I don’t think ‘High valuation’ is the parameter for ‘Low risk’, otherwise I would have mentioned ‘IRCTC’ in my list
For me, Titan is a safer investment because of their Track record, while IDFC is still a waiting game. Somebody mentioned above that Business cycle is of 12 years, Titan has shown over 2 decades that they can tide over those Business cycles, IDFC still has to prove it (though they have done really well during Covid).
Market always over-appreciates the outperformance and over-reacts on underperformance, that’s the nature of the market. This nature helps long term investors like us, who can find value at time of underperformance and sell at Euphoria over Outperformance. I actually see it as a virtue of the market.
I guess you are going a little too strong against ‘High PE’ companies. Just like every ‘Low PE’ company is not a value investment, every ‘High PE’ company is also not a High risk/Low growth trap.
This is what I agree with completely. You don’t see 20 years earnings visibility so you shouldn’t invest, but I do, so I am invested. HDFC bank was bought at 100 PE by Mr. Damani in 1995 at 200 crores valuation because he saw the 20 years visibility.
Reality is, I got this learning from one of Mr. Sanjay Bakshi’s videos shared by you ‘Opposite of a good idea can also be a good idea’. Thank you for sharing that video
The best way to learn is to take strong positions held loosely. If you have to be wrong, be wrong publicly, it results in the highest amount of learning as long as we are open minded.
See this. I dont take myself (or my own opinions) too seriously. More than happy to change my views if data proves me wrong and that is why the public bet
one major risk to titan is disruption by new age players like fitbit, amazon , samsung etc where they are able to provide aesthetically good watches along with more functions ( read health sensors like hertbeat monitor , walking speed/ angle/distance etc , blood pressure monitors ,sleep detectors) & they have much more deep pockets & technology backing than tatas…
Titan is not about watches anymore. I haven’t seen the revenue break down but i guess their major contribution comes from jewelry( Tanishq) . Tanishq is able to markup 30% over the gold prices whereas other jewelers down south Kalyan, Thangamayil get about 15% markup. You can see how well the jewelers perform.
Pls take my views friendly and with disclaimer that I can be completely wrong…
One basic flaw (only IMO) in this exercise is that it is for 3 years. High PE stock are high PE for a reason and one of them is the longevity of compounding…so real result may come much beyond 3 years…
Having said above, just for sake of fun, apart from Dmart, Titan, Tata Consumer mentioned already by others…the quickest 3 which come to my mind, but I would not bet them for only 3 years though -
United Spirits
United Breweries
Burger King India
Disc: Invested, biased. No buy/sell recommendation. Can be completely wrong in my assessments and above views only for academic purpose
Why pe of 120, it could be above 100 because any pe over 70-80 is expensive
Why over a period, no one is married to a stock, when the story plays out you exit. I could exit in 6 months
My pick would be
Sona comstar
GMM Pfaudler
Also why three and lastly why can’t you observe this historically, check pe of Apollo tricoat for instance
All high pe companies eventually become low pe as profits catch up
Isin’t any activity, job or hobby actually a study or discovery and observation either historic or future ? If you can already observe historic performance why spend valuable “bull market phase” time in observation?
Personally I think pe doesn’t play any role in stock selection, anything that can be done on excel usually doesn’t add value else investing would be a very easy game of putting money where pe is cheapest
Recently been studying fiem, indoco, etsy, Black rose.
Fiem has been able to penetrate almost all electric 2w supply chains (specially noteworthy is Hero electric & ola both are fiem clients). Small position due to lack of conviction. Still need to pin down what is their competitive advantage in this concentrated industry. Great value migration play (from halogen to LED). Great pick and shovels pick for electric 2w penetration. One interesting thing is that 2w volumes have not really picked up in last 7-8 years. From my understanding, 2w and auto volumes have a strong correlation with economic activity/GDP. An economic revival could lead to higher 2w volumes which would take care of the other open question: industry tailwinds (volume wise).
