Happy Diwali

Dear friends,

So we finally had a good Diwali even courtesy the stock market. We hit 5 year highs today and broke the record for daily turnover.

What makes me proud of this is the belief in the run. I was so embossed by reading of reports on the inevitable market crash that all I did was to trash them. In school in a simple lesson we were taught that the break of dawn comes immediately after the darkest hour of night. But in the darkest of predictions on the markets, we forgot some basics. It’s so ironical that investing is a habit and is intended to be cultivated over the long run but is seen as a scratch card where the result must be revealed instantly.

Now justifications on why the rally occurred are being propagated by those who know what they lost. Who cares. Stocks are meant to give you returns and if you have made your money you are at liberty to decide to keep it, encash it or whatever.

This market has truly rewarded investors while exposing the difference between the best and the impacted cos. In this polarization, have stood out some fine cos that remained egged on to their business growth and didn’t spend too much time overpaying analysts to write on them.

What disturbs me a bit now is the same reasoning. When you stand out initially, you could be a loner and thus any company added to a loner doesn’t make a crowd. When too many people collect, a crowd is formed and crowds compel silly actions. We now have swarms of web sites, blogs, investor forum, twitter accounts etc where the same names are being recycled.

Picture this: I invited many of you to post your Diwali picks on twitter. The results are almost the same cos. If all of us are buying, aren’t we being fooled into valuations.

May be yes. May be not. My take is a few scrips despite being great cos are overdone now. They may not fall much or may well fall but don’t seem to offer the same excitement to own them as they did when they stood apart. Remember crowds attract curfews and arson too.

Turning to my picks, I am following a strategy of capital protection now in my decision making as greed amongst many leaves lesser food.

I see the Information technology sector doing well and continue to believe in tech m and Hcl tech as my best picks.

In pharma, there has been a huge run up. I would not like to venture into just any pharma name as if it’s the last journey in town to ride. I see some safety in Biocon and a potential for value unlocking. A great co lead by a great leader and now ready to take off. Product development is a time oriented process and when the gestation is done with, the results can be fantastic. Divi labs also affords comfort in the fact that it has completed its capex and should benefit from that and it’s forex ratio.

I trust the words of mr rajiv bajaj when he says exports would propel his co ahead. I continue to like bajaj auto as also Bosch where a huge capex has been completed even amidst a cost reduction by weekly plant shutdowns.

There is such a dearth of sanitation facilities in india that it does not escape my attention that for years to come, sanitation ceramic cos should do well. Hygiene, privacy, public amenities, population growth, food explosion, contraction of field land etc are all pointers. Cera remains a top pick.

I have avoided reference to many other ideas in my mind for two reasons:

One we all agreed to list 5 picks and I am amongst you.

Two: I encourage discussion on stocks including alerts on negatives or difference of opinion. While it gratifies me to see many followers on twitter and here, it does. Of feel good to see most people as inactive and reading posts for tips.

I don’t advocate naked buying ie without understating the logic as logic alone will guide you. The views expressed are my own and what I am doing. I do not suggest or recommend cut copy paste as each person has a different horizon despite different situations of investing.

I thank all of you who interact and give valuable comments. It’s been a great year of returns and prayers and hard work will continue.

Wish you an enlightened Diwali and much prosperity. In the midst of cloudy Diwali night skies, I shall look out for a new star. : ) be inspired.

Cheers.

Quickies

Hey guys,

been busy with lots of things on, two quickes. One I am very happy with sintex industries and its price movement. What started as a tweet just about a few days back as a trading idea, has in fact been a stunning performer. what guided my reco on sintex at 17 rs cum dividend was basic value where market was treating this very co that was featured in Rashmi Bansal’s book as a highly innovative co as if it was dead and gone. Even when it announced a dividend. The co has a variety of products post lay triggered by its internal innovation right from customer centric products like water tanks to monolithic homes. It’s interesting how much innovation the co has made in applied plastics right from a branding exercise of sintex to a product segregation between a white tank and a black tank. How it has extended plastics to include telecom boxes and collapsible housing that works well for construction sites and armed forceS. What went wrong for the co was only a fccb issue with volatile currency. But not enough to punish it to 17. Thankfully my reading on it worked with a dividend of 1 rs already received and now a surge of over 100 percent to 37.

 

the second quickie has been acrysil, a 26 odd year co into kitchen sinks. The co started with stainless steel sinks and moved to Quartz sinks. A plain reading of its balance sheet where an emotional chairman paves the way to his son’s succession, also explains the demographic shift resulting from higher income earning by households from steel sinks to quarry sinks.

Come to think of it, I see huge no of ads in magazines and papers of Cos advertising modern kitchen modules. While the market in kitchen appliances struggles with almost at par and comparable technologies, the market in modular kitchens has a huge market yet to be dented. On the same lines, ceramic and steel sinks are giving away to their better looking quartz sinks. In one of the books I read some months back, I noticed a study that highlighted how design skills when conjoined with automation or computerization are paving product innovations in an unprecedented way. The key is the ability to design. Acrysil annual report talks of not less than 20 new product innovations that are being executed in the coming year. The co also benefits from exports and hence currency and although the amt is still small, the potential is not.the scrip is dogged by the silly rule of auction bidding but nevertheless is placed in my view exactly where I saw la opala at 80 some 2.5 odd years back only to return as a 3 bagger in a tough market. I am not predicting acrysil market price as I duly respect the market but not its participants who rush in and out as if it’s some Diwali mela sale.

