A new beginning

A new beginning.

A new beginning

The election results are finally out. And more than the fact that India has voted a single party to power after several years, it brings with it some rays of hope. Consider when a new year arrives. You make resolutions: to make more friends, to exercise, to travel. You start off on a new note. When you buy a new note book or pen, you tend to take notes and don’t like to score off mistakes by avoiding them. The Govt has a hope too as it is unprecedented and even beyond BJP hopes to have got such an astounding majority. When you go to the top you can be seen from far distances. The BJP realizes that after years it has been given such a chance.  More than ever they will need to deliver to keep their hand at governance. And Modi has a stellar history of good governance.

The markets jumped in euphoria and then settled up but off the highs. I read a technical chartist today in Et saying mkts failed to hold and fill fall. I recommend you guys to find good investment scrips and follow disciplined investing ignoring these wild calls. The markets have rewarded investors throughout history and all that fails is greed and fear.

If you read the papers today, the industry captains have expressed hope. Investments in businesses are also based on hopes. On better demand, of more profits. Its been a while since businesses got buoyant and in their optimism lies the opportunity to find companies that have been traditionally good in terms of their business edge and competence but which were plagued by confidence, indifference of policies, tax or environment uncertainties or any other problem that was a passing phase.

Having remained bullish since 5700 levels and totally invested all this while, I still remain bullish.

 

The investment theme now will be three pronged:

a) Core companies: which have been steady compounders and are true wealth creators. Most of these could be in pharma, consumer, IT or banks (pvt) and all that will matter is if I get a good price to buy. Currently the market seems euphoric on some sectors and believes that some of the best performing cos are defensives prone to currency or export shocks. History speaks otherwise. Hence I would look to selectively add to holdings here if I get good prices.

 

b) Dividend and Value plays: bull markets reward Value as new money looks for new ideas. A lot of small and mid caps fit this description. In the last few days, I added Noida Toll Bridge and ILFS Inv Managers to my holdings based on mouth watering dividend yields of over 9 percent and possibility of growth in both. There are many other companies that fit this bill and Im working on a few ideas. Kitex Garments is one such company in kid garments  sphere that was added at 120 odd levels last few days. The co has a history of spectacular ROI, ROCE, growth. And caters to a growing and exciting sector. The stock has run up massively last week perhaps triggered by its AGM. Im not sure what triggered it but the co is worth adding on any correction. RSWML is another co in this category that promises growth with dividends. A deep value play appears to be a co called Hindustan Composites. The co makes brake pads for two wheelers and railways. It has been in business for 49 years which means this is the 50 th year-usually companies reward on such milestones. In its core business, it earns well and has a PE of around 10 at cmp. The year ahead seems promising for its core business. But here’s the cream on the coffee: the co has a market cap of around 200 crs. a market price of around 450 bucks. The BV is an astonishing 1200 plus while it has liquid investments in shares and liquid investments of double of market cap. The investments excluding those made in group companies are in listed stocks. A list of the stocks can be seen from its annual report. The liquid investments are in interest yielding instruments. The stock value of the portfolio was based on 2013 and should have been further augmented. The co does sell investments as and when they appreciate and earns interest on liquid instruments. Its rare to find a co with so much cash in excess of its own Mkt cap. in a running business. Furthermore the promoters have a good record in their past ventures with JL Morison and Rasoi and hold around 75% stake. 14% odd is with institutions leaving little at hand with the public. I added this stock to my holdings recently and am happy to sit tight and see value unlock. 

 

c) Beta plays: most of the stocks I added in this segment were based on election results and included many PSU banks. While I am not sure I would stick on as there has been a phenomenal run in their prices, some PSU stocks like BEL, Concor offer lots of promise.

 

I intend to update the blog next before June vacations.

 

A standard caveat: I am not an investment consultant. The views expressed are personal. This blog is not a recommendation site. Readers are advised to do their home work and exercise due diligence. I have vested interests in the stocks discussed.