Nevertheless the point is still the same. The participants are relying on
short term data points to take a view on stock markets. This in our opinion
is a futile exercise. It is best to leave the quarterly earnings to the
companies. It is nothing more than an indicator of their short term performance.
It would be better to concentrate on long term fundamentals and business models
instead. And if you have identified such a stock then the short term news of
negativity is nothing more than an opportunity to get this great stock at a
bargain. Going along with the herd will yield nothing but pain in the long term.
Monday, 8 October 2012
Sunday, 7 October 2012
Below is the edited transcript of his interview.
Q: When first time investors want to enter equity markets, what is the good rule of thumb for them?
A: We suggest a rule of thumb to all our investors. It is devised by the founder of the Vanguard Mutual Funds, largest mutual funds. Subtract your age from 90, that percentage of amount should be invested in risk assets, mainly equities. That is a good thumb rule to start with.
I would like to add one thing before you start investing in equities, it is very important to be yourself financially secured. Peter Lynch who was the fund managers of Magellan Fund said, ‘Before you start looking at buying equities, buy a house atleast.’
Make yourself financially secured and make sure that all your immediate financial commitments are taken care of. You don’t require that money for three to five years. You should allocate that money towards equities and try and be committed to it. Buy equities through the ups and downs of the market and you will find that equity is a magic.
Q: Investor had stock of ITC and that was age old with my dad. What happened was, we saw that ITC was not moving ahead for quite sometime - 11 months and so and in this time real estate prices were going up. In 2010-11 the time came that the ITC hit the all-time high. I thought this is a good price to sell, maybe it will come down. I will invest this in real estate. While I did that, I sold the stock and immediately I saw that instead of going back the ITC went up. While I was trying to invest in real estate I again tried investing back in ITC. So, where do you see this stock going up awhile?
A: That’s a billion dollar question to figure out when is the top, when is the bottom. ITC has been a great performer. It generally delivers a 15-20 percent kind of an earnings growth, which means its profits grow by 15-20 percent at an average. It has been doing that consistently for 30-40 years now, because people keep on smoking and the younger generation keeps on growing and as affluence increases people move from beedis to cigarettes.
So, they have a fabulous business model which grows by 20 percent every year. Because the profits grow by 20 percent, as a thumb rule, whatever your profit growth is, that will be the increase in the stock price. That’s the thumb rule over 5-10-15-20 year period. So, ITC per se is like your fair weather friend or ultimate friend. You can keep on buying it whenever you have some money set aside. It could be among the top holding which has been for you in your portfolio. Although in some cycles you may see the stock price correcting, but by and large it is still on a fabulous upswing.
you will be allowed to file belated tax returns for FY11 and FY12 by 31 March 2013 and 31 March 2014,
Under section 139(1) of the Income-tax Act, it is obligatory for an
individual whose total income exceeds a specified income threshold to file his
tax return within the applicable due date. Returns filed after the specified
date is considered belated return.
The belated tax return for a particular financial year (FY) could
be filed within two years from the end of the relevant FY, assuming that your
income had exceeded the threshold for each of the five FYs.
From FY08 to FY12, you will be allowed to file belated tax returns
for FY11 and FY12 by 31 March 2013 and 31 March 2014, respectively
. However, the
belated tax return filed shall suffer the following limitations:
You can’t revise the return even if you discover an omission or
misstatement in the original tax return filed;
The losses incurred in the respective FY (except for house
property loss and business loss on account of unabsorbed depreciation and
capital expenditure on scientific research) can’t be carried forward to
subsequent FYs for offset against corresponding income streams.
Further, you would be required to pay interest/penalty on account
of delay in payment of taxes and delay in filing returns within the due
date.
For FY08 to FY10, the due date for filing a belated tax return for
earlier FYs has expired and become time barred.
However, in case the tax has not
been paid before the due date, you could at least pay the tax along with
interest to substantiate your bona fide intention.
The tax officer, at his discretion, may levy penalty for non-filing
of tax returns within the specified due dates if the tax return is not filed
within a year from the end of the relevant FY.
Saturday, 6 October 2012
It is well-known that blue light can suppress melatonin production, which is vital for promoting sleep and relaxation.
Lighting which contains red light can actually increase melatonin production and counteract jet lag or insomnia, not uncommon when you travel.
The bathroom light apparently has higher amounts of blue light in the spectrum to help you wake up as you start your day with more red light in the sleeping area.
Retail investors have turned over a new leaf
As a class, they now prefer blue-chips over small-caps, invest more in
defensive sectors such as FMCG and pharma and actually buy shares when the chips
are down.
They punt on penny stocks, jump in and out of the market at just
the wrong times and don’t know an ITC from a GTL. If that is the impression of
retail investors that many of us carry, it is time to change it.
