Thanks Donald.
Hi Anil,
Nuziveedu’s barter system is interesting, never heard about it before. Could be a small fraction of total sales, but what would be the thought behind that?
Which broker report is this?
Cheers
Vinod
The conviction in Kaveri giving good returns and the stock giving over 40% returns in the coming year seems pretty high. Can any senior tell me if it would be a mistake if I allocate about 70% of my portfolio to Kaveri at least for the medium/short term ?
I am influenced by Hitesh’s statement that it is not just important to choose good stocks but also allocate enough to good ideas.
My portfolio size is small and my own buying will not influence the price so much.
Hi Amit,
Form your query I am assuming you are new to markets. Hence a good bit of “cautionary” brotherly advise. If you are experienced in markets then please ignore, its purely your call:).
In the frenzy of hype around a stock (deserved or undeserved) mass human psychology tends to ignore one basic principle. This is a very very important aspect to good stock picking called “Margin of Safety”. Please educate yourself about it.If you get the PRICE WRONG even the best business will likely give you poor returns. And if you get the price dead right even a average business may give you good to great returns.
Don’t use the word “Conviction” lightly. Don’t get your conviction flying because everyone says so…or an expert says so…do your own homework. Convince yourself why it was a very good buy at 1100-1200 in March/April, and why it was a good no-brainer kind of bet even after Q1 results were out because of stronger visibility at 1300-1400. And why at 1600-1700 levels, there is less margin of safety and thus allocations cannot be very high.
Go back thru the entire thread. There is a whole lot of education out there. There have been people who rode Kaveri from 400-800 and exited. again to get back at 1200. And there have been folks who have ridden it from 850 levels from a year back riding on CONVICTION that built up with every bit of field-work, management Q&A and further deliberations, slowly accumulating at every level as we gained more visibility and conviction levels went up.
Unless you are very active in the markets, have enough experience, and can devote 15-20 hours a week you are well advised against being very gung-ho on any business, betting the house on it, no matter which expert says what or even when everyone seems to be agreed on something…like in the case of Kaveri.
Its better to work hard yourself by reading up, questioning facts, help gather data to help gain that Conviction …and then bet prudently …with the right margin of safety. There is just no substitute to these 2 simple principles. Hard Work and Margin of Safety.
Having said all that there is a pretty good chance Kaveri may cross 2000 levels post exemplary results, and there are possibly good upsides even from here. But can we be dead-sure about it now? CAN we bet the house on that? Were we better off slowly accumulating from lower levels??
Thinking about these will point you to some answers.
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a recent esprito santo report is what is earlier referred to
they quote distributors feedback about kaveri having sold 50-60% higher as compared to same quarter last year.
That feedback fits in nicely with the team hyderabad projections
Amit,
We are in the same boat…but I took the plunge earlier itself. So my average price is at 1250 without considering the profit from buying earlier at 800 and selling at 1450.
If you are really really convinced and can sleep well with a super high allocation then it should not be a problem. Especially so if you consider your portfolio to be small with respect to your non-equity investments.
I had sleep-less nights before I took the high allocation 
Since I was part of the management meet at Hyderabad and dealer interviews then, it was easier for me to have a clear vision on its prospects. The odds seem to favor Kavery highly and I think I am taking lesser risks doing a super high allocation here for 4-5 months. I may never do it again as this opportunity was unique from whatever I had seen so far.
You don’t get to speak to the customers of the company and understand how the sales picture would be so clearly in most other opportunities. That is just one part…the entire analysis took some effort but finally after listing down the worst case scenario (wrote a pre-mortem) I was willing to put in high stakes.
Did chew the brains of many seniors here in the process…Donald, Hitesh, Om, Tirumal, Kiran…but finally the decision has to be yours.
Keep a very close track if you get in big and be ready to move quickly if at all something goes wrong. Also would suggest to makeup your mind on a partial exit irrespective of the price atleast by October so that you are not exposed to a high concentration risk for more than a few months.
As Donald says without taking a stand it is not possible to get the best of learnings out there.
Hope this helps
Vinod
amit
I tend to agree with donald about too much allocation to kaveri or for that matter to any other stock.
Even if portfolio is small it does not mean we have to take more risks…
personally I usually have a benchmark of 30% allocation to any stock as the limit and I dont go over it.
about conviction pl heed donald’s advice and dont take it lightly. Conviction often changes with changes of stock price for most people… Only seasoned investors can retain their conviction in the face of severe correction in stock prices.
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call
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Thanks Donald, Hitesh and Vinod. I consider myself relatively new to investing, mainly because of lack discipline. Your advice will have a long lasting impact on me.
Reason for Nuzeevidu"s barter system is their own cotton ginning .
So it is win win situation to them in barter system.
Hi Hemat,
I just went through annual report of Kaveri, 2011-12, in that they have mentioned that they own 600 acres of agricultural land.
Thanks
Ashish
1). to scale up
2). growth in the
I think Nuzhiveedu took over 2-3 cos which helped in boosting the mkt share.
