Q-Which sectors create the greatest wealth in the long run in the stock market?

-Historical studies of stock markets in the US have shown that the following sectors created the maximum wealth in the long run

-Pharma (due to strong research and patent protection)

-Consumer Non Durables e.g. FMCG (due to brand and franchise power)

-Financials

Q-Is it a good idea to invest in cash rich companies especially Piramal Healthcare?

-Investing in Piramal Health Care is like investing in a PMS (Portfolio Management Service) with Ajay Piramal as the fund manager. Therefore if one is comfortable with that idea and Mr Piramal has a good record, taking that into consideration one should form a view about the stock.

Q-Is it a good idea to buy a stock on a new high

-Buying into a stock at its first lifetime high and holding for at least a year may be an interesting strategy,  as it usually may indicate some kind of paradigm shift if it is the first lifetime high ( Some further discussion on Jesse Livermore and his strategies).

Some discussion on gold loan companies. Also, discussion on how in some states an arbitrage opportunity is present by taking priority sector loans and putting into high yield NBFC deposits.

Q-Can we predict the growth of companies like Page, Hawkins and other consumption led firms

-Predicting how consumer companies like Page and Hawkins will do in the very long run is difficult. A good way to understand consumer trends however is to compare India to 1970’s and early 1980’s America as certain trends are common. Also, in India consumption being driven by schemes such as NREGA etc.

Q-Whether schemes such as NREGA etc.  and macro conditions such as Europe and US Slowdown can impact Indian consumption stocks like Page, Hawkins etc.

-Once a scheme like NREGA is announced and is successful, it will be difficult to withdraw it politically, hence it will likely continue.

-Consumption stocks are unlikely to be impacted by macro-economic conditions in any of the above countries.

Q-When to sell a stock

 - When you find something even better and even cheaper to buy

Q-How to avoid commodity price inflation and it’s impact for a stock

-To avoid impact of commodity price on inflation buy a product with a lot of pricing power. For e.g. Marico hikes the price of Parachute when commodity prices are high. When the prices reduce, it gives away 20% free on the bottle. By comparison Page hiked prices due to high cotton prices last year. However now it does not have to give 20% extra underwear when raw material prices fall again. So Marico does not have pricing power, but Page does.

-Markets always pay for variant perception (read Michael Steinhardt). For e.g. though Titan may have great earnings, it is expected, hence there is no upside surprise. However, if a firm delivers an earnings upside surprise the market will reward the stock.

Q-Why did Page Industries get a low valuation at its IPO?

-The reason for Page Industries getting a low valuation at IPO was that it was treated as a textile company rather than on its other strengths

Q-TTK or Hawkins which is better

-TTK and Hawkins are both good companies. However the management of TTK is more communicative compared to Hawkins. Hence the earnings of Hawkins are likely to cause surprise, mostly on the upside.  This creates the opportunity of a variant perception on Hawkins, hence it might be better.

Some discussion on management of Hawkins and interesting incidents at the AGM.

Concept of variant perception and Michael Steinhardt discussed. Example of Titan having excellent economics but no variant perception hence likely to cause not much of upside surprise and likely to be a steady CAGR performer.

Q-Why was TV 18 such a good business in 2007

-The operating costs were fixed in terms of anchor, sets, telecasting costs etc. Hence if the viewership doubled, the costs remained fixed (only one Udayan Mukherjee needed independent of viewer size so fixed cost) and this ensured that additional revenue so obtained went to the firm’s bottom line.

Q-What are the characteristics to look for in a potential multi bagger?

The typical characteristics of a multi bagger

    -Sector leader

    -Reasonable P/E ratio

    -Sector should not be commoditized

    -Return on capital is high

    -Pricing power

    -Growth

    -Small cap

-Stock that fell in the last year and needs to be examined - Lakshmi Energy - a viewer answered because they have a rice husk plant and rice production problems both.

Q-Can the success of VIP Industries be replicated by buying another luggage company like Tainwala chemicals?

-Several participants noted that Tainwala has a stake in Samsonite India, however this is through an overseas subsidiary probably Singapore. Also, several years ago Tainwala had taken the most profitable subsidiaries and delisted them or spun them off. Consequently the listed entity is not an efficient route to do the same and also the management may not be very pro minority share holders.