Analysis of retail behaviour in the NSE-listed stocks reveals that
small investors are getting smarter and savvier in their market moves.
Retail investors, as a class, now prefer blue-chips over
small-caps, invest more in defensive sectors such as FMCG and pharma and
actually buy shares when the chips are down.
To arrive at these findings, we used shareholding patterns of
retail investors over a three-year period, juxtaposed with the market cap of
1,200 NSE-listed companies.
Here is the story with the numbers.
Fact # 1: Retail investors prefer blue-chips to small-caps
Retail investors love penny stocks. They would rather bet on a
Subex Systems than on an Infosys. If you believed that, it isn’t true anymore.
Indian retail investors have made a drastic shift in their
portfolio in the last three years, away from small and mid-cap stocks and into
India Inc’s marquee names.
Latest shareholding data (June 2012) shows that a whopping 72 per
cent of all the retail money invested in NSE-listed stocks is parked in stable
large-caps today.
Large-caps are stocks with a market capitalisation of over Rs
10,000 crore. Only 13.5 per cent of retail money is deployed in small-cap stocks
(market cap of Rs 2,500 crore or below).
If you had checked on the same numbers three years ago, the
picture would have been quite different. Just after the market crash, in March
2009, nearly 25 per cent of the retail money was invested in small-caps and
another 19 per cent languished in mid-cap stocks. Blue-chips accounted just over
half of the retail portfolio then.
That retail investors, as a class, have migrated to quality stocks
is heartening. With their portfolios hitched to more established businesses,
they are likely to enjoy a smoother ride than before, if the stock market
decides to do its yo-yo act.
In fact, if you take stock of all the retail investments in
NSE-listed companies at current market value, the top stocks, by market value,
in this ‘portfolio’ are Reliance Industries, L&T, ITC, Infosys and Hindustan
Zinc — names that any fund manager in the country wouldn’t mind owning.
These five stocks now account for a fifth of all the retail money
invested in Indian markets.
Fact # 2: They don’t chase the flavour of the month
Banks, FMCGs, software and metals — theseare the sectors that seem
to be retail favourites at the moment. Small investors also have more money
invested in sectors such as FMCG, pharma and automobiles, not much affected by
economic cycles, than the FIIs or domestic institutions.
However, it is worth noting here that small investors have not
made a beeline for FMCG or pharma stocks because they are the flavour of the
season. They had allocated about 15 per cent of their portfolio to these sectors
way back in March 2009 and gradually raised this to about 16 per cent by June
2012.
Small investors have also pegged up holdings in bank and metal
stocks, despite their being out of favour.
Small shareholders as a class also own a far more diversified
portfolio than domestic mutual funds or foreign institutions.
Banks/finance, FMCG and software, the top three sectors where
retail money was invested in June 2012, made up only 37 per cent of the retail
‘portfolio’. In contrast, FIIs put nearly 50 per cent of their aggregate funds
in the top three sectors.
Fact # 3: Retail investors don’t buy high and sell low
“When the shoe-shine boy on Dalal Street begins to get in, it is
time for you to get out”. Stories like this reinforce the perception that retail
investors jump on to the bandwagon when stock prices are soaring and shun
equities like the plague when they are down.
But actual evidence from the markets in the last three years
suggests no such thing.
Between March 2009 and November 2010, when markets steadily rose,
retail investors actively offloaded their holdings. They cut stakes in 54 per
cent of NSE-listed stocks.
Dhanlaxmi Bank, Lumax Auto, TVS Motors — these are select stocks
where retail investors pruned stakes by between 5 and 13 percentage points in
2009-10 as they delivered manifold returns.
When stock prices began to tank from end 2010, retail investors
went into accumulation mode, buying into 56 per cent of the listed stocks.
In the 2012 market rally, retail holdings have again been pruned
in front-runners, whether it was mid-cap names such as Shanthi Gears and Wheels
India or large-cap ones such as Hindustan Unilever and Reliance Power.
The ‘stickiness’ of the retail investor is even better captured by
data on the overall level of retail holdings in the stock market.
Retail investors owned 8.4 per cent of the total market cap on the
NSE in March 2009. This inched up to just 8.7 per cent by end 2010, after
markets vaulted over a 100 per cent. As the index went into a tailspin,
surprisingly, retail holdings rose even further.
These numbers are hardly suggestive of retail investors, en
masse, jumping into or out of the markets, whenever it changes direction.
Fact # 4: Retail investors did make money
A final myth about retail investors is that they seldom make
money. Owing to timing their moves all wrong and selecting the wrong kind of
stocks, they are said to miss the bus in a market rally and suffer agonies when
the market tanks.
But that’s not true either. The portfolio of retail investors may
not have raced ahead of the market during bull phases.
But it sure has contained losses well during a market crash.
To gauge this, we constructed an index of the top 50 stocks in
which retail investors had deployed the most money at different points in time.