An interview with reclusive MD of Kaveri Seeds .
Company brands does catches the immediate & lingering attention of grower with imaginative names like Jadoo, Jackpot, ATM, Singham,Barood , Super Boss,Fouzi .
One of the major differentiator for Kaveri is their substantial landholding,Their habit of investing surplus in land is reaping rich dividend n acts as a long term major edge over competition IMHO.
Kaveri Seeds has been in the seed business for over two decades. It has production, processing and R&D facilities in Andhra Pradesh and Karnataka. The company owns about 400 acres of land in Andhra Pradesh and Karnataka where it undertakes R&D activities and also grows foundation seeds, thus enabling it to keep better control over germplasm.
Kaveri Seeds is one of the few organised industry players with its own land for R&D. It also grows foundation seeds on these lands. As the company grows foundation seeds on its own land, it has more control over germplasm and the total process of developing hybrid seeds which thus minimises the possibility of misuse and piracy of the companyâs hybrids.
Team Hyd,
Any final updates on the sales figures for Kaveri now that the sowing season is pretty much over?
Hemant
one of the promoters has sold around 50000 shares on 12 th instant.
what is the IMPACT}
Around 55-60 lac packets for cotton and around 100 cr sales for Maize.
One company PE expands when the
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Promoters have walked the talk for several years
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Company earning is predictable & sustainable
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Company has a durable moat which Kaveri has in form of solid R & D n germplasm ,big landbank producing quality foundation seeds
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Dividend increasing
Kaveri is a fit case for PE rerating due to above factors.
Maximum wealth is created when both EPS & PE expands.
Attached is a dated report 2 years old which shows how nicely Kaveri promoters have walked the talk & sizeable size of opportunity which is still substantial now that Capex is behind KSCL .
Given the structural demographic issues of rising population and surging food demand which is exerting pressure to raise crop yields on the back of shrinking farmland, we believe that the structural shift towards hybrid seeds is now a reality. Seeds being sequentially amongst the initial inputs used by farmers are now witnessing a conscious shift towards hybrids after tasting success with GM cotton seeds and success of programs like NREGA. Cotton is the best example of how hybrids have not only improved productivity and incomes of farmers but has also led to a decline in consumption of pesticides. In line with this trend we expect Kaveri Seed Co. Ltd. (KSCL) to improve its volumes of cotton seeds by 50% to more than 1.8mn packets during FYâ12 which on the back of a 25% rise in prices over last fiscal should ensure that KSCL would derive half its total revenues in FYâ12 from cotton seeds in which it has half a dozen hybrids. We believe hybrid seeds would continue to remain the most profitable link in the agricultural value chain which should spur profits of pure hybrid seed companies like KSCL with a predominantly domestic focus and we expect 24% EBIDTA margins to be easily sustainable for KSCL.
Our pick to play the agricultural productivity theme in India
FYâ12 & FYâ13 should witness robust free cash flows since most of the capital expenditure is now behind KSCL. With 9 seed processing plants having cob drying and cold storage facilities along with transgenic containment units, gene bank & a Green House, we believe that KSCL which owns 600acres of farm land within the listed entity has completed most of its capital expenditure. With the investment phase behind it, KSCL in our view is now poised for robust free cash generation this fiscal and during FYâ13 which bears testimony to the road map laid out by the management in building a sustainable growth oriented business model for KSCL with a presence across crops. Poised for a 35% CAGR growth in pre tax profits over FY-11-13 on the back of a 25% CAGR growth in revenues over the same period, we believe KSCL trading at 8.5xFYâ13E earnings is the best available stock to play the agricultural productivity theme in India.
Valuation
KSCL over the past few years has clearly demonstrated its ability to grow in a highly competitive business environment across its product categories. We expect KSCL to continue the growth momentum and recommend a BUY on the stock trading at 11xFYâ12E and 8.5xFYâ13E earnings.
KSCL has some amazing investors with midas touch like Kenneth Andrade of IDFC MF & Asshish Kacholia who bought in bulk from Reliance MF @ 470 2 years back.
IDFC Premeir equity along with KSCL has United Spirit,Page Industries,Asian paints,Blue Dart,ndia,HDFC Bank.KSCL is surely in some excellent company. Grapewine is that Kenneth has bought Hawkins in bulk recently.
Any idea if Ashish Kacholia is the man behind lucky securities & if he is still invested in KSCL?
Hi Donald / Hitesh / Vivek ,
Despite all the gung-ho on the expected results and immediate future of the company, director/Promoter has recently sold around 49000 shares in open market. Does it tells something to us? may be the internal picture is not that rosy as we are expecting it to be. My only doubt is if the expected results are going to be blockbuster why cant the person wait for a month for the results to be out and then sell on market’s reaction ?
Is this something that we can really ignore given the intensive research that our team has done on the recent performance of the company in the market from various sources?
Vivek no point following these guys, In the above you forgot that IDFC also bought intoINNOVENTIVE INDUSTRIES @ 138. It is our own conviction that should be played all along and not of others.