Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Hot Companies from Cool Places

with 33 comments

Except for 30 odd companies in mid cap space I don’t find many bargains purely from financial screeners on any side of the ocean. Could be a case of poor vision as aging taken on its toll on me or the fact that I am not in touch with markets (have not seen TV in ages) and certainly don’t know the anchors who don’t own shares but do hold the fort on investing.

India has been one of the poorest performing stock markets this side of calendar but now offers some value in small and mid cap space. 

In gratifying exploration for the bargains I unearthed a few valuable rocks.

May the patients rest before finally resting in peace

I found Zero bargains in United States and feel that we are likely to have an encore of 0% S&P returns from 1999-2012 yet again for at least another five years with a few exceptions obviously (I almost have to throw exceptions in there, don’t I want to be right when predicting !) . Almost everything is super expensive for those that are not yet in billion dollar club.

Found an interesting company which is a market leader in hospital mattresses, ticks the value investor boxes, capital preservation and some nonsense jargon like that…at a palatable 10 PE multiple.

http://www.spanamerica.com

https://www.google.com/finance?q=span

About the dead certain events

Father Lynch gave us flowers in the desert (Symphony Ltd) and corpses in the garden. On that note I discovered a market leader with cutting edge bacterial decomposition occurring naturally under the ground with latest strains of bacteria acting on dead bodies. If it sounds eerie, it is.

This market leader with over 50% market share in cemetery in prime cities has outperformed most Australian stocks. But Ozzies having fat wallets and raked in bundles by selling mountains of dirt and dust to the world don’t leave things cheap on stock market for sure deals such as this stunner.

Unfortunately this steady business will come dear at 26 times earnings.

http://www.invocare.com.au

Provides funeral, cemetery and crematoria services in Australia. Count on this before you count on Daburs, Colgates, and ITCs, okay ITC is a friend, it helps grow this business.

Wondrous Wealth in a Remote Island

I like un-earthing stocks that are not on the published map in India. This prompted me to further research into geographies that are not in radar of Fund Managers. That would mean non-radar stock squared, works better than cocaine for me, prompts me to pray for extra long life just to be able to compound the wealth.

The best company I have found in a while is a billion plus dollar entity that contributes to 10% of Papua New Guinea’s (PNG) GDP. In these island economies, the best part is, a number of large companies end up taking the mantle of a natural monopoly.

When Warren Buffett spoke about Island A and Island B and likened America to Island B; and that Island A inhabitants who enjoy trade surplus would gradually take over assets of latter, we want to buy stocks in Island A. It is not without reason that Buffett burnt jet fuel, time and effort in combing through Germany.

Investor is in for a two fold treat if a right stock is selected, investment performs well and foreign currency will outperform local currency over time. Unfortunately Germany does not have the luxury of Deutschemark (sorry Hitler) and PIGS are pulling it down. But there is not such problem with other countries without currency union where trade surplus does not get shared with slackers.

Going to the past

Wouldn’t it be great buying into IT revolution knowing who the winners would be, or supermarket chains knowing they over take the rest or McDonalds in 70s or Infosys in 1990s. Going to past may not be possible for most of us without superhuman ability, but we can go to the places on this planet which look like the past. PNG gained independence in 1975 from Australia (great, 30 years even behind India !). With only 15% urban and 85% rural and a mind numbing trade surplus of 1.5 Billion – 3 Billion $ on GDP of 12 Billion $ makes it better than even Germany in relative terms.


I suggest you go through the annual report of TATA SONS of PNG (Steamships Trading Company Ltd), the biggest conglomerate of PNG and is likely to have more companies in few years and projects than we can count. It owns 50% of hotels in PNG, 50% of Colgate-Palmolive, 50%+ shipping business in PNG, Supermarkets, Warehouses, 20% IT business in PNG+ lots more, all for about 1 Billion Australian Dollars. Makes me feel like we have a better bargain than buying into Buffett Partnership in 1960s.

While the stock was available for 2$ few years back and 26$ last year, at this price of 31$, I still consider it a bargain. When you are done investigating the company, you’ll realize that it is owned by a 200 years old respectable ancient business group which owns numerous businesses like Cathay Pacific, Coca Cola bottling in the US etc.

Parent of TATA SONS, sorry Steamships Trading Company

http://www.swire.com/en/about-us/overview

Steamships Trading Company, itself a 93 year young toddler

http://www.steamships.com.pg

http://www.steamships.com.pg/downloadAnnualReport.htm

If you like HDFC Bank in India then chances are that you would swoon over BSP Bank in PNG that has 52% market share, awesome management, great dividend all at 10 PE. Figuring out how to buy this stock. Check the quality of Annual Report and transparency, needless to say monopoly !

With Steamships, it has a dual listing on ASX Australia besides PNG.

http://www.bsp.com.pg


India offers a bargain

I have no game plan other than continuing to add to existing hottest ( cheapest) stocks, i.e. Gulshan Polyols, Vikas WSP, Zylog, Infinite Computer and unstoppable growth stocks like Thangamayil, Cera Sanitaryware, Bajaj Finance.

