Ok sir . thank you for your time.
Sir are you tracking Bajaj health care ? A small cap from API segment ?
And Poly medicure ?
Hiteshji, wanted to know your thoughts on Britannia. I remember you mentioned few days back that companies like Britannia at good price when many companies in market like cyclicals etc run up a lot and Britannia seem to be taking a breather. I have been a long term investor in Britannia from lower levels. I am aware there was always some question on corporate governance every now and then on Britannia, even during last decade on the back of which still its stock did exceptionally well because of the amazing business performance it gave.
If I look at business and brands, the company still seem to do pretty well with above peer growth, better than most MNCs in FMCG.
But on other hand the same corporate gov. issue come up. This time, I see that the management has crossed their own set limits for ICDs. Is this a red flag?
Do you see this ICDs and promoter’s other risky businesses as a big drag on Britannia and a red flag for long term investors?
Also, a sudden huge spike in dividend yield is also something that goes along the lines of promoter needing money…something like how it used to be with Bajaj Consumer with very high div yield.
The next step comes is increase in promoter pledge and market keeps derating the stock. Is this a precursor to something which happened to Bajaj Consumer or Emami (although they lagged business vise also and Britannia is not lagging business vise and has extremely capable and professional management)?
Would be great to know your thoughts in such cases where the business is great, management is great and very professional but there are some corporate governance red flags (old ones and increasing, although gradually)?
Thanks!
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Hello Hitesh ji…can you please share your views on CAMS from a long term perspective please.
Thanks.
Hitesh Sir,
Regarding Marksan’s softgelatin products - is that really a niche/high-entry barrier/low competition area , and can lead to some additional PE re-rating ?
if this is put on paper then its very big game changer for newspaper industry in whole.and negative for digital media
I too am not too sure if soft gelatin products are too difficult to manufacture and market in this day and age. It might not be too big a moat.
But if the numbers are to believed, Marksans has done everything from cleaning up balance sheet to get growth and high margins in its business over the past few years. The fact that majority of its sales comes from regulated markets is comforting because it assures us that the quality of products it manufactures meets global standards.
The company suffered losses till fy 2012 and then somehow managed to turnaround its business from 2013 till 2015 after which there were two lacklustre years and then since 2017, there has been consistent growth in sales and profits. Main concern here is we need to understand which are the sustainable margins and whether there will be hiccups in company performance going ahead.
I am still in wait and watch mode. No investments.
I do not track axtel, britannia, bajaj health or cams.
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Okay sir TY .
Btw do u track Aurobindo Pharma Ltd
Is it a good portfolio stock for long term?
I’ve read it had some Serious USFDA issues.
And it’s trading below 10 P/E . Any reason for such low valuations? Can it rerate ?
Hiteshji,
What is your view on FDC Ltd. Trading at at an earnings multiple of 15-16.
The company has been consistent in profit growth (10-11% over 5 years) , return on equity of 15-16,%. Does it warrant a place in portfolio as consistent compounder or a value play ?
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Hi Hitesh bhai,
Would love to hear your thoughts about the small and mid-cap “mania” going on right now.
These indices are hitting all-time highs, and I read one of your comments before the Jan’18 crash regarding this too (the indices crossing those levels does make it a little scary I guess)
How do you see this? Or how can we get a feel if there’s a lot of froth in the market, especially small and midcaps?
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Hi Hitesh,
Any thoughts on Kaveri Seeds? In the current market euphoria, it seems reasonably priced on P/E basis. Management is guiding 10-15% top line and 15-20% bottom line growth for next couple of years at least. Balance is slowly tilting towards non-Cotton seeds. However it has not participated in the current rally at all.
Thanks…
I mentioned somewhere earlier also that the current rally in small and midcaps has happened after a very long drawn correction which began from Jan 2018. And this rally materialised out of nowhere. It has taken most market people by surprise.
I think with the sector being in the dumps since past 2 years or so (before the rally began) there is a lot of underownership and hence there seems to be huge interest once the rally has intensified. My guess is this can go on for some more time. If one looks deep and wide, there are still attractive opportunities to be found. So in a sense it is a stock picker’s market.
The beauty in this rally that I have seen is that if one can read technicals reasonably well, then most patterns are playing out and one can rely on technical knowledge and connect the dots fundamentally and find winners.
Some amount of froth is definitely visible and that might be the beginning or middle phase of bubble. Who knows we might be closer to the end, There is sector rotation also at play and one can play that too.
Part of the rally is because of the huge liquidity and the TINA factor… there is no alternative to equity kind of feeling… Most other asset classes including gold, fixed income, real estate etc as of now are not providing the promise of good returns. So the party goes on. How long is anybody’s guess.
