I have been a regular reader to this forum and benefited tremendously. My contribution was less so I thought to pen down my limited views to contribute to this forum. Below is my analysis and few recommendations:
Panic 1: Corona Virus
As per me, it has least impact over India as a country. We are poor nation and struggling to basic healthcare. Our fatality is far far higher for diseases for which cure is available e.g. TB, Pneumonia, Dengue, Hepatitis and so on. Statistically speaking, probability of being hit on the road is far higher than Covid-19!
As per me, Corona Virus is a developed world worry, their human life is much valued and due to lack of any vaccine their fear is far higher than us. Any death due to lack of medical treatment is a egoistic issue for them.
We have summer coming soon which is boon for India. Due to intense heat survival rate of virus drops.
Panic 2 - Oil price war
Needless to say, India is a net oil importer and this drop augurs well for us. But at the same time Rupee is depreciating so hard to estimate its impact on us. I believe net-net would NOT be negative for sure.
Panic 3: China Supply Issues
China is a global supplier of raw ,materials so current disruption will have cascading impact from across the globe. Its a near term serious issue for India especially for those sectors which imports raw materials from China. But any supply side issues are always short lived, people easily find the way to build a new capacity elsewhere. So this issue will have a short life span.
Opportunity:
I have very few but safe ideas to benefit from this opportunity which comes once in a decade. Focus is to spot the business which are grown locally and consumed locally. Below names may sound boring to many of you but they have huge margin of safety with decent appreciation ahead. Core investing idea is as summarised below:
I follow 5x10 = 25x2 rule: It means outcome will remain the same when either you invest 5/- with 10X gain vs 25/- with 2x gain. Left had side is definitely super sexy to get but very very hard to achieve while right hand side fairly predictable and achievable. So I have below recommendations based on RHS of this equation:
1- Paint Companies
Asian Paint and Berger Paint is the biggest beneficiaries. Oil derivatives (Ti2O) contributes biggest RM while there will be little drop in their demand.
2- FMCG
VST Industry: I don’t think this business has any impact of all above mentioned reasons. It will continue to sell tobacco and branded sticks, addicts gives a shit to global issues. VST Ind is slowly gaining market share from ITC and super clear to remain focused on its core business. They don’t have any diversification issues like ITC.
NESTLE: Its products are mostly for elite class of India except Maggie. I don’t see any kind of threat to its product. People won’t stop buying Katchup, Noodle, Chocolates, Coffee etc.
Pidilite: Again it’s a beneficiary of oil price drop. There is virtually no competition for its products in India.
3-Lenders
Indian Banking sector is in complete mess. PSU Banks troubles will be forever due to socialistic policies of the Govt and Pvt banks are also into deep shit e.g. Yes Bank, RBL Bank etc. So where the banking business will move too? They will be grabbed by only two lenders HDFC Bank and KM Bank! Kotak looks well placed to benefit the most. Its CEO is still young and knows banking deeply well. My Uday Kotak is a super shrewd banker and knows the art of lending way better than its peers.
SFB - AU Bank and Ujjivan are the best, they lend to poor and these folks I doubt ever heard about COVID or any other things for which world is worried right now. They continue to grow crops, sells vegetables etc. and life for them would be as usual.
Bajaj Finance: It’s already well known and researched stock. It lends to elite class of India, I hardly see any reason for a drop in demand or lack of repayment from his class.
4- Retailer
Titan: More the panic across the world more is the flight to safety which is GOLD. Titan is the best company in retail space, I don’t think Indian stop buying Gold for marriages or occasions and new investment will continue to happen in Gold. Little worry is falling Ruppe, there’s a large possibility that HNIs are buying Gold hence Rupee depreciating. Govt might regulate it so this variable remain a monitorable.
In addition to above there are opportunities in Sp Chemical or in API space but they would be short lives. As I said Supply side issues are always solvable, someone somewhere must be busy building new capacities hence a deep knowledge is must before one invests in this space. If you are sleeping and new supply comes up then it will hit your hard earn money overnight! So I don’t mean to say its not a white space but if you invest then be vigilant to monitor new supplies coming elsewhere in a world!
Good luck guys, looking forward to your valuable inputs to build a high conviction PF. It appears to be a god send opportunity to invest with conviction and get rewarded in next 1-2-3 years.
At last have a colourful and vibrant Holi!
12 posts - 6 participants