Friday, December 11, 2009
Thursday, November 26, 2009
So far, the Indian portfolio is up some 80%-90% odd this year.
Monday, October 26, 2009
Friday, October 23, 2009
Considering 20% of my India portfolio is in this stock, I want to exit it. But considering it is so illiquid, I will need to figure out a better time to exit.
NRB Bearings is up 8%. It also reported numbers today. 1H profit is 8.5 crore. If we annualize it, we come to 17 crore. Market cap of FAG is 300 crore. So it is trading at 15x. FAG is still cheaper.
I hope this is the bottom of margins. Hopefully Schaffler group is not screwing us - the minority shareholders of FAG.
Wednesday, October 14, 2009
Tuesday, October 13, 2009
Thursday, October 08, 2009
Friday, September 25, 2009
Thursday, September 24, 2009
Thursday, September 17, 2009
Wednesday, September 16, 2009
Thursday, September 10, 2009
The real story is the shabby public health infra in India, and the opportunity for private players. If we look at what Fortis is paying for Wockhardt, Apollo would look a no-brainer. But then, we know that Sardarji screwed the Japs with Ranbaxy, and the money is burning a hole in his pocket. So we shouldn't take it as an indication of what a hospital is really worth.
What I like about Apollo is that the stock is not very volatile. Its correlation with the market is non-existent. So it is a relatively good stock to rotate into out of the more risky stuff. One can also think about it as a long-term investment - if one believes in the Indian hospital story. It is a capital intensive biz. And with Apollo, numbers are always an issue, like for a lot of other Indian companies. The saving grace is that the hospitals are there for everyone to see.
Disclosure: Own Apollo
Monday, September 07, 2009
Wednesday, September 02, 2009
Unfortunately, these stocks - Nilkamal etc - are up 10% since then. Indian mid-caps/small-caps are still running strong even though the bigger indices have turned. Probably these are the best stocks to long-short. They don't rise until the large caps are well and truly up (see May 2009), and they don't fall till the large caps have been taken to the cleaners.
Tuesday, September 01, 2009
Monday, August 31, 2009
I sold Nilkamal and Phoenix Mills last week after the stocks jumped 20%-30% within a couple of days I purchased them. Now it might turn out not to be the smartest thing that I have done if I am unable to re-enter at a lower price. But what is the harm in experimenting?
Disclosure: Positions might change at any time.
Wednesday, August 26, 2009
Tuesday, August 25, 2009
New research even suggests that lightning's effect on technology can shape the course of regional economies. After analyzing lightning data for the lower 48 states, four economists from the University of Copenhagen found that those states more prone to lightning strikes tended to see worker productivity grow more slowly than in states with very little lightning.
This held true when the economists controlled for a range of other factors, including hurricane frequency, urban density and the education, age and racial characteristics of local populations.
The economists concluded that the use of computers and the Internet spread more quickly in areas less prone to lightning strikes, boosting worker output there. This lightning effect didn't exist prior to the 1990s, say researchers Thomas Andersen, Jeanet Bentzen, Carl-Johan Dalgaard and Pablo Selaya, when the advent of the Internet led to the rapid adoption of information technology in the U.S. and an accompanying surge in productivity.
We need a few successful IPO's to get people really excited. Adani Power unfortunately was not it. And NHPC is also not going to be it. The IPO market might take a back seat for a few months if NHPC doesn't do well. At that time, broking stocks like Kotak might crack up a bit. And then there might be a flood of IPO's. If things play out that way, there might be an entry point into brokerage stocks sometime around Oct-Nov.
ET reports that IPO financing is picking up again. NBFC's have raised almost 10K crore for it. Good for Crisil and ICRA. They need NBFC's.
Also, by the way, it has started raining again - at least in Mumbai. A couple of days it rains more like this, an article here and there that monsoons have picked up, and agri commodities (sugar) cool down a bit. I might get to re-enter Dhampur at lower levels. Nothing ever goes up in a straight line forever - though the stock markets are doing that right now.
Monday, August 24, 2009
- Material handling crates, containers and bins. One will find Nilkamal plastic crates in vegetable markets, dustbins in cities etc
- Plastic Moulded furniture - chairs, tables etc. This is where the company started from. At a lot of weddings in India, one will notice that plastic chairs are Nilkamal.
- @Home - Home Store retail chain.
