Portfolio approach to investment in stocks
A balanced portfolio of growth stocks:
A balanced portfolio of growth stocks:
1. TATA COFFEE LTD: Rs.1040/- (Stock price has multiplied more than 9 times since 2004, i.e., in 9 years).Current EPS is Rs.62/- and current dividend pay out is Rs.12.50.
Share price is at yearly low.
Share price is at yearly low.
Company's Vision statement states that it will be a Rs.1000 Cr. enterprise by the year 2015. Current stand alone turnover is Rs. 600 Cr.Its stand alone 20% business consists of plantation and 60% from Instant Coffee.
Tata Coffee is arguably the largest integrated coffee plantation company in the world .It has a hand in every aspect of the coffee making process, with business activities ranging from growing and curing of coffee and tea to the manufacture and marketing of value-added coffee products. Tata Coffee grows coffee on its own estates, processes the beans, exports green coffee , manufactures and exports Instant Coffee and retails coffee with its own branding in the domestic market. Tata Coffee is third largest exporter of coffee.
It has commissioned a premium coffee extraction plant at its instant coffee manufacturing unit at Theni in Tamil Nadu at an investment of Rs 70 crore on 19.6.2013. Tata Coffee's instant coffee division, located 170 kms from Tuticorin port, has an installed capacity of 4,000 tonne per annum. The 100 percent export oriented unit produces and exports spray dried agglomerated and freeze dried instant coffee. The new extraction plant will add 2,000 tonne to the existing capacity (at the unit). The new extraction plant will help the company position its freeze dried coffee product at premium levels and increase the overall instant coffee capacity by over 30 percent, it added. The company has two instant coffee manufacturing facilities -- Andhra Pradesh and Tamil Nadu--with a combined installed capacity of 6,400 metric tonnes, which will increase by over 30 percent to 8,400 metric tonnes.
"Its expertise in the bean to brew value chain, efficient processes and focus on sustainability has helped maintain a strong leadership position in the coffee business. The expansion of Theni instant coffee facility illustrates strong commitment to providing world-class premium coffees to customers worldwide," Tata Coffee Managing Director Hameed Huq said.
The Latin American state is the world's top coffee grower and mainly produces the aromatic arabica variety used by Starbucks Corp. Robusta is either blended with arabica beans for lower-cost brewed coffee or processed into instant coffee.
Vietnam is the world's number one producer of robusta. Robusta coffee beans is used in biscuits and drinks.
India's organised cafe market is approx. valued at around US$185 million, and is estimated to be growing at a compound annual rate of 25%. India's growing youth segment, around 50% of India's 1.2 billion people are 25 or younger. By 2015, this is expected to increase to 55%. This segment of young indians is expected to be the driver of cafe revolution in the coming years.
The Indian market has the potential to touch US$800 million to US$900 million with a total of 5,000 (currently around 1500) cafés by 2015. The nation's per capita consumption of coffee is just 85 grams, compared to 4.5 kilograms in France, 4.6 kilograms in Japan and 6 kilograms in the U.S.
The Indian Coffee Board's numbers reveal that while India is the sixth largest coffee producer in the world, with an annual output of 300,000 tons, domestic consumption is only a third, or 100,000 tons. That is because like most of Asia, India is predominantly a tea drinking nation. Coffee is a staple only in the southern part of the country.
With 17,000 stores in 55 countries, including 426 in China, Seattle-headquartered Starbucks has signed an agreement with Tata Coffee, India's largest coffee producer, in January'12. Starbucks will source and roast green coffee beans from Tata Coffee and will also set up retail outlets in partnership with the Tatas.
Tata Starbucks Ltd is a 50:50 joint venture company, owned by Starbucks Corporation and Tata Global Beverages, that owns and operates Starbucks outlets in India. The outlets are branded Starbucks Coffee "A Tata Alliance". Starbucks, through an agreement with Tata Coffee, serves coffee that is 100% locally sourced and roasted.
On 19 October 2012, Starbucks opened its first store in India, measuring 4500 sq ft in Elphinstone Building, Horniman Circle, Mumbai. Starbucks expanded its presence to Delhi on 24 January 2013 by opening 2 outlets at Terminal III of the Indira Gandhi International Airport, and later one in Connaught Place.
Initially, Starbucks opened a combination of standalone outlets located at malls, airports and metro stations, and commercial complexes. The company plans to expand its retail footprint in India by opening outlets in hospitals, near gyms or health stores, educational institutions and corporate campuses. The decision to open outlets inside Tata-owned retail stores and properties would depend on the brand's premium positioning.
As of June 2013, Starbucks operates 15 outlets in 2 cities (Delhi & Mumbai) of India. The company plans to have 50 outlets in India by the end of 2013.