Stay off the grid and get rich !

Written by amitdipsite

March 17, 2013 at 6:04 am

Posted in Uncategorized

33 Responses

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  1. Please throw in a few more businesses that I forgot for Steamships Trading Company PNG, Apple distributorship, SONY distributorship, HP distributorship, DIAGEO distributorship etc etc…

    Amit Arora

    March 17, 2013 at 10:11 pm

  2. Hi Amit,
    Could you please elaborate as to why you like Gulshan Polyols?

    totalview

    March 19, 2013 at 2:43 pm

  3. Hi Amit

    Excellent and crisp write-up.

    What is your view on Manappuram Finance and Muthoot Finance after recent correction?

    bb

    March 20, 2013 at 4:59 am

  4. Great choice, like both but own Muthoot only at the moment, Regards

    Amit Arora

    March 20, 2013 at 9:26 am

  5. Amit Arora

    March 20, 2013 at 9:28 am

  6. Thanks galore Amit !

    totalview

    March 20, 2013 at 1:10 pm

  7. PS : Only problem top-line is stagnating for the last two years !

    totalview

    March 20, 2013 at 1:15 pm

  8. Hi amit

    I saw your small write up on mps ltd.
    Whats your view on the same at this moment…

    pratik

    March 20, 2013 at 4:33 pm

  9. Hi Amit,
    Please have a quick look at BILCARE !Extremely cheap valuations.Consolidated FY11-12 Sales 3665 crores and PAT Rs.136 crores, EPS Rs.60 ! Consolidated 9 months ending December 2012 – Topline -Rs.2800 crores and PAT Rs.110 crores. Annualised EPS may be around Rs.70 ! Current Market Price Rs.81 !Lower Circuit for the last three days. Eye-popping valuations. Needs your quick appraisal !

    totalview

    March 21, 2013 at 8:31 am

  10. what about atul auto & thangamayil at these levels? thanks.

    chaitanya

    March 21, 2013 at 10:29 am

  11. Top line is stagnant because their sales of CACO3 and Sorbitol is somewhat flat. Paper should be a dying industry in the long run – not sure how much of the CACO3 is sold to paper industry. Sorbitol – small projected growth.

    I think this is a market inefficiency play. Probably not a keep till you die play. Available for 50 crores and they have an owners earning of about +/- 20C after their maintenance capex. If their expansions start revenue generation (Mannitol, DMH and Alcohol), very little reason why it won't be ~4 P/E. That should give a 2X return even if it plays out in 2 years.

    PS: I am huge fan of Amit, but writing here for the first time. Just sharing my view. Feel free to point out if something is not right. Disclaimer: I don't hold this stock.

    Suresh

    March 21, 2013 at 11:35 am

  12. Amit,
    Your comments are solicited.Do you think it can be a 3x multibagger in three years'time?

    totalview

    March 22, 2013 at 2:27 pm

  13. I am not so sure and have not researched on Bilcare or other Pharma companies. Hospitals and larger Pharma companies have tremendous power over receivables from firms like these. Opto Circuits is suffering from this and has better prospects of survival.

    I am invested in only market leaders even if that means leadership in one state of India or one category/niche like Atul Auto or Thangamayil, these will more than survive.

    Right now if you just buy 50 companies from a blanket screener with criteria of PE < 10, ROE > 20, Div Yield > 3%, Revenue and EPS cagr for past 5 years > 20%, market cap < 600 Crores and buy all of them, you will outperform sensex and all global indices. A few of them will fail but rest will more than make up. But if you are buying only 10 companies then each one must survive, and for that long and arduous imagination has to be applied.

    Amit Arora

    March 23, 2013 at 9:29 pm

  14. dear Amit,I want know about laopala,cravatex at this price and marks an pharma can I consider this.what's your opinion.

    taml Sarkar

    March 24, 2013 at 3:47 am

  15. Dear Amit,

    But there is a dilemma of a retail investor who has no sufficient funds to buy all the 50 companies, he can only buy 10 companies and wants to achieve 25 % CAGR.

    He can only buy Cera,Ashiana,Atul etc.even he cannot prefer to buy Zylog bcz for him, capital protection also is a matter of concern.

    regards,
    Shanid V H

    shanid

    March 24, 2013 at 6:26 am

  16. After quite some time, in an otherwise bearish market Photoquip was cracking ! Total volumes traded 36,500 and counter closed at Rs.46 up nearly 17% from yesterday's closing !!!! Looks like to be year-end adjustment of promoters !!!It seems shares held by proxies have been transferred to promoters' account !!

    totalview

    March 26, 2013 at 11:06 am

  17. There is potential and value in the company, dividends and rumours aside. Hawkins was flat at 40-70 Rs for over 7 years, TTK and Relaxo too below 100 Rs for a decade. All three were positions of Jhuhjhuwala too but he could not make any money from above three. Same with Symphony.

