Automobile sales numbers are like some kind of a guidance on the economy’s strength. If it is growing, it means people have money to spend and that will give support to other sectors. Continue reading
India is the world’s best economy today. Following its robust journey that is going to come up in the next 5 years, there is going to be a dramatic shift in the whole economy and with it even the economic barometer of India, the SENSEX. The SENSEX will also undergo change by replacing some of its constituents. Those stocks that will take a space in the future index will be the stars of the markets in the next 5 years.
What if we can identify them and be invested in them?
The growth those companies will have is going to be tremendous and the potential for profits will be equivalent. The expected stocks that can move in to the SENSEX, the list is big with some new not yet listed companies too. Though for the new ones we may not have a direction, for those that are existing, and if identified and invested, can give great gains.
EICHER Motors (Royal Enfield Bullets)
Page Industries (Jockey and Speedo brand products)
TITAN (Watches and Jewelry)
NESTLE and the likes.
Companies that have premiumisation as their focus are likely to shine bright. So, look for premium products in the market and the companies that produce them and be invested in them, chances are you will end up having a goldmine.
At present our portfolio contains the first 2 names and we have been holding them for quite a long period, in these years that we have owned these businesses, they have showed continuous growth in their sales as well as profits. If they continue the same for the next 5 years, we will still have them. While, there is no guarantee that it will be so.
In the last year, there were some companies that made it big on their growth and become the darlings of the market. Some of the best ones are
Ashok Leyland, Britannia., HPCL, Baja Finance, Ramco Cements, Maruti, TCS, Ultratech Cements, PVR & Kotak Mahindra.
And there are a next set of business that are showing signs of reaching for the best. They are Canfin Homes, TCI, Tata Motors, Orient Cement, Persistent, Heritage Food and BHEL.
These were the names that have come up in the ET500 listing.
Among the above names we are invested in about 7 businesses, while we have doubts on some like BHEL, TCI etc., while if they qualify our parameters in the future we will definitely look at adding them in our portfolio.
By being invested in the best performing companies, our portfolio is managing to grow the best. Last year we had an Alpha of 63% against the NSE 500 Index, This year in the first half, so far we are at 28% Alpha against the NSE 500.
We will continue to grow in the same manner adhering to the best practices and innovative thoughts.
Last week, auto sales numbers came out. It was not impressing; in fact it did revoke some thoughts. Apart from Maruti and Hyundai, no other company is positive on sales. This message makes it clear that people are not buying automobiles.
Real Estate sales are down for quite some time, which means people are not buying homes either. Inventories of apartments are moving up on a regular basis which is placing severe pressure on the finances of real estate developers. It is just time, that the developers will do distress sales of their holdings which will still supress the markets.
On the other side inflation is cooling down, fuel prices getting eased has given a lot of cushion on the inflation. Wholesale price index has moved into deflation. This again means that people are not buying more of essential products because only if there is no demand can the prices move down.
Does this mean that people don’t have cash to spend, which is not likely because there have been good increments in salaries.
Where does all the money go? One area where it can go is investments. Even there we don’t see a big pick up, though compared to previous years the savings rate this year is a little higher, which is the reason Mutual Funds gave a big support when the markets fell this time. They had purchased stocks to the tune of 22600 Crores in the last 8 months.
So, if investments are not happening, and people are not spending, where is the money going. Obviously, it cannot be stored in the back yard though. A little guessing on this idea, made me think that there is indulgence spending happening in the economy. People are spending money on things that are not of much value. Off late India has become a booming place for start-ups. Every other day there are at least a few start-ups coming out and the beauty is that all of them want to corner market share to show their investors and get funded. And when funding happens, there is more pressure to scale up so that the investors take exit and give way for the next level of investors.
To achieve this goal, almost all of them are playing the discount game. The public today are lured to offers, even if they don’t require a product, for the sake of discounts, they buy things. Buy three get three free. The product price may be ₹5000, which is sold at ₹7000, the buyer feels he makes a 30% profit and buys this merchandise, even though he does not require the 3 that comes free of cost. Whereas for the seller it is a win-win, he would have already got his investment because the merchandize that comes free are those that were inventory that was considered waste and all of its cost had been factored into the existing pricing.
