In a bull market, everything tends to be valued with higher expectations. It’s important not to compare an IPO price, which is decided by management and merchant bankers, with the stock price, which is determined by the market. If Piccadilly can maintain a growth rate that meets market expectations, it is not richly valued. However, if the growth rate declines, it may be overvalued.
Posts tagged Value Pickr
Pratik’s Portfolio – Review (21-06-2024)
Some members reached out to me in DM on WPIL and Shakti Pumps.
“Seems new govt will focus on rural recovery… So, why have you sold wpil, was just curious to know…
Also Shakti Pumps going to benefit from solar focus and rural recovery but valuations are high…
Please share your rationale…”
My response: I like WPIL and it’s promoter. No problem as such in holding it. I exited WPIL because there were better opportunities like Shakti pumps where I thought returns would be quicker and more. I entered into Shakti pumps around 2100 level and added more up to 2600 level. Regarding your question on shakti pumps overvaluation, I don’t think it is overvalued although it has ran up a lot. If you look at last quarter, they did 90 cr in PAT. If you annualise it, they are still available at a PE of less than 20. I estimate them to post 750 cr revenue this qtr and for them to beat last qtr numbers. Screener PE might seem high but forward PE isn’t in my judgement.
Above response is just on the valuations of Shakti pumps but there is a lot more on Shakti pumps that I would want to pen down and share with other members. I will try to do that later today.
Great articles to read on the web (21-06-2024)
Siddhartha Bhaiya on Cracking the Multibagger Code. He explained easiest way to find multibagger.
Siddhartha Bhaiya on Cracking the Multibagger Code |Aequitas| CFA Society India |Investment strategy
Siddhartha Bhaiya on Cracking the Multibagger Code |Aequitas| CFA Society India |Investment strategy (21-06-2024)
(topic deleted by author)
Aurion Pro : Yet another IP product company? (20-06-2024)
Aurion Pro Investor Day
Ishaan’s Longterm Portfolio (20-06-2024)
This is the only post I read whenever I am in a confusion. I have managed to strike a balance between the two but I do tend to awaken the investing and saving demon inside me from time to time.
RIL: Is the ‘Reliance” on ‘Jio’ Justified? (20-06-2024)
Jio Financial wants to lend routers so that Reliance Retail’s revenue goes up
We’ve spoken about this a couple of times. If you’re a billionaire, you probably like having separate companies for separate businesses. One of your businesses might be old, boring and predictable. It’s probably what brings in a stable income every month. Another of your businesses might be batshit crazy with years to go before it sees a profit. If the wacko blows up, you don’t want the reliable uncle to go down with it.
This insulation is nice for you, and it’s nice for your investors who can pick and choose the companies they like and ditch the ones they don’t. In general, having multiple companies doing different stuff is a good thing.
Sometimes, though, these companies might intersect. If one of your companies is, say, a large retail company, and the other is a payments company, it might make sense to plug your payments company into your retail company wherever you can. That way, your payments company can get some business, and your retail company can hopefully get a discounted price. [1]
Let’s change the example. Let’s say business hasn’t been great for your retail company. Now, what if you created a new company just so that it could go and buy stuff from your retail company? That’s probably not too nice. From the Ken last week:
Reliance Industries (RIL) is back with yet another one-of-its-kind deal structuring—this time, targeting three birds with one stone.
The latest instance of the deal-structuring chops of the Mukesh Ambani-controlled oil-to-retail behemoth lies in a proposal from its youngest child, Jio Financial Services. The financial services entity wants to buy and lease customer premises equipment/devices and telecom gears, such as airfibre, phones, and laptops, worth Rs 36,000 crore (US$4.3 billion) over the two years ending March 2026.
There seems nothing exceptional about it, except that Jio Financial wants to do this big deal in-house. Its subsidiary, Jio Leasing Services, plans to buy the equipment from group company Reliance Retail and lease it to customers of Reliance Jio Infocomm, RIL’s telecommunications arm.
Mukesh Ambani owns both Reliance Industries and Jio Financial Services. [2] Jio Financial Services—which doesn’t even have a financial services business yet—has a subsidiary called Jio Leasing Services. This subsidiary, Jio Leasing, is going to buy some electronics from Reliance Retail, a subsidiary of Reliance Industries. Jio Leasing will then lease these electronics, which I guess would be stuff like routers, modems, antennas, to customers of Reliance Jio, the telecom company which like Reliance Retail is a subsidiary of Reliance Industries.
Also—Jio Leasing is going to buy ₹36,000 crore ($4.4 billion) worth of stuff?! Jio Financial, which owns Jio Leasing, is an NBFC whose primary business is supposedly to lend out money, charge an interest, get repaid. It’s not begun doing that yet, but it is spending $4.4 billion over two years to lend out some routers and modems instead? [3]
You know what? Fine. Maybe routers are going to replace fiat money very soon. And all lending and borrowing is going to be denominated in TP-Link routers. Maybe the RBI is going to ask banks to ditch their Rupee reserves and switch to routers instead.
Even so, why does Jio Financial buy those routers from Reliance Retail? Here’s the company’s rationale from its postal ballot notice asking shareholders to approve this transaction (among others): [4]
RRL [Reliance Retail] is in the business of dealing in customer premises equipment, enterprise devices and other telecom devices. RRL is able to procure these goods at competitive prices due to large volumes and RRL will be providing these devices to JLSL [Jio Leasing] at cost plus agreed margin.
