It’s been a while since I posted. Trust me, I have been buzzing with ideas and thoughts. Just that things have been on such a fast pace that I missed writing here though did a good job on twitter. Even if I say so.
As you would recall, in or around January, this year, I took a decision to increase wightage of some large caps against mid caps. The move rewarded well with the likes of hdfc, hdfc bank, icici bank outperforming the market by a good margin.
Somewhere down the line, I found irrational write off on mnc stocks exactly opposite to the euphoria that they enjoyed in the delisting hope. As they say in markets, neither hope nor undue fear is a strategy. I thus took what seemed to most to be an insane move of turning bullish on mnc stocks. This not withstanding that they continued to have a higher PE relative to beaten down stocks. I am not a believer in rewarding losers for winners. There is a sense of the market in assigning high values to companies not only with moats but also a pedigree of market capitalization. Don’t forget, the cardinal rule that mnc cos rank per market capitalization and that is the true driver for their managements. A CEO of an mnc co likes to say I head a 50,000 cr group more than anyone else. Since mnc’s have parents overseas, they usually bank on their subsidiaries either for mkt capitalization or for royalties and dividends. While dividends fall in the same treatment boat for all shareholders, royalties are perceived to be negative by minority shareholders.
What this ignores is that royalties are usually a function of sales and not a fixed amount like they are in the case of a one time payment. This implicitly implies that an mnc will fight for market share and try and increase the same. As most mnc’s have high margins including due to better products and technologies, there is every chance of an increase in sales and hence profits. So even if royalties are paid, they benefit the interest of shareholders by being a function of higher sales and profit.
Coming back to the point, this logic payed well in taking a contrary call on HUL when the market decided to bring the stock down from 550 to 440. We have stood to benefit from the idea, just as we did from a Colgate coming down on similar fears, followed by nestle, gsk consumer, gillete, procter and gamble or other similar plays.
If the returns in HUL were purely out of luck with an announcement of a buy back and subsequent rally to a handsome 680 level from 440, I’m sure you would show some respect to the moves in others.
And if you chose to believe this was again peculiar to consumer plays, factor this:
Good year moved from 245 to 300
Fairfield from 90 to 200
Siemens from 450 to 620
Abb from 470 to 660
ConAgra (agro tech) from 450 to 550
Astra Zeneca from 590 to 800
Bayer from 1100 to 1260
Godfrey Philips from 2400 to 3450
Fag from 1300 to 1450
Maruti from 1280 to 1720
As of now, I remain invested in many of these as also on oracle.
In our earlier lot of stocks, hdfc bank, icici bank, bajaj finance, mnm finance, Indus ind, yes bank, Jk bank, Asian paints, itc, cera, page, astral, Eicher, Atul auto, mrf, Mayur, Wockhardt, united spirits, Apollo hospitals, divi, Wimplast, bata all beat the markets.
I initiated a reduce rating on amar raja at285 to 290 and am happy to see th stock at 245 now, even more so in a rising market. The bearishness on opto circuits continues as also on geodesic, skumars and any others, some of which I can’t even short.
Satyam and tech m are more or less stagnant since the last update but continue to be buys.
Had added a small cap in Venus remedies at 150 followed by 240. Against the advise of many others. Am happy to exit now at 350. Another small cap, orbit exports perhaps remained one of the rare small caps that defied the fall in jan, feb, march in all small and large caps and has since rallied from 65 to 75. I have added small amounts in noida toll, caplin, kovai medical and repco. Am quite happy With repco as recommended the stock at 163 and it has since rallied to 210.
I reduced some arshiya as the profits were tempting to offset one loss. Also booked out of symphony post it’s rally to 360. I don’t own any tbz anymore.
My digitization belief remains intact. I have in fact added some more to the theme.
Its been rewarding so far. I’m not tired, not confused, not unduly worried. However it’s always good to book some profits. Winning is a habit and sets a new mind frame.
Happy investing, feedback welcome as always. Thank u all for your support and friendship.