For more details visit, www.tatacoffee.com
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2. MCX INDIA LTD: Rs. 823/-(It was listed just one year ago). Current EPS is Rs. 59/- and current dividend pay out is Rs.24/-.
Share price is at yearly low.
Share price is at yearly low.
3. CITY UNION BANK: Rs.56/-(Stock price has multiplied 14 times in last 9 years).Current EPS is Rs.6.60 and current payout is Rs.1/-.
Consolidating around Rs.56/-.
Consolidating around Rs.56/-.
4. TITAN INDUSTRIES LTD: Rs. 225/-(Its market price has grown 45 times in last 9 years).Current EPS is Rs.8.20 and dividend pay out is Rs.2.10.
Share price is at yearly low.
After entrenching its presence in watches and jewellery segments over the past 25 years, it's slowly finding its feet in the eyewear segment. The publicly-held company is enabling itself to look at a slew of products ranging from sarees to writing instruments, mobile phones, musical instruments, educational accessories to kitchen equipment among others.
As per the management it was not necessary that they would enter all these segments, but they were enabling themselves to look at various categories. " They have created a 'New Business Division' under a dedicated CEO to look at various segments we can look at. The basic premise on how it enters a segment is based on a few critical aspects. The market should be large, it should be unorganised and how it can differentiate in that segment with its innovations and strong brand image," .
Titan Industries has been relying on innovation to a large extent and has been actively funnelling in various innovations from across its workforce. It has set up an ‘Innovation School of Management’ (IScM) to address the objective of creating the ability to innovate and making it a culture among its employees. It co-created a customised learning course on innovation with an industry-leading consultant.
IScM offers a six-month course and students are given challenges to work on in an innovative manner. They are trained in various tools and techniques to develop innovative thinking capability, and the head of departments are trained as a mentor to use the innovation outcomes.
The school focuses not only on the results, but also on the process of making people think differently. After three days of classroom training, they are given four hours a week of free time to work on the project and mentored for two hours a week. As of now, the integrated supply chain management unit of Titan jewellery division has 185 trained innovators.
In addition to it, Titan Industries, which also has a growing presence in the precision engineering segment catering to the aerospace and mechanical engineering segment, is expanding the scope of this division by supplying equipment to sectors such as oil & gas exploration.
Titan Industries’ targets:
Jewellery: All types of ornaments, jewels, diamonds, gold, silver, platinum, metal alloys, precious and semi-precious stones of all kinds.
Logical expansion of its eyewear business: Contact lenses, hearing aids and related accessories.
Lifestyle platform: Apparels, garments, sarees, bags, belts, caps, helmets, headwear, wallets, fragrances, perfumes, writing instruments, mobile phones and other personal convenience articles, devices and musical instruments, entertaining apparatus, sound equipment.
Educational aid: To design, develop and render content through educational workshops, conferences, theatre and entertainment shows gadgets, entertainment products, food and beverages.
Tapping solar energy: Solar panels, solar powered home lighting systems, batteries, fans, torches, solar lights, solar mobile,solar cookers, etc.
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Share price is at yearly low.
Update as on 25.6.2013
Recent newspaper clippings:
Titan adds 'Skin' to boost lifestyle portfolio
Titan Industries, the $2-billion jewellery-to-watch retailer of the Tatas, is readying a big push into the small but high-growth Indian fragrance market under the brand Skin, a move that possibly signals a broader interest in the personal care industry.
Bangalore-based Titan, best known for eponymous watches and Tanishq jewels, will employ a new trademark, Skin, to launch fragrances priced at Rs 995 and Rs 1,995 as part of a business diversification, said people briefed on the matter. The company has explored multiple new business forays to reduce dependence on jewellery retailing, which accounts for 80% of the revenue currently.
The high volatility in the bullion market, and growing political sensitivity around it, may hasten new business plans. Titan in the past has talked about expanding the lifestyle product basket to offset cyclical threats to jewellery retailing. The roll-out of optical stores under Titan Eye Plus was one such move.
Titan's board of directors has decided (subject to shareholder approval) to change the company name to Titan Company Ltd to reflect the changing focus on lifestyle products.
The entry into the Rs 1,200-crore fragrances market will see Titan battling ITC (which tapped this segment under Essenza Di Wills) and global heavyweights such as P&G (Old Spice, Hugo Boss), Coty Inc ( Calvin Klein, Davidoff) and Puig SL ( Nina Ricci).
But significantly, Trademarkia, a visual search engine for more than 6 million trademarks, shows registration called Skin by Titan, with a listing of cosmetic preparations, toiletries, perfumes, aromatic body care products such as body lotions, shower gels, shampoos, conditioners and soaps.