Umm… Jio Financial is buying $4.4 billion worth of stuff. Sure, Reliance Retail might be able to procure these goods at competitive prices. But couldn’t Jio Financial? If I was spending $4.4 billion, I wouldn’t go to a retailer. I’d go to the manufacturers and pick the one that danced the best.
Footnotes
[1] This is happening! In addition to Jio Leasing Services buying from Reliance Retail, another subsidiary of Jio Financial—Jio Payment Solutions—is going to manage payments for Reliance Retail’s stores as well as website. In addition to, of course, buying equipment from Reliance Retail itself. It seems to me like buying from Reliance Retail is every Jio Financial subsidiary’s rite of passage.
[2] I mean, they’re both listed companies so Ambani doesn’t technically “own” them. He just owns huge chunks of both.
[3] At the end of March 2024, Jio Financial had ₹24,000 crore in total assets. How is it going to pay ₹36,000 crore to Reliance Retail? Unfortunately, they don’t tell us that. Hopefully it’s something funny so that I can write about it.
[4] Since the possible conflict of interest in transactions like this is obvious, Jio Financial has to take shareholder approval for them to go through. Considering Ambani owns nearly 50% of Jio Financial, it probably will go through.
Original Source: Jio Financial wants to lend routers so that Reliance Retail's revenue goes up
Ishaan’s Longterm Portfolio (20-06-2024)
In case, you forgot this.
Ishaan’s Longterm Portfolio (20-06-2024)
Yeah sure. So these are basically 6 Leg Option Strategies. It is completely automated. I have personally completed the Out - Sample and In - Sample Back Testing. For the last 2 years, the average return has been 2.5% on Invested Capital. I cannot share the exact details of my strategy because then I will be answerable to my clients.
But, it is an option selling strategy with a drawdown of less than 4% for the last two years. Last year in September, the options movement was really pathetic and that’s the reason behind the 4% drawdown. As far as this year goes, max Drawdown has been curtailed to 3%.
Minimum Capital Requirement is 5Lakhs. But this strategy is suitable for even bigger portfolios. Lets say you wan to invest 10 Lakhs in my Algo, I first invest that money into a Debt Fund which gives a 5-7% return annually. Then I pledge that units to get up to 80% ( 8 Lakhs ) of that fund as a trading capital. The strategy generates 25 - 28% return on this capital. So lets say I made 2 Lakh gain which is a 25% ROI, on the entire capital it is 20%. Adding the debt fund returns, it makes total ROI to 26-28%. Deducting the Brokerage and STT, etc ( 4% ) I am left with a gross return of 24%.
In this way I manage my capital. Now, the after tax profits from the Algo are invested into MF or Direct Equity depending on the Market Condition. One obvious question is, Ishaan if you can generate 25% ROI annually, why even invest in stock and MFs? Well, its an Algo and there will be times when it will Underperform. It has not till now but it might. So I have to safeguard my profits as much as possible. I have to be diversified. Although I haven’t faced huge drawdowns yet, it does not mean I won’t in the future. I have to be ready for the worst.
Hope this helps.
DIY Momentum QnA and Discussion (20-06-2024)
** I follow factor Investing Based on Z-Score:**
Why It Is Better:
- Objective Measurement: The Z-score provides a standardized way to measure how far a stock’s price is from its mean, allowing for a more objective comparison across different stocks.
- Statistical Rigor: Utilizing the Z-score incorporates statistical methods, making the investment process more data-driven and potentially reducing bias.
- Enhanced Momentum Capture: By focusing on deviations from the mean, Z-score can help identify strong momentum plays, as stocks significantly above or below their historical average may indicate strong trends.
- Risk Management: Z-scores can help identify outliers, potentially flagging extremely overbought or oversold conditions which can be useful for risk management.
Pros:
- Quantitative Approach: Reduces emotional and subjective biases in stock selection.
- Scalability: Can be easily applied to large datasets, making it suitable for institutional investors.
- Versatility: Can be used in conjunction with other factors like value, quality, or size to enhance a multi-factor investing strategy.
- Early Signal: Helps in identifying stocks that are starting to diverge from their historical performance, potentially catching trends early.
Cons:
- Over-Reliance on Historical Data: Z-score is based on historical price data, which may not always predict future performance accurately.
- Market Anomalies: Extreme market conditions can distort Z-scores, leading to false signals.
- Complexity: Requires a good understanding of statistical concepts, which might not be suitable for all investors.
- Volatility Sensitivity: Stocks with high volatility might frequently show significant Z-score deviations, potentially leading to more frequent trading and higher transaction costs.
While investing consider the following points:
- Data Sources: Reliable and consistent data sources are crucial for calculating accurate Z-scores.
- Backtesting: Share experiences and results from backtesting Z-score strategies to provide practical insights.
- Integration with Other Factors: Discuss how Z-score can be integrated with other factors like earnings growth, price-to-earnings ratio, or other momentum indicators.
- Real-World Application: Share examples of stocks that performed well using a Z-score approach and those that didn’t, to provide a balanced view.
- Continuous Monitoring: Highlight the importance of regularly updating the Z-score calculations to reflect the most recent data and maintain the strategy’s relevance.
Engaging in discussions about these points can provide a comprehensive understanding of Z-score based factor investing and its practical applications.