Thanks for your input. Here is my conviction about PSU about why it is part of my portfolio
Bank of Baroda
Major focus on Maharashtra,Gujarat and Uttar Pradesh.
Strong fee based income compared other peers in PSU Banks
NPA is among the best in PSU banks.
Clearly focused in its strategy of increasing the quality of its asset and not focusing on asset growth
With the current performance it will take at least 5 years to decrease their Gross NPAs back to 1.4% levels
Next 2-3 quarters will have weak earnings due to bad assets and this provides opportunity
You have included some quality businesses in there like PI, Repco, Eicher, MPS, etc.
But have you bought all these over the last week? If yes, I wouldn’t expect significant upsides in your portfolio in the near term. In fact, some of them are valued so highly that one poor quarter can lead to 15-20% downside.
I’m hoping you also looked at the valuations when buying. There’s a fine line between paying up and paying too much for growth.
If you are expecting next 2-3 quarters to be bad, will it not be prudent to move your money in a quality growing company? Even though you pay a premium, earnings will catch up somewhat in next 2-3 quarters and in the long run a quality company will definitely beat a PSU.
Gurjota yes I have bought last week and want to hold for next 3 years at least.Any pointers to sector/stock so that i can spend time on valuations and update my PF over few months.
As Warren Buffett said, “The investor of today does not benefit from yesterday’s growth.”
Kalyan, I do not want to discourage you. But I must mention that when you are paying premium for a stock, like you have paid for PI industries, you should be well aware of the risks associated.
The ideal thing before investing is to have a short one page or so of investment thesis on each of the companies.
just to give a brief idea,
I usually follow,
idea about what company does, sort of introduction and then slot it into the category of business.
What excites me about the business or potential triggers
Brief financials – no of shares outstanding, market cap, promoter holding, pledging or not, debt, return ratios, dividend history etc . . all these of past few years.
potential negatives and positives.
Investment theme. what kind of opportunity I see here…
Most of the businesses u have selected are quite decent but you should preferably go thru such or some similar exercise (with which you are comfortable – whatever works for me need not work for everyone and hence one has to try and find a comfortable style)
@hitesh2710,
Sir any note on how do you take care of valuation. I realize there cant be one straight formula but just want to know your opinion on this.
For Page, 50 PE could be considered cheap whereas for mediocre companies like PSU banks, even 10-15 PE may be considered expensive.
I think the topic of valuations would take a lot of words. But we have a thread on it on THE ART OF VALUATION which provides a good idea on how to value companies.