In march i had sold off most of my holdings except for transpek where i had a lot of conviction and no option but to hold on due to poor liquidity
While in the selling I got some calls right, I sold some stocks that went up subsequently tòo. I guess i was not quick enough to sell in the early part of correction.
Post that I was very hesitant to invest but seeing the strength in pharma sector, (a lot of companies posting strong numbers and or giving strong commentaries. Accompanied by stocks hitting all time high or 52 weeks highs) I started doing fundamental work on companies in tge sector. And got convinced that in a Corona riddled environment, this was the sector least likely to be affected. So ended up buying a lot of pharma companies.
Currently cash is around 20-25%.
Regarding current market, I am taken by surprise by the nonchalance shown by the markets and the resultant rally. Personally I am still not too sure about how long businesses are going to suffer because of a variety of factors. But after a point, its futile to argue with the tape, so started buying into pharma. The other sector I like is speciality chemicals. Telecom seems least likely to be affected.
Regarding whether to book profit or continue to ride the rally is a tough question to answer. But my gut feel is it might be advisable to book profits in companies which have run up a lot and business prospects are not too clear.
Regarding assessment of management quality, I agree with @rajguleria. Idea should be to look for whether they are walking the talk, are minority investor friendly, have scaled up the business successfully besides financial matrices.
Hi
Hitesh bhai can give much more detailed insights on the same but will try to give my 2 cents - i feel the ability of management to walk the talk , achieving targets communicated or exceeding them , prudent capital allocation (i.e history of putting capital to correct use by making right acquisitions or paying regular dividends , managing company in trouble some times , not taking unnecessary debt and if taking debt, retiring it timely and leveraging it to good use by increasing ROCE , not doing unnecessary diversification .
An example i like of steering through earlier tough times is Bajaj finance , Prudent capital allocation is Pidilite (the way they are doing good acquisitions related to their field), Nestle (innovating in its category and adapting and changing strategy after Maggi fiasco by introducing more products , focussing on volume led growth ). Quality managements are nimble footed . Have efficient working capital management and cash flows
For riding success stories especially for the longer term, the idea should be to keep the focus on fundamental factors like sales and profit growth, debt levels, margins, and management commentary besides monitoring the peers, and the tailwinds for the sector.
Trying to use technicals too frequently in these kind of situations will cause unnecessary entries and exits.
In case of multibaggers, the usual story is that we buy very cheap. e.g when i got into ajanta, it was growing its profits at 30% cagr in past 4-5 years with improving margins and available at very cheap valuations of 5-7 PE. Gradually as the growth story kept unfolding the stock price kept getting higher and higher after nearly every quarterly results. The previously 5-7 PE stock got re rated to 10 PE and then 15 to 20 PE. Thatâs when I had started getting jittery thinking enough re rating had happened and upsides were limited. I ended up selling my position after nearly 6-7 X gains within a quick time period. But I realised my mistake and got in at slightly higher price with even higher allocation and the stock went up another 3X post that entry point and PE reached nearly 35-40. That was too much for me and I had exited at the then price of around 1500 but subsequently the stock price went up to 2000 plus before correcting to levels of below 1000. Now its again back to 1400-1500 levels when I am again back in as the exports seem to be doing great and two newly commissioned facilities at Dahej and Guwahati should serve as growth engines. The annual report of FY 19 is worth a read.
In the early phase of the journey of a multibagger there are a lot of misconceptions about the company and or the promoters and we ourselves tend to get swayed by other peopleâs comments and views. Hence it becomes compulsory for us to have an independent viewpoint and keep focus on data points rather than opinions.
An approach a lot of investors keep using while buying is to keep adding as the story keeps improving and pyramid on the way up. Earlier I did not do this as I was so aggressive in my buying that the allocation in the beginning itself was very high. But gradually I have got around to using this method in my style also.
Exits wise the graceful thing to do is to gradually keep reducing positions as valuations climb up to uncomfortable levels and froth keeps building up and there are tell tale signs of bubble.
I have found Donald to be quite savvy in his exits in his big winners. He takes a calm approach while exiting and does so in a staggered manner.
Learning about you investing journey has been a great and rewarding experience for me, thank you so much for your wonder full insights, it really helps beginners such as myself.
Sir can you please share some filters that you use while identifying new stocks.
