........But can you therefore hypothesize that Energy stocks will continue to rise for a long time at varying rates and with varying fluctuations?

 

Stocks( I mean stock prices) dont map the commodities in entirety. The direction may be identical in most of the cases but magnitude is not. Tell me, Jayshree Tea and Mcleod fell 40 p.c from their peak, but have tea prices fallen 40 p.c.???Similarly, from the bottom these stocks rose almost 8 times, but did tea prices rise 8 times?

 

That again makes me go to the first point I mentioned.....look for good business at cheap enough entry rates. And dont forget, tea prices dont have too much of a speculative element....therefore chances of it falling like a rock is very remote, until and unless it shoots up like a rocket first.

 

Also, I dont know whether one should look at tea like a necessity or a luxury....but if you do take it as a necessity, these stocks wont falter in the long run.

 

 

 

The stocks which will give you the most incredible returns will be the ones who you discover cheap and who has a feature of regular consumption( that may or may not grow, but most importantly, it shouldnt decline). Now, to obtain great returns, we not have to only meet the second condition, but we have to meet the first condition as well.

 

I think the concern talked about by Hit makes a great sense. We have to concerned about standalone garden companies and focus on companies which have a wider geographical plantation base.

 

Just think about it.....at a time when we are paying 5-10 times turnover for FMCG companies, we are not paying one time turnover for Goodricke. What we are ignoring is that the balance sheet is in the best shape in the last 10 years.....Just think, we are paying for consumer companies in big big multiples to their book values, we are trying to get them at sub-2 p.c. dividend yield then why not consider stocks which hav the feature of regular consumption of their finished goods, but not perceived as fast moving available at pretty decent fundamentals.

 

Consumer companies can also be rank under-performers.....there's no consumer company in India having a bigger basket of brands than HUL. But track its performance over the last 10 years.

 

What looks great at the moment may turn out to be pretty dud. Nothing is predictable beyond a point....we cannot figure out competition with accuracy, we cannot figure about demographics with accuracy, we cannot figure about technological change with accuracy. Nothing in stock markets remain hot for ever, and nothing remains cold for ever. What you try to do is avoid getting into the hottest stocks ready to be placed into the refrigerator and not avoiding the coldest stocks just placed on the burner.

 

They have gone into way too many businesses, some of which are allied and some unallied to their cash generating business of detergents and soaps. I am also holding a few tickets of Nirma, and am not in any hurry to sell them, but am not finding it exciting enough to load up more.

 

But one thing I must say is that companies should continually invest in strengthening their main business if there is scope. Just look at ITC....while HUL is busy in monetising its assets, it is acquiring assets and building up facilities and capacities in practically all of its business. HUL is finding no better use of cash but to do nominal buybacks, ITC is using it to spur future growth. I am going through ITC's Annual Report for 2009-2010 and I am experiencing a greater sense of investor delight as I turn pages.

 

Nirma also has added capacities, but its marketing effort has become pretty ordinary. As a shareholder I would like to for companies which takes on competitors and turns the heat on them. Nirma fails in that. Its a value for sure, their American acquiition of trona mines should hold them in good stead. But I want them to hit HUL with force. PnG( unlisted arom of PnG) is walking away with the kill, and Nirma, it seems is remaining a mute spectator to this. If PnG is going all guns blazing to kill Surf and Rin, Nirma should try to do the same to Wheel.

 

Fincials-wise, I am unable to locate a cheaper FMCG company that Nirma. And thats why I would stick with it. But Nirma shouldnt just stop at that....