Disclosure: invested. Recommend home work, verification, believing in what you know and not what you are told.

Market update September 2013 end

Hey everyone,

Hope all of you are doing well. It’s been a while since we interacted on markets. And in a way, a blessing in disguise. The lack of interaction has been a savior to many investors as I learnt from their tweets, emails, whatsapp messages that they oscillated between a belief of a rally to a certainty of a fall. I don’t know why financial experts on tv believe it is inevitable that they know it all. Further why activism is better than its lack when uncertain. Fortunately my view has been to remain cut off from noise and to remain focused in the pursuit of either finding more capital to invest or in reading up on new stuff, most of which has been off market. I have also used this while to travel a lot and benefitted from some time spent in morning walks, afternoon high teas or off moment cappuccinos to mull over what all I may be doing. Enjoyed the rains too and this time the weather has been a turn on.

Back to markets. Mostly an inactive phase. When the markets dipped as should be done by an investor, the opportunity was used to increase stakes in core ideas. One of the ideas I have twitted on more long has been a combine of pvr and Cinemax. Pvr first appealed to be at some 160 bucks but I become more serious on it around 220. It was not rocket science to read the several crores of rs movies were clogging and the amounts were getting atrocious. It is also evident that such collections are actual theatre collections since the euphoria of announcing nos is almost like the take off in a 100 m race and its dash to the first weekend.

It is also a known fact that funded by an investment from L Capital, pvr chose to acquire Cinemax and thus created a strong hold even in Mumbai markets. Cinemax resulted in an open offer from pvr promoters and then a drop in share price for no reason. At 100 bucks, Cinemax seemed a no brainer with an inevitable open offer or merger into pvr. Well the latter has now materialized and the surprising element is that even post the announcement of merger ratio, Cinemax remained at a huge discount to pvr. Thankfully both have rallied with Cinemax up from 100 to 270 odd and pvr hitting 52 w highs regularly.

Since I owned both and have not sold, the weight age of these two holdings which I count as one given the forthcoming merger is up significantly post their run up and thus Pvr Cinemax combine has entered the core portfolio.

I also used the opportunity to add to den tv and tv18, as digitization is one of my best themes. The recent infusion into den by Goldman at a huge premium is inspiring and it’s tie up with star should do well.

I also increased the weightage of an old fav, Asian paints and added bajaj corp, jyoti labs and to repco finance. Other wight ages increased include hdfc bank, hdfc, bajaj auto, cera, atul auto, all old favorites.

The portfolio changes are as follows:

1 HDFC Bank Core Added

2 Indus Ind Bank Core no change

3 J&K Bank Core no change

4 Asian Paints Core added at 385

5 ITC Core added at 285, 290

6 Cera Core added at 456

7. Page Core no change

8 Astral Polytechnik Core No change

9. Bajaj Auto Core. Added at 1750, 1800

10. Hero Core No change

11. Eicher Motors Core added at 3050

12. Bosch Core added at 8100

13. Atul Auto Core added at 147

14. MRF Core. Added at 12800

15. Mayur Uniquoters Core no change

16. TV18 Core added at 17

17. Den Core Added at 147

18. Hathway Core. No change

19. Sun TV Trading. No change

20. M&M Finance Core. Added at 225, rural india doing well

21. Bajaj Finance Core. Added

Wockhardt Exit from core, sold most at 600, 525

22. Apollo Hospitals Core No change

23. Divis Laboratories Core No change

24. Wimplast Core no change

25. Supreme Industries Core No change

26. United Spirits Trading No change

27 Tata Global Core. No change

28. Bata Core. No change

Orbit exports. Booked profits, exited. Better opp elsewhere

29. Kaveri seeds. Core. Reduced at 1700 as euphoric state

30. Oracle Core No change

As orbit, Wockhardt are out of core and united spirits and sun remain trading positions, the no of core scrips is down to 28. Pvr and Cinemax enter into the list at 29 with a lower buying price but post run up a high weightage has caused their entry.

I intend to remove sun tv in this listing being a trading position and am contemplating making united spirits a core. Diageo integration seems on track and elections usually are a precursor to consumption.

Additions into core from money raised:

31. Bajaj corp. core. Rural idea play, brand extension
32. Repco finance. Core. Recommended at 163 on twitter and in earlier writings, the weightage is up now to core.

And a corrigenda here: I seem to have forgotten to include one of my fav scrips that I have been blogging on, tweeting and recommending when it was ex Satyam, Tech M. One of the highest weight ages. The very fact I forgot it shows it makes me sleep like a baby with peace. Continue to maintain a buy on it but post Infy results as not too sure of short term movements knowing how mobs behave.

Wish you all a good festive season and happy investing.

Cheers.