Thats strong conviction and most importantly sticking to your investment style in difficult times!
My style is rather SIP oriented and I have also doubled my Nykaa position over last few months at various price points. Although my overall portfolio percentage of Nykaa would be negligible in silo as well as compared to yours so I can only imagine your courage & conviction!! (increased Nykaa allocation from 1% to 2% of portfolio…so I must not even be commenting here )
As we talking about Nykaa, some recent thoughts I had - No doubt recent pink sale was a tremendous hit but off-late I am not seeing many Nykaa packages with numerous delivery people, when they come in societies etc., as I used to see back in 2021-early 2022.
(I know not very relevant but still at back of my mind).
Also, today I saw a Big basket delivery agent carrying beauty products, that also unpacked and delivering like loose potatoes. First time I saw them delivering something other than eatables. My wife informed even instamart has beauty products. The USP for these is quick delivery and also they are more widely used for non-beauty products also. What this means to me is that customers have starting trusting more non-Nykaa platforms for Beauty products…something to keep watching…
So many strategies to make money - as long as we get the returns commensurate to the risk we are taking, all is well. My strategy involves gut wrenching falls & high volatility. How ever, I have underperformed many diversified portfolios last year! Let’s see.
At this juncture, I’m not too much concerned about the competition but I have them at the back of my mind - as you said as well. The customer engagement of the Nykaa app is really miles apart. The fulfilment costs, customer acquisition costs & strategies, premium user base, app experience, myriad collection, in house brands, more importantly the execution skills of the management is top notch. I personally believe they will pull this off well.
Even Blinkit delivers beauty products. None of them are making money yet. Even Bigbasket is losing money in the grocery business.
Bigbasket has a right to win in online grocery segment, DMart has a right to win in offline grocery, Titan has the right in offline jewellery, Nykaa has that right in beauty & premium fashion category. My observation is Nykaa is meticulously targeting a specific user base, which will be its strength in future. Market now does not differentiate all this. Nykaa is pioneer here while even Tatas are followers. Tatas missed the digital bus & are now busy making up for it by venturing and/ or buying monitory stakes in digital businesses. Tatas even bought 10% stake in Matrimony at 1200 & current stock price is 550. My personal opinion is - they must have had a whirlwind meetings couple of years back & started to venture aggressively. Anyway, we cannot brush the Tatas. Tata Neu app is meh actually.
At some point the online beauty would be massive Billions USD - probably 15 years? So, competition is not the worry now, the worry is will India grow to 5 T USD, 10 T USD GDP? If yes, then lots of wealth creation opportunities, if No, then why are we in stock markets at these rich valuations? For now, market thinks Yes, so Indian stocks are at these valuations. EU, USA stocks are at such low valuations right now because the growth is hardly anything there.
Looks like your society observation is right because consumer discretionary companies are reporting loss of momentum in sales from mid nov from urban centres. I think & hope this is temporary. So, short term guys will sell & rotate to staples while long term investors will wait this out. Fingers crossed.
What is priced in the current price? This is a major determinant of the short & medium term returns.
Disclaimer: I’m not an RIA & None of the stocks mentioned are recommendations & this is purely academic discussion. I hold some of the stocks mentioned in this post.
A narrative has build against Nykaa, false or true is a different story. A narrative backed with a sharp fall in price. So, I want to see some consolidation on the chart. Before I start buying again.
A consolidation like in Kotak, Dmart.