The retail chain is making losses. The moulded plastic items business is very profitable, and the company has done very well over the past decade to become a market leader. On a consolidated basis, the company is trading in mid single-digit PEs. If one does a SOTP and values the plastic biz and @Home separately, then the plastic biz is trading at low single digit PE. It is a levered company - market cap of 130 crore, debt of around 300 crore. Levered companies benefit when interest rates go low - as is the situation today - due to lower interest expense. The potential appreciation in a leveraged company's stock is higher than in an unleveraged one (so are the losses). On an asset value basis, the stock can easily be a double.
Risk with this stock is - it is a small cap. If markets start falling, these stocks just do not find any buyers.
Disclosure: Own Nilkamal. Positions might change at any time.
Friday, August 21, 2009
So the other malls and hotels that Phoenix mill is developing and has already sunk capital into (including the other one in Kurla in Mumbai) are not being ascribed much value right now.
I like this statement by Atul Ruia (director of Phoenix Mills) in this interview with Mint earlier this year: "You raise capital in good times and build in the bad". Phoenix mills raised 980 crore through a QIP in Aug 2007. It is one of the few developers that hasn't yet diluted shareholders this year after stock fell 80% from their peak - unlike a DLF or Unitech.
The risk with this stock is - it is a real estate stock. In any market correction, real estate will fall the hardest, and this stock will fall accordingly. I have bought it with an intention of not looking at it till 2011.
Disclosure: Long Phoenix Mills
Monday, August 17, 2009
Sugar stocks are favourites of the speculative crowd. So even if earnings are quadrupling next year, it wouldn't matter if people decide to rush to the exits en masse. But still, I think Dhampur hits 150 next year. So hopefully it falls some and a bit more.
Dhampur: Mkt Cap = 450 crore. Debt = 900 crore. EV= 1350 crore. Sep 09 EBITDA = 200 crore. EV/EBITDA = 7x. Debt/Mkt Cap = 2x
Shree Renuka Sugars: Mkt Cap = 4700 crore. Debt = 800 crore. EV= 5500 crore. Sep 09 EBITDA = 500 crore. EV/EBITDA = 11x. Debt/Mkt Cap < 0.2x
Balrampur Chini: Mkt Cap = 2900 crore. Debt = 800 crore. EV= 3700 crore. Sep 09 EBITDA = 375 crore. EV/EBITDA = 10x. Debt/Mkt Cap < 0.3x.
The EBITDA numbers are all approx. Still, the broad argument is - sugar is in a bull market. Dhampur is the most levered. So if these stocks go up - Dhampur will benefit the most. If one makes the argument that Dhampur is cheaper on EV/EBITDA and the gap should narrow, then we get a multi-bagger.
Disclosure: No position, positions might change at any time
Thursday, August 13, 2009
There is an inflation conundrum in the world today. Pessimists are wondering - how long is it before all the money printing causes prices to explode exponentially. Optimists point out to the excess production capacity in the world and are more worried about deflation. It seems for now that the optimists have the upper hand.
However, the argument of excess capacity is not true across all sectors, industries and countries. Right now in sugar, expected demand is exceeding excess supply. And it is probably in sectors like these that we will see significant price spikes caused by low interest rates and excess liquidity - much more beyond the 94% that sugar has gone up YTD. In other words, we will see very high inflation in areas where demand exceeds supply, and low inflation/deflation in sectors where supply exceeds demand - which is true for the majority of global economy. For commodities like sugar which are traded on exchanges, it is that much more easier for speculators to pile on.
This argument can be presented in another way too. If in commodities where there is a shortage don't see 2x-4x price spikes in record low interest rate environment, then the optimists on inflation are probably right - how will we get price increase in other areas with excess capacity? So more than anything else, I think sugar is a very important case study.
Disclosure: Long Dhampur Sugar
Tuesday, August 11, 2009
Monsoons are a big issue. Between 2002 and 2004, FMCG growth flattened out as monsoons failed successively. While we are far away from that possibility this time, markets will no longer price these stocks to perfection as it has been doing of late. For food companies (esp. Britannia, whose biggest competitor Parle hasn't raised prices in years) it is a double whammy - growth might slow while raw material costs (esp sugar) go up.
I have traded in and out of sugar over the past few months, this time I will let this one run. My thesis is - all sugar stocks are going to get priced at peak multiples on peak earnings in the next 6-9 months. I did some work on the Indian sugar companies two years back, and from what I recall Dhampur is the most levered on debt/market cap basis. Right now, Dhampur is not more than 8x '10EPS - some will argue it is at 4x-5x '10 EPS. So, there is a potential double here after the double that has already happened.
What I am not sure of is - is it Indian sugar companies or Brazilian sugar companies (Cosan) that benefit the most. The deficit is in India - so the exporters to India (Brazil) should benefit more. That is something we will figure out only as time passes.
