'spendmoneywisely' had queried regarding the suitability of Alok Industries, Kajaria Ceramics, TVS Suzuki and Cipla from the view point of long term investing. For this let us try and roughly enlist some of the reasons which we would normally look for in a scrip for it to qualify as a good long term portfolio pick. Firstly the pedigree of the Stock ie the quality of Management it has; have there been Management related issues in the past; is the integrity of the promoter group above reproach etc. Secondly the Scrip should be liquid and widely held; Thirdly the Sector that the Company is part of ie suitability from the macro economic perspective eg we all know that the Banking Sector is one of the Sectors which is in sync with India's growth parameters or that the FMCG Space is favoured because of its Consumption based focus which jives with India's growing population both in numbers as well as aspirations. Fourthly the visibility of earnings and the stage of its life cycle that the Company is currently in. Fifthly we would certainly look for a fair measure of safety implying thereby that if we look at a time period 10 years dowm the line where would we expect the Sector as well Company to be? We all would like a Scrip where Growth, profitability as well as longevity is assured. Sixthly and most importantly the price at which one is getting entry.Of course this is an off the cuff rough and ready list and there would be a variety of other factors relating to Balance Sheet quality, Cash Flows, Debt projection etc which would also be of significance .
Now coming to the stocks in question as I had pointed out in the Comments page Alok Industries is too much of a Traders Stock to really excite the long term investor; yes one may trade it off and on and perhaps make some money but its not a long term portfolio stock, in my opinion. Actually I am not a big fan of the Textile Space itself (too much dependence on raw material prices, low margins due to a large unorganised sector presence etc etc, simply put there are better Sectors available). However if one is hell bent on entering the Textile Space then I would perhaps think about SKumars Nationwide (being in the Branded relatively higher margin space) with an upcoming IPO value embedded etc but again the entry price would become extremely important since this too is a bit of a Traders favourite and hence prone to sharp moves.
Kajaria Ceramics is a better long term prospect but at CMP Rs 106 odd has run up a lot in the last 6 months before seeing a bit of a correction in the past couple of weeks. I would wait a bit for seeking entry into this Scrip on sharp downs which might well happen on a bad day in the overall Markets. So Kajaria is an interesting opportunity for entry on 15-20% dips. Another Scrip in the same space is Hindustan Sanitary (HSIL) which is the Market Leader in the space but similarly has run up a lot in the past 6 months and would be an interesting idea on 15-20% dips. So these two scrips seem good long term buys on dips as above and possibly the Market may oblige by providing that opportunity in the near future !!!!
Coming to TVS Motors I would ideally like to go with Bajaj Auto in this space being a more stable long term opportunity but were one to get TVS Motors near its 52 week low of 40 odd I would perhaps enter with a strict stop loss with a one year time horizon in mind; however from the long term buy perspective I would pip for Bajaj Auto.
In the case of CIPLA , nothing wrong with the stock just that I don't like the Pharma space too much from the point of view of long term investing. Reason being that the biggies like DREDDYS, SUN, LUPIN etc are stretched on valuations and the midcaps like GLENMARK, AUROBINDO etc are far too volatile. CIPLA though has been a steady story but has hardly given noteworthy returns in the past year and even near its 52 week low is very stretched on valuations. The other problem with this Space is that a couple of failed ANDAs or adverse FDA references and the concerned stock will tank. Coupled with a low visibility of growth it doesn't make a very promising case for long term investment. However one notable possibility in this space could be DIVIS LAB which is into Contract manufacturing in this Space and is a steady player and could be bought into on all dips in the 700-750 range for the long term.
One more point I would like to make at this stage is that Retail Investors usually have limited investible resources so even though there may be many possible scrips available/suitable for long term investing one cannot and should NOT invest small bits in ALL since that makes the portfolio overdiversified and unwieldy.
Choose your limited number of stocks well, invest wisely in them in stages, track them carefully and hold them for long periods if you believe in them. That is the only way to make healthy profits.
Now coming to the stocks in question as I had pointed out in the Comments page Alok Industries is too much of a Traders Stock to really excite the long term investor; yes one may trade it off and on and perhaps make some money but its not a long term portfolio stock, in my opinion. Actually I am not a big fan of the Textile Space itself (too much dependence on raw material prices, low margins due to a large unorganised sector presence etc etc, simply put there are better Sectors available). However if one is hell bent on entering the Textile Space then I would perhaps think about SKumars Nationwide (being in the Branded relatively higher margin space) with an upcoming IPO value embedded etc but again the entry price would become extremely important since this too is a bit of a Traders favourite and hence prone to sharp moves.
Kajaria Ceramics is a better long term prospect but at CMP Rs 106 odd has run up a lot in the last 6 months before seeing a bit of a correction in the past couple of weeks. I would wait a bit for seeking entry into this Scrip on sharp downs which might well happen on a bad day in the overall Markets. So Kajaria is an interesting opportunity for entry on 15-20% dips. Another Scrip in the same space is Hindustan Sanitary (HSIL) which is the Market Leader in the space but similarly has run up a lot in the past 6 months and would be an interesting idea on 15-20% dips. So these two scrips seem good long term buys on dips as above and possibly the Market may oblige by providing that opportunity in the near future !!!!
Coming to TVS Motors I would ideally like to go with Bajaj Auto in this space being a more stable long term opportunity but were one to get TVS Motors near its 52 week low of 40 odd I would perhaps enter with a strict stop loss with a one year time horizon in mind; however from the long term buy perspective I would pip for Bajaj Auto.
In the case of CIPLA , nothing wrong with the stock just that I don't like the Pharma space too much from the point of view of long term investing. Reason being that the biggies like DREDDYS, SUN, LUPIN etc are stretched on valuations and the midcaps like GLENMARK, AUROBINDO etc are far too volatile. CIPLA though has been a steady story but has hardly given noteworthy returns in the past year and even near its 52 week low is very stretched on valuations. The other problem with this Space is that a couple of failed ANDAs or adverse FDA references and the concerned stock will tank. Coupled with a low visibility of growth it doesn't make a very promising case for long term investment. However one notable possibility in this space could be DIVIS LAB which is into Contract manufacturing in this Space and is a steady player and could be bought into on all dips in the 700-750 range for the long term.
One more point I would like to make at this stage is that Retail Investors usually have limited investible resources so even though there may be many possible scrips available/suitable for long term investing one cannot and should NOT invest small bits in ALL since that makes the portfolio overdiversified and unwieldy.
Choose your limited number of stocks well, invest wisely in them in stages, track them carefully and hold them for long periods if you believe in them. That is the only way to make healthy profits.
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