Reading across portfolio threads and interacting with fellow investors, I get the feeling that a lot of investors sitting on cash have been taken by surprise and have missed a large part of the rally and now are fearful of entering after such a big rally.
I dont track fdc, aurobindo. Kaveri seeds seems to be out of favour with the markets. A company with such good fundamentals and results just refusing to move up is a bit of a surprise.
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Sharing a chart of small caps to nifty ratio sent to me by an astute technical analyst friend of mine. If this pattern plays out there can be a lot more to come for small cap index.
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For those who want to see more of such ‘relative strength’ charts, there is a guy, Anosh Mody, who regularly posts such updates on Twitter. Here is a link to his blog post from Jan - https://thefinancialpandora.com/smallcaps-the-kubers-treasure-of-the-stock-market/
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Sugar as a sector seems to be coming out of a long hibernation. First hint of this in terms of price indication is given by the weekly close at all time high by the sector leader Balrampur Chini. A lot of other or say most other sugar companies are making strong bullish patterns on weekly/monthly charts. Some are close to all time highs, others have cleared 1,2,3 year highs.
Fundamentally, there are a few important triggers.
First is the govt’s intention to push ethanol blending aggressively. The date originally set for 20% blending was 2030 and govt has declared to bring this date forward to 2025. Currently the blending stands at close to 5%. Even if as expected the govt targets fall short and reach blending rate of 10%, then also it creates immense opportunities for all these sugar companies.
Govt has fixed the prices of ethanol derived from various routes. Sugar cane juice and B molasses converted into ethanol fetch the highes prices. These are followed by other routes of ethanol production. What this does for all these companies is that it offers diversion in product range and companies with capacities can opt to produce ethanol instead of creating surplus sugar stock, whose prices can fluctuate widely.
Secondly govt had allowed export of sugar in quota based manner. The subsidy on exports has been reduced to Rs 6 per kg . Although this is lesser than earlier, this has been made up by higher international sugar prices.
High international sugarcane prices are a result of a big jump in diversion of sugarcane to production of ethanol in brazil. Brazil remains one of the key players for sugar production. So it has a major impact on sugar prices globally if Brazilian supply is curtailed. Plus disease and climactic conditions in other geographies also has contributed somewhat to the high international sugar prices.
With domestic ethanol story playing out, and parts of UP sugarcane belts affected by disease and hence lower production, the inventory of sugar which always used to be very high will reduce and going forward will support domestic sugar prices.
Some or all of these factors could provide improvement in the business models of these sugar companies and probably make these businesses less cyclical and more stable. If and when the perception towards the sector changes, there could be some benefit from re rating in the sector. Many of these companies quote at single digit PE, more like 3-5 PE. A lof of these companies have reduced debt. Some like balrampur chini and triveni (atleast two i know of) have completed buybacks.
All in all things seem to be looking up for the sector. This also is seen reflected in price charts of sugar stocks.
Question is how to play this sector. Best way in my view is to create a basket of 3-5 companies and buy them in appropriate percentages and try to ride the story (if one is so convinced about the sectoral story.) For guys who can look at charts, try to look out for stocks which are coming out of tight consolidation ranges and have broken out of those ranges with volumes. These kind of stocks can give good fast rallies.
The risk of rally fizzling out remains because sugar remains a politically sensitive commodity and is subjected to various govt diktats. But as long as the crude prices remain high, govt will be incentivised to push the ethanol blending programme in an effort to reduce crude imports.
disc: recently invested in a basket of sugar stocks. Trying to play a sectoral game after a long time. Last experience was with the polyfilms segment some time back which gave satisfactory returns. Currently also the polyfilms esp BOPP segment is on a tear but I missed the rallies. It remains in my watchlist.
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I have been a big fan of techno funda investing since a long time now. Tried to incorporate styles of William O Neil, Mark Minervini, and the method mentioned in the book Next Apple by Ivayly Ivanov. Basically most of the styles of all these masters are similar and the Gangotri remains the same. William O neil remains the absolute master class in this field. A lot of his followers have made it big in the markets.
Recently read the book Roundtable with momentum masters. It features a question and answer type of format with four momentum masters namely Minervini, David Ryan, Dan Zanger and Mark Ritchi II. Four of America’s top momentum investors. The beauty of this book is the practical aspects covered in the book. How these guys evolved as investors, how they go about their day to day trading, how they select trades, how they go about position sizing, how they book profits and losses etc. For someone interested in techno funda investing and momentum investing, its a very interesting and enlightening book.
It is one of the rare book which gives practical insights on the business of momentum investing. And that too with guys who have given phenomenal returns of nearly 100% cagr over few years.
