Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Investing Strategies from Peter Lynch and Philip Caret

with 23 comments

I was asked recently by azmath, a follower on this blog to provide an opinion on Jindal Polyfilms. My first reaction was lack of knowledge in this industry. I looked up its competitors and players in similar industry like Polyplex Ltd, I realised yet again that I have missed out a whole cyclical turnaround of polyfilm and allied industry.

I was tuned into radio station of sub 30 crore market caps for the past few months and I would have missed out TTKs and Relaxos if there were in the making even now. Likewise, I have no grip on sugar, steel, oil, cement industries. Playing cyclical stocks can be very very rewarding if one is at top of their game, best part is that its repetitive. While there are secular growth stories in India right now and for a while to come, perhaps after few years, I might cultivate interest in keeping tabs on cyclical stories.

Peter Lynch is a strong advocate of buying stocks in Industries where ‘you’ are a leading sensor by virtue of your employment/association in that industry. If you were an employee of Jindal Polyfilms, you could have made 5X the money in last four months, ditto for Polyplex. Or if you were in trading, shopkeeping, wholesaling business, you’d know when this industry is turning around and finished goods prices are soaring. There is an interesting story of Buffett sitting outside a factory and counting train bogies entering a factory with raw material to predict turnaround.

Second learning is, patience. After investing in solid 6 growth companies, there is nothing left to do for the next one year, other than reading quarterly results. One has to follow one’s hobbies and interests outside investing or reading related to investing, unless one indulges and enjoys trading.

Three months back I was prepared Photoquip may not move an inch for a year, I was cool with it. When I think now, is it possible for Photoquip to earn 10 Crores in net profits in two years from today (20 Rs EPS) ? Is it possible to get re-rated to 20 PE since it is a consumer brand ? Multiplication of previous two numbers results in eight times possibility of upside from 50 Rs price available today, so if one’s brain is convinced, then what is left to do, unless one finds something even more seductive.

I will probably not be updating the blog frequently unless something too exciting happens, will keep adding to existing three positions (Photoquip, Relaxo, Cravatex) until proven wrong.

Both lessons remind me of this video

Written by amitdipsite

November 20, 2010 at 7:55 am

Posted in Uncategorized

23 Responses

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  1. Hi Amit

    Agree to your viewpoint that we should keep tracking the the performance of Photoquip and Cravatex.

    BTW Photoquip has a fan page on facebook. If you go through the profile of its fans on facebook, you will find that majority of them are professional photographers.

    I think this is another alternate way to find out the market potential of Photoquip's products.

    Ansh

    Ansh

    November 20, 2010 at 2:49 pm

  2. Thanks Ansh,

    Was aware of their facebook page but never bothered to look at their fan pages.

    A small number of them have links to their websites, ideally every professional photographer making a living out of it should have their own website.

    A few I found were:

    http://www.studiopanorama.com

    http://www.lightandmagic.com

    http://www.kaushikchakravorty.com

    http://weddingfotographer.wordpress.com/about

    There were a few annual report/corporate photographers too amongst them…interesting

    Thanks
    Amit

    Multibagger

    November 20, 2010 at 9:05 pm

  3. What a shame, I missed out Fila India website, looks neat:

    http://www.filaindia.in

    Multibagger

    November 20, 2010 at 9:55 pm

  4. Nice concept of brand building:) , seen video on Fila Apparels link ?

    Multibagger

    November 20, 2010 at 11:46 pm

  5. My quote on microcap investing, a twist on Gandhi's quote:

    “First there is disbelief, there is slander, then they laugh at you, then they envy you, then they buy the share and speak no more.”

    Multibagger

    November 21, 2010 at 11:49 pm

  6. hi amit,

    How did you determine the 85 percent market share for photquip?

    einstein

    November 22, 2010 at 5:09 am

  7. Hi einstein,

    Exact percentage from horses mouth, and also confirmed from trade sources.

    Amit

    Multibagger

    November 22, 2010 at 5:14 am

  8. Can you please tell me some of the trade sources that you refer to?
    I like the way you did ur analysis, not throwwing urself too much into numbers and analysis paralysis and looking at the few critical variables and the big picture. What is preventing the competitors from snatching market share from photoquip? I mean if the whole industry takes off in a big way wouldnt it attract more competitors?

    einstein

    November 22, 2010 at 5:37 am

  9. Hi,
    Can you please study batliboi ltd, 80% with promoters, a conservative but consistent company operating in engineering, textile etc. Additional factor is, they have huge land holdings bought at very cheap rates in early days. Please check if am missing something in this.

    Raju-Seetha

    November 22, 2010 at 5:47 am

  10. Thanks einstein🙂

    You'll be amazed how open people are mostly. google for “india wedding photographers” without quotes, then call up each person for 10 minutes appearing on first page of results, seven of them are going to have time to speak with you either today or in next day. All of them must be having Elinchrom or had it. Also, please read the post on 1st of November.