The end result is buying something that did not have much use and having it stored in the house. The inventory that was to be lying at the seller’s godown now takes a place into many buyers’ residences. The loss is distributed, while the buyer is not much worried about not using the purchased products.
Similar situations are happening around the country, thereby sucking liquidity from the markets. And there is one more interesting thing happening now in our country. A couple of decades back, in every house the only word that was familiar was software. Software not only took space on the computers, it went into all the nooks and corners of the country. Every house had a software engineer, either working in India or abroad churning big sums as salaries. Since they were earning big money, they were splurging in expenses too. All of a sudden shirts cost upward 3K, shoes above 5K. Real estate sky rocketed all because of demand and there was money chasing these merchandize.
Inequality started showing largely in the economy. A poor man walking with his kid across the road can see through the glass panes of a pizza outlet where the family of a software engineer is wasting food, half eaten and half left because he had judged that he has a big appetite only to realize that his stomach got full with half the quantity. Keeping the food on the table his kids are enjoying a softee from which the ice-cream is melting through the hands of the kid. While at the same time the poor man who is watching this has no money to buy a square meal to his child who doesn’t have a good clothing to wear.
Money just flew away and got accumulated with the software people. Now, after 2 decades, the people who are funding the start-ups are the very same software engineers from their savings. They have so much money, which they want to multiply even faster; in the bargain they are taking wild bets on the start-up companies.
In reality what is happening is that the hoard of money earned is now getting distributed in the form of discounts. The people who beared the brunt of low paying jobs while our software guys took away fat salaries are the people who are most sorts after by the start-ups for their companies to show market strength. All the start-up companies will not see the light of listing in the stock markets which is the ultimate exit point for the Angels and Venture capital investors (Almost all these investors are one time software engineers).
The winning percentage here is less than 5%, if 100 ideas come out as businesses, only 2-3 businesses will get listed. There will buyouts and merciless killings of companies happening in the coming years, in all this drama that is going to happen, the money that is going to be used is from the Angel and Venture capital investors
This kind of spending is not good for the economy. This start-up bubble will soon go into thin air and by that time the distribution would have been fully through.
If the public are smart, each family can easily make a couple of lakhs using the discounts that are dished out by these new age companies. As the money gets distributed, it will move from the hoarders to where it is required.
Be smart, make use of all the apps and take as money as possible from these deep pocket investors, who mostly do not know the dynamics of investing. One thing is good here; this loss to the Angels and Venture capital funds is not going to hurt anyone, because it is a bigger level gambling that is happening in our country now.
So, enjoy the journey, make money in the bargain.
One serious message to the public, when these companies come out into the market to get listed, doesn’t invest in them blindly. Almost all of them are under loss; don’t get sucked by the hype. You were already killed once by sacrificing your dreams when they made big salaries, now, don’t feed in again. Stay out and watch the fun.
Auto sales were weak for most of the frontline companies in August this year. Hero lost near 14%, TVS had a 1% growth, Maruti managed due to Ciaz and S-Cross, which otherwise would have been negative. M&M goes weak, Tata Motors 0.50% down on overall sales.
Ashok Leyland & Eicher were super stars. Ashok Leyland managed a 39% growth, supported by pre-buying ahead of ABS (Anti breaking System) becoming a mandatory norm from October 1st 2015. The growth was slightly ahead of expectations. Eicher continued with its above 50% growth. Royal Enfield sales grew 59% and commercial vehicle sales grew 22%.The company has opened sales office in the North America, which is another positive for its growth as exports are on a steady increase.
Ashok Leyland turned around in the last quarter and it is likely to continue its growth phase for some more time to come. Stock has already run up, but still has a lot of room to be captures. Ashok Leyland came into our portfolio at ₹74, in August 2015. Post strong growth numbers we are adding to the existing exposure after the current correction phase is over.
At its high of ₹99.65, our investment in this stock has reached 30+ percent profits in a month. The broad based correction in the market post Chinese currency crisis has brought the stock down, which is an opportunity to accumulate for those who missed it at 75 levels.
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.
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.
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.
When we are investors in the companies that produce the products of our consumption, we have a lot of advantages.
- 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.
- 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.
- 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.
- Equity investments provide the highest return, currently it is at 15.10%.
- Long term capital gains advantage, which makes your profits tax free.
- 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.
- 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.
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 produced 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.
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.