Titan might not restrict itself to fragrances — domestic demand growing at 25% annually, according to PwC estimates — and explore adjacent segments in personal care. This would broaden the scope of the new foray; giving one of India's most admired consumer companies a sizeable market to play in.
Critics have long argued that Titan's business diversification (after Tanishq) has been incremental, chasing mostly high growth yet niche markets.
Titan operated 953 stores (with 1.27 million sq ft retail space) to show up with Rs 10,000 crore turnover last fiscal. While Rs 8,100 crore jewellery and Rs 1,400-crore watch businesses grew 14.8% and 9.6%, respectively, income from other segments comprising precision engineering, eye wear business and accessories grew 26% to Rs 414 crore.
The high volatility in the bullion market, and growing political sensitivity around it, may hasten new business plans. Titan in the past has talked about expanding the lifestyle product basket to offset cyclical threats to jewellery retailing. The roll-out of optical stores under Titan Eye Plus was one such move.
Titan's board of directors has decided (subject to shareholder approval) to change the company name to Titan Company Ltd to reflect the changing focus on lifestyle products.
The entry into the Rs 1,200-crore fragrances market will see Titan battling ITC (which tapped this segment under Essenza Di Wills) and global heavyweights such as P&G (Old Spice, Hugo Boss), Coty Inc ( Calvin Klein, Davidoff) and Puig SL ( Nina Ricci).
But significantly, Trademarkia, a visual search engine for more than 6 million trademarks, shows registration called Skin by Titan, with a listing of cosmetic preparations, toiletries, perfumes, aromatic body care products such as body lotions, shower gels, shampoos, conditioners and soaps.
Titan might not restrict itself to fragrances — domestic demand growing at 25% annually, according to PwC estimates — and explore adjacent segments in personal care. This would broaden the scope of the new foray; giving one of India's most admired consumer companies a sizeable market to play in.
Critics have long argued that Titan's business diversification (after Tanishq) has been incremental, chasing mostly high growth yet niche markets.
Titan operated 953 stores (with 1.27 million sq ft retail space) to show up with Rs 10,000 crore turnover last fiscal. While Rs 8,100 crore jewellery and Rs 1,400-crore watch businesses grew 14.8% and 9.6%, respectively, income from other segments comprising precision engineering, eye wear business and accessories grew 26% to Rs 414 crore.
Now, it is in the process of rechristening itself as Titan Company Ltd to reflect its morphing into a complete lifestyle company, has set itself a target to go after a wide range of products suited for the emerging lifestyle.
As per the management it was not necessary that they would enter all these segments, but they were enabling themselves to look at various categories. " They have created a 'New Business Division' under a dedicated CEO to look at various segments we can look at. The basic premise on how it enters a segment is based on a few critical aspects. The market should be large, it should be unorganised and how it can differentiate in that segment with its innovations and strong brand image," .
Titan Industries has been relying on innovation to a large extent and has been actively funnelling in various innovations from across its workforce. It has set up an ‘Innovation School of Management’ (IScM) to address the objective of creating the ability to innovate and making it a culture among its employees. It co-created a customised learning course on innovation with an industry-leading consultant.
IScM offers a six-month course and students are given challenges to work on in an innovative manner. They are trained in various tools and techniques to develop innovative thinking capability, and the head of departments are trained as a mentor to use the innovation outcomes.
The school focuses not only on the results, but also on the process of making people think differently. After three days of classroom training, they are given four hours a week of free time to work on the project and mentored for two hours a week. As of now, the integrated supply chain management unit of Titan jewellery division has 185 trained innovators.
In addition to it, Titan Industries, which also has a growing presence in the precision engineering segment catering to the aerospace and mechanical engineering segment, is expanding the scope of this division by supplying equipment to sectors such as oil & gas exploration.
Titan Industries’ targets:
Jewellery: All types of ornaments, jewels, diamonds, gold, silver, platinum, metal alloys, precious and semi-precious stones of all kinds.
Logical expansion of its eyewear business: Contact lenses, hearing aids and related accessories.
Lifestyle platform: Apparels, garments, sarees, bags, belts, caps, helmets, headwear, wallets, fragrances, perfumes, writing instruments, mobile phones and other personal convenience articles, devices and musical instruments, entertaining apparatus, sound equipment.
Educational aid: To design, develop and render content through educational workshops, conferences, theatre and entertainment shows gadgets, entertainment products, food and beverages.
Tapping solar energy: Solar panels, solar powered home lighting systems, batteries, fans, torches, solar lights, solar mobile,solar cookers, etc.
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6. INDIA GLYCOLS LTD: Rs.118/-( Stock price has appreciate 3 times in last 4 years). Current EPS is Rs.41/- and current dividend pay out is Rs.6/-.
