Friday, 8 June 2018

VALUE EMERGING

VALUE EMERGING

Friends, On 7th November, when Nifty was around 10500 I wrote this article on blog "Be Value Sensitive" advising people to be cautious and not to buy stocks at high valuations. I remarked on the bottom of the article "This gyaan might seem pointless right now, Remember it when the fall starts :)"

Today, Nifty is at 10700 but look at select midcap and smallcap stocks. Post 31st January announcement of Long Term Capital Gain Tax, most of the stocks have made sure that no one pays any long-term capital-gain tax. Of-course there have been exceptions that have gone up sharply such as the Graphite Twins (Heg, Graphite) or our Take Solutions (Read: Discussed at 162 now at 260).

While many experts say P/Es are useless to look at, I feel for a layman it is an important tool.
The bad thing about looking at P/E is we can miss out on wealth generation in stocks like Avenue Supermarts (Dmart) but the good thing is we also miss out on Manpasand Beverages and Vakrangees of the world. It's good to make less wealth than burn a lot of wealth you know.

However, Don't decide anything by looking at the P/Es, we made that mistake in Narmada Gelatines and the stock never performed. Because minus the growth in earnings businesses enter a degrowth phase and once that happens your stock prices correct, irrespective of P/Es.

Coming to the current market scenario, Nifty is at 10700 right now.

As I had remarked in the BE VALUE SENSITIVE post :-
"Lot of  small,mid & even large cap stocks having completed their cycles of over-valuations in the past were in the undervalued territory in 2013-2014. From there they rallied sharply. As of date, Lot of them are in the fairly valued or over valued territory. That is when Analysts start estimating earnings of 2020 and justifying the valuations or over-valuations. But, A stock can fall to the under-valued territory again as well."

Today, I feel a lot of large caps are in the over-valued territory. There can be corrections in the large-caps soon now. But index might or might not even fall, Index looks to be really well managed, You can see select stocks leading a rally as the rest of the stocks go through corrections. So Index might show you 10700 or 11000, But re-balancing can certainly take place.

But, for us Retail Investors. I feel there are good opportunities now emerging in midcaps & smallcaps space.
There has been a sharp correction from highs, Some of the chased stocks that actually have good fundamentals and had become over-valued went through a correction and have come back close to the value territory. Though not highly under-valued yet.

So what I mean by all this is, Time for "Value Investing" or rather "Value Hunting" is back.
Maybe we can have another wave of correction, But like the valuations got stretched on the upside in Jan 2018, Now there are chances the valuations can get stretched in the lower side now meaning that there isn't a lot of room left for Huge Corrections in select stocks.

If everything goes well, some of the good stocks will not show these prices in next three years.

Looking forward to write more about stocks going ahead,
Prem Doshi (The Ace Investor)
ACE Equities

6 comments:

  1. Please name what are the stocks you are talking about

    ReplyDelete
    Replies
    1. Very soon, we will be back to writing out our value picks :)

      Delete
    2. Waiting for your pick.

      Please add me to the mailing list

      vrajesh.saha@gmail.com

      Delete
  2. What Happened to Richa Industries? Can that be considered "valuable" now?

    ReplyDelete
    Replies
    1. NO, I humbly accept it as a failure..
      I saw value when there was none.

      Delete
  3. THIRUMALI CHEMICAL,AVANTI FEED,KIRLOSKAR IND.,FOSECO,NAVIN FLOURINE,SANWARIA,STRIDE SHASHUN,CAPLIN POINT ANY OF ABOVE IN UR LIST TO BUY FOR LONG TERM FOR GOOD RETURN.

    ReplyDelete