Thanks so much for explaining your allocation process. On a somewhat different note, when I look back at 2010-2013 I could screen out a number of companies which were available quite cheap (<8 P/E or 1 P/B) and growing at very high rates (>20%). Do you still find such companies in the current markets? If yes, can you help us with some names
Wanted to get your thoughts on the below companies:
TCNS Clothing - company operates in womenâs Indian/fusion wear apparels (brands include W, Aurelia). They have been growing at 20%+ CAGR in the last 3 years (pre-Covid). Price has been falling since its IPO. Limited debt. Promoters have stepped away and brought in an external professional to run the company. RoCE at 25%+. Company trades at 20PE currently. Moat lies in launching fresh designs at a rapid pace - W enjoys a better brand perception than Biba or Globaldesi.
Atul Limited - diversified chemicals company. Has been present for a long time. Strong growth and RoCE profiles with no debt. My only concern is it has some investments in Arvind Ltd & Arvind Fashions (Atul and Arvind have a history from the Lalbhai family). Otherwise, the CEO is a technocrat, and the company is trading at 20PE unlike some of the other chemical companies at expensive valuations.
Both these companies appear to have a low profile - maybe Lynch businesses? Can you share your thoughts on these two businesses?
@ravi_ambati Atul ltd got Arvind and Arvind Fashions due to Arvindâs business restructuring, basis earlier investment. They also have received loan from promoters, though at a reasonable rate and small amount.
Apart from this solid business, present in Perfumery and Agri as well, CEO keeps low profile, not much in limelight.
Disclosure- Invested.
I had a look at TCNS clothing post its IPO and liked the business. But at that time around 700 kind of levels, it seemed to be expensive looking at its short history. But now due to Corona led correction it seems to have come to reasonable valuations. With a quarter or two of pain expected and then if its business as usual, it can provide decent returns provided it maintains its brand strength and consumer spending in the sector returns.
Atul Ltd is a big player in chemicals/speciality sector and can be a good compounder going ahead. Recently there was a scare due to govt ban on a variety of insecticides etc wherein a list of banned chemicals was put out. But Atul has a wide portfolio and that mitigates the risk to a large extent.
Have a generic but potentially insightful question if the answer comes from you!
How do you generate ideas on a regular basis ? Is it through talking to other investors/media reports (not Twitter but something you read regularly maybe). How has this evolved for you over the years as you have gained more experience and success?
In past three months many themes have emerged and many investors have missed out on the initial 40-50% bump in Pharma and Chems, ofcourse if the runway is much larger it is not much to cry about but just thinking that market is usually fwd looking and once the verdict is out in the open then the majority of the (easy) gains are done with.
For example, mostly in this forum many people agree that auto is not out of the woods and will be while before that happens and there are chances of disruption and what not, but as and when it does come out market will not give a clear sign and its down to ones interpretation and ability to read the signs but there is clearly money to be made there, and perhaps some other sectors which are out of flavour currently.
Hi @hitesh2710 - Have you looked at Bajaj Consumer recently - valuations too good to be true.
There could be near term impact on sale of personal care items due to Covid19 but still can one bet on PEs going back to 20-25 in 1-2 years or may be trade at 3% dividend yield in future?
Superb insight on multibaggers Hitesh bhai .
If I may ask , could you pls share what stocks you find interesting currently for multibaggers or are a part of your portfolio and you find them at such juncture as Ajanta ?
Many thanks for the wisdom sharing Hitesh bhai
@hitesh2710,
I find the current market interesting. While the economy is making new lows, market is making new highs, which is kind of baffling to me. I feel this discrepancy will be short lived. Please let me know your views on the same. Although a difficult proposition, but what are the factors that you will look as signs of possible market bottom. Lastly, TCS looks an attractive bet to me, I am waiting for a price range of about 1200-1400, please let me know your take on it.
Many a times markets and economy may not go in tandem. Very high liquidity and low interest rates, thrown in with generalised pessimism often causes sharp rallies. Like the current one.
But over the medium to long term, say months to years, markets, more specifically stock prices tend to follow earnings and future prospects.
People have been sceptical of this rally since many days, citing poor economic prospects. But markets like God, move in mysterious ways.
We as investors have a choice of sitting out, or selecting sectors and companies we want to invest in. And we should exercise our choices rather than be carried away by narratives and market levels.
@hitesh2710 The way the infections are rising rapidly and minutes of meeting of senior level Health officials available in public domain, it appears that Covid situation is becoming v bad with infections rising and facilities fall short of requirements. There are various estimates of likely figures,month of peaking out, still time in vaccine availability etc etc. Definitely ,the rising trend would worsen the micro economic situation in India and the stock market may not remain indifferent to this situation for long and may also decouple from the market where the situation is improving.
Whatâs your opinion for a long term investor and your assessment of the Covid situation in India?
