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Ashutosh
Senior Member
Joined: 05/Apr/2009
Location: South Africa
Online Status: Offline
Posts: 226
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   Posted: 15/Aug/2010 at 11:33am |
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My lord ...this is a amazing piece of work and the way the strategy of giving ranking is done is amazing.
Never seen something like this earlier.
The Name which you have choosen "SmartCat" is absolutely right.
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My tastes are simple: I am easily satisfied with the best
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EquityInv
Senior Member
Joined: 21/Jul/2009
Location: United States
Online Status: Offline
Posts: 536
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Posted: 15/Aug/2010 at 11:45am |
Amazing work smartcat! 
Joel Greenblat does same thing but only based on his magical formulae of 2 parameters. a) RoCE and b) Earnings Yield.
Originally posted by smartcat
Basant, you know these 11 stocks better than anybody else. It would be interesting to know your ranking of these 11 stocks based on your parameters (including subjective factors like management pedigree & future prospects) at current market prices. If it almost matches this quantitative mathematical model, then it would be amazing. |
I think BM would consider 5*x rating for RoE and RoCE and 0.00005x to Div/yield.
No doubt, Hawkins scores very high from all parameters here as well as magical formulae.
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One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do – James Rogers
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prabhakarkudva
Senior Member
Joined: 16/Jan/2008
Location: India
Online Status: Offline
Posts: 1624
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Posted: 15/Aug/2010 at 11:55am |
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I was thinking if we could run this system as if we are in 2006-2007 and see how well the stocks that come up triumphs using the system have done in reality.I could do that once smartcat finishes his exercise.
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Take your chances and keep them in a box until a quieter time.
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hardikp
Newbie
Joined: 08/Jun/2010
Online Status: Offline
Posts: 1
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Posted: 15/Aug/2010 at 11:56am |
Originally posted by smartcat
ROUND NO. 3 - THE MARKET CAP
It is almost always better from capital appreciation point of view to invest in stocks with low market cap. So, in this round, the lowest market cap stock gets the maximum while the stock with the highest market cap to get just 1 point. Expect the HDFC twins to be hit hard in this round.
| Company Name |
Market Cap in Rs. Cr. |
Points Earned |
| Hawkins Cookers |
513 |
11 |
| Voltamp Transformers |
914 |
10 |
| Page Industries |
1249 |
9 |
| Zydus Wellness |
2015 |
8 |
| Blue Star |
3962 |
7 |
| Voltas |
6847 |
6 |
| Thermax |
8879 |
5 |
| Yes Bank |
10926 |
4 |
| Titan Industries |
12436 |
3 |
| HDFC |
87369 |
2 |
| HDFC Bank |
95932 |
1 |
ROUND NO. 4 - LAST 4 YEAR SALES CAGR
Sales growth rates are as important as profit growth rates, if not more. If a stock has a scorching bottomline growth and a dull topline growth, it probably implies that the going might not last long. Bottomline growing faster than topline can happen because of improving margins, for example. But there is only a limit up to which you can increase margins - after that, the bottomline growth will align with the topline growth.
So in this round, we reward companies with high topline growth and take away points from companies with lower sales growth rates.
| Company Name |
4 year Sales CAGR in % |
Points Earned |
| Yes Bank |
87.91 |
11 |
| Zydus Wellness |
72.88 |
10 |
| HDFC Bank |
37.88 |
9 |
| Page Industries |
35.92 |
8 |
| Titan Industries |
33.36 |
7 |
| HDFC |
27.69 |
6 |
| Voltas |
24.37 |
5 |
| Blue Star |
21.92 |
4 |
| Thermax |
21.06 |
3 |
| Hawkins Cookers |
18.61 |
2 |
| Voltamp Transformers |
15.88 |
1 |
ROUND NO. 5 - LAST 4 YEARS PROFIT CAGR
No need to explain the logic behind this round I suppose!
| Company Name |
4 year Profit CAGR in % |
Points Earned |
| Zydus Wellness |
96.8 |
11 |
| Hawkins Cookers |
73.21 |
10 |
| Yes Bank |
71.61 |
9 |
| Voltas |
48.89 |
8 |
| Blue Star |
44.8 |
7 |
| Voltamp Transformers |
38.95 |
6 |
| HDFC Bank |
35.68 |
5 |
| Titan Industries |
35.57 |
4 |
| Page Industries |
31.89 |
3 |
| HDFC |
22.45 |
2 |
| Thermax |
3.47 |
1 |
Now we add the scores again after 5 Rounds -
| Company Name |
RoE (Pts) |
P/E (Pts) |
Market Cap (Pts) |
Sales Growth (Pts) |
Profit Growth (Pts) |
Total Points |
| Hawkins Cookers |
11 |
10 |
11 |
2 |
10 |
44 |
| Zydus Wellness |
10 |
3 |
8 |
10 |
11 |
42 |
| Blue Star |
9 |
8 |
7 |
4 |
7 |
35 |
| Voltas |
7 |
9 |
6 |
5 |
8 |
35 |
| Page Industries |
8 |
6 |
9 |
8 |
3 |
34 |
| Yes Bank |
3 |
7 |
4 |
11 |
9 |
34 |
| Voltamp Transformers |
5 |
11 |
10 |
1 |
6 |
33 |
| Titan Industries |
6 |
2 |
3 |
7 |
4 |
22 |
| HDFC Bank |
2 |
4 |
1 |
9 |
5 |
21 |
| HDFC |
4 |
5 |
2 |
6 |
2 |
19 |
| Thermax |
1 |
1 |
5 |
3 |
1 |
11 |
Ranking of stocks with the best combination of low P/E, high RoE, high sales & profit growth and low marketcap -
| Company Name |
Ranking |
| Hawkins Cookers |
1 |
| Zydus Wellness |
2 |
| Blue Star |
3 |
| Voltas |
3 |
| Page Industries |
5 |
| Yes Bank |
5 |
| Voltamp Transformers |
7 |
| Titan Industries |
8 |
| HDFC Bank |
9 |
| HDFC |
10 |
| Thermax |
11 |
ANALYSIS:
- Hawkins tops each of the 5 rounds except for the rather crucial sales growth round.
