Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Two Stocks in my dream duality of Maya

with 11 comments

Just a quick post. If I were forced to limit my holding to just two stocks and I were compelled to keep up with my peer performance for next 12-24 months, though not value stocks by conventional yardsticks, those two stocks would be:

a) Cravatex @ 400 (Already a four bagger in last 9 months since I entered, refer here)

b) Page Industries @ 2500 (I’ve made mistakes last year in trading in and out of it)

The results will not be disappointing. I feel very strongly about both companies and they can be 5 baggers from here again in less than 1800 days (5 years). In case of Cravatex upside will be even more strong if and when funds show some mercy on creeping crawlies like us. I see no reason Cravatex should not command 1000 Crore market cap in a few years (96 crores today). Page is discovered but will continue to compound.

I know there are always some gnarly issues vexing an investor, promoter selling, loss making subsidiary, undergarments by Fruit of the Loom, Hanes, DKNY in India – Nike and Reebok wiping out minnows like FILA and oh my ! the list is endless. That is exactly where you come in and I walk out, I will leave it to you to solve those questions!

What I do know is even B grade company like Relaxo will be around 1000 Crores in sales and market cap, I spoke many years back about it overtaking Bata in revenues,  Money is limited, ideas too many, bet hard !

PS: Cravatex has not announced any news for Acushnet’s golf brands yet. If they do get these brands, it would be time to back up the truck. When I visited sports stores across the region I found them dominating their categories. I now have the numbers for market shares of those two superlative brands, Titleist golf balls have 69% market share in United States and Footjoy shoes have 57% market share in United States.

Written by amitdipsite

August 12, 2011 at 8:10 pm

Posted in Uncategorized

11 Responses

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  1. Indeed. Money is limited and ideas too many. If I buy a stock I tend to stick with it for at least a year or two before I sell and book losses, and so far I am fairly satisfied with my approach (Balmer Lawrie is a good example, it only went down for good part of the year, but now I feel contended for holding it). Also having a day job means little time for portfolio churning for me. How are you dealing with this Amit? I understand you are very nimble and have your own framework for capital allocation. How many stocks you own at any point in time and what has been your portfolio churn rate?

    MG

    August 13, 2011 at 4:54 am

  2. True MG,

    I try to come back home by 5pm (10am India), so in a lucky position and then devote until midnight to stocks. I do get tired also.

    Earlier I held 10, then 5, I mean Nestle, Page type of stocks you can hold just 6, then again I went to diversified phase around 15-16, now I am trying to concentrate on idea that “definitely” should grow capital by 20%, and lesser allocation to positive black swans like AK Capital or Photoquip. ( Debt market 93 Trillion, Equity Market 25 Trillion but India is opposite ). I am constantly re-evaluating but its not easy, you could say its toss of coin, I like so many small stocks but if Funds or HNIs won't buy them they will continue to bite dust, so there is “fund fluff factor” to consider too now. My portfolio churning has been 50% meaning 2 years holding time, and I have made money in only 40% of stocks and lost in 60% of stocks.

    Regards

    Amit Arora

    August 13, 2011 at 8:22 am

  3. Hi Amit

    I am learning a lot on equities after finding your blog last year.

    There are many micro cap stocks from your picks like Photoquip,Puneet Resin,Simran Farms and Cravatex whose yearly net profit after 3-4 years will be equal to its current market cap.

    Once we find few good stocks,one can maximize the return by using Technical analysis and Data Mining.One should also have good knowledge of Options to protect his capital in volatile and bad times.What do you say?

    Many PSU Banks also look attractive at current level.

    In next X (?) years, Imagine BBB- Rating for all developed countries and AAA Rating for India with 1.5 Billion population.

    Thanks & Regards
    Manjunatha.

    Manjunatha

    August 13, 2011 at 12:12 pm

  4. Hi Amit,

    Do you still track Everonn Education?

    In your previous blogs, I read you were bullish on this stock..

    But are you still bullish on this stock given the fact that they have recently got huge order from government.

    Regards
    Amit

    Amit

    August 13, 2011 at 1:15 pm

  5. Dear Manjunatha,

    Thanks a few more points:

    – Knowledge always pays back, even knowledge of commodities or options will pay back

    – If one is salaried and can take a hit of 50% fall in portfolio, then one can avoid options, or at peak index PEs and if one is and intends to be fully invested and knows market is historically expensive no harm in pay 2-3% insurance money on index option

    – I believe it take 4-5 years full time / 8-10 years part time (10,000 Hours rule) to get at the top of game

    – One has to be really hard on oneself, a great photographer that shoots cover story for National Geographic has to choose 40 out of 2000 pictures for “telling a story” that words can't express. That remains hardest part, its become manifold times easy to be a good photo shooter.

