Alembic is strong, Lupin is weak, and we got it right.

alembic_600The 2nd quarter results for both ALEMBIC PHARMA and LUPIN show a very different picture. ALEMBIC PHARMA had a 83% sales growth and 273% profit growth. While LUPIN had only about 2% growth on sales and a negative growth of above 35% on its profits.

Both these companies were in our investment portfolio a couple of months back. Lupin moved out following the slowdown of its results in March 2015. It was the time the stock made a steep rally to 2100 levels and took a beating after some news in the media that they are facing challenges in the US markets. We made a small profit of 20+% on our investment which was on hold for a couple of months since September 2014.

lupin_pharma600On the other hand ALEMBIC PHARMA has been a steady performer and we continue to hold this investment which was picked up in the early 2014 at around 200 a share. This investment has so far given us about 200% profits, not very big when compared to stocks that have made more than 500% in a year like CEAT  & EVEREADY. While it has been a good investment for the portfolio.

Post our exit in LUPIN, the price of its stock kept moving higher giving us a sticky situation as to, whether we missed a rally in a good stock, because media reports were favouring LUPIN on its performance. We struck to our discipline of not holding an investment if the company is not growing. Now, we don’t have any regrets, in fact we are happy, our system ensures that we are invested in the best businesses across making the BEST POSSIBLE PROFITS to our investors.

Pharma Sector is the strongest in the current markets and among them the Midcaps are the leaders today. Our exposure to Pharma sector is considerably growing too.

Eveready hikes battery price.

BatteryAAThe management of Eveready Industries have increased the price of batteries by 5%, to manage costs that have got increased due to the rupee depreciation. This is a very bold decision, though Eveready commands a very big market share in India for Batteries, the price increase can put the competitors at an advantage, mostly the low priced Chinese products that come into India.

In his interview with CNBC, Mr. Amritanshu Khaitan, MD, Eveready Industries reiterated confidence that the competitors will follow soon.

This confidence shows the belief the management has on the business and the added profits this price increase is going to bring will increase the profits and the price of the stock too. In last June Eveready stock was prices at ₹45, when we added the stock to our portfolio. Today after about 15 months, it is at ₹290 after reaching a high of ₹370, so far giving us above 500% profits.

The management is expecting to have their profit margins at 11%, from the 3.83% that the company is having now, it is a fairly big jump and it is going to take the stock to greater heights.

Eveready has entered into LED lights business, where it is competing with many prominent brands. The advantage we found with their product when we shopped for a few lights was that the price is very competitive against the other brands. This will push the sales, which is again an advantage for our investment.

RBI has approved the increase of FII limit to 49% of the company’s equity. The present FII exposure is close to 44%, which gives scope for another 5% increase and to that extent there will be demand for the stock in the market and it is add up to its price rise. Just because foreign investors are having a big stake in the company does not mean that the company is going to be ever growing, there are many instances where some FII investments have gone wrong too. The advantage we have here is that, since the company is showing good strength, FII’s will be willing to take exposure even at a slightly higher level and that will be at our advantage as the stock will move up faster. We will track the performance & stay invested only till the company is growing.

Wireless is a boon to battery companies…..

I invested in Eveready Industries in the month of June 2014 after the stock came into our ranking tables. The ranking table measures a stocks earnings and its stock price against  a group of stocks and ranks them. We invest in those stocks that have both their earnings(EPS) and price (PRS) above 80. At that time the stock price was ₹. 45.00. At the price, the stock’s chart was showing pretty high strength, it has a good run up I price. I normally don’t buy into a stock that has already run up. Now, the decision has changed, I had committed myself that I will follow the system without second guessing or judgement.

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After I bought the stock it was going higher and higher. By September it crossed the 100 mark.

BatteryAABy the end of November 2014, it has reached 195.00, has given 350% profit on our investment in 5 months period. September quarter results came out and the performance was stronger, but, still was not in a position to give a growth signal, which we consider when a stock gives 25% plus growth in its sales as well as its earnings in comparison with the same quarter of the previous year.

One day when I had asked my son to buy batteries for the mouse and keyboards at home. He bought 6 nos, stating that, we need that much as it is used in the clocks, remotes, keyboards and mouse. This made me think, if we are consuming so much, it would be the same to others around the country too. With the world going wireless, usage of batteries has at least multiplied 3 times. And this is  going to increase going forward. A reason enough for Eveready to sky rocket in its sales and earnings. Eveready has been the leader in this industry segment, when we think of batteries we only think of ‘EVEREADY’, it has become a ‘XEROX’ for copy machines. This means, there is a very high potential for this stock to give us 1000% profits along with some fancy dividends. The beauty is that, all of this profit will be tax free, as the period it would take to hold on to this growth is going to be above 365 days. What a nice choice to be invested in Equities.

This incidence also made me think, if I can search such kind of supporting thoughts to find companies that have the highest potential to growth, the returns on my investments will be triple digit year-on-year.

Are we using our independence well…..?

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Why did we get freedom?

For 3 centuries prior to our independence India’s resources have been used by the colonial powers, exploiting them and carrying the profits to their country. After getting our freedom & being independent, have we changed?

India is a country that is diverse not only in its population; it has diverse natural resources in such abundance that it can support any kind of growth. Not many countries have resources like what have, take for example the United States & Japan, which are known to be the top 2 economies in the world. The US mostly manufactures weapons of destruction. Always wants or creates disturbance across the globe to keep their business growing by selling weapons of destruction to both the fighting countries, many a times in the guise of protecting mankind, they involve themselves in doing more damage. But, they are dependent on the whole world for the supply of their regular basic requirements. The global economy feeds their requirement of basic necessities, providing them credit as well as buying ammunition from them in the fear of protecting themselves and making the US grow abnormally at their cost.