One thing that struck me was that these guys usually invest over a few days to a few weeks. 2 days to 200 days as one of the guys mentioned. This often leads to a lot of churn. For example, in the journey of Laurus from 400 to 1800 odd, (adjusted for splits) they might have bought and sold maybe 10-12 times based on their signals. For guys who are some what longer term oriented than these guys, there might be some adjustments needed, but overall this book could provide some tricks to improve upon momentum investing. One thing that struck me and has hit home for me is the quick loss booking these guys undertake. They book losses sometimes within a day or two if they feel the trade is not going their way. And often at stop loss levels of 2-5% at times from their buy price. This too came as an interesting thing for me.
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Hello Hitesh sir… are you still tracking Surya Roshni? It’s looking good on the charts with the price now at 52 week high with decent volumes.
Fundamentally also the Company seems to moving to disciplined working capital management by reducing average debtor days and inventory days.
All this is made despite growing Sales and EBITDA at above average rates over last few years.
How do you plan your tranches? Do you have a method to accumulate based on technical triggers, or do you add when you see the stock fall on days where Nifty has been weak?
Thanks!
@hitesh2710 thank you again for sharing the book and your knowledge … Connecting dots backwards is easy process and when i try to see my couple of years i found the concept that you share works in most of my cases . one must BE SENSATIVE to the loss from the POINT your bet already reached and what i used to think that i anchored to the price of purchase and hesitate to add more in case share has sharp rise … ith sharp rise i try to book the profit ASAP it reaches to my Target yet the tragedy is on the lower side i just don’t able to act so FAST as with in mind it happens," YAAR 5% stop loss pe socha thaa bech doon ek do point se KAYA HOGA shayaad during day ya phir ek do dinoo main it will regain the PRICE but practically what happened is that when one go for selling one can’t guarantee that he can get the return as per the STOP loss as per ones own investing rules and some time the equity is get continuous lower circuits so could you comment that is it right strategy that ," **No matter what happen to market or to narrative if one’s choosen stock hits one’s predefind stop loss one must just sell it … though it might be Britannia or Laurus or Persistent systems or any other ** … … as the fundamentals may take some time to PLAY in the MARKET
Regards
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Most of the times I tend to buy in one or two lots. Only sometimes if the initial position is not enough for a variety of reasons, I tend to buy later on. Most of the times this happens when in a company I consider worthy of long term investing, the story keeps on improving in terms of numbers and prospects. In such situations I tend to scale up the position. Other times if the trade is based more on techno funda, if the stock after initial buying goes up quickly and I can make out consolidation in a tight range like a flag or triangle, and where I am reasonably confident of the uptrend continuing, I buy more.
Its rare that I have funds on days that nifty is weak. 
Most of the times I am fully invested and often its a toss up between selling something to buy something else. Or else sit tight. This margin funding problems have come as a blessing for me. Because nowadays in a couple of my accounts, i have not activated margin funding and hence I cannot buy something against something I sold. I have to wait for a day or two before I can buy against stuff I sold. So that often gives a chance to buy sometimes on days when stock prices are weak.
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@yourraj Maintaining discipline while practicing any kind of technicals based investing is of utmost importance. If you cannot get the better of your stop losses, simple thing to do would be to plan your trades and make a diary of your trades. Simple things like what you bought, why you bought, how much, at what price and what kind of targets you have in mind and what kind of stop loss you have in mind.
After this kind of exercise you would be able to analyse your mistakes and be capable of taking corrective actions. Another thing that can be done is to plan the action for the day/week in advance and try to get ready with a plan. It can be as simple as putting targets and stop losses in maybe 2-3 positions where you feel action needs to be taken. That often helps in the execution part. Most investors and traders often fall short in the execution part and fail to take action at the correct time inspite of knowing fully well what to do.
If you are not able to execute stop loss orders, you can put stop loss orders right at the beginning of the day and then the thing would be out of your hands.
Another thing which these momentum masters often re iterated is to practice small positions if one is not too experienced or too confident. They also advocate small trades if you have a string of bad trades which have ended up in losses. Once the trading record improves and confidence and discipline is back, one can start scaling up positions.
And about stop loss, one should not confuse fundamental investing with technicals based investing. If we begin a position as an investment bet after all the due diligence necessary, many a times one has to be patient and be ready to bear temporary pain, be it for whatever reason. In such situations, stop losses make little sense. Although one may have some pre decided level below which one might want to exercise some kind of stop loss. In such situations, one can scale down positions and see how it goes. Or else exit totally even if there is loss.
@princevegeta Not tracking surya roshni.
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