- Although Zydus "looks expensive", it still seems to be among the best stock to buy if we consider the above 5 parameters.
- Thermax had an extraordinary expense (write off) in the last quarter of FY10. Our methodology punishes such a company, because at the end of the day, the market looks at the numbers on the table. Only the "perfect" companies are rewarded with higher rankings.
The contest isn't over yet - 5 more rounds to go, before we decide on the winners and the losers.
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vinvestor2010
Senior Member
Joined: 19/Mar/2010
Location: India
Online Status: Offline
Posts: 299
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Posted: 15/Aug/2010 at 11:58am |
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Smartcatji what is your opinion on using EV/EBIDTA as a replacement for PE ratio?
Also do you think that financial companies, utilities etc may be structurally different and may require sector specific adjustments?
Amazing thread this is :-)
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mano222
Newbie
Joined: 31/Mar/2010
Online Status: Offline
Posts: 1
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Posted: 16/Aug/2010 at 12:01pm |
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Regarding market cap, please exercise caution especially for Hawkins which is operating in matured market and also market size it self can't be compared with other business.
Also it is better if we consider promoter holdings as one criteria.
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nitin_jagtap
Senior Member
Joined: 29/Dec/2007
Location: India
Online Status: Offline
Posts: 1283
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Posted: 16/Aug/2010 at 12:12pm |
Originally posted by smartcat
ROUND NO. 3 - THE MARKET CAP
It is almost always better from capital appreciation point of view to invest in stocks with low market cap. So, in this round, the lowest market cap stock gets the maximum while the stock with the highest market cap to get just 1 point. Expect the HDFC twins to be hit hard in this round.
| Company Name |
Market Cap in Rs. Cr. |
Points Earned |
| Hawkins Cookers |
513 |
11 |
| Voltamp Transformers |
914 |
10 |
| Page Industries |
1249 |
9 |
| Zydus Wellness |
2015 |
8 |
| Blue Star |
3962 |
7 |
| Voltas |
6847 |
6 |
| Thermax |
8879 |
5 |
| Yes Bank |
10926 |
4 |
| Titan Industries |
12436 |
3 |
| HDFC |
87369 |
2 |
| HDFC Bank |
95932 |
1 |
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The points weightage for Mcap IMO has to be revisisted , as an example at what Mcap would you say HAWKINS is high or low ..if the cookware industry size itself is 1000 crs and hawkins in 500 crs ..i wouldnt say its low mcap...on the other hand if cookware industry size is 10000 crs then hawkins has still a long way ahead. Same applies to almost all companies.
For that matter why does HDFC deserve such a high PE compared to Hawkins. I would think its because of the huge size in the HFC market itself and the visibility of that growth for next 10-12 years..same is reflectd in Mcap also.However when market size/opportunity isnt very clear or short term then PE would certainly be lower which would then lead to lower MCAP
Since we have used parameters based on histrorical data..betting that Mcap will grow big might not fit in this model.
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Warm REgards
Nitin Jagtap
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EquityInv
Senior Member
Joined: 21/Jul/2009
Location: United States
Online Status: Offline
Posts: 536
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Posted: 16/Aug/2010 at 12:19pm |
Originally posted by nitin_jagtap
The points weightage for Mcap IMO has to be revisisted , as an example at what Mcap would you say HAWKINS is high or low ..if the cookware industry size itself is 1000 crs and hawkins in 500 crs ..i wouldnt say its low mcap...on the other hand if cookware industry size is 10000 crs then hawkins has still a long way ahead. Same applies to almost all companies.
For that matter why does HDFC deserve such a high PE compared to Hawkins. I would think its because of the huge size in the HFC market itself and the visibility of that growth for next 10-12 years..same is reflectd in Mcap also.However when market size/opportunity isnt very clear or short term then PE would certainly be lower which would then lead to lower MCAP
Since we have used parameters based on histrorical data..betting that Mcap will grow big might not fit in this model. |
Very valid point! Scalability is one of the most important.
But it's difficult to "predict" scalability of business and I think smartcat doesn't want to go into prediction and hence MCAP is taken for simplicity.
Let me correct it.. scalability is some guess or detailed research or debates..
Edited by EquityInv - 16/Aug/2010 at 12:23pm
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One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do – James Rogers
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