CGDs are a good idea because of visibility in earnings. If available at an attraction PE, then it is not a gamble at all. In Mgl there is going to be great as well. It may not be a Blockbuster stock, but surely a good compounder for the next decade.
LIC HFL is the same with more business revenue, but in case there is boom in housing which will eventually happen in India in next 3 - 5 years. IMHO, GIC HFL will mutiply more than LIC HFL as it is small in market cap with more or less the same business model. Here point is we need to enter at a very low price & hold GIC HFL with patience as they are very less aggressive. It is a boring company but will not go bankrupt.
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All is good about GIC. Read towards the end for the goodness. But, one most important factor will surface in the days to come, which is “VISIBILITY”
GIC has low visibility amongst investors since it is a small cap, which is further shown by the fact that its low PE of 6 inspite of have better numbers.
GIC HF is better than LIC HF because:
*Has higher Interest Margin 3.8 (v/s 2.3)
*Has lesser visibility/popularity is therefore trading at a lower PE
*Has zero NPA (v/s 0.5 for LICHF)
But has a higher PBV (GIC 2.0, LIC 1.80), which is more important than PE while comparing Finance Companies.
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As per screener, Gic hf is quoting at 1.05x BV.
Edit: 20 yr log chart for Gic hf
https://www.tradingview.com/x/36M4Qgav/
50 % fall from High, 6 PE, preceded by secular growth in last 5 years. GIC is available at attractive valuations. @jamit05 this stock is typical of your choice. What’s your take on visibility of earnings.
How about adding one Paper Company Stock to your portfolio. The stocks are available at decent valuation with visibility in earnings. In my opinion the stocks to look out for- JK Paper, West Coast Paper Mills, NR Agarwal Industries
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50% fall is not the only criteria. One feels that it gives MoS but it doesnt. MoS is more if a sector leader is purchased even at a higher PE.
For ex. Sun Pharma has fallen sharply. In fact all it has done the past year is fall. Inspite of that, it feels incorrect to buy a RoE < 10 company at PE 28. Its sales growth too is poor. There are better prospects in the sector. Like Cadilla, Glenmark.
Similarly for GIC. It is cheap for a reason, as people think its profitability may fall due to liquidity issues and a general recession in the sector. However, there are companies which will lead the pack. They may flutter, but not fall. They are the ones worth buying during a correction.
In short, I think its a terrible idea to buy only that which is cheap. Some friends have chosen to buy Yes bank cuz its cheap. I say, why gamble. You may purchase 5% of your portfolio at 50% discount, that is barely 2.5% gain on your overall position, which a good PF will cover in 2 months. So for a paltry amount, why compromise the integrity of the entire PF.
In summary, buy the leaders of a sector, they have better visibility and MoS.
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@Venkat.Anna: I went through your list and wanted to understand your reasoning for Deepak Nitrate. At a cursory glance at stock and it’s current valuation, a lot seems to be baked in. I see that the return on capital employed is also not great. Additionally, topline is not growing at rapid pace. Are you anticipating significant changes in near term future or in current times? If yes, what is your logic here
In November, the company had announced commencement of production at its Mega Plant for phenol and acetone with a capacity of 200,000 MTPA for phenol and 1.2 lakh MTPA for its co-product Acetone. It is a import substitute. You can refer on the same in Deepak bnitrite thread. EPS expected to increase to RS. 20 by 2020. So, buy DN near 200 once the price comes down during the current volatility. Future looks bright for the company.
Paper industry is sure in for good times due to China factor.
Exports from india has shot up substantially. NR agarwal is one company that is high on exports, currently. They have increased price left right and centre in 2018. Price rise started in October 2017 and price has remained firm till date. There are new plants coming up but there is no sign of price reduction as of now.
I hold JK @ 156, NR Agarwal @ 465. West coast I am interested in buying.
Also holding magnum ventures @ 6.50. It owns a hotel in NCR.
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Added a new entry oil India to my portfolio. 10% of my portfolio. Oil India is for short term only. Also, increased my allocation to Deepak nitrite & Rain industries in the current down turn.
Note to myself, time is coming for me to create a blue Chip portfolio this year. Tracking hdfc bank, Bajaj finance, Pidilite, Asian Paints, HUL, Nestle, Abbott, ITC, HDFC, Merck. Any of these with less than 18 forward pe, will add them.
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Very good selection except YES Bank. I am not comfortable with their very low NPAs
Yes Bank is good in comparison to other private banks except for Hdfc bank & Kotak. All Banks are in big mess but Yes Bank will stand out after the current short negatives. Future looks really bright as there are not many banks which can compete with Yes Bank.
Here is a good read about hdfc bank:
Yes Bank may stand out but for me Corporate Governance is of utmost importance. On news of CEO resigning stock fell like anything. Good companies are not person dependent
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Excellent thoughts explained beautifully!