Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Stock Market is loony for growth ( Orbit Exports Ltd )

with 29 comments

The crowd psyche has excessive predisposition towards growth, more so if it is accompanied by consistency. Our personal leanings on any scenario that we refuse to appreciate have little to do with investing success. That is why the quote “Don’t argue with the tape” or “Market is always right”. For example I don’t like a 20% growing company at 40+ trailing PE no matter what the organisation or who runs it, no matter how seductive the growth prospects. This mindset has helped me more often than not. I never became a victim to private sector Insurance mania, satellite TV (Dish TV), micro finance etc.

However, market gives two hoots about my opinion. Market will pay heady multiple for growth oriented stocks no matter what the downside. That is dangerous for small cap investor, as some small caps may never recover. Being greedy, I follow the Lynch maxim, Big Stocks small moves, Small Stocks big moves. Big moves can be in either direction !

Some Mistakes

As a micro cap investor you have to be vigilant to avoid big move on the downside, or one could lose 70% or more on paper very quickly. 30% volatility in micro caps is similar to 10% volatility in big cap, don’t even think of stop losses.

The mistake I make often is to wait too long for a stock to get cheap, something I may not learn, but this has helped me more than otherwise in toto. I want to share a story on two stocks. One of them that I missed was Spice Mobiles in early 2010 around 20-30 Rs. I wrote briefly about it on theequitydesk.com here when the price was around 50 Rs. At the time Spice Mobiles was a 100 Crore entity in 1 Lac Crore market of handsets. It was not merged and name of company was Spice Mobiles Ltd.Stock went to 150 Rs over next 6 months.

Second mistake was with Orbit Exports, I recognised it at 15 Rs with A class management and a niche with excellent clients in US but did not buy it. Since I keep looking at downside more than upside, with each rise my aversion grows. I think it has steam left but I don’t buy if in my world view downside is disturbingly high.

Aim for achievable, Show me the Money

Contrary to what the general perception may be I am not looking for 10 or 20 bagger or 50 bagger, that is pure serendipity. I welcome if they so turn out to be. I am just looking for a simple 5 bagger in 4-5 years, that is not at all bad if you compute the compounding.

A five bagger in five years translates to a 25 bagger in 10 years and 625 bagger in 20 Years with a much higher probablity than investing in blue chips like IDFC Ltd and holding them for my grandchildren. Since nobody can look that far into future of any enterprise it pays to be medium term oriented and straining your mind only with what your regular corrective vision glasses render, over reliance on telescopes can injure investing performance.

As a rule I don’t buy hope and hype, dreams of prosperity, bright future prospects or any new and improved industry. I believe in my company showing me the money, here and now.

Disclosure: Not invested in either of two

Written by amitdipsite

April 26, 2011 at 12:48 am

Posted in Uncategorized

29 Responses

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  1. Hi Amit,
    do you have any view on new listing lovable lingerie

    regards
    tirumala rao

    rao

    April 27, 2011 at 8:35 am

  2. Hi Tirumala,

    Its already shown quite good listing gains. Potential exists but its slightly on higher side. Neither is cheap now but Page is still better relatively in my opinion.

    An Australian company also has same name

    http://www.lovable.com.au

    will be interesting if they come to India.

    Triumph and Victoria's Secret are better brands but not listed in India.

    Regards

    Amit

    Amit Arora

    April 27, 2011 at 10:42 am

  3. Hey Amit,

    Did you notice Photoquip promoters seem to have started buying from market

    http://www.moneycontrol.com/livefeed_pdf/Apr2011/Photoquip_India_Ltd_280411_SAST.pdf

    MG

    April 28, 2011 at 5:04 pm

  4. Hey MG,

    Thanks mate. Did not realise until you sent me the link. You're on top of all things to do with Photoquip !🙂

    One concern I was depressed about was – Management has indicated dividend payment only in 2015, this implies greed + intention to take up holding to 75% limit by 5% rise each year😦 I can understand the motivation but 1400 days seem to far away🙂

    Market has rewarded non-dividend paying companies like Gandhimathi Appliances but for it to become a star performer like TTK Prestige and for this to happen, Funds must lap it up, pre condition for them to take it to higher ground is dividend be it 50 Paisa per share which as you know requires patience.

    Regards

    Amit Arora

    April 28, 2011 at 9:00 pm

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    AAR VEE

    April 30, 2011 at 2:29 pm

  6. Hi Amit ,

    Photoquip quarterly result seems to be decent….what is your take on it ??

    umang

    May 1, 2011 at 6:34 am

  7. Hi Umang,

    While sales have grown by a nice 33%, raw materials consumed have grown by 45% resulting in lesses growth of Net Profits i.e. 18%.

    I have requested the company to explain the reason. My guess is that it is due to increase in raw materials and lack of pass through. One would expect a global leader in its category to pass it on to customer. Unlike Elinca S.A. Photoquip's 80% customer base is one company i.e. Elinca S.A. and remaining 20% customer base is Indian market. Yet to see if this is just time lag in pass through to Elinca S.A.

    Also Elinca S.A are growing close to 50% whereas Photoquip are growing around 30%.

    Regards

    Amit Arora

    May 1, 2011 at 9:31 pm

  8. Hi Amit,

    What's your view on camson biotech? A lot is being talked about its bio products for agriculture, seems like the next bing thing.

