@hitesh2710 Sir,
I have vividly gone through this entire thread and amazed by looking at the list of stocks you owned. While one or two of such stocks shall be enough for investor to make fortune, you had at least dozen of them in your portfolio during high growth phase. Really impactful. And the open-hearted knowledge sharing has no parallel to it. A big Thank you.
Taking inspiration from this discussion, I just started looking at technical charts and just started reading William O’Neil. For one of my long-term position - Indiamart Intermesh, I suspect can we call pattern formed during mid-Jul to Nov 2020 period as high - tight flag? I am holding it with 3 to 5 year view, but a bit concerned since price has run up lot in short span of 1 year. Fundamentals are strong though and keep on watching technicals for major indicators.
In the last 5 years, the company has been able to convert only 68% of its profits to cash. when we compare this with Alembic or other pharma companies, the number does not inspire confidence. Your views
You are looking at only one parameter of a company while evaluating it for investment. I had a brief look at alembic and there too it seems cash flow might have a slight mismatch. You might want to check on that.
Try to look at a company from all angles. Different vantage points as Prof Bakshi teaches.
Well established big pharma cos usually don’t suffer from problems of cash flows. Domestic pharma is a cash cow business for all good solid pharma companies. Alkem has bulk of revenues from domestic markets. Exports are growing at a fast pace but still remains 30-40% of overall revenues.
Hello Hitesh Sir,
My question is related to current market conditions. If we look at the market currently every stock is giving fantabulous return irresptive of the fundamentals/technical. I see every other stock either at upper circuit even if the company is in loss for so many quarters. How do you approach such market. Do you make changes to your portfolio on a regular basis Or do you patiently wait for your stock to perform. Just an example in case if I have invested in granule india in last 3-4 months as it has medium term tailwind the stock has not moved a lot; however lots of stocks have given great returns during that period. Please guide a novice investor like me on how to approach these situations
Currently we are in a strong small and midcap rally which was in response to the correction it underwent from Jan 2018 till somewhere around April May 2020, which is more than 2 year correction. Now when there is a rally to a correction lasting more than 24 months, it is not likely to fizzle out soon. In many companies what we see is catch up moves. In others there is some froth. But if one looks carefully, and turns around a lot of stones, there are still some companies available at attractive valuations.
Regarding our own response to these kind of markets, we have to learn to navigate these times. The good quality companies are always going to outperform the markets over a long period of time. Just to give you an example, companies like PI inds, Britannia, Abbott etc which had a stellar run earlier are all sideways to down now. In my view for someone with a long term view, these are the companies to study in details as these have very strong business models and are merely undergoing time correction which should get over at some point of time.
If your speciality is small and midcaps and you have access to newsflows and technicals, it might be okay to ride these small and midcap moves. But its not everyone’s cup of tea.
I had a couple of questions on API which hopefully you can provide some guidance. Am trying to understand this industry better.
What percentage of the final formulation cost constitutes cost of the API? A ballpark figure or an indicative range will help.
If a company manufactures API “X” today and wants to shift to API “Y” due to changed market conditions, how big a change is it? Does it require structural changes to the plant design and / or new machinery etc., or can they simply buy the new ingredients and make the new API?
The basic infrastructure needed for manufacturing APIs are reactor, shifter, multimill and blending. and dryers. These kind of equipment are common to all API manufacturing.
But some specialised APIs which involve fermentation will require different set of set ups. Same goes for oncology products.
But broadly speaking if a company wants to replace a molecule with another molecule with not too much difference in chemistry, the process could be easy.
It is only when a company wants to migrate to products which are totally different in nature to the ones earlier manufactured, that big changes need to be made.
Having said that, I would need to know all these details only if I were contemplating putting up an API plant. As investors we need to better understand the prospects and longevity of the products in question.
What are your views on why the market has gone up to it’s current levels?
Two reasons I can think of are
The federal reserve is printing dollars at the rate of 1.2 billion dollars a day. All these new dollars are resulting in equity prices getting jacked up. These new dollar bills are chasing assets like equities, gold and even bitcoin.
How long can this continue? Nobody can say for sure.
The other plausible reason is that the US Gov’t AAA 10 year bond is currently providing an interest of 0.9%. If we invert this, it translates into an asset which has no growth for ten long years and available at 111 PE (100 divided by the yield of 0.9%). Logically, this means investors are better off buying at 100+ PE also. Why would anyone not buy equities where there is hope for some growth rather than buying an 111 PE no grower (the treasury bond), which is certain to create permanent losses of capital in the form of reduced buying power aka inflation?
Just trying to brainstorm this. What are your thoughts?
Hello Sir,
Have you studied Mrs. Bectors food specialties Ltd…as after a bumper IPO listing …its turned rather sharply to the down-side …first generation Entrepreneur but the listing was at a premium …so dont know if one can look at it with a horizon of 1 to 2 yrs …for upside potential …any view ? & All views welcome !
Fundamentally, Phenol spreads are on an upwards trajectory+0BA has bottomed out too. One thing which was underappreciated about Deepak- their ability to maintain the margins in spite of the highest profitability achieved last year in the performance products division. Going forward, incremental capex in the derivatives opportunity and the F&S Division (Guidance of maintaining 40-45% EBIT margins)+Stock hitting consistently all-time highs and with the chemical industry tailwinds. Are we looking at another pattern of Lollapalooza effect playing out like what has happened historically with the likes of Ajanta, Mayur, Laurus, etc? These are some of the patterns which seem common
One of the simplest answers to the question why markets have gone up to its current levels and continues to do that is "Nobody expected it to go up. " In stock markets, the expected rarely happens and … you know.