If Indian FMCG stocks lose their safe haven status, where will the long-only funds park their money if markets tank? Last year, FMCG stocks had negative beta for a time with the Sensex. My suspicion is - this time it might be tech (Infosys). Again that is something we will figure out only as time passes.
Also got out of Torrent Power when it spiked today. This was an indirect play on Adani Power IPO. This company doesn't talk to investors at all, and its financials look suspiciously clean for a power company that is on a capex spree. Maybe it runs up another 20% if Adani Power opens up with a bang. But the way Adani Enterprises has traded in past 2 weeks, I am not that sure.
Monday, August 10, 2009
I had first looked at this company in May 2007 - the last time it filed its DRHP in anticipation of an IPO. At that time, I thought this company would be a great short if it ever got listed, and I continue to believe so. Shorting this and going long NTPC (govt owned thermal power company) will likely make a lot of money if held over a long period of time.
The company's ROI is close to 5%, and it appears to have always been below 5%. The company survives on generous equity infusions by the government each year. What it means is that over the long run, the company will repeatedly dilute its equity holders to fund future mega-projects. The government of India has really sent taxpayer's money down the drain with this company.
Now the bulls might argue that the company has always been on a capex spree as it was developing new projects, so its important to ex Capital work in progress (CWIP) from the asset base to calculate ROI, as the CWIP doesn't generate earnings. But we can argue the same for NTPC. Like for like ROI for NHPC is substantially lower.
Developing a hydro project takes more time than thermal, so NTPC's capacity growth should be higher than NHPC. So not only will NTPC grow faster, but because of its higher ROI, it will need to dilute lesser to fund its growth. If the market gives NHPC a nice pop on the opening day so that its P/B discount to NTPC narrows, it might be a great time to put on the trade.
What I am not sure is of the funding cost of this trade. And whether one can really put on this trade considering the only way to short in India is through futures.
Sunday, August 09, 2009
Wednesday, August 05, 2009
June qtr results were quite good for GSK, like for all other FMCG companies. GSK is at 20x and I have been thinking whether it is time to exit. The only reason not to sell is - Nestle, Colgate, HUVR are all trading in high 20x - low 30x. Even the mid-cap Indian FMCG companies like Godrej are now trading at 23x. GSK is one of the cheaper FMCG stocks around!!
Colgate has had the best growth numbers over last 3 years. GSK and Nestle growth has not been dramatically different over the past 3 years. Nestle has been trading at 25x levels for past 3 years. Is it very unreasonable to bet that GSK moves higher from here?
I am getting tempted to take money out of FMCG stocks and move into media stocks. I doubt there are positive earnings surprises left in FMCG, but it is possible that ad inflation pick up in India again later this year. India is a consumption growth story.
Tuesday, August 04, 2009
This is why I went long CTSH, short Infy in early June - CTSH has a better growth profile than Infy. CTSH used to trade at a wide premium to Infy till a year ago - right now Infy trades at a premium to CTSH. Since I initiated the long-short, Infy's premium has grown a bit. As I had mentioned then, we will need at least two quarterly reports out of CTSH for markets to realize its superior growth profile. We got one today.
There are 5 kind of NCD's. Option III is effectively a zero coupon bond, which would have the max capital appreciation if yields were to compress. I have applied for this one. Issue is open till 15th August.
Friday, July 31, 2009
Unilever is barely growing its volumes - growth there is being led by pricing. The other three are growing very well on volume and pricing. Unilever, Nestle and Colgate are all trading in 25x-30x PE band. GSK is trading at 18x-20x. If GSK keeps up the growth momentum it has shown in the last several quarters, I wouldn't be surprised if the valuation gap closes. This is what has happened with Colgate over last 2 years vs Nestle.
Disclosure: Own GSK, positions might change at any time.
Thursday, July 30, 2009
Tuesday, July 28, 2009
Monday, July 27, 2009
Saturday, July 25, 2009
Thursday, July 23, 2009
Wednesday, July 22, 2009
Tuesday, July 21, 2009
- Russia’s unit case volume declined 9 percent in the quarter, reflecting the impact of a continued challenging macroeconomic environment. Russia is struggling - this might impact PM and BAT due to downtrading.
- Unit case volume growth in Northwest Europe was partially offset by weakness in Spain and Eastern Europe due to significant macroeconomic challenges in those regions.
- Strong unit case volume growth of 6 percent in the quarter was led by a 6 percent increase in Mexico, a 5 percent increase in Brazil and a 6 percent increase in Argentina. Latam is up 6% on volumes in 1H - thats good news for the other beverage companies.