We arrived at the top 50 by multiplying the retail shareholding with the stock’s
market value at each date.
This index (let’s call it the Retail 50), vaulted by 133 per cent,
a few paces behind the Nifty, in the raging bull market between March 2009 and
November 2010.
As the Nifty nosedived by 27 per cent over the next one year, the
Retail 50 contained losses at a lower 23 per cent. As the Nifty took off again
in 2012, rising 23 per cent, the Retail 50 was right with it, gaining 21 per
cent.
Given that only half the professionally managed equity funds have
managed to outpace the Nifty over this three-year period, that’s a splendid show
for the ‘uninformed’ retail investor. Isn’t it?
Colgate-Palmolive India: Book profits
October 6, 2012:
Piggybacking on the market’s fondness for consumer stocks,
Colgate-Palmolive India (Colgate) has sprinted 25 per cent in the year to date.
At Rs 1,238, the stock is valued at 36 times trailing earnings,
placing it at the higher end of the valuation spectrum of FMCG stocks. Given the
run-up in stock prices, the FMCG space could also lose attention as markets look
to other growth sectors in the light of recent reforms.
The company holds over half the toothpaste market on strong
pricing power. Sales and net profit have clocked steady growth. Colgate also has
a strong standing in toothbrushes and the nascent mouthwash segment. With the
urban market almost fully penetrated, the company is building on its rural
presence to push sales.
However, gains on these fronts appear to be fully priced into the
stock. Further, growth in volumes is beginning to taper off. The company has
also ceded market share in the lucrative toothbrush segment to competition. In
premium toothpastes, too, which Colgate is now driving, competition is growing.
On these counts, investors in Colgate can book profits in their
holdings. With a more limited product profile, Colgate also lacks avenues to
boost sales growth, unlike peers such as Dabur India or Hindustan Unilever.
Premium push
Revenues have grown at an annual 17 per cent over the past three
years, while net profit grew 16 per cent.
However, growth in underlying volumes has moderated from an
average 13 per cent in the earlier quarters to 11 per cent in the June 2012
quarter.
Colgate is pushing its premium toothpaste brands such as Colgate
Sensitive.
However, in the near term, an increased premium presence is
unlikely to improve operating margins, given the promotional spends needed to
push these brands.
Colgate forked out 11 per cent of sales in adspends in the June
quarter against the 9 per cent in the March and December quarters. Operating
margins have remained in the 23-25 per cent band over the past three years.
Market share
The premium category is also seeing competition from HUL’s
Pepsodent range. Further, an entry by P&G is a distinct possibility in the
longer term.
Colgate has already conceded market share to players such as
P&G’s Oral B in toothbrushes; Colgate’s share in the segment has dropped
around three percentage points over the past two years to 38 per cent now.
In mouthwashes too, Colgate’s market share has hovered around 26
per cent for the past few quarters, after its initial rapid growth.
The company is not actively pushing its Palmolive body-wash
portfolio, also an intensely competitive segment.
Wednesday, 3 October 2012
Fri, Sep 07, 2012 at 14:30
Motherson Sumi eyes 40% earnings growth by 2015Motherson Sumi has recently acquired Peguform and Visiocorp and Vivek Chaand Sehgal, Vice Chairman of the company said, the acquisitions have reaped good returns so far.
Besides, Motherson Sumi is eyeing 40% earnings growth by 2015.
Here is the edited transcript of the interview on CNBC-TV18.
Q: A lot of brokerages have been giving thumbs up mainly because your acquisitions, Peguform and Visiocorp are now beginning to pay. First take us through Peguform, what kind of performance can we expect this year?
A: I think these are very big acquisitions and we have acquired them at virtually attractive prices. In the first quarter itself Peguform has given a PBT positive after taking into account all the interests and the loans that we have taken.
The mirror company has been PBT positive and EPS accretive right from day one. Basically, the message is loud and clear - we acquired good knowhow, good companies and it took a while. In fact in 2005 we had gone out for an FCCB and it took us up to 2009, four years to acquire the first company.
We do a lot of detail work before we takeover the responsibility of a company. We are happy with Peguform’s response and we believe that globally it will be a very strong company in the coming time.
Q: Some of the brokerages have put out a figure saying that you will probably give an EBITDA earning of Rs 700 crore in the next two years i.e. FY12 to FY14. Is that a fair assessment?
A: Peguform is doing about 15,000 crore as turnover, so 700 crore seems a bit on the lower side, isn't it.
Q: Tell us what you will do by way of margins, we can calculate the EBITDA?
A: We do not give guidance and EBITDA on margins. We always give guidance on ROCE (return on capital employed) and we are sure that by 2014-15 we will give a ROCE close to 40%.
|
Monday, 1 October 2012
Subscribe to:
Posts (Atom)