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prosperity
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   Posted: 22/Mar/2007 at 4:42pm |
Basantji,
Between a Bharti and Pantaloon, what would you add at current levels for fresh allocation of money? Assuming that you already have some exposure to both.
Thanx !
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basant
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Posted: 22/Mar/2007 at 5:20pm |
Cannot compare the two Bharti is less risk with less reward compared to Pantaloon. So it is more of a risk reward call!
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deepinsight
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Posted: 22/Mar/2007 at 6:27pm |
Basantji:
A) Should pe-rerating be part of our original investment hypothesis?
or
B) is it simply an outcome of buying a good company at a reasonable price? (and the company getting recognized by more people as good through operational outperformance)? and investors getting a "bonus" through pe re-rating.
The question is more rhetorical but I am trying to understand if such assumptions of pe rerating should be part of ones thoughts while analyzing or taking the initial position in a company? And if its really possible to narrow down companies which could get re-rated in the future? It would obviously strengthen the investment argument.
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"Investing is simple, but not easy." - Warren Buffet
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basant
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Posted: 22/Mar/2007 at 6:45pm |
Originally posted by deepinsight
Basantji:
A) Should pe-rerating be part of our original investment hypothesis?
or
B) is it simply an outcome of buying a good company at a reasonable price? (and the company getting recognized by more people as good through operational outperformance)? and investors getting a "bonus" through pe re-rating.
The question is more rhetorical but I am trying to understand if such assumptions of pe rerating should be part of ones thoughts while analyzing or taking the initial position in a company? And if its really possible to narrow down companies which could get re-rated in the future? It would obviously strengthen the investment argument.
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I would go with (B) above because a good company will always get rerated upwards (if it is trading at a lower PEG). I do not buy low PE companies just to see them get a higher PE but if an opportunity comes along then it is like icing on the cake.
Generally low PE stocks remain at a low PE for a reason. SOmetimes we get small cap companies at low PE because no one has discovered them and that is the opportunity. But the analystical process does not start from a low PE stock which could be bought in the hope of a PE rerating.
Now if we hjave two stocks with a PE of 15 and 25 then it is not that we shall buy the 15 PE stock because then we are using only the PE in analysing a company whereas investing goes far beyond that.
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prosperity
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Posted: 22/Mar/2007 at 8:48am |
Thanks Basantji, I have understood..
Now my second and last question on this, between NW18 and Pantaloon - at current prices, which should be added on with fresh money - assuming that one has decent exposure in both stocks ...
Thanx !
Originally posted by basant
Cannot compare the two Bharti is less risk with less reward compared to Pantaloon. So it is more of a risk reward call! |
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basant
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Posted: 22/Mar/2007 at 8:55am |
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NW 18 is value cum growth Pantaloon right now seems to be pure growth so I would prefer the former when it comes to between the two and after knowing that an investor has decent exposure to the two companies.
Edited by basant - 22/Mar/2007 at 11:23am
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basant
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Posted: 15/Apr/2007 at 12:28pm |
Originally posted by nikhil090
Basantjee,
I agree with your view. After the recent rise again, the margin of safety in Educomp has diminished considerably. It was looking much better at 900 than at 1300+.
Looking at the The Equity Desk XI now, what 2-3 stocks give you the comfort to buy at these levels? I am talking from a reasonably diverstified portfolio perspective. Actually i am getting out of educomp and gitnajali and will have some cash - Not able to make up my mind on where to invest... Banks present a great opportunity and some part will definitely go there on corrections.. But from the agressive growth stock perspective, I am not very clear..
pls guide? |
I am feeling the same as you are. All these stocks Educomp, Pantaloon Retail will now drive themselves on EPS growth only.The scope of a PE expansion is minimal or rather negative in these type of companies. PE could expand a bit in TV 18 it is at 30 times Fy08 and could go to 40 times. There is the ceiling there so not much to bet there as well.
Once we have a situation where PE cannot expand beyong a point then it makes sense to back companies with sustainable growth only. For example if I had to choose Tv18 with a 40% growth with an HDFC Bank with a 30% grtowth I would go with the latter. This is just an example to explain the thoughts.
PE expansion is like a pinch hitter in the cricket XI it makes a quick fire 40 in 25 balls but expecting it to make another 40 in the next 25 balls is difficult.
I would still back Tv18, Network 18 and Pantaloon if you have a lesser exposure there. ENIL also looks done from the PE expansion point of view so the MOS is the growth in EPS only.
Now people may have targets for Educomp some will say it could go up to 4000 and that looks big but if we think about it objectively that target is only a 3 bagger from these levels!!!
Edited by basant - 15/Apr/2007 at 12:42pm
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go4lalit
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Posted: 15/Apr/2007 at 12:34pm |
The same logic is true for Pantaloon as well who wish to take exposure at these levels. There can be PE derating (absolutely no chance of PE expansion). Even if EPS grows, returns can be dismal if the stock gets derated.
From 2000 till now, EPS of Wipro/Infy has grown multifold, but not the returns as PE was derated for these.
Edited by go4lalit - 15/Apr/2007 at 12:35pm
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