Share price is at yearly low. Excellent, sustainable, business model, fully integrated with India's rural economy. Only concern is the margins which are not stable inspite of very wide consumption led product range.
Share price is at yearly low. Excellent, sustainable, business model, fully integrated with India's rural economy. Only concern is the margins which are not stable inspite of very wide consumption led product range.
7. ICRA LTD: Rs.995/-(Stock price has multiplied 3.5 times in last 4 Years).Current EPS is Rs.60/- and dividend pay out is Rs.22/-.
8. CHOLAMANDALAM INVESTMENTS AND FINANCE LTD: Rs.253/- (Stock price has appreciated 10 times in last 4 years).Current EPS is Rs. 24/-. Dividend pay out is Rs.2.50.
9. BAJAJ FINANCE LTD: Rs. 1440/-( Stock price has multiplied 20 times in 9 years). Current EPS is Rs.135/- and dividend payout is Rs.15/-.
10. YES BANK LTD: Rs. 465/-(Stock price has multiplied 8 times since 2005, i., in 8 years).Current EPS is Rs. 36/- and dividend payout is Rs. 6/-.
11. AGRO TECH FOODS LTD: RS. 511/-(Stock price has multiplied 12 times since 2004, i.e., in about 9 years).Current EPS is Rs.17.20 and current payout is Rs.2/-.
Company had announced share buy back at Rs.520/-.
Company had announced share buy back at Rs.520/-.
Agro Tech Foods Ltd (ATFL) is a public limited company engaged in the business of marketing food and food ingredients to consumers and institutional customers. It is affiliated to ConAgra Foods Inc. of USA, which is one the world’s largest food companies. Its vision is to become the Best Performing Most Respected Foods Company in India.
12. Bajaj Corp Ltd:Rs. 250/-(Stock price has multiplied 3.5 times in last 2 years.Current EPS is Rs.11/- and current dividend pay out is Rs.6/-.
13. Sundaram Finance Ltd:Rs. 540/-(Stock price has multiplied 7 times in last four years).Current EPS is Rs.50/- and dividend pay out is Rs. 18/-.
The above portfolio is expected to give a compounded return of over 26% p.a over a period of next three years even if all the stocks do not perform. It means that the value of above portfolio is expected to double by 2016. One should invest same amount of money in each of the above stocks, say Rs. 5000/-. The total sum invested will be then 5000 x 13 = Rs. 65,000/-.
The essence of the above writing is to think LONG TERM and TAKE A PORTFOLIO APPROACH to investment.
EVERY BUSINESS TAKES TIME TO BREAK EVEN AND START MAKING PROFITS AND ONCE IT STARTS MAKING PROFITS IT ENTERS THE NEW PHASE OF GROWTH. IT IS THIS PHASE WHEN THE BUSINESSES GETS RE RATED AND THEIR MARKET CAPITALIZATION GOES UP EXPONENTIALLY IN JUST FEW MONTHS. STOCKS LISTED ABOVE ARE, THEREFORE, TO BE HELD ON TO LONG ENOUGH TO BE ABLE TO GIVE DESIRED RETURNS.
STOCKS ARE NOT JUST A PIECE OF PAPERS, BUT THEY ARE BUSINESSES WHICH ARE SATISFYING A PARTICULAR NEED OF THE SOCIETY. GOOD BUSINESSES WHICH ARE ABLE TO SATISFY THE NEEDS OF THE PEOPLE REPEATEDLY WITHOUT MUCH CHANGE IN THEIR PRODUCTS OR SERVICES SURVIVE PERPETUALLY AND ARE THE BEST COMPANIES TO INVEST IN.
EVERY BUSINESS TAKES TIME TO BREAK EVEN AND START MAKING PROFITS AND ONCE IT STARTS MAKING PROFITS IT ENTERS THE NEW PHASE OF GROWTH. IT IS THIS PHASE WHEN THE BUSINESSES GETS RE RATED AND THEIR MARKET CAPITALIZATION GOES UP EXPONENTIALLY IN JUST FEW MONTHS. STOCKS LISTED ABOVE ARE, THEREFORE, TO BE HELD ON TO LONG ENOUGH TO BE ABLE TO GIVE DESIRED RETURNS.
STOCKS ARE NOT JUST A PIECE OF PAPERS, BUT THEY ARE BUSINESSES WHICH ARE SATISFYING A PARTICULAR NEED OF THE SOCIETY. GOOD BUSINESSES WHICH ARE ABLE TO SATISFY THE NEEDS OF THE PEOPLE REPEATEDLY WITHOUT MUCH CHANGE IN THEIR PRODUCTS OR SERVICES SURVIVE PERPETUALLY AND ARE THE BEST COMPANIES TO INVEST IN.
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