Japan is dependent on the world for almost every need of theirs, but, they are pretty smart to have created such high value in their products that, the world has almost thronged to give them business by all means.

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We got freedom……

We fought for our freedom to ensure that all the resources we possess will be used by us to help in our growth. 67 long years have passed since our independence, are we really free? Do we use all the natural resources available to us for our growth?

Our natural resources, including the talent pool in which we have an edge in the global market, are used by the industries of our country to produce products and services for our citizens to consume. In turn these companies generate profits and grow their businesses.

Out of the industries spread across our country, about 6000 companies are listed companies. Their shares are traded in the stock exchanges helping investors to take a share of profit from their growth. These companies contribute to more than 90% of our GDP.

By listing their shares in our stock exchanges these companies have provided an opportunity for every prospective investor to invest and get a share of the profits they earn. The shares grow in value as the companies grow their businesses. As these companies grow, their share prices increase, thereby increasing the value of the companies. This value creation is called Market capitalization.

The combined market capitalization of all the companies listed in our country is 83.25 lakh Crores. As citizens of our country, do we own these companies? The latest available statistics show that 50% of the market cap of our country is owned by foreign institutional investors. Indian retail participation is just above 20%. This means 50% of the profits generated through the talent pool and natural resources of our country are taken away by these investors to their respective countries.

So, what has been the change both pre and post independence. Either way most of the synergies of the country which has the world’s second largest population, a terrific advantage not many countries have, have been utilized mostly not by the people of the country. We are still the same, giving our resources to other countries. Earlier it was by force and now it is with all willingness.

If this continues how will our economy grow? We are only making other global economies to grow from our potential. Why have we not participated to own our economy? Indian household savings as on Dec-13 is 221.14 lakh crores, while we have invested only 17 lakh crores in Equity to own the companies that form our economy. As a natural process we shy away from Equity investments due to fear of losing or not having belief that the companies in which we invest will provide growth to our savings.

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Our necessities can be our beliefs too…..itcgrouplogo

As human beings we have to fulfill our basic necessities in order to live and experience life. You can see logos in this article of some brands that have been part of our life and will continue to be so for generations to come. We have not feared using them; we have had very strong belief in them. Then why did we not believe and invest in the companies that manufacture the very products which are required for our survival?

One of the reasons is, when we consume the products, we experience it, while we cannot experience growth of these companies physically. Then there is fear that our judgment might go wrong and we will lose our hard earned savings.

Many of the investors though have the eagerness to invest in equities do not have the expertise to identify companies that are good. They can seek help from professional investment advisors; Bravisa Templetree can help you in identifying the best growth companies of our country.

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Advantages of owning the companies that produce what we consume:Bata

 

When we are investors in the companies that produce the products of our consumption, we have a lot of advantages.

  1. Every time we buy and consume the products, we pay ourselves a share of our expenses as profits on the holdings that we have in the company.
  2. We will be more interested in promoting the products word by mouth, which will bring more business to the company and in turn increase our investment.
  3. The profits that we earn from our investment is ploughed back again into the economy either by consumption or through investment. Both of it help the economy to grow.
  4. Equity investments provide the highest return, currently it is at 15.10%.
  5. Long term capital gains advantage, which makes your profits tax free.
  6. By investing in our companies, we ensure the money keeps circulating within our country, growing our economy. If all of us work together, in a decade we will have individual income levels at par with the developed countries.
  7. We will eradicate poverty and increase standard of living.

The immediate thought that will go round in our mind will be, my consumption is so small, how would it be of use in growth? As one person it is really very small, but, what if all of us have the same thought. Maybe half the population, the potential for growth will be extraordinary.

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How you will be paying yourself?

Assume you own shares in ITC, every time you buy Ashirwad Atta, Sun feast biscuits, stay in ITC hotels. Buy a Fiama Di Wills or Vivel soap; you pay yourself a small percentage.

If you own shares in Maruti, the next time you want to buy a car, you will explore possibilities of buying a Maruti, because you know a part of your expense is your profit too.

The next time you wind a week with a drink, you will prefer to have a Kingfisher, if you own shares in United Breweries. Like this we can benefit from every purchase of ours, because all the products we use in our daily routine are NESCAFEproduced by companies listed in our stock markets.

List out the products that you consume in your daily life and invest in the shares of those companies. It can be Raymonds, Bata, Titan, Voltas, Eveready, Colgate, TTK Prestige, Sobha Developers etc., the list can be big. It gives you diversification as well as lesser risk coupled with growth. In case you would require any help, we at Bravisa Templetree are glad to lend you a helping hand in making your choice.

 

An example of a stock that has grown 6 fold in the last 4 years. Page Industries, the company that manufactures “JOCKEY” brand of lingerie. This company has grown at more than 30% every quarter since 2009, would that mean our people are buying so much lingerie? Don’t know whether it is right, but, if you pass though the roads, in about a kilometer you can find at least 3 outlets of “JOCKEY’. With such high presence, it is common sense that the growth is tremendous. If you are a consumer of this product, go ahead and buy the stock, it is one of the best growth stocks in the market today.

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Be invested in our economy, India is the economic super power of the world for the next 10 years. If you have not participated, you have wasted a life of being born in a country as diverse as India. Be proud of being an Indian.