    Thanks,
    Vivek

    Vivek

    May 3, 2011 at 5:16 am

  9. Hi Vivek,

    I don't know about Camson Bio

    Thanks

    Amit Arora

    May 3, 2011 at 7:06 am

  10. Hi Pradip,

    I had a look at your company, very decent management, good div. yield and growth. Although one aspect to be aware of – raw material / input costs account for very high part of sales. It was high as 80% and even now quite high. Margins are thin and its a Cyclical company for a diversified portfolio.

    Regards

    Amit Arora

    May 3, 2011 at 7:15 am

  11. Hi AKKI,

    From your list of companies I like the company into Food business. It has potential, it can run when margins improve a tad

    Regards

    Amit Arora

    May 3, 2011 at 7:22 am

  12. Hi Amit,
    how is the Amrutanjan result for you,
    any take after the result.

    regards
    tirumala rao

    rao

    May 4, 2011 at 7:55 am

  13. Hi Amit,

    What ur view on simplex project. I am Anil who asked about zydus wellness

    anil

    May 4, 2011 at 10:25 am

  14. What view on manappuram.They are consistant growing 100% yearly and CEO said will contiue 100% growth for next 5 yrs more.
    Debt/Equity Ratio: 3.01
    PE Ratio: 19.42 Return on Equity: 19.60
    Book Value Ratio: 0.74
    Average EPS Growth Rate around 150% for last 3 yrs.

    EPS 6.8, Included in A group recently.Capital 5547.03. Net profit is 28%, divident paying, bonus on cards. Has 120 tionnes of gold as collateral security. FI holding 30%, promoter 37 %, general public only 12%, Shivanand Mankekar 1%.
    if it continues on same phase 1000 is sure shot in 3 to 4 years

    anil

    May 5, 2011 at 1:47 pm

  15. sir.. Can you Suggest Levels to Buy AK capital ?? Do u think current valuations demand a buy signal???

    sandeep maddali

    May 5, 2011 at 2:48 pm

  16. Hi Amit,
    Appreciate the hardork done for detailed research done on microcap companies.

    Are you trackig Biopac india?..

    whatz ur view on that.
    its a microcap, and a manufacturer of disposable food containers.

    Even though the sales growth is muted, the debt is decreasing.

    with best regards
    Zain.

    zain

    May 5, 2011 at 3:28 pm

  17. Hi Amit,
    What do you feel about Ineos ABS(india) and Vesuvius India. Although Prices have hit high for both these stocks in last two months, their financials deserve a second look. will appreciate your feedback. Thanks.
    Amar

    Amar

    May 5, 2011 at 9:45 pm

  18. Hi Guys,

    Ineos ABS and Vesuvius are both strong companies. Ineos is younger and more aggressive.

    Since they provide output to cyclical industries buy them on bad quarters since their results will provide opportunities being non linear in growth.

    Not tracking Biopac, Mannapuram, Simplex. I don't believe in Gold at any price. Or for that matter “any” commodity unlike Jim Rogers. I belive money is in technology not commodity for long term. Even Jeremy Grantham is riding same bandwagon. He probably knows a lot of things but not that there is plenty of gold in universe or for that matter diamond too. Infact even in core of earth there is enough gold arguably to cover surface of earth with half metre of gold.

    Amrutanjan : So far they have frittered away the moolah. Lets see how they do next year, too early to buy in my opinion.

    Regards

    Amit Arora

    May 6, 2011 at 7:36 am

  19. Dear Amit, Why AK Capital has beaten down a lot. Can we accumulate this company on every dip. Does the RBI actions has anything to do with this. Please advise

    Thanks
    NR

    Nanna

    May 6, 2011 at 2:25 pm

  20. This comment has been removed by the author.

    kuheli

    May 7, 2011 at 1:43 pm

  21. Dear Mr Kuheli,

    I am invested in Photoquip so I am likely to sing favourable tunes about it.

    The whole story is in front of you, final decision is yours.

    Regards

    Amit Arora

    May 8, 2011 at 1:09 am

  22. Hi Amit,
    Pls guide us whether there anything else to A K Capital being beaten down other than RBI action. I would like to add more upon correction.

    Thanks, Amar

    Amar

    May 8, 2011 at 8:48 am

  23. No other info Amar on AK Capital. Poor Q4 and scam related to finance companies. Nothing known specific to fall from 900 – 300.

    Thanks

    Amit Arora

    May 8, 2011 at 9:31 am

  24. This comment has been removed by the author.

    kuheli

    May 9, 2011 at 2:09 pm

  25. Leave room to average all the way to 200.

    Amit Arora

    May 9, 2011 at 10:43 pm

  26. This comment has been removed by the author.

    kuheli

    May 10, 2011 at 1:10 am

  27. Amit,

    By anychance did you had a look @ Glodyne… Company is giving good results but stock is getting beaten down.. I think we av a gem here.. Would appreciate your comments..Thanks

    jm

    May 12, 2011 at 2:13 pm

  28. Sir,
    How about SIP(ing) in A K CAPITAL on weekly basis for next one year?

    kuheli

    May 14, 2011 at 12:57 am


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