Disclaimer: The views here are PURELY personal. But, they do have some weight because I have completed all the required studies certifications to become a SEBI registered Investment Advisor. Unfortunately, I could not get one required NoC. I still don’t have it. So SEBI has put my application on hold for 7 months. However, I still continue to study stock markets with the same rigor. Please read it but make sure you do understand the logic behind my interests in these stocks. Besides, if you make a decision for your investment based on this input, you still are ON YOUR OWN. In case you lose money, you can curse me but that you may do anyway to many other people anyway. So if I am added to the list, no sweat on that 🙂
The last few sessions, well plenty now, have seen a significant selloff in the stock markets. By any analysis, we are in very very bearish territory.
While the downturn was long coming, multiple factors led to this meltdown.
- Started with China COVID-19 crisis
- Got compounded by the withdrawal of Russia from OPEC to compete with the US in the open oil market
- Reached its zenith with the recent global COVID-19 outbreak.
Conventional wisdom says that such events are very good opportunities for value picking, of course with the disclaimers in italics above. Remember no one is forcing you to enter the stock market or invest your hard-earned money into something that requires some specialized skills and also is sensitive to multiple external factors as well. Many times, value investing requires a lot of patience and ‘SPINE’ to weather any future storms like this one.
If you are still interested, please read on.
Large Caps Thoughts
- Reliance Industries – At current levels, Reliance industries is trading at lower than its true valuation even after paring the debt factors. The group has multiple businesses with the primary focus on –
- Oil exploration and refining – The company has monopolized the sector with only some PSUs and few smaller private players competing in this space. There is some concern about the heavy dependency on the revenue from this business for the group. However, in the last few years, the company entered into multiple other businesses at scale to expand its revenue streams.
- Telecom – With Jio, the company has emerged as a clear disruptor in the space. With the adjusted gross revenue verdict and implementation, the Indian telecom sector may become a duopoly with Jio being one of them. Clearly, great value play. When combined with the other digital infra and services areas that the company has entered, this is a great value creator for the group.
- Retail – With Trends, Reliance Industries is the only serious omnichannel player in the country. When combined with its Jio capabilities and reach, it is a top bet for the group. The COVID-19 situation crippled the gig economy completely. Reliance with its omnichannel strategy has beaten the odds out of even Flipkart and Amazon India.
- In many ways, the company has entered its golden decade, to quote the company’s Chairman. In the next 2-3 years, we should see value unlocking with the listing of Jio and Trends as separate stocks of the group.
- For many and sound investors, this could be a retirement bet 🙂
- Bajaj Finance – The share price of the primary retail lender for the short term, small packet loans in India is at a very interesting price point. From the current price level, there still some pain left in the stock. But following are few things to know about the stock –
- The RBI issued moratorium offer has put some pressure on its cash flow. The collection is adversely affected due to this
- The lending cycle has completely stopped due to a dip in the consumption cycle
- Interest rates will need to be readjusted to attract the customer back.
- The primary thing in favor is the fact that the moratorium still accrues the interest. So the backend gains once the economic cycle moves again will offset the temporary setback in collections.
- The long term consumption trajectory for India remains intact
- With current governments’ aspiration to become a USD 5 Trillion economy, consumption and so consumption enabling loans will become an important element in the overall cycle.
- There is a rebound for sure in the stock that should happen provided you have the spine to stay invested.
- Titan Industries – The one thing that is timeless in civilizations like India is the love for gold jewelry. Every year millions of families crowd the showrooms of the flagship brand Tanishq, all over the country at Gudi Padwa, Akshay Trithiya, Dhan Teras, Diwali, marriages, etc. The company has launched multiple brands like Mia and Aveer. In addition, frequently it collaborates with Bollywood to build a custom jewelry line for movies with an appeal. Here are a few additional things about the brand –
- Titan also has very strong presence and brand recall in watches and clocks with brands like Titan, fastrack, and Sonata. It leads the market share with these three brands combined by double percentages over the nearest next competitor.
- To secure the brand of Titan watches, the company is continuously refreshing its product mix to include wearables.
- It has also ventured into eyeglasses space with Titan EyePlus+. Given the kind of growth other brands like Lenskart.com etc have witnessed, there is sufficient headroom for the brand to capture the market and come to lead position here.
- It has a perfume brand also known as Skinn.
- The cash cow stays Tanishq for the company.
- With COVID-19, there will be secondary and tertiary impacts on consumption pattern changes. The first preference like to be is essentials, then durables, consumables, etc and last would be luxury items.
- This means that the jewelry segment may see more pressure in the coming days. This, in turn, would impact its smaller competitors more.
- Compounded with the raw material cost in gold escalating, many small players and mid-level competitors may face significant headwinds as compared to Tanishq.
- The brand should be able to prevail over them. So this is the reason for it being my recommendation.
I shall list 3 mid or small-cap stock in the coming days, most likely tomorrow. Stay tuned!
Don’t forget to read the DISCLAIMER above before following this thought!