finding value / growth companies in current scenario

is it possible to find any listed company which can be bought in this high volatility  ?

if your answer is no or difficult  to find then stock market is not the place you need to be.

there is always some where companies stock price are traded less than their actual performance ? 

how do you decide the stock price is trading less than its performance ?

example companies growing revenue / sales / PAT  / EPS 15 to 20 % and stock price not even moving more than 20% in that year.

this are the companies where you need to dig more and research the reason why ?

elimination factors:

are this companies are cyclical business ? is this down cycle ? 

does the management has history for miss-management or bad decision / dilution of equity very often / bad capital allocation ?

is company growing with high debt on books ?

not paying dividends ?

will the product generated by companies make sense which can grow well in upcoming days ?

is the company enhancing's the product / innovating new / upgrading technology ? how well it can add value to companies growth ?

read management commentary / con call / interviews to understand the temperament of management. 

decision making : the main stuff which depends on person to person 

all above should give better way of  visualization - now this depends on individual how well they can visualize things with the current data and judgements from above inputs.

then comes the main part - to decide on buying it in the desired price range which you think its best price range to cover margin of safety from sharp downside incase of uncertain event which could affect the current market sentiments. This also depends on individual how good are they to decide and you need to believe in yourself to make this decision rather others opinion.

 once you decide the buying price range now decide how much concentration of money you can allocate in it. 

Note: its very important to also allocate concentration when you are investing as actual wealth for compounding is dependent on this. 

risk control:  this also depends on individual 

Never allocate all your income portion in it always keep certain portion to cover margin of safety in case of uncertainty  for the company  / your family.

below is what I try to follow to cover risk and I do skip sometimes the exact allocation percentage  bcoz my believe in the management is so optimistic that I am ready to allocate a high concentration

example: if I have say 10K of free cash. 

I will allocate 5K in the company

2K reserve to add more incase their is any downside 

3K for family

this becomes as 

50% invested

20% reserved as insurance to cover downside

30% reserved to cover family

   

portfolio review start of H1 2021

 

Enhancement made in writing journal

 Sooner I will be sharing my complete portfolio of stock investment and review them each time in H1 and H2.

if I have made a entry and exist for a company stock I will also write my note the reason for exposure / exist taken.

Note: I will not be writing my entry and exist the moment I make or break into a stock it will be purely twice in H1 / H2 as this is not to influence others to buy/sell the same but its more of journaling my thoughts process about companies and what made me to land or fly away from it.

start of H1 - end of H1

start of H2 - end of H2 

Learning from 2020

lot of learning made in 2020 here are some  key of them which I had noted for improvement.

when it comes to taking decision on investing in bear market I did failed in 2020.

I failed to add / increase my exposure to quality company like allcargo / polyplex during 2020 lockdown disruption it was all  in my mind but didn't have the courage to make the decision.

both of this companies performed better then expected during the Q2 / Q3  of 2020 probability is high they will in upcoming years.

Failed to take exposure in pharma companies during bargain stock price I was convinced  pharma will perform in 2020 as this is necessity to keep the supply chain available of medicines globally.

reason no courage to make the decision.

Lesson learned : I need to enhance my thinking process which is needed  for investing to get clarity of thoughts for decision making.

bear market and disruption are the best opportunity  to invest in quality management who can stand still and increase exposure when company are performing well during uncertainty.

lost patience in one of the quality company stock polyplex and made a early exist.

Lesson learned : question why you want to sell ? if the answer is uncertainty then hold that moment erase all the noise.

I have enhanced my approach to get clarity in  decision making process here is my key question and checklist I consider to take exposure for companies

1) why do you want to invest ? is it growth / stories / or your own thought process that brought you to this companies ?

if its story then better to trade on story rather then parking money for long.

if its your thought process then take a next steps for checklist for long exposure

2) is cashflow / balance sheet supporting ? 

how much % of operational cash is getting converted ? is it on higher side 15 to 20% + ?

what % of  operational margin it makes ? 25 to 30% + ?

3) is the company investing in its growth and how its investing via debt / equity or cash usage ? 

if its via debt / equity question why is not using cash available ? no cash available then how is the companies sustaining in the industries ? check other companies in the same industries is it same case ?

past investment scenario how it was done and its performance ?

3) is the company paying dividend ? what is the yield ?

no dividend question is why ? if no dividend and I assume it must be using the money for investing in companies growth ? if not then where is the money going ? is the management eating up the cash via higher payments to them ? check employee cost ?

4) is it a cyclically scenario of company  ? commodity based product ?

yes - then long exposure cannot be made - set a target when to sell once exposure is taken as commodity based product are cyclically like crude / steel / cement / chemicals .

no - is it a monopoly business or in the top 3 franchise of its industries ? any dependences of its product in market ? what can cause failure for monopoly business ? what is the probability  of such failures ?

5) study on management team ? can it be trusted  ?

- increase research about management team / search interviews / read con call details / annual reports.

check how well is the management answers the queries raised are they making too much forcast for growth ? do they acknowledge the gaps or failures made or just cover up the story ?

if it passes this condition I take exposure in the companies when the stock price is at bargain range.

is financial sector showing sign of improvement ?

 As lockdown is relaxed more are more people are now stepping to buy their own personal transport and own house for living ?

not all of the people are buying with their money in the bank ? mostly via borrowing money from financial institute 

all cooperate sectors has already show +ve sign in there quarter result which means cooperate are also paying interest back to financial institute as normal phase. 

which means financial sector will revive in next coming 6 months. 

take position in this sector with strong franchise and balance sheet. 

if work from home is new normal which sector you can bet on ?

 

people dont need to commute to work place or the frequency for travel will be less .

people will be relaxing at their desired home location saving time / energy / money

people will stop buying home near their work location or prime locations

properties prices in prime location in city will reduce  as most of them will start living in more favorable  places where they get more space for living and its desirable for them.

check on companies which are providing quality apartments and space for living as sales of properties will increase in low cost areas.

check on companies which provide building materials

home loan rates are reduces now / seller have started providing discounts 

all sign are in favor to boost the sales so bet with better margin of safety.

Opportunity in lock-down and covid19 epidemic ?

  what are the option available to buy now since the market index has already reached pre covid19 level ?

 will there be correction ?

 

the probability is high for market to give some correction and this can be used as an opportunity to enter and take big position

 1) Entertainment industries 

2) API industries for pharma 

3) Alcohol beverages industries 

4) Chemical industries 

  I am hopeful all this industries will start there revenue sequentially once solution to current epidemic is found permanently.

 Remember market always discount stock price before the revenue start so better to calculate the risk ratio and position yourself.

Once  situation is back to normal I hope banks can generate there revenue as well so keep an eye on it as well and calculate your risk ratio when to take position.