opportunities in the small and midcaps.
Dear Hitesh, While majority of the stocks have undergone huge correction, the index is still at high levels. Do you foresee the NIFTY / Sensex falling another 20 to 30% from current level?
Great thoughts sir. Just want to add a little more ⌠Most important thing to be a successful investor is to stick to the investment philosophy and plan in a full equity cycle (bull+bear cycle). Theory of opposites work best in the financial markets. Markets rise on wall of worries and falls on ray of hope. In todayâs time, still there is lot of hope in terms of finding a solution to the corona problem. World central banks are pumping in money, govtâs are writing bills, analysts are expecting virus to die a natural death in upcoming summers and many more. People fail to understand that Wuhan - the epicentre of virus - is reporting no new case now amid ongoing winters, while Australia, a relatively hot place, is seeing cases rising. Humans build assumptions as per their comfort and changes from time to time in line with changing circumstances.
Staggered buying is recommended in both - bull cycles and bear markets - but quantity of accumulation should vary - buy more in bear and less in bull markets. The recent magnitude of fall also states the weak foundation of capital markets which have been surging on hopes of economic recovery thus far. But hope is eternal in nature and slated to change shape time and again - earnings recovery to earnings acceleration. To be a successful investor, we need to take risk in bear markets and maintain discipline in bull markets.
Most surprising fact in present times is that Warren Buffett who will turn 90 in August is sitting patiently and calmly on nearly 60% cash value ($128 billion) to the portfolio, while instant gratification youngsters are fully invested these days. If ones investment horizon is long, then instead of sitting idle, first quality scripts ought to be accumulated on declines with adherence to risk weights.
Important: Biggest wealth destroying industries in financial markets are forecasting and advisory. Customer of these 2 industries only passes the time and donât create wealth.
Do you think we have entered the phase of capitulation? Trying to apply the various stages as described by Peter Lynch and I doubt if we are there yet⌠experts are still cautiously optimistic, the fall is being looked at as a great opportunity etc. I mean people are still not hopelessly abandoning the subject. But when we see on the screen that PI is down 10% and Transpek is down 20%, I donât know what to make of it. Do share your views please. (Just being greedy because we may still get better entry points in capitulation, hence the query).
Also, if possible, it would be great to know what you are buying in such times. Or at least your wish list please .
