ValuePickr Forum

Identifying current themes - and taking advantage of them

This is the first time I’m trying to do this. I will try to isolate and focus on high level portfolio drivers (a.k.a themes) and based on that try to pick up companies that might qualify.

Please participate actively instead of watching from the sidelines :stuck_out_tongue:

I believe that the ensuing steps would be like :

  1. Identifying a theme (themes can be economical ,political or sentimental)
  2. Isolate the country and its sector and its sub industry that will be most affected by the theme
  3. Pick out stocks that have moats in that sub industry.

Above three steps provide the flowchart to arriving at particular companies worth investing

Please correct me if I’m wrong

Crude oil prices are likely to go up in the coming days

Evidences to support the statement
**1.**Crude prices surging even when the inventories are at the all time high level.How would you interpret that? Is the supply demand rule being bent? Or supply is truly at all time low level?
**2.**Unconventional reserves will take another few decades to be commercially viable. Even so, the prices are likely to be sky high as the oil extraction process is going to be extremely expensive. They wont find many customers.
**3.**Spare capacity, both in OPECS and NON-OPECS are at all time low.
**4.**EMs economies are about to expand, hence putting pressure in oil demand.

If this comes out to be true, 3 sub industries are going to make money worldwide -

1. Oil & Gas Exploration & Production (Upstream)
2. Oil & Gas Drilling (because the upstream will start searching for oil to (1)Increase sales to take advantage of this price rise (2) Satisfy the increasing demand
3. Alternative energy

Lets look into these 3 sub industries one by one

It may not be the case in near term. The oligopolistic nature of the industry gave rise to cartelization by OPEC countries. This industry structure is now being challenged by non-opec countries like US & Russia as they become the biggest producers of oil. Also new technologies like ‘Fracking’ is providing low-cost advantage to US. The oil may not see the high prices enjoyed historically for many years to come.

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Non-opec countries will be able to compete as long as their reserves last. Recent data says 75-80% reserves are held by OPECS. Since the non opecs are the ones going to be depleted first(unless new reserves are discovered), oil prices will again be determined by the opecs.

Yes, you are right,this isn’t something that is going to happen within a couple of years from now, but it wont be too late either.

Lastly,this might not be important though, opecs are notorious about artificially keeping the price high by lowering supply.This in turn will divert customers more towards the non-opecs and hence depleting their reserves faster, which in turn has the potential of accelerating the entire process.

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Crude is not going up anytime soon. There is a serious oil glut and OPEC is unable to cut production to regulate prices like they used to. Fracking in the US will not stop as it will lead to serious financial crisis. All this will lead to revisiting $30 a barrel in the medium term. As for demand from Emerging markets like India, we are not going to be dependant only on Crude for energy because we are a net importer. Renewables are going to contribute more and more to our energy needs and electric cars are going to be a lot more commonplace 10 years from now. I don’t think crude prices are going up any which I see it.

About 400 bbl of reserves exist in the non opec realm (compared to 1200 bbl in opecs) and global oil consumption is about 35 bbl /yr. This deduces that non opecs will last for another decade (assuming they are the only suppliers). ****Please let me know if the data is wrong
Argument against the aforesaid statement - non opecs are NOT the only suppliers
Argument for the statement - global consumption will surpass this 35 bbl in the coming years.

Once again, what after non opecs become dry?

For renewables, I can say that the ethanol movement that started almost a decade back (probably in the US) has gathered quite a momentum by now and our govt is not only encouraging,but pushing for biomass based fuel production, regardless of lack or excess of crude oil price and availability. So this is necessarily a political theme that will encourage use of ethanol regardless of the outcomes.

So not every renewable need attention by now except for ethanol.

And there are too many plants that manufacture ethanol in India . Hithesji already started a thread on Praj. But I need to study all the ethanol producing companies and figure out why he filtered out every other company.

Renewables especially solar power must be taken seriously. Latest bidding for solar power project is likely to quote price of power at the rate below Rs. 3/unit. It is only the storage problem (including development, maintenance and optimization of battery or any other alternative medium of storage) that needs to be solved. Serious research all over the world is going on to solve this problem. Once that is solved, most probably petrol/diesel vehicles will be relegated to history. Major consumption of crude happens in vehicles. That itself will be put in jeopardy when storage problem is solved. Just my two cents. I may be wrong also

Increase in population will be beneficial to the following sectors:
-Utilities
-Consumer staples
-Health care
-Telecom

Due to massive immigration in France, the above four sectors will have a great time there.

