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basant
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   Posted: 14/Oct/2011 at 8:48pm |
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Thank you all, its nice to hear such nice words from you. The purpose of this writeup was to suggest that while the going is good we need to keep our eyes and ears open for any change in trend.
As a purely hypothetical example lets take two companies both trading at a PE of 30 times FY12; showing similar revenue and profit growth, same yield and capital efficiency parameters but one of them has a larger scale of opportunity then the other which is creating a market for itself.... logic suggests we should move to the one where the scale of opportunity is already present and which is already a large cap rather then being invested in the one where the overall market is not that big but expanding with each passing year.
It is tough to create a market then to grab market share from less dominant players.
Such kind of tactical switches need to be made at the right time.
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MR TED
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Posted: 14/Oct/2011 at 9:11pm |
Originally posted by basant
Thank you all, its nice to hear such nice words from you. The purpose of this writeup was to suggest that while the going is good we need to keep our eyes and ears open for any change in trend.
As a purely hypothetical example lets take two companies both trading at a PE of 30 times FY12; showing similar revenue and profit growth, same yield and capital efficiency parameters but one of them has a larger scale of opportunity then the other which is creating a market for itself.... logic suggests we should move to the one where the scale of opportunity is already present and which is already a large cap rather then being invested in the one where the overall market is not that big but expanding with each passing year.
It is tough to create a market then to grab market share from less dominant players.
Such kind of tactical switches need to be made at the right time. |
Thanks Basantji for your Posts! Above, do you mean we should keep an eye and switch to Large Caps at right time?
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basant
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Posted: 14/Oct/2011 at 10:35pm |
Not necessarily, I just gave an example to suggest that we have to keep making those tactical switches depending on the opportunities available. Anyone who does not try and make those switches will not get to keep the above average rate of return because all returns revert back to the eman over the very long term.
So even within the consumption basket there would be companies which would appear relatively better the effort should be to identify those pockets and get away from the ones which for an equal valuation are more expensive because of lower or more difficult growth/payout/management issues or any other attribute.
In other words the buy and hold strategy can beyond a point could dilute these supernormal returns.
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kumarn
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Posted: 14/Oct/2011 at 12:57pm |
Originally posted by basant
one of them has a larger scale of opportunity then the other which is creating a market for itself.... logic suggests we should move to the one where the scale of opportunity is already present and which is already a large cap rather then being invested in the one where the overall market is not that big but expanding with each passing year. |
So,
"the scale of opportunity is already present and which is already a large cap" = Titan
and,
"the overall market is not that big but expanding with each passing year" = Zydus
???
Am I drawing correct parallels??
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j2eeprofessiona
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Posted: 15/Oct/2011 at 12:26pm |
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Basantji and others, has someone figured out the next winner in the consumption play ?
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MR TED
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Joined: 26/Jul/2010
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Posted: 15/Oct/2011 at 12:37pm |
Originally posted by MR TED
Originally posted by basant
Thank you all, its nice to hear such nice words from you. The purpose of this writeup was to suggest that while the going is good we need to keep our eyes and ears open for any change in trend.
As a purely hypothetical example lets take two companies both trading at a PE of 30 times FY12; showing similar revenue and profit growth, same yield and capital efficiency parameters but one of them has a larger scale of opportunity then the other which is creating a market for itself.... logic suggests we should move to the one where the scale of opportunity is already present and which is already a large cap rather then being invested in the one where the overall market is not that big but expanding with each passing year.
It is tough to create a market then to grab market share from less dominant players.
Such kind of tactical switches need to be made at the right time. |
Thanks Basantji for your Posts! Above, do you mean we should keep an eye and switch to Large Caps at right time? |
Great Words of Wisdom Basantji  I understood its essence when I read it second time  Thanks!
But I doubt though. As you had only mentioned that a growing company always commands a higher PE. What if the Market that a growing small cap company shall create with each passing year may after few years be bigger or rather the growth rate be more sustainable than the Large cap? Is such a situation possible?
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basant
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Posted: 15/Oct/2011 at 12:43pm |
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My example was "hypothetical" and was based on similar growth profile. In case of growth differential we move to the higher sustainable growth vehicle for equal valuation set up. Actually large cap other things remaining equal should be valued at higher PE and hence the preference for a large cap other things remaining equal.
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'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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MR TED
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Posted: 15/Oct/2011 at 12:46pm |
Agree! Thanks for guiding Teddies at the right time. Respect!
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