How do you buy gilt otherwise looks well diversified as well as concentrated
Posts in category Value Pickr
Low Volatility Stocks (19-05-2024)
Finance textbooks use Standard Deviation (SD) as a measure of volatility, a practice which has been carried forward by industry as well. SD uses Closing Price to measure volatility. Average True Range (ATR) uses more inputs as it also considers High and Low price for the period, besides Close. This makes ATR a conceptually better metric than SD. ATR is an absolute measure of volatility, but it can be easily converted into percentage by dividing the True Range (TR) by previous closing price.
For example, look at the following calculation of Maruti Suzuki, which had a TR of Rs.343.60 on 17-May-2024. This can be easily converted into a percentage by dividing it by the previous closing price of Rs.12,497.65 (i.e. 343.60 / 12,497.65 = 2.75%)
On the other hand, see the same for Motherson Sumi Wiring (an auto ancillary which caters to most of India’s top car manufacturers with Maruti as its largest customer):
On 17-May-2024, it had a TR of Rs.2.65 which is 3.81 % of the previous closing price of Rs.69.50. Conversion of absolute values into percentages this way makes volatility of the two stocks with widely differing absolute values comparable.
One can calculate TR & ATR anytime just by downloading the stock price history from NSE website and copy paste it onto an excel, once the basic formulas are input into the excel.
Technical analysis textbooks take 14-day average to calculate ATR, but this is at our discretion. One can choose what one wants. As a long-term measure, I sometimes look at 1 year average or 1-year median TR (instead of just the 14-day average which is more short-term). However, this is just for added insight into the stock I am looking at, not as a selection criterion for reasons explained earlier.
The stock picks you? (19-05-2024)
I have not much experience with these situations, but I think experiences may differ here, as different arguments can be made.
If market is giving a low multiple, there must have been some reasons for that, so going for a low hanging fruit, so to speak, we are essentially taking a chance. This chance may very well turn out to be a success, if rerating happens. There have been such success stories like these here in VP.
Also, if it does not work, then we are stuck with a non-performing stock, which can still go down some more. We may lose patience, we may even revisit our thesis, may be even think we made a mistake and exit.
Perhaps, sometimes, when companies with stable sales, strong cash flows, dividends too, go down with the broader markets, so maybe then we can act then.
I have a position in Coal India, bought more than 2 years ago. I did not buy it for growth at the time, I bought it for the dividends, the price appreciation was unexpected. I bought after reading an article which explained about the business, and concluded why the market price at that time is a good price to buy. I bought and added to my position as it went up.
I was interested in buying Mirza a few years ago, purely from valuation perspective, compared with Bata or even Relaxo. I don’t remember all the details, I must have bought and sold quickly.
Even investors with deep understanding of the business may be proven as wrong sometimes, but then again, bargains also can be profitable.
So I think, each such case is different, and maybe a bit of luck is also involved.
Avanti Feeds (19-05-2024)
How do you look at businesses like these w.r.t returns? Price has been in consolidating for 4-6 years. Would you not think too much in cases like these, if you had made big returns, so even if the non-performing years are added to the holding period, the overall return is satisfactory for you, and your focus lies elsewhere? Or you have a certain threshold w.r.t time, after which you exit, not to mention the fact that you know about the businesses very well? Or 4-6 years of time is not that long for businesses which will be existence for decades, and assuming, as you would have fairly large positions, you will hold for longer periods?
I have not particularly read many of your comments, one reason being, you are a very experienced investor, who manage several portfolios, but it will help to know.
And is holding for years a combination of availability of capital for other ventures, affordability of opportunity cost, and temperament or is it an advantage limited to few?
The stock picks you? (19-05-2024)
As a long-term investor, we choose the sector and then study 3 to 4 top companies. we wanted to buy the best company. but the best company is overvalued. there are 3 to 4 companies in the sector which also means there is no moat in that sector.
Assume AMC sector. only 6% of of indian population submit tax. huge run way ahead for amc business. you might want to buy hdfcamc or nippon amc. but uti amc is at 15PE and at 5% dividend yield.
kindly share your experiences in picking another stock just because of the valuations. so basically the stock chooses you more than you chose the stock. whats you learnings on this ?
Raymond – The Complete Man (19-05-2024)
It looks the NCLT hearing on May 9th didn’t come to final conclusion yet and the next hearing is set on June 20
Forensics and the art of triangulation (19-05-2024)
The company came into my attention as multiple twitter handles simultaneously started projecting it as Special Situation.
The company is Himachal Fibres aka Rudra Ecovation.
The company had announced merger with Shiva Texfab – a related company.
Now, company is proposing to invest 150 Cr for 21.46% stake in Shiva Texfab → Valuing the entire company at approx. 750 odd Cr
As per the information submitted, Shiva Texfab is a textile company which had a turnover of 410 Cr in FY 24 as compared to 504 Cr in FY 23.
What interested me: When the whole is crying for retail investors to invest for once in a life time opportunity, one particular group is continuously selling after making almost 6x in less than 6 months.
As per exchange filings,
Anisha Fincap Consultants LLP and PACs purchased first shares on 24 – 08 – 2023 → Price was 6.93/-
By 26 – 10 – 2023, they had 7.79% stake.
Allotted 5,00,0000 convertible warrants at an issue price of 10/- on 8 – 11 – 2023. (Share price 19/-)
First selling came on 14 – 12 – 2023: Share price – 31/- (A cool 4.5x in 4 months)
And since then, continuous selling is there whereas price is going up on corporate developments.
There is another round of preferential allotment at 48/- : Another listed company Race Eco Chain is investing for 20,85,000 share / 10 Cr.
This – Race Eco Chain has amazing track record. It had subscribed for 43,50,000 warrants at 13/- in Prime Industries Ltd in April 2023, which will constitute almost 20% stake post conversion. Current share price of Prime Industries is 194/- (Almost 13x)
Both Race Eco Chain and Prime Industries have fixed assets of 2.87 Cr and 0.1 Cr as per September 2023 results and Current MCap of 547 Cr and 307 Cr respectively.
Rudra Eco investors are in good hands with glorious past.
Stylam- Decent Fundamentals with Cheap Valuation (19-05-2024)
Japanese laminates major Aica Kogyo looks to pick stake in Stylam Industries. This news has lead to increase in share price recently. Any views for the purchase?
Sahil’s Portfolio (19-05-2024)
This was helpful. Thanks Sahil