I have been stuck trying to justify purchase (SIP) in Bhel, Gail, EiL, Nalco, Sail, Union Bank, SBI and Corporation Bank.
My points of worry:
1). They are all PSEs.
2). Are being thrashed in all corners.
3). And Nifty has not even completely corrected.
Then I came to a realization. Something I read a while ago. One has to decide what he wants to be: A Value Investor or a Growth Investor. Both styles have a very different flavours of success.
A VI is satisfied with a company that:
1). Earns regularly. Has endless history of quarterly profits. Some cyclicals like Sail and Nalco would have subdued profits, but definitely not in loss.
2). Has little or no debt (except banks) and even if there is a portion then it is easily serviceable.
3). Reliable management.
4). No fancy acquisition intention or history, or major investment plan.
5). Has deep history. Not a new-comer. (And some other important details too)
(A Growth Investor would look for very different parameters like high ROE, OPM etc.)
And most important point is, a VI purchases them at a steep discount. Else, remove “Value” from “Value Investor”… he is a plain investor with no special Edge!
The reason these companies come to attention is because PSEs are being heavily sold due to GOI’s intention to make good. Whatever the reason, the fundamentals of each individual company are still very solid and Dependable.
FMCG, Pharma, IT, healthcare sectors are expensive to a VI. Only sector that corrects would catch his attention.
There may be plenty of downside left… but it feels that the share price will, at some point in the next decade, catch-up to the value.