Wont Transmission & Distribution (wiring and oiling) be another theme that would be seeing the GoI led capex as India recently became a net power exporter but faces limitation on power distribution as well as transmission losses.
Players who are into this domain include (without any preference order):

  1. Skipper Ltd
  2. Apar Industries
  3. Techno Electric
  4. Powergrid

There might be more companies in this area.

Discl:1,2,3: Have stock position

A relatively well known presentation on ‘India’s consolidation wave’ by Jatin Khemani.
http://stalwartvalue.com/video-talk-delivered-at-fil-alumni-meet-pune/

I’m sure this has been posted in other threads. I’m simply posting it because of its relevance to this particular thread.

I think the whole Power value chain has potential when you include renewable power. Power producing, financing, transmission all have a good future with govt. initiatives in the sector

  1. PFS
  2. REC
  3. Techno Electric
  4. Suzlon
  5. Ujaas
  6. Powergrid
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After identifying a theme, how to filter out individual companies?
Anyone willing to show the entire step by step process while taking a real life theme as the example?

India is highly under penetrated in sanitation & water management system. Considering the current focus on the subject, I consider Indian Hume Pipe Comany Limited may be a beneficiary. Opinion sought.

I have recently added these as trial portfolio:

I am also maintaining these in my watchlist for adding as trial:

I have recently sold these in a very sort time. These were also 4 trial. I am trying to learn the rule of the game & thereupon will build a portfolio for wealth creation.

  1. Insecticides India
  2. Caplin Point Lab.
  3. VRL Logistics

Selling list also include these:
http://forum.valuepickr.com/uploads/default/original/2X/2/2a7733bdd44019ae5dd8d563b0ec71a0a74a1604.png

Is there any site or link available where we can monitor any sector performance also the underlying stocks…like paper , reality ,plastic sector etc on a filtered and sorted condtn like 1M, 3M , 1Y basis… ?
i have posted the same in other thread as well but thought relevant for this one as well .
basically what i am looking is how the sector wise performance calculated in the below video.

Regards,

I have taken the BSE SmallCap as my stock empire. Thereupon, considered following criterion:

  1. Momentum, i.e., CMP within 5% of 52-week high + > 2x of 52 week low
  2. Return in last 1, 3, 5, 10 years must be very high, e.g., 75, 50, 25, 20 (indicative) respectively
  3. Revenue Growth & EPS Growth in 1, 3, 5 years must be high, say 20% (indicative) each
  4. OPM & ROE must be high, say 20% (indicative) each
  5. Debt/Equity < 0.1 (indicative)
  6. Price/Sales must not be very high, say 2-3 (indicative)

The figures above were varied to return sufficient no. of stocks while screening against each of the criterion so that final pick-up is done from a large pool of stock.

Stocks returned from screening against each of of the criterion was appended & sorted for sector & then for alphabetical name.

Stocks with Bold & Red, Green, Blue color (randomly with no additional meaning attached to them, just to make clearly visible in the list) are representing the stocks which qualified more than one screening criterion.

Stocks with Bold & Black color are my choice (arbitrary).

Then, studying about each stocks, what they do & who are their promoters, mainly from the company’s web-sites. I have a fairly decent knowledge of management pedigree of companies (of course through published informations)

Then, considering the macro-economic situations (domestic & global) & also the geo-politicals around the world, try to understand the growth & other business prospects of each of the screened companies.

Finally, the shareholding pattern of the companies, watching the price action for few days & then buying it.

Yeah, b4 buying, I also look for any other exciting company from the peer group (which I am aware of for some other reasons). What are these reasons, I will discuss in some other post.

The things that I lack are finding any hidden financial stuff in company’s a/c book & any development before being reported in media.

123.pdf (500.6 KB)

Comments please.

I have some more stock empires, based on some other screening criteria. I will share them if this one excites fellow boarders.

Thanks in advance for being patient while reading my long post & long list.

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