Indoco is also a transformation play. India pharma business is becoming more profitable as they sweat their MR more, focus on chronic & sub-chronic therapies. US biz is starting out small & can scale up well in next 2-3 years. Even there, focus is on value added generics (opthalmology is one area which comes to mind), not pure generics. However, i do not expect great topline growth beyond this initial spurt of growth. Valuations are muted specially compared to other indian pharma heavy cos. That initial jump in valuation is part of the investment thesis. I am looking at this purely as a 2-3 year play where invested capital can double. Beyond that, unless some significantly new info comes to the forefront, id be happy to reinvest capital elsewhere.
Etsy is the one which excites me the most. Here is a modern marketplace (which btw are insanely hard to build & scale up) which has an almost lollapalooza effect going for it: social commerce, Brick & mortar to digital (digital penetration is only 15-18% in USA), more engagement b/w buyer & seller, personalised manufacturing. Etsy cannot replace Amazon but can certainly complement the unmet need for personalized lifestyle products. The management is very tech savvy & really understands the tech platform inside & out. They’re building the right things (both tech & product) which if done properly would lead to higher customer engagement, retention, delight & commerce. Their house of brands strategy shows that their core competence is in identifying, making more efficient & scaling up human-heavy commerce platforms be it core etsy, reverb for music instrument, depop for resale fashion or Elo7 for a localized etsy like experience in LatM. valuations do seem steep to me (since im not in the business of relative valuation), so i intend to buy in tranches, not all at once.
Only got started with Digispice & black rose so dont have much to talk about, lets see how it goes.
Portfolio is becoming a little large (specially in terms of long tail) but imo this is hard to avoid. a year ago, valuations provided enough comfort to concentrate, which i did. But now, we dont have that luxury any more, which makes me more vary of concentrating into a few companies. Perhaps over time as I mature as an investor id be able to concentrate PF even when risk-reward tradeoffs are against me (at a portfolio level).
Im not invested in any smallcases anymore. Although I was happy with Abhishek sir’s smallcase i realised that it does not fulfil my hunger for intellectual progress. the only way to do that is to get my hands dirty with small positions. Part of that capital now lies in bank FDs, and part of it has been/will be deployed into companies where i am vary of valuations but there is a good industry structure, growth prospects & competitive advantages. In some sense, I am taking myself up on my own bet. That is the only way to win. Heads, I will. Tails, literally I win. The best thing is i will get to learn something because my skin is in the game and i will have to track these cos closely in order to ensure i do not lose capital. This set of investments would be Etsy (largest due to strongest competitive advantages, best risk-reward tradeoffs), Indigo Paints, Sona Comstar, Tatva Chintan. Might add more bets here to diversify the risk of owning overvalued equities while strictly controlling size of this part of PF to ensure lower downside risk from valuation corrections which i am very wary about.
Im overall quite happy with Q2 results which have been disclosed until now. 2 of the Q1 laggards Neuland & IDFC First have started to perform much better. VGL & laurus results have some volatility but IMO long term growth is very intact in both cos. VGL which we thought might grow at 25% topline, probably wont happen any time soon. A more sober 15-17% topline, 25% bottomline is more likely here.
Disc: Invested, biased.
Edit: One thing i forgot to mention, in all the valuation-neutral cos, i am treating it purely as a trading bet with 15% pre-decided stop loss (will be triggered automatically with GTT order via kite)
Hi Sahil. Just a suggestion regarding the 15% stop loss thing. Many a times, stocks fall intraday to touch our SL levels only to recover by end of day. So the SL should be on daily or weekly closing basis. IMO GTT orders will trigger lots of your SLs. I have fallen victim to this a few times. I bought a stock High Energy Batteries as a deep value bet at Rs 800. Stock was at 1150 and due to some intraday panic my GTT stop loss at Rs 1050 was triggered. The stock recovered intraday to close at 1120 I think. Then went up to Rs 2900 in a few months.
The other side of argument is that we don’t know what will happen at end of the day. It’s also possible that co could close 30% lower instead of initial 15%. We don’t have an ability to predict whether it’ll recover or not. Whether this ends up being a good or bad heuristic, we can only know in hindsight.
Hi @sahil_vi curious if you are continuing to buy Laurus in tranches as it derates, and if the degrowth in ARV concerns you? I’m sure you would have gone through the recent discussions on its VP thread which I found quite insightful.
Disclusure: I have just 2.5% if my PF allocated to Laurus (have been adding in small quantities for the past few days). I am evaluating scaling it up significantly at some point in this correction.
