Sunday, April 27, 2008


I am still trying to figure this one out. It is very dangerous to stand in front of the momentum train. Nasdaq at 3000 can become Nasdaq at 5000 before it become Nasdaq1500. At the same time, in retrospect it becomes one of the easiest trades to make. What event needs to happen to change the sentiment on commodity/agriculture? Dollar strengthening? Monsoons? Already India is predicting a record wheat production this year.

Philip Morris Int came out with very strong results this qtr. So thats good. My thinking has changed a bit on the stock. Earlier, I was thinking this stock should command a 20x multiple like Coke and other FMCG companies, as its EPS growth is around 10%-12% like Coke. That is incorrect. Volume growth for PMI is close to 0% and there is always the litigation risk. So 16x is probably a good enough multiple for this, which is where it trades. So I bought this stock at fair value - the best I can hope now is EPS growth.

Blue Dart came out with phenomenal numbers. It is now trading at 13x-14x FY08EPS. If this stock falls again to 10x-11x, as I am sure it will, I will pick it up.

What about Crisil? This is the S&P arm in India. Its ratings business is growing at 50% (due to Basel-II norm implementation driven business), but Irevna is flat (as it does I-banking outsourcing work). Both contribute about 45%-45% topline for the company. At its current price, it is trading at 25x FY08. For a 25% EPS grower, isnt that the right multiple to pay? If Irevna comes back, the growth could be even higher.