Hello Friends,
Before making any investment, one needs to think with a mindset of business owner also, not as an investor alone. Think how can your company come out of this crises, assuming that the largest shareholders/board thinks more innovatively than you.
Between PVR and Airlines, winner will be the company which will come out of this unexpected problem more convincingly with minimum added cost pressures.
Better to avoid sector/company having high degree of cyclicality i.e subject to higher number of input variables, higher possibilities of human contact during the service, inability to square-off higher cost pressures through pricing power etc.
This crises unlike recession has more realistic bearing on human lifestyle, therefore for an investor, ground reality is a bigger guide than any excel sheet.
PVR: Conventionally, biggest risk is eating of market share by digital platforms. But second- level thinking could be that PVR enters OTT platform category (just guessing and trying to think as a business owner if my business sees severe hit)
Valuation: Current price is a consensus of market participants about current fundamentals and future earnings. Try to think what others couldn’t to identify value (difference of opinion creates value). If your thesis is right, investment philosophy and risk appetite allows, and valuations are in comfort zone, then take a call on investing with pre-decided risk weights.
Like bifurcation of virus-affected zones as red, orange and green, imposing such classification on one’s portfolio companies will not be a bad idea.
Green - Structural plays with strong fundamentals
Orange - Cyclicals (could turn red or green anytime)
Red - Risky plays with moderate possibility of turnaround.
Caveat - During extreme bull cycle, red might look orange, orange as green, and green as red as exhuberance takes over rationality.
Once categorisation is done, assign risk weights and try to achieve them in due course of time.
Good luck in your investment journey.