Wednesday, May 21, 2008

Real Estate and Retail Play!

All of you might by now have realized the importance of both growth as well as value. Investing should be holistic and you need to consider every possible factor. Just because a company has made low profits in the recent quarter, does not make it bad. In fact several times just because of a few special situations profits might decline, and this leads to the hammering of the stock price. Not necessarily that the company is bad. For example sometime ago cement company stocks got hammered because of government regulation and price control. Every analyst, journalist and broker out there was telling to sell cement. However was it really the time to sell cement or rather buy it when everybody sold in a panic? In the game of investing you need to keep your emotions under control and be able to see what others are not seeing. I know I might sound a bit ruthless when I tell you to buy when others are selling in a panic, but that is one of the best ways to play the game of investing. Just because everybody says something is right, does not make it right. Similarly just because everybody says something is wrong, it doesn't make it wrong. What makes things right or wrong are simple facts.

One company whose stock price has been hammered from a high of over Rs. 300 to around Rs. 90 has caught my attention, and I have started investing in it. This company is involved in manufacturing as well as retail and has had rapidly growing sales over the past few years, even though profits have not grown as well. One of the reasons I like this company is because it can benefit largely from the domestic Indian growth story. The retail sales are projected to grow exponentially in the next 3-4 years and large investments are being made into establishing a competitive retail chain. Besides that, this company also has significant amounts of land in major cities like Mumbai, which are being developed.

The company offers a lot of growth ahead and at the same time the land and factory make the remaining business almost free. This mixes elements of growth as well as value. As I mentioned earlier that companies should never be judged just by immediate returns and the last two quarters. If you go back into history, you will see how it makes sense to invest when there are challenging moments being faced. Laxmi Mittal bought steel mills in Kazakhstan when these units were all loss making and the government wanted to shut them down. He made his billions by having the guts to buy when nobody else had the guts to buy these sick steel mills. He did not have that much money and went around knocking several doors till he could raise the money. He is an inspiration for all of us and we should all follow those who have created wealth.

I would like to stress as usual that this report is being shared to help you learn more and you will need to try to search for more information on your own. The reason I am doing this is because this way you will learn more and understand better. What you learn can be applied to companies universally. Please never ever invest blindly without proper understanding and learning.

You can find out more about this company by downloading this report
here. You would be directed to a Paypal page where you can pay securely via credit card/Paypal and once the payment has been received you will be able to download the report online.


Happy Wealth Creation!


Yogesh Chabria

Happionaire

See What Happionaire Had To Say About Being Traders and Investors At The Same Time

Don't forget to attend our free workshop on investing in Mumbai on Saturday, 24th May 2008

26 comments:

subir mehta said...

Thanks Yogesh for sharing something so priceless and universal. I also went through the report and it is amazing how simple the logic behind investing in these companies is. But what is difficult is finding such companies, it will take people like me still some time to be able to find such companies. As you have mentioned always even in your wonderful book we should spend time learