Adding to this post: Was listening to 5paisa webinar with Madhushudan Kela and Anuj (good watch btw) and what stood out for me was large number of new brokerage account openings. Same was said by Zerodha’s Kamath sometime back. I think with this lockdown retailers are ending up trading and tasting some blood (success) due to this pullback rally. I think its not going to end well for most of them and we need to be extra cautious to just survive in this markets.
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I think its not going to end well for most of them and we need to be extra cautious to just survive in this markets
This part of your message is not clear.could yo elaborate?
I mean there is no free money in markets. The way markets have been pulled up till Nifty reaches 10k when most economic activity has come to stand-still is mind boggling. We can justify markets are forward looking and they have discounted few quarters of pain etc but still given this pandemic has impacted all the world economic activity simultaneously, its unprecedented. I hope it turns out ok and my fears are unfounded but markets are there to cause maximum pain to maximum participants and these first timers are the perfect candidates riding on their beginner’s luck.
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Corp governance is a tricky thing to figure out atleast on first look. I think we should first go through the corp frauds in the past to see how the guys committing corp frauds have behaved in the past to get a basic framework of what to look for in fraudsters. We have enough threads on the latter in the form of Yes Bank, ilfs, dhfl etc.
But aside from these, there are some tell tale signs of good promoters and good companies which have been oft repeated in the past. A good read of past annual reports gives a lot of idea about what promoters/management has been talking and what actually has been done. Besides these, some of the red flags like cash flow mismatch, lofty promises not possible to live up to, pledging (in some cases), poor dividend payouts inspite of hefty earnings, piling of debt, unnecessary expansions, poor capital allocation etc are easy to track.
There cannot be one size fits all kind of framework to look out for corp frauds but if we have seen enough frauds being unravelled and if we have been observant in the markets, we can atleast have some sense of unease and be on the toes.
You can read through some red flags ashwini damani has raised and rebuttals to those by others. These gives one some points to ponder. Idea is to keep reading from experts and try to imbibe stuff and apply the accumulated knowledge in companies we are interested in.
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Indigo is in a sector which is bound to make a comeback sometime in the future. We cannot imagine a world not connected by airlines. And indigo remains the most well placed player in a troubled sector.
One worry can be the emergence of a strong competitor in the form of any player buying out govt’s stake in Air India. Currently it seems far fetched but it remains within the realms of possibility. Besides airlines as a sector has very few examples of sustained wealth creation. In fact the opposite is true to a large extent. Just try to find out rate of bankruptcies in airline industry and the statistics will be staggering.
Charlie Munger made a famous quote. : “All I want to know is where I’ m going to die , so I’ll never go there .” When we have a sector which is known to be a big wealth destruction sector, its better avoided. So personally I have avoided looking too closely at the sector.
@anup_dhere Guj gas is one company which will be up and running once the economy recovers post the current situatioin. So definitely one to keep on the watchlist. Among these piped gas players I would prefer players who have a high proportion of revenues from domestic piped connection as it lends a lot of stability to earnings. Let me know which one is best placed in this aspect if you track the sector closely.
@Kuldeepjadeja
I dont track hester bio too closely. Maybe you can get a better idea by going through the relevant thread.
@Peabody, @dd1474 maybe a better resource person for answering queries regarding honeywell auto. I dont track it.
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Thanks Hiteshbhai for suggesting my name on Honeywell. I have very small allocation in Honeywell and intend to increase at appropriate price. The current price appears near my purchase price but does not give comfort to increase my allocation. Businesswise, details are provided on Honeywell thread on VP. Since, there is lot of dependence of Industrial growth of Honeywell business, I would see short term chellanges in business (which is true now almost for 99% of listed business in India). I thought market would provide longer opportunity to enter at around 20,000 level, but is remain for very short period and I could not get in.
I would wait and watch for price to correct before increasing my allocation. I already have around 6-7% 3M which also have high dependence of industrial growth and hence would not like to increase allocation at high price for Honeywell. I am optimistic for MNC capital goods supplier in medium and I see 3ASH (3M/ ABB/Siemens/Honeywell) Indian subsidiary being great beneficiary due to De-chinisation of Global supply chain. However, in past Siemens and ABB have not treated their minority equity partner fairly and hence limited my choice to 3M and Honeywell. Both are very expensive and I may be completely wrong in forecasting future.
Discl: Hold 3M and Honeywell. Not a SEBI registered advisor, investor shall consult his financial advisor. Proabability of my forecasting future correctly is materially low.
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Hitesh Ji, I wish to have some Pharma Stocks in my portfolio and already put some money in Divi’s. Also have bought some Alembic Pharma and Lupin. But After lot of reading of Annual reports, I am somewhat confident of CIPLA. What is your view on Cipla. Also I am grateful If you can suggest some Pharma stocks for my own research.
I hope, it helps!
(source: Why city gas distribution stocks may be slightly better off in covid-19 times | Mint)
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Thanks for putting up the picture! I also read from the annual reports that domestic customers for Gujarat Gas are similar to Indraprastha Gas. But valuations for them differ a lot with Indraprasth trading at PE of 30 and GG at 16. and in fact GG has 50% more sales than Indraprastha Gas. (6500 Vs 9500 TTM. )
IGL has expansion plans in UP, NCR, Haryana and Pune (through Maharashtra Natural Gas Ltd) where as GG has plans in Gujarat, MP, Rajasthan and parts on MH. Mahanagar Gas caters only to Mumbai and adjoining district. I have started thinking that instead of choosing only one of them, we can buy all three.