Coming to the reasons I feel markets have gone up,
First obvious reason is the deluge of money coming into the markets which is chasing returns. All other avenues like bonds, real estate, and so on and so forth dont offer anything exciting. So there is the TINA factor at play here. There is no alternative. Except equities. And success breeds followers and fan clubs.
Work from home has made investing and trading easy for a lot of people who are smart with their computers, brains and money. That has created a whole new class of investors/traders.
We were in an actual bear market since Jan 2018 if we were to consider the broader markets. Bear markets usually last 1.5 to 2 years. And usually bear markets end when all is doom and gloom. Which was exactly the scene back in March-April-May 2020.
If you look at major global events of a negative aspect, these have usually led to strong durable bull markets. The dot com bubble and the lead up to bull market of 2003-2007… Post that the global financial crisis and the bull market starting somewhere in 2013-14. Some might dispute the exact dates but what I have read and learned is most global catastrophes have been followed by roaring bull markets. The reasons for bull market and the nature of the catastrophes preceding it may be different but the pshcyology surrounding the atmostphere of both bull and bear markets remain same.
How long this rally is going to last? As of now its like an onrushing train without any brakes and shows no signs of stopping. The encouraging sign is the breadth of the market which shows participation across sectors. In fact the most favoured sector at the beginning of the rally which was pharma has not gone anywhere except for some remarkable winners esp in the API, CDMO space. Again the expected rarely happens. Against that, metals have had a breath taking rally along with the out of favour commodity chemical companies, besides many other sectors.
As I wrote earlier, the Jan-March timeline usually is a time to look out for major tops and I would be careful jumping headlong into not so good companies. If at all I get in to these, they will be trading bets with clearly defined exits and stop losses.
Thanks for the response Hitesh Bhai. You are right there is a mismatch in alembic too but my only concern was if I take a 5 year period, then overall Alembic has good profit to cash conversion in comparison to Alkem. Anyways as you said that cannot be the only data point to be considered. Had a discussion @barathmukhi and he has an interesting point on this in the case of sun pharma, where CFO was around 60% of profits consistently and the stock during the period was a 25 bagger.
Would like to know your views, if you can share more on Alkem. Their export portfolio no doubt seems to be good but domestic seems to be flat. Why do you see a growth coming over here? Anything specific. Thanks
Hello Hitesh sir,
Hope you are doing fine. First of all, thank you so much for giving us this forum, never seen such a great peer to peer learning. Had it not been VP, I would have done a lot many mistakes.
By reading on VP and using Screener, I started investing in equities for the first time and below is my portfolio -
I kept buying on dips( HDFC AMC, Laurus) and even averaged up (Infosys, Astral) in the last 9 months.
However, I am not able to understand what next should I do?
Below are my concerns -
Market is rallying and some of the stocks i own touched their all time highs. Even as an investor I feel it is overvalued (not mathematically but seeing the rush in the market)
Due to the above point, I am at cross-roads if I should buy more from my existing portfolio or trim or look for other opportunities ?
My learning curve has hit a plateau and I think I may have to read up on more financial concepts which I am unfamiliar with. I usually think in terms of scope of growth, headwinds, general perception and simply look for consistent Profit growth, ROCE and low debt.
I graduated few years back and after saving up some capital I entered investing now at 25. Seeing my gains in %, I feel had I invested more, my returns would have been better.
I would like to know from your experience what should be my next step in terms of managing my portfolio and also in investment style.
I am quite heavy on TCI Express. Business execution seems good due to asset light model. But valuations looks stretched to me. Please can you share your views?
Sir as the govt has imposed anti dumping duties on caustic soda could you share your views on DCW / DCM shri ram , Andhra sugar ,Grasim Industries Limited, Gujarat Alkalies and Chemicals Limited etc Which company will be most benefited as you are vtern and may be have some insight / knowledge to the sector or the companies which are not available online or on public domain …
source : https://taxguru.in/dgft/anti-dumping-investigation-concerning-imports-caustic-soda-2.html
Hi Hitesh bhai,
I wanted to know your opinions regarding ‘averaging up a stock’.
I bought Deepak Nitrite and RACL Geartech at low prices and now they have moved up significantly (>70%) and I have averaged up since I have confidence in both the companies and also a significant margin of safety in terms of current market price and my buying price (I want to hold both of these for the long haul by following their business performance so even if they correct by 30-40%, I won’t be in losses and still be comfortable).
This is what my thought process is right now, would love to hear your opinions (even if you don’t follow these stocks, your general thought process regarding the same would be helpful too )
Would also love to know your opinion on Kaveri seeds, I’m bullish on it because they are diversifying away from cotton and management commentary is also very positive.
I have some concerns due to the low P/E ratio the market is valuing it by (maybe because it is a cyclical company, not really a secular story?), Pabrai selling a large stake, audit issue etc.
Does it also make a difference negatively that Kaveri played out pretty well in the first half of last decade, then crashed and maybe investors lost their faith?
As investors we need to better understand the prospects and longevity of the products in question.
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