    One can hold a stock only so many years before selling out. But if you buy a large number of stock that are ridiculously cheap even statistically, some of them will surprise on the UPSIDE, that Surprise element is NOT captured in the price already.

    Amit Arora

    March 27, 2013 at 6:16 am

  18. Jatin

    March 27, 2013 at 6:54 am

  19. Nearly 1.5 lac shares of Photoquip traded today ! But what an irony more than 1.45 lac shares were through bulk/block deals !!! Hardly 3,000 shares were traded in retail !!!! I hope today`s trading completes the permissible limit of 5% creeping acquisition for promoters for Financial Year 2012-13 !!!!!!

    totalview

    March 28, 2013 at 5:25 pm

  20. Stock market such a nice drama of Emotion and Value, that it tends to look good when stocks are expensive.

    Amit Arora

    March 29, 2013 at 4:07 am

  21. Amit, can you provide your opinion about laopala,can I buy this or not,and I have photoquip1000share from 2005 @15,can I add more or not,last about cravatex I sold it 680level can some quantity add?I need your opinion.thanks.

    taml Sarkar

    March 29, 2013 at 5:02 am

  22. One may form an opinion that Photoquip will go up based on the value parameters or any other parameters and eventually be correct in that opinion but will lose money if he acts too soon. We all know that untill the promoters acquire all the stocks they intend to acquire the stock is not going to inch up in a meaning full way. Also there is no guarantee that the promoters will let the retail investors make money( they can de-list at a lower rate). By acting too soon one is losing other opportunities and also a possible opportunity in Photoquip aswell.

    vel

    March 29, 2013 at 5:25 am

  23. That is a very valid point, “by acting too soon” and “opportunity cost” is a big factor in stock selection, comparison against existing stocks with more probability of outperformance.

    Amit Arora

    March 29, 2013 at 6:56 am

  24. Hi Amit,

    Your thoughts on promoters holdings decreasing in Zylogs case? If its at such cheap valuations why aint the promoters buying back from the market. They have cash as per financials to do so right.

    Thanks. Cheers
    Mokhtar

    Mokhtar

    March 29, 2013 at 2:11 pm

  25. But we must admit that promoters have been very smart and they saw to it that they were able to keep the price in the range of 40 for quite a longer period !!! My worry on this counter is a little different ! Suppose even after acquisition and performance share price refuses to budge !!!! Promoters' conduct on corporate governance is far from satisfactory !!! They have not declared dividend since inception whereas they have been taking handsome salary packages for father and two sons !!! In fact, it is exorbitantly high keeping in view the size of the company and it's operations !!! There is no guarantee that they will come on the dividend list even after everything is done as per their wish-list !!!! I can quote you so many companies whereas handsome profits are being recorded year after year and companies are refusing to reward the shareholders.In fact, minority shareholders are being treated like a step child. Our present Corporate laws provide hardly any remedy arising out of such a situation. Ultimately, retail shareholders are left with no option except to accept any “sell out” coming from the promoters or even no reflection of performance on the share prices. With the result share prices are quoting at laughable prices. For example just check up “Samtex Fashions” !!!!!

    totalview

    March 29, 2013 at 3:48 pm

  26. Oh it zoomed to 112 and that too on Upper Circuit !!!! Was a very good short term, atleast for now, opportunity !!! More than 40% return in less than 7 working days !!!!

    totalview

    April 4, 2013 at 5:01 am

  27. Hi Amit,
    dont you think PNG is highly dependent on Mining and any slow down/ cooling of the commodity prices will have cascading impact on its economy and also SST.

    SST used to hold Honda Mitsubishi Land Rover dealership too.

    Jatin

    April 4, 2013 at 6:01 am

  28. It seems that Small and Mid-cap investors have been badly butchered !!! It will take quite a good time to see that there is some life in this segment. What's your take, Amit?

    totalview

    April 4, 2013 at 10:09 am

  29. Hi Amit,

    Are you still invested in cravatex or have exited the counter? Does it still seem to be the multibagger it was about 3 years?

    Pratul Lobo

    April 5, 2013 at 9:34 pm

  30. hi amit,

    I have recently come across your blog and have become a regular reader of all your posts.
    I would like to bring to your attention a company called Fluidomat which has a mcap of 22 crore into the fluid couplings industry. The promoters have gradually increased their stake in the company which suggests good prospects ahead. Can you please advise if this is a good company to invest in?

    Pratul Lobo

    April 6, 2013 at 2:40 pm

  31. Hi Pratul

    Thanks and I have already mentioned my opinion on these type of companies here

    http://multibaggersindia.blogspot.co.nz/2012/05/investor-is-king.html

    Regards

    Amit Arora

    April 6, 2013 at 10:35 pm

  32. Amit what's your take on Astral Poly, Kaveri seeds, Repco Home, TCS, Bajaj Corp, Mayur Uniquoters, Indusind Bank, Accelya Kale, Canfin Homes ? Have you ever invested in these cos ? What's the future for them?

    Vivek Gautam

    September 16, 2013 at 7:14 pm


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