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prabhakarkudva
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Joined: 16/Jan/2008
Location: India
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Posts: 1624
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   Posted: 12/Oct/2011 at 9:33pm |
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Great write up Basantji as always.
We should all be thanking you for leading us on to this path and ensuring we dont stumble in between and make mistakes.This article is another of those reminders that there is still money on the table for anyone who is willing to bury his ego/mistakes and get on this train. Most of the companies we discuss on TED can easily do a 25% CAGR for 10 years - that is about 10 times in 10 years even after all the ups and downs that we'll see in the next decade - which can be an enviable result for a common man who dumps all his earnings in a fixed deposit or in buying apartments.
We need to take that step to allocate a meaningful amount of our portfolio to equity and then invest a meaningful amount in these consumer stocks and then become Rip Van Wikles. We probably won't do too bad.
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Take your chances and keep them in a box until a quieter time.
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SK1076
Senior Member
Joined: 17/Apr/2010
Location: India
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Posts: 109
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Posted: 12/Oct/2011 at 9:35pm |
Basantji - You have Superbly  put across this consumption play story. Although i am not a very good dancer but am sure that will definitely learn one or two great steps with you @ TED
Originally posted by basant
This caption was conceptualized with a lot of happiness and a little bit of arrogance. The ability of human nature to feel proud and happy on success is natural. Hence the kind of success that TheEquityDesk has generated for all its members through their collective debate and reasoning especially relating to the investment potential of consumer stocks is extraordinarily phenomenal. Most of the consumer names here have been up by four to twenty times over the last 2 years even while the broad market has done almost nothing!
Taleb would call this a random event and if it is that so be it. As someone mentioned that given an option in between being lucky and smart he would rather be lucky then be smart, the same logic applies for all the members of TheEquityDesk who have made a ton of money in the great Indian consumer boom.
In my relentless endeavour to interact with money managers and analysts I have seen no one being bullish on consumption stocks. Most of them have found it expensive and a few of them were courageous enough to admit that they missed it while a small percentage of the others were waiting for a fall to buy it. It is strange that people always want to buy a stock a in a recurring infinite loop 20% cheaper then what it quotes at.
So this story repeated itself with many of the consumption stocks where most of the Ted members made money while the world waited to buy it at a lower scale the believers pyramided with incremental salary cash flow thus creating a portfolio of multibaggers.
Most analysts argue against consumer stocks on the basis of a relatively high PE ratio. Quality growth stocks have to be bought with the thought that if the growth continues for a couple of more quarters the stock would become cheap. They are seldom available at absolute levels of cheapness (whatever that means) and when they are as in March 2009 the others trade at PE ratios of three and five with an yield greater then the PE ratio and many of them generating returns of 20%+ on invested capital. So relatively speaking, quality is always expensive.
The general market consensus is that everyone else has bought consumer names and are hiding in them so it can crash but no one says that he has bought it himself, so it is a case of no one buying this in bulk but still assuming that everyone else has bought it.
Another argument is that if you add the market cap of the top best performing consumer stocks (TTK Prestige, Page Industries, Jubilant Foodworks, Hawkins Cooker Bata etc) the total market cap is less than US$ 5billion. If you add Titan to this list then it moves closer to US$ 10 Billion. This is certainly not the sign of a bubble in an economy where private final consumption could hit US $ 3.4 trillion over the next ten years.
Over the past couple of years as these consumer stocks moved ahead there is a case of not even a single consumer oriented mutual fund being floated. How many did we have before the infra and real estate sectors went bust? I guess around three dozens and a few more.
But, here comes the important but, like all sectoral rallies this one will also collapse and to counter that we have to keep our eyes and ears to the ground both in terms of what the companies are doing as also as how the market participants are thinking. Both are equally important and also amongst the consumer names one has to keep getting out of the relatively expensive ones and buying more of the relatively cheaper ones something that is easy in hindsight and almost impossible in foresight but investing is about making educated guesses and we keep doing that.
However even when this music stops most of us will keep dancing as has happened in every boom over the last four hundred years and so it is important to stop and make sure that we have to dance as long as the music plays rather than assume that the music will keep on playing till we dance!
For the moment though there does not seem to be any signs of the drums stopping though depending on the beats one has to keep evaluating and switching the dance steps.
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Patience PAYS/-
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datta.supratik
Senior Member
Joined: 23/Apr/2010
Location: India
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Posts: 235
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Posted: 12/Oct/2011 at 9:58pm |
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Basantji,
Is there a way that we can consolidate all your posts and zip them :) I want to read them over and over again.
Please do publish a book.
I understand that great people are born not made...
Thanks a lot for your contribution in our life.
Regards
Supratik
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jagbir
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Joined: 17/Apr/2010
Location: India
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Posted: 12/Oct/2011 at 10:30pm |
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Thanks a ton Basantji for a superb, crisp and to the point article squeezed in few hundred words having wealth of knowledge equivalent to thousand pages of an investing book!
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I find that the harder I work, the more luck I seem to have.
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manish_okhade
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Joined: 20/Oct/2008
Location: India
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Posted: 12/Oct/2011 at 10:32pm |
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Each boom looks very obvious when it starts. Trick is get in and out if one has the guts to spot the trend. Few past fiasco:
1) Internet boom - Eyeball ration, easy to get rrillion dollar and so on...
2) Infra boom - wasn't it so obvious like consumption theme? India still has a long way to go for power, road etc. but music seems to have completely stopped.
Now new theme is consumption, it is still in its infacy will grow young and later die old too so if thats the prognosis then time to run with this baby before it does.
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FutureBull
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Joined: 06/Feb/2009
Location: India
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Posts: 1868
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Posted: 12/Oct/2011 at 10:40pm |
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Great thanks Basantji!! this stimulates stock taking. I believe consumption theme will carry on for few decades but stocks would peak out at different point of time. Time changes need changes so within consumption one needs to keep open eye. Look at US, even today consumption themes are valued higher than other themes. Log way to go but keep eyes and ears open.
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‘The market always does what it’s supposed to — BUT NEVER WHEN’.
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subu76
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Joined: 25/Feb/2008
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Posted: 12/Oct/2011 at 11:02pm |
I'd say it's not a great idea to extend the trend for the last 2 years and assume we'd get such outsized returns from a basket of consumer stocks over the next 10 years. I just looked at the 10 year charts of Bata, Hawkins, TTK Prestige, whirlpool, VST and each on of them was extremely flat till 2009 before they started their steep climb. Clearly this sort of steep climb is not sustainable forever. There is a huge difference between a steady compounder and a galloping stock in terms of wealth creating. At a minimum we need to understand the factors which kept the stocks down from 2000 to 2009 before the take off started. Also no one should wonder why they did not look at these stocks earlier. They were lucky since these underperformed badly between 2000 - 2009/
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garun1980
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Joined: 10/Oct/2010
Location: India
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Posted: 12/Oct/2011 at 6:17am |
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Great write up Basantji. I still remember my tentative buying in Jubilant Foodworks not knowing whether I made the right decision. I have held on and have made healthy gains in excess of 60 percent in the last one year. All thanks to the reasoning and astute analysis of fellow boarders on the Jubilant Foodworks forum!
Many of us believe that small/midcap consumer names only can give healthy returns. I have been invested in ITC for a while and in the last one year the stock has given returns in excess of 20 percent.
Basantji has very correctly stated, we need to look for cheaper stocks in the consumer space. I will start evaluating a few names in that arena, Tata Coffee (have a small holding), Tata Global and Talwalkar.
Once again a hearty congratulations to Basantji for this awesome forum.
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Back in school!!
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