Along with the safety of hdfc im also building a position in a very risky company that ive been tracking since forever ie Lux industries. Fell to 1180 today which is where i built a position equal to 2.5 percent of my portfolio. Will be freeing up funds on april 1st ie may be selling Dlink and orbit(so i can take advantage of 1 lakh tax benefits for next FY) and will use that cash to build the position further to a max of 5 percent. Reasoning being… Its currently available at around 1.5x sales. It has no debt… and the current eps is just 34 or so which is what they were hitting in 1 quarter just 2 years ago ie when cotton prices were reasonable. Can see a lot of potential here ie a lot of factors which could change overnight ie a drop in cotton prices leading to higher opm, the fight between owners resolving(or not resolving… as long as it comes to an end at some point), foray into premiumisation etc. Am i confident… not really… hence why i doubt il build a position of more than 5 percent. I want to own a debt free 2500 sales company whose brands are known by the whole of india with 15 to 20 percent OPM and hence around 100 EPS 2 years from now… its just that im buying it when everything is at its worst at present. The stock price may fall further but i cant see the business performing much worse and can see opm and hence earnings increasing slowly but surely over the next few years. In an overvalued market that is currently looking very stretched i honestly find a bit of comfort in an undervalued risky bet like lux.
Disc: Not a sebi advisor. Only accounts for 2.5 percent of my pf at present and i may never invest the second tranche. Please dont follow me into this madness without your own study. Cheers
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