What do you think are the themes that are playing out in smoking? It’s a habit you pick when young (in most cases). Apart from peer pressure, associating smoking with being ‘cool’ are there some other trends that I’m missing out on? I see women also picking up the habit and it’s more risky for them to do so. Earlier it was mainly men who would smoke. Now you’ll find both doing it. Can we see these trends continuing in the long term?
Lock down of 21 days may make several people to give us the habit of smoking. One of the reasons people smoke is because the addiction they might have picked up in youth days is hard to give up. Now with forced lock down, the availability getting disrupted and after not smoking for 10 - 21 days, some people may never pick the habit again. This will be permanent loss of revenue. Good for society, bad for ITC business.
When I entered ITC after the corporate tax reforms earlier this year, on Screener.in home page (I followed ITC on Screener.in) I noticed a large number of sales by insiders. I took this with a grain of salt but the company’s share price went South after the reforms (the COVID-19 panic selling only accelerated its downfall) and I’ve now made it a point not to enter companies with heavy insider sales.
I exited ITC but could not find enough evidence to say or write about why I wanted to exit ITC until I realized lately that heavy insider selling is not the norm of a high growth company. Please compare the insider trading volumes of Unilever (some insider trading but people are also buying instead of only selling), PGHH (next to no insider trading) and Nestle (next to no insider trading) before you consider buying companies such as ITC which has heavy insider selling.
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You can see huge insider selling for HDFC & HDFC bank on a routine basis(even before COVID 19 days), dossn’t mean it’s a low growth company. The main reason there’s high insider selling in ITC is because they’ve given more ESOPs as compared to Nestle and HUL.
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I think this move will also bolster the ITC presence in Northeast…
ITC started producing additional Savlon to meet the excessive demand for sanitisers…
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Here’s an interesting perspective from US, although there is no lock down there like India and stores / kiosks are open.
https://finance.yahoo.com/news/looks-wrong-time-quit-smoking-120932264.html
That’s too extreme a statement. I’ve seen people panic-buy cigarettes as well, so they can smoke for some time. To conclude that they’ll give up smoking is a little too far-fetched. They’ll have other coping mechanisms, maybe they’ll smoke fewer sticks everyday but they’ll maintain the habit. Whenever they get the opportunity, they’ll go out and buy again. That’s what many smokers would do.
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Some personal musings.
Yesterday I was in call with some of my friends (More than 7). All of them were smokers except me. I asked them a question that there is a popular saying that if you practice anything for 21 days then you will continue that for long time. Since you all guys are not smoking for 21 days will you continue this routine of not smoking.
All of them with chorus answered “The moment they get cigarettes, they will smoke at least one pack that day itself”
Most people agreed they cant think without cigarettes. Some people bought 10 packs of cigarettes the day when Modi announced lock down. Cigarettes are very addictive in nature, In fact its more addictive than Alcohol.
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Thanks every members to meaningfully contributing with their and nearby experience. However, let us concentrate on core subject of investing. Given that in recent lockdown, we find two state have classify liquor as essential.
In that context and given the amount of revenue generated by Cigarette, I feel Cigarette would continue to see higher taxes allowed to be sold to the people at large. Being addictive, there is reasonably strong pricing power with Cigarette companies in my view.
Discl: Same as last message. view may be biased due to holding. Purchase 10% of quantity hold last week.
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A win win situation for both ITC & Jubilant foods, zero contact delivery of essentials from ITC by Domino’s
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I’m evaluating this company for the first time. Can someone help me with a few details?
- What % of and profits split between Cigarettes, FMCG-Other and Hotels is ITC targeting for a few years down the line?
- What will the FMCG-other margins look like once they have ramped up their brands? Is it fair to say their operating margins will be similar to that of HUL or Nestle?
All the information available and discussed in the thread already. please go through
and other posts… no one can be sure of future… but looking back at HUL and Britannia history they also had long period of product gestation before higher margins…
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Monthly-Portfolio-march-2020.xls (154.5 KB)
March 2020 holdings fördert PPFAS - ITC is a core holding.
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Cigarette business would deter ESG investors and reduce the number of buyers. However, being carbon and water positive, environment friendly, waste management etc are net net ESG attractive. ESG has E as first, so I am guessing the company’s Environmental initiatives will take precedence over Social parts.
Disclosure : Have bought over 2500 shares of ITC since budget.
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As this crisis situation due to Covid-19 still continues to exist, economic projections pertaining to that remains gloomy. With no clarity on when that will subside, the slowdown can run deep and can last for many quarters to come. And when it comes to recovery, different sectors will have different recovery times.
When we talk of FMCG sector, few stocks such as HUL & Nestle have so far shown strong surge in stock price owing to the demand created by panic buying as a result of prolonged lockdown exercise to tackle the coronavirus situation. ITC however, could not replicate such a comeback surge in its stock price as compared to HUL & Nestle. But when we think of investment decisions in such uncertain times, utmost priority should be given to safety considerations and appropriate valuations for the sake of long term sustainability. For ITC Limited, this can be analyzed and talked upon when we draw a comparative landscape with HUL & Nestle, on the basis of few growth, safety & valuations metrics :
From the above chart we can see that ITC is lagging behind HUL & Nestle when it comes to growth metrics such as EPS growth and RoE growth. That means ITC has performed mediocrly on the earnings front for the last few years as compared to HUL & Nestle. However, when we consider from the Value Investing perspective, when we look for the more safer bargains (specially in these uncertain & volatile times) , ITC seems to score over HUL & Nestle with its lesser PE ratio and relatively much lesser Price to Book Value ratio.
Though debt-to-equity ratio for all three companies is almost zero when we consider another important safety metric viz Current Ratio, ITC seems to be doing far better than HUL& Nestle over the years as visible from the following chart :
The superior current ratio of ITC as compared to HUL & Nestle denotes that it has had much better operating financial health all these years which indicates that the company has enough financial resources to remain solvent in the short-term. A consistent current ratio (upward of 2) should make ITC relatively much better prepared to deal with payment and collection disruptions which are highly likely owing to the prolonged lockdown.
Also, a substantial cash balance and large liquid investments on its books come as a strong source of financial flexibility for the company in times of economic downturns. However, from the long term perspective ( keeping aside the crisis concerns) how well the management utilizes these cash & investment proceeds for brand building for ‘FMCG Others’ vertical need to be seen.
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Is this a red flag?
17,66,516 shares were sold by insiders at an average price of Rs 186 in the last 3 months.
Selling by insiders at low price makes me very uncomfortable
Few of the Linkedin Profiles of the guys, who have been selling
- One of the senior vice president Anil Rajput has been in the company since last 44 years, why would he sell at lower price?
- Head of manufacturing, Rahul Gouraha, has been working there since last 15 years
- CV Sarma, Vice president finance
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The company is one of very few corporate which have lenient ESOP policies. Many higher position individuals sell the holdings to buy new ESOP which are in the money. Not checked on an individual you mentioned, but my post provide details over last 12-14 years ESOP by employees. Please go through the thread to get more information. I personally do not see any major negative.
Discl: same as previous post, bought some more share during last 15 days. View may be biased.
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