    Spend a week (or more as you are investing lacs or more of Rs or will at some stage in investing) reading discussion forums like:

    http://photography-on-the
    net/forum/showthread.php?p=11320619

    Investing with #1 player available at dirt cheap valuations is a case of no brainer for me. There are many imitations, some at even half the price but there
    is only one best selling Mp3 player iPod. For some strange reason I also bet on #8 or #10th player like FILA and #60th player like Relaxo. So question would be more pertinent if you had asked me why I bought Relaxo than asking why am I investing in Lamborghini Holding Spa. I hope you don't take offence.

    Elinchrom has ventured into intermediate level gear in the past 3-4 years after many decades of existence, that is showing on results…

    Regards

    Multibagger

    November 22, 2010 at 6:07 am

  11. Hi Raju-Seetha,

    Please share with us, why you like Batliboi, then we can dig into it ?

    Regards

    Multibagger

    November 22, 2010 at 6:35 am

  12. Hi Raju-Seetha,

    I re-read your comment. About “land bank” factor, its not time bound, 'when' your money will grow, in the months/years you hold one becomes weary, dejected, dispirited.I would One would need to allocate very small percentage say 0.2 %, if thats your style…

    Regards

    Multibagger

    November 22, 2010 at 7:22 am

  13. HI Amit,
    Could you please analyze on accel transmatics. I noted this just becuas eof its animation wing. Yenthiran Robert film animation done by them. Also Ek tha junjle in disney TV. Now producing Shakthiman animation in colabioration with BIG TV. Also thier software division USHUS technology doing well. Recently it doubled within 1 month. Some big players jumping into this. Could you please hsare you view on this

    anil

    November 22, 2010 at 1:04 pm

  14. Hi Amit

    Have come another stock – KDDL Ltd. (erstwhile Kamla Dials). The company is a supplier of watch components like dials,hands to international brands in Switzerland. But the business that is relatively exciting is that they are the owners of ETHOS – which is primarily into luxury watch retailing.

    The Indian luxury watch market is worth Rs 1,200 crores and grew at 55% in the last Four years.

    Source – http://www.dnaindia.com/money/report_luxury-watch-companies-say-time-s-ripe-to-step-up-india-play_1350146

    The company market cap is 82 crores as per today's closing(Rs 112.5) and it looks like a leader in a fast growing segment.

    Can it be a multibagger, need your analysis….

    Regards

    Ansh

    Ansh

    November 22, 2010 at 4:10 pm

  15. Unconfirmed info ( please do not ask source), some funds/HNIs may be into Cravatex.

    Regards

    Multibagger

    November 22, 2010 at 7:02 pm

  16. @anil,

    I know who is recommending accel transmatics. Unfortunately my style is not momentum trading…so no views on accel, its in 'too hard' category, so pass.

    @Ansh

    Looks fair enough opportunity. I don't know how to develop conviction as I never wore a watch. Perhaps it's to be looked up as status symbol / jewellery for men.

    Regards

    Multibagger

    November 22, 2010 at 11:04 pm

  17. Hi Amit,
    Great work! Appreciate the hardwork and effort made for doing the indepth analysis.
    Since you have analysed Relaxo in details i would like to ask you about this company.
    The company is Mirza International (Red Tape brand) is planning to expand production [4.0 million pairs/annum to 10.0 million pairs/ annum] as well as retailing [The company plans to have 200 exclusive REDTAPE stores in India itself by 2011]. Would like to know ur view.

    Regards

    Zain.

    Slave2Master Money

    November 25, 2010 at 5:02 pm

  18. Dear Zain,

    Thanks, overwhelmed.

    I will try to look at Mirza.

    Regards

    Amit

    PS: news item

    http://www.afaqs.com/news/story.html?sid=28886_Rediffusion-Wunderman+bags+Proline+Fitness+digital+business

    Multibagger

    November 25, 2010 at 6:48 pm

  19. Hi Zain,

    Although Mirza did not go anywhere in past 10 years, retailing move is something to watch out. Looks decent, need to keep close eye on debt they take on for expansion. Looks fair opportunity. Its best to be 1-2 year late in retail stories after expansion is proven.

    Regards

    Amit

    Multibagger

    November 25, 2010 at 7:02 pm

  20. Hi Amit,

    Looks like time for bottom fishing and the great value investor style hunting is here. Mid caps and small caps have gotten butchered. Some of the great ones have fallen by as much as 50% to 60% in the last few weeks. And many are also at their 52 week lows, inspite of their fundamentals and earnings only getting better. Your thoughts?

    Regards,
    Manish.

    ManishBG

    December 9, 2010 at 6:15 pm

  21. Hi Manish,

    I agree, time to keep biting, although still not time to take loan and buy equity. Scared “Firangis” may overdo fear and reduce sensex to 12000. So, time to continue SIPing on those counters where you have faith of 25%+ growth, negligible debt, PE < 10. I am still waiting for any big position. This time I will sell the house too if sensex goes to 12,000. Regards Amit

    Multibagger

    December 9, 2010 at 7:49 pm

  22. Ha ha🙂

    What's happening to the markets is scary and probably drastic. But strategies are even scarier. But guess you are right. If sensex does go to 12,000 levels it will become a money multiplier for sure.

    Thanks,
    Manish.

    ManishBG

    December 10, 2010 at 3:39 am


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