Hitachi, Bluestar - do command a price premium for their ACs. Because of Brand perception and high quality. But even after this, their net margins are razor thin. Its an industry wide phenomenon. Also, the stocks are too expensive for me.
Whirlpool- A better business, specially margin wise. Again …valuations are steep. But their margins are pretty healthy, I must say.
Will check out Voltas for sure. Looks good…at least …at first look.
Consumer durable penetration -
V guard’s product line is not as under penetrated as others. Agree.
But its the growth opportunity is not small.
If India grows, new houses…new wires, stablizers, fans, JMGs, heaters, switches, switchgears, other cooking appliances …can keep growing for a long time to come.
If India doesn’t grow, even the under penetrated categories may remain under penetrated forever.
So, that’s the logic.
Its a broad brush, I know. But this is what I think.
@MHS…Hi. Thanks for the kind words.
Will reply to you over the weekend.
I follow your posts/ analysis closely. I know that jyothy labs was part of your portfolio. Assuming it still is, wanted to know your views on Jyothy labs. Because of tepid growth, the stocks is falling continuously and has broken 52 week low & today tried to bounce back from 130 level. I assume investors are moving away from Jyothy labs and are moving money to other stocks with good company growth leading to such carnage. Do you still feel Jyothy labs is a good bet with it’s fundamentals still intact?
Please refer my post number 187…wherein I had disclosed that I had sold practically all my JLL shares @ 170-180 levels. I had also brought out the reasons in detail.
Also, I am maintaining a small tracking position in JLL.
Incidentally, I have just placed an order to buy some more of JLL shares. ( again small Qty ).
In my opinion, as long as this rural slowdown persists, JLL may not find the going as smooth as otherwise.
Silver linings -
One of their channels- CSD canteens is firing. CSDs are literally jacked up with fresh stocks of Henkos, Exos, Prils, Margos. (Disc: I am an Air Force Officer)
1- TVS srichakra. As we all know the situation in auto industry is not that rosy.And Tyre makers are still filling the pinch with no respite in near future.So please let us know your investment thesis for it.No doubt the valuations are cheap but when the growth will be back??
2- VIP Industries.I believe they import most raw materials from China.Now the situation due to cornovirous is definitely going to impact the company atleast in near term.so in your view what should be the impact??
3-Indusind bank- The share price for it has been in downturn.Infact from 1900 odd levels it has now come to below 1200.What is the reason for this downfall?what market knows which the numbers are not suggesting??
4-JLL - The recent release of pledged shares by promoters seems to be good.also the debt levels have gone down significantly.Also promoters have indicated that they will be debt free by next year.This seems to be good news.So are you planning to increase your exposure in it considering being cheap.
There r a couple of thumb rules that I follow and a couple of thoughts that I would like to share…
One must look at Rakesh Jhunjhunwala’s portfolio. Majority of the stocks would be loss making. But their portfolio allocation in those stocks would be too meager to matter. Winners… he would throw his weight behind them. Ex- TITAN …portfolio allocation would be disproportionately high, very very high. But that’s how things work well.
His risk appetite is much higher. Even in a conservative portfolio ( like mine, atleast I believe so ), there would be stocks doing well and not doing well. Say, in a portfolio of 15 stocks, 5 may be rocking, 8 descent performers , 3 laggards. Trick is to monitor all closely but ramp up only on the ones with exceptional business dynamics and momentum. Access quarterly/yearly and re balance accordingly. That’s why I would always regret selling Bajaj Finance. It went up 8 times from my buy price, but I could not hold my nerve during the NBFC crisis.
For Real Bluechips, by that I mean companies having reasonable moats, very good corporate governance, high ROEs, descent runway …the FII apetite is always there. So, u can safely invert their P/Es and compare them to global bond yeilds. And then, 50 PE wont look astronomical. Judging PEs in these stocks without a comparison with global bond yeilds, is like measuring height without scale. ( also factor in dividends and currency movements )
@babu44b…I ll draft a reply in a day or two. Hope u dont mind.
very insightful . i completely agree everything is expensive or cheap compared in relation to something . even when many say that 65/75 pe for few stocks is overvalued, what they arent considering that many that were at 15 pe are at 30 pe now .
I ll just pen down some of my thoughts on the stocks mentioned by you-
IndusInd bank- Steep correction - Yes.
Positives-
1.No corp governance issues
2.40 % plus CASA
3.Fat NIMs
All three- unlike Yes bank ( just a random reference )
4. Owns and operates one of the biggest Micro Fin businesses in India with not so meaningful presence in NE parts ( where the trouble is ).
5. Next yr… on a conservative basis, pre provision profits should be around 9000cr.
Even if Ideavoda blows up, more stress shows up in real estate and gems/jewelry etc…it can still provision say 5000cr and still report 4000cr of Net Profit.
Basically…it has the capability to take hits and still be very strong.
Thats why, I am not worried ( at the moment ). But I wont average aggressively, because I can only know so much. Plus in banks, one should be doubly cautious…just a matter of personal policy, I guess.
TVS Srichakra-
I have little idea as to when will the fortunes turn for the company / tyres industry.
But…to my mind, its a well run company. Tide would turn one day. I am in no hurry.
Can it go back to Mar 16 like profitability…why not !!!
VIP industriesand Jyothy labs-
Broadly agree with you. But there is only so much that one can do. As long as the company is good ( specially VIP ), why worry.
If we compare to global yields then forex risk cost should be factored in, that would easily double the numbers. Do not think FII kind of investment is chasing indian blue chip, for HDFC and some others it is true, mainly good banks, but several blue chips have seen foreign holdings going down. Bonds can give them double or triple returns, risk free.
The correction in market today and this week has been really worrisome.so what do you think how much of cornovirous impact will be there in the near future and are you doing any kind of activity in portfolio in this mayhem?
In my opinion,the workable strategy can be adding to on or two solid fundamental stocks in one’s portfolio during this meltdown. It will result in substantial gain when market corrects.Finding one or two good stocks is not difficult. The patience is required even after selecting the stock for staggered buying,because we don’t know exactly how low price can go and how much time it takes.In case of staggered buying,whenever upward move starts,the gains will start showing after some time.
Definitely,these are companies with sound fundamentals.
Additionally,we can select from large number of companies after quantitative and qualitative analyses combined with subjective opinion.
P & G HH, Bajaj holdings,Bombay Burmah, Relaxo,Bata and many others can be analysed.