There is one thing that I would like to ask. Gujarat Gas is owned with 55% stake by Gujarat State Petronet Ltd. GSPL has its own gas transmission business as well. Still GSPL trades at 9000 crore market cap and Gujarat Gas trades at 17000 crore. So would it not make sense to buy GSPL instead of GG? even after holding company discount, there seems to be some underpricing of GSPL.
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Hiteshji
please give ur views on Adani gas also …after TOTALs entry it will be different league …
Thanks
hi Hitesh sir,
Do you track Varun beverages- The bottler for PepsiCo in multiple markets in Asia
Products like soft drinks are ever green and they have the trademark for Pepsi PET bottles as well.
Keen to know your thoughts
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Hello @hitesh2710 sir,
Do you track BASF India? If you do then can you please share your views on the company.
Can you pls elaborate on what siemens and abb did earlier which was not in favour of minority investors. Thanks!
GSPL mcap is 11700 crores whereas Guj Gas mcap is 17800 crores. 55% holding value of GSPL comes to 9800 crores. Usually holding company discount can range from 40-60% so one needs to make appropriate adjustments to calculations.
As said before I dont have too detailed study on these gas companies and hence cannot comment on relative merits of IGL, MGL or guj gas. Adani group for me is an avoid because I dont like the promoter group.
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Business wise I could not find too much to get excited by basf india. But on charts it seems to be trying to come out of a bear market. Need to see how it behaves if markets were to correct further from here.
@Mukundks I dont track varun beverages.
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Hi Hitesh…First I would like to thank you for patiently replying to all the queries posted here.
I was going through roto pumps, you were interested in 2012 it seems after that could not see your comments. Mgt is guiding for 15 to 20% growth next 5 years. Quality of the mgt seems to good and product is accepted through out world but only in rotor based positive displacement pumps. Currently they are in top 10 global companies and aspiring be part of top five and asipiring to be a fluid service provider. They have a dedicated R&D team.
Are you still tracking this company and your coments please
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Find enclosed news report about issue with Siemens and ABB related to Corruption in global practice. Please note that in Capex good business, it is also kind of business “to facilitate” decision and hence one can not say with assruance that other managment I like (i.e. honeywell and 3M) are clean and there is no issue whatseoever. I can not give guarnatee of my behaciour and hence there is no question to provide assurance of management of companies. Please read this news with important disclaimer of I being having a negative bias to ABB and Siemens managment.
On simple google search while working on this post, I came across even enquiry being initiated against Honeywell for alleged mispractice in dealing with Brazilian company.
In case of Siemens, they hive of high potential telecom equipment business to Siemens AG in FY1997 (just 3 year after mobile started in India. The company booked all losses related to setting up business in listed companies. And just about when business to take off, they divested 70% stake to Parent Siemens AG and Listed company hold only 30% in telecome business. This is my understanding and It can be wrong as well. However, to best of my memory, even stock market and other minority investor found this development being adverse to them).
The result of this restructuring of telecom business, Siemens AG stake in telecom business increased from 51% (being its holding Siemens India listed company) to 70%+ 15% (51% of 30% stake held by listed company in telecom business)~ 85% at very nominal price in my opinion.
Find enclosed extract of Annual report (which also cover part of Chairman speech explaining above development).
https://www.reportjunction.com/Preview/Siemens-Limited-1997-71347.htm
Hope this provide some basis for negative perception of Siemens Managment.
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What are the main factors or causes that leads to an increase in operating profit margins of a company. It is often seen that companies operate at certain margins for N number of years and then suddenly as they grow and scale the margins tend to increase and in many cases they have increased by over 50%.
A case in point example is sunadram fasteners. If we look at it from 2008, for a handful of years the margins fluctuated around 10-11% and then from 2016-2017 themargins went up considerably to 17-18%.
What generally causes this to happen?
Is it because of 1)economies of scale 2) product mix 3)optimization of costs 4) operating leverage 5) favourable market cycles for industry ?
Secondly how does one go about spotting companies where this phenomenon might happen?
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First, apologies to Hitesh for hijacking the thread and thanks dd1474 for detailed reply. One last basic thought - I read above that you were comparing your 3m pick with Honeywell and you mentioned reason for not increasing holding in Honeywell as already existing exposure to similar via 3M. I went through Honeywell automation website, their offerings and some details in Google, I see them as a IOT focussed technology solutions provider to various industries…industrial iot to be specific…and I regret I didn’t reach it earlier few years back when I was on the look of iot focussed companies in India. While 3M , I see it more of an innovative products company in different areas with retail as well as Industrial elements to it…just curious why you see them similar as to me they are very different pieces of business. Thanks!
Hi Sir,
Would like your views on PSUs/Semi PSUs (NALCO, Coal India, Petronet etc.) which are sitting on cash, as fiscal deficit is expected to widen this year government might force them to pay higher dividends.