Smartcat

Message

Originally posted by smartcat

Surprising....you used to appear as one of the most 'enterprising' investors. 

However, in stocks, you have to take into account relative valuations, rather than just take into account absolute valuations. So, although a Great eastern Shipping may be offering me 3.5 p.c yield, but I may sell it if SRF is getting me almost 9-10 p.c. So, its not just what valuations my stocks are commanding, its also important to keep the eyes open to spot better opportunities. 

What I mentioned there was just my new entry/exit strategy, not a stock picking plan. Dividend yield is not everything for me - I need to like the business before I buy it.

For example, I gave Graphite India and TNPL a pass inspite of high yield. 

Graphite India gets a big percentage of its sales from outside India - that could affect its performance in the future (it hasn't in the past, but still..). Plus Graphite India has no control over its raw material costs.

TNPL is a bagasse based paper company. And bagasse is obtained from sugar cane. And sugar cane industry in India is crazy. So TNPL is a big NO for me - I would rather go for WCPL which has control over its raw material costs. 

I see your argument like this:

Business is a necessary condition, but dividend is a sufficient condition for making an investment. 

So, in effect, dividend becomes a part of your stock-picking plan without your realising it.  

Edited by Vivek Sukhani - 19/Jul/2009 at 9:56am