Update on positions & why such a ridiculous poultry stock ?
I wanted to update on the previous positions.
At this point I am bullish only on Relaxo and Simran Farms for long positions in terms of stocks listed on this blog. If you are willing to holding 5+ years you can buy TTK Prestige and Page Industries (owner of Jockey brand for South Asia) although they are wee bit expensive but they are almost certain to return 5 bags in 5 years.
There were many other stocks that I bought and sold and still like somewhat that have not been mentioned on this blog:
– Cera Sanitaryware
– Mayur Uniquoters
– Patels Airtemp
– Dhanuka Agritech
– Vinati Organics
– VST Tillers
At the moment I own none of above but I had them last year and if current stocks turn expensive I will look for them again.
My inclination is now for ultra micro cap stocks, between 5-25 crore. There are other stocks that I do not mention because they are high risk kind and I do not want others to suffer losses.
Public sector banks hold immense value, though many have doubled in price but not intrinsic value, in past 3 months. Over next 10 years PSU Banks will outperform 95%+ of all listed stocks on BSE (approx 6000). Their collective return would be north of 20-25% per annum. Inspite of knowing all that, I am not betting on them just yet. Because heart yearns for that little extra return.
Why Simran Farms ?
This seems like a junk stock. Not far back it was a penny stock too !
Mind you Symphony too was penny stock (2Rs) couple years back and in 2009 it was for 20 Rs.
Simran Farms is so lousy (in perception not reality) that you have to read it to believe it !
Admin of the forum has criticized it and also closed the topic on Simran Farms 🙂
That is when you know there is absolute disbelief.
If you read Peter Lynch’s One up on Wall St or Beating the Street, he empirically proves through a long historic timeline and examples, as why to choose low tech over high tech.
– No MBA, Engineer, CA worth his salt is willing to enter poultry industry and work with hen excreta for sure. What does it mean ? It means figure amongst ciphers. Or an equivalent proverb in hindi “aandhon mein kaana raja“
– Compare that with other high tech industries, where one cannot predict future of small cap players
– Poultry industry has huge potential
– Size of opportunity is gi – normous 50,000 crores INR+
– Small unorganised players are being wiped out by bigger players as it is no longer economically feasible to run a standalone poultry farm, integration is as necessity for survival. Thus, even if market size were stagnant top five players will thrive ! That phenomenon happened in US carpet industry in 1980s. It is also happening in other industries like jewellery, where market size is not increasing but smarter players are growing rapidly – shift from unorganised to organised.
– Poultry industry has all the goodness charm of loatheful industries which keeps MIT engineers and innovation in Taiwan at bay but its size is increasing by 10-15% per annum !
– A dumb industry does not attract new players, look at number of new players in mobile handsets !
– Scalability is not an issue, it can be implemented swiftly without Capex. Poultry integrators expand by contracting farmers with spare land and labour, this is nothing different from McDonalds franchise but without brand
– Simran Farms’ young guns, new blood with fire in belly, who joined since 2005 have proved to some extent and will continue to transform company
– Simfa Labs (Vetline), a division of Simran Farms commands good brand recall and is represented in industry forums
As RJ emphatically drives through, when outperformance happens, it is viewed with doubt and disbelief. Only when Simran Farms will earn 30-40 Rs EPS and stock will cross 200 mark next year will the institutions wake up to its potential.
I very much prefer potato chips to computer chips as an investor if not as a citizen in society.
True, bird flu can strike which can result in stock price reduced to half but hey, even Berkshire Hathaways’ stock price halved too couple of times. An overwhelming majority of stocks price halve in correction. In last century Dow Jonex index has corrected 13 times by more than 30% and 39 times more than 10%. As Buffett says, “If you don’t have the stomach to see value of your holdings in half, stocks are not right asset class for you”.
PS: Its my opinion, which may or may not work. Only time will tell who is on the right side. If Simran Farms does turn out to be multibagger as I believe, all credit goes to Peter Lynch.