Occasionally there are companies holding significant empty plots which are marked in book at historical prices. As such they are not reflected in its profits or book value but the company can always sell or develop these land banks boosting their future earnings. In such cases it is useful to consider market value of the land while determining the valuations of stock.

Dmart’s case is different. Its land holdings are being fully utilized by building stores over it which saves rent expenditure. This reflects in better profit margins for the company. Hence its properties are already being accounted into its earnings and there is no need to separately deduct market value of its land bank from the market cap.

@Amil_Sharma

I have been accumulating it for some time. I have mentioned about my holding status in the thread for the personal portfolio. For personal investments, let’s not use the company-specific threads.

As far as my views about astec are concerned, my views are mixed, and here’s how I see it:

• It’s a bet on the assumption that management is good. Often managements seem good until they become bad. I would rate the management once I start seeing a couple of quarters of execution.
  (Just because management has worked in the past doesn’t mean they are going to succeed again. This happens everywhere – as even the World XI loses the match.)

• I don’t have a view of the margins. It’s too soon. Let’s see what management guides overtime.

• There are concerns about how Agrovet will manage Astec along with other subsidiaries. The track record of the Godrej group does give some confidence here but concerns are there.

• I am curious/uncertain if this ends up being a LT story or just a 3 to 5-year journey. For now, I do not see this as a hold and sleep stock.

• When I compare the unknowns/risks, and the valuation of ~1500/1600 market cap which could have a limited downside from there (unless the earnings get eroded further), I can NOT see Astec as a screaming buy.

• So what gave me the confidence to buy? I am interested in the agriculture industry as a whole. The opportunity size is large and there has to be growth in this sector. The group is unlikely to con me (). The valuation isn’t cheap but could have a limited downside while the potential upside is catchy. Management’s guidance is interesting and there are triggers for growth in the near future. The time value of money seemed rewarding. I had cash and this felt like taking a small position.

• However, investing in Astec is going to be on serious assumptionns/hypotheses. The moment my hypothesis/assumptions get challenged OR I find a better use of cash, I would evaluate reallocating/cashing out. Another question I am looking to find an answer to is: Agrovet v/s Astec: which is the better way to ride this journey?

Disclaimer: I may or may not be invested in any of the names discussed above. I am not a SEBI registered advisor or analyst. This is my personal view and not a recommendation. I am often wrong and do change my views without being able to inform anyone.

Thanks Swapan,

Yes growth story seems intact, one of the reasons i started building positions gradually.

As long as guided topline is achieved in accordance ro the forecasted growth. Int& dep on elevated levels wont hurt for next few qtrs, coz market will discount that in accordance to forward looking no’s.

Discl: started building in recently & accumulating on bad days.

All these companies that have destroyed wealth of investors have a simple pattern. They failed to sustain, let alone grow, their revenue and earnings which market punished appropriately. And it’s not as if they happened to be in a sunset sector where all their peers were equally struggling. Wockhardt revenue and earnings started declining and never recovered while sector leaders continued to do well.

In every sector, we can find companies that have built strong franchises over the years not just with luck or a product breakthrough but great quality of management and ability to excute better than their peers. Such companies tend to enjoy their market dominance for very long time. Researches have proven a strong correlation between stock performance of a company and quality of its leadership.

So when you have companies with strong pedigree of leadership, uncompromising corporate governance and a track record of execution, you would expect them to do very well over a long period.

So you have long-standing sector leaders such as HDFC and Kotak in banking, TCS, Infy in IT, SRF, Pidilite in chemicals, Asian Paints in paints, Bajaj Finance in NBFC, Nestle ITC in FMCG, L&T in Infra, Maruti in automobile, JSW in steel, Ultratech in cement etc. These companies have maintained their market leadership over many years both in terms of business performance and market cap. They have superior capital allocations, cash flows and balance sheets than their peers. And no wonder they have also proven be consistent compounders over a very long time period.

Now if I built a portfolio of such consistent compounders and applied “buy and forget” strategy , what are the chances that I’ll end up losing my money or generating sub-index returns?

Looking at their historical returns over 20-25 years (quite a long holding period for an investor) the answer is absolute zero. Now there is no guarantee that history will repeat itself into the future and stock market is realm of possibilities. But statistically speaking I’ll be comfortable “buy and forget” strategy if I had these stocks in my portfolio.

Where I’ll NOT be comfortable with “buy and forget” strategy is when my portfolio composition starts veering towards substandard companies.

Majority of retail investors invest in tier 3 and 4 stocks in the hope of making quick fortunes. They will avoid sector leaders because they require a long time horizon to generate returns and not many have patience to wait for 1 year, let alone 10 years, for a large cap tier-1 stock to work magic through its compounding power.

So when these substandard companies start delivering superior earning performances during a sector specific bull phase, everyone gets excited and we see massive retail participation. When sector specific bull phase gets over and investors face the reality check most of their capital is lost. Every one wishes they should have got out in time.

So in a nutshell buy and forget is not a myth. It’s just that it doesn’t work with all the stocks. In the market you get what you pay for. You buy bad quality you get bad returns.