    – Same way our performance will be mind blowing if we are able to tie in all areas of knowledge and confluence it into an idea. For ex: we want to buy stocks in the Cusp of explosion and also note that Funds have begun to evince interest :

    Such explosions can occur in Relaxo, Photoquip, Cravatex, Globus Spirits etc. when you get 5 times return in a single year.

    Even the “great” Jhunjhunwala sold out Relaxo @ 40 Rs, Hawkins @ 80 Rs and TTK @ 70 rs and Symphony Comfort @ 20 Rs around 2007-08 after he got tired in 3-4 years of holding.

    Check here for MF Holding:

    http://www.moneycontrol.com/mf/user_scheme/mfholddetail_sec.php?sc_did=PI35

    We have to get in before them but not 5-7 years earlier🙂

    – One thing we don't learn is to never hesitate is booking losses and never mind paying top prices.

    – Another learning is to not buy stocks which don't have “significant” potential of PE rerating. For example: Like Uniquoters maybe Puneet can grow @ 40% per annum and its great returns but it may not command 15 PE until its big enough (400-500 crore revenues), look at PI Industries or Sudarshan Chemicals, their performance has put 3M India ( just a 20% grower) pale but their PE just does not expand. Uniquoters is a 100 bagger in last 10 years but market does not pay excessive PE, that confuses me a bit.

    But I still feel one would be better off (less risk and same or better growth) in buying 100 stocks with 1% weight with niche leading positions like National Peroxide which has 40% market share than buying just 4 stocks. Some people compound 27-28% per annum as well with 100s of stocks. So the dilemma is real between concentration and diversification for a small investor but for a big fund it has to be diversified, no questions.

    If you get in in a microcap @ 4PE and 5Rs EPS i.e. 20 Rs which has the makings of a mid cap, then you get 4-5 times PE re rating and 4-5 times EPS growth in a few years, operating efficiencies, brand, scale, funds mania, popularity etc. everything going for you and a 20 bagger just like that. Only needful is to make sure atleast 90% of your picks end up landing in mid cap space and to not get in way too early.

    Regards

    Amit Arora

    August 13, 2011 at 9:34 pm

  6. Hi Amit,

    I have been going through your older posts for some time now. I wonder, if you are still tracking the Simran Farm. Did anything go wrong with the story. I can see that cost of raw material is really increasing although the sales growth is probably on expected lines. Both Simran and Venky's have had a decent decline in their price. But, what baffles me is what stops these players from passing on these high raw material cost to the consumer. I understands it's a commodity kind of business but then shouldn't the prices for consumers be increasing in a more generic way(by all players). I mean under these conditions none of the players can probably survive for a long term.

    What's your take ? Anything Charlie's mental model suggests on these ? Can we expect the price rise to happen sometime in future ?

    Regards
    Raja

    Raja Panda

    August 14, 2011 at 3:15 pm

  7. Hi Raja,

    If Poultry sector/industry as a whole is growing by 40%, high protein requirements by people who can increasingly afford, then the question to ask is who is it growing by 40% ?

    If existing players are not growing, then they are losing market share, are there new entrants each year that are taking away share from existing players. Sometimes an industry just turns pear shaped because of the players, competition and undercutting. Entry barriers are low, obviously lot of them will be wiped out, ones that stay around will reap well. I prefer to stay away just yet.

    Opportunity Cost is high right now.

    Regards

    Amit Arora

    August 14, 2011 at 9:15 pm

  8. Hi Amit,

    Whats your view on ABM Knowledgeware

    Regards,
    Rahul

    Rahul

    August 15, 2011 at 11:01 am

  9. Dear Amit

    Thanks for your points.

    I spent around 500 hours in last 4 years learning on equities.
    Your blog points are worth 500 hours that makes my total to 1000 hours.

    Thanks & Regards
    Manjunatha

    Manjunatha

    August 15, 2011 at 1:42 pm

  10. MMFSL is hitting lower circuit everyday.

    Amit , what do you think? Was the stock manipulated to move up?

    shri

    August 17, 2011 at 5:08 am


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