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Management Interactions, Company and AGM Visits
 The Equity Desk Forum :Investment Ideas - Creating winning portfolios! :Management Interactions, Company and AGM Visits
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Vivek Sukhani
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Quote Vivek Sukhani Replybullet Posted: 18/Aug/2006 at 6:33pm
Basant, I see your portfolio( rather I see you )being more inclined towards the services sector. I believe, thats a good approach but dont you think you should balance it with some some very strong manufacturing plays where you can use your excel sheet. I will be extremely glad if you can throw some light on this spreadsheet. As I am knowing you more and more, I am feeling fascinated by your approach to equites.
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Quote Ambarish Replybullet Posted: 18/Aug/2006 at 8:52pm
the book Zebra In Lion Country: The Dean Of Small Cap Stocks Explains How To Invest In Small Rapidly Growing is available at amazon or you can put it as a search in google, you'll find it there
www.halwasiya.uni.cc
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basant
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Quote basant Replybullet Posted: 18/Aug/2006 at 10:23pm

Vivek:

India is a service economy, it is known more for its services then manufacturing also if you see the gdp break down the service sector grows at 10% + each year. That is for the broad macro part on the other hand you will get new and high growth sectors (Retail, Media, Insurance, telecom, Pvt Baking)in services only. Also manufacturing is very much cyclical and you have to be nimble footed not so in services. You could buy an HDFC Bank and become Rip Van Winkle for 20 years and the company could grow 100 times (@26% CAGR) you will rarely get those kind of opportunities in manufacturing.

The spreadsheet is an inbuilt collection of ratios that tend to balance each other out. Let us take 4 ratios

Mkt Cap to sales

Growth

Price to Book

Dividend yield

RoE

 

For growth companies the Mkt cap to sales would be higher and so would be the growth rate but they would lose out on Price to book and dividend yield

 

Some companies having high book value will have  low RoE since RoE = EPS/BV so they lose out there but would make up in the price to book category.

 

I have devised it in such a fashion that I do not remain dependent upon any single ratio

'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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Ajith
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Quote Ajith Replybullet Posted: 18/Aug/2006 at 11:13pm
 Mr. Basant,I too like the services sector the most .Services as a percentage of GDP IS SHOWING A RISING TREND and that really shows the tremendous oppounities.Now it is necessary ideally to find a company with ecompettive advantages that will not necessarily constant requirements of large amonts of cash  or at  the most for a period of 3 years by which time it should sustain itself for cash.Perhaps banks,print media,TV channels,Tourism could throw up multibaggers.
           To take 3 instances.Transport Corporation would need to update its fleet but does it really have a strong competitive advantge?I maybe wrong but I think not.So it may not be a good buy even if market cap looks appealingly low(it will take a lot of effort on the part of TCI to do well).NDTV does not require a huge amont of cash to grow exponentially from a relatively small base,it has its audience for a decade or more and so high PE is justifiable and it may be a decent multibagger.ICICI Bank will probaby grow organically to a giant banking entity in 10 years because of its competitive advantages.(I do not have ICICI Bank.The only large cap I have is ITC)This is my way of thinking.
 
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Quote basant Replybullet Posted: 18/Aug/2006 at 11:18pm
Great. Could not agree more. And even if one or two ideas fail the rest should make it up. SOmething like errors cancelling out each other. All service led economies have a amtrket cap to GDP of more then 100% some run even as high as 500% .
 
If you could get a high PE investment right it pays you in later years as well suppose NDTV trades at  aPE of 40 and next year also at 40 and the year after that at 40 while ACC trades at  a PE of 15 for 3 years. Invariably if you notice NDTV would have given you a 40% return while ACC 15%. the trick is to look at PEG and not PE in absolute numbers as most people do.


Edited by basant - 18/Aug/2006 at 11:22pm
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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Quote basant Replybullet Posted: 18/Aug/2006 at 11:31pm

This should make the services argument clearer

http://www.theequitydesk.com/biggest_macro.asp

'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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Quote BubbleVision Replybullet Posted: 19/Aug/2006 at 3:04pm

This is an absolutely amazing summary of Why to buy any stock and the courage and the conviction required to stay on when one is right. That Conviction only comes with detailed Research. For Me fundamental or Technical research does not matter as long as one is honest and he knows why is he buying. This Summary should be included in the book "ONE UP ON DALAL STREET" By Mr Basant. One can only learn from your experiences. This is on lines on your "Hope and Hype" article which was also amazing. Any one who has not read that must read that. Mr Basant can u link this to that article//

 
Amazing...
You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer!
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BubbleVision
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Quote BubbleVision Replybullet Posted: 19/Aug/2006 at 3:21pm
Mr Basant
With regards to Market Cap to GDP ratio.. Dont you think that we should look at the Number of company listed also, as In HK most of the Companies are listed, while the same is not the case in India. Also HK contains two of the biggest construction companies in World.. Cheung Kong, Hong Kong (M CAP: $24.89 billion) and Sun Hung Kai Pro, Hong Kong ( M cap: $24.67 billion), while India is waiting for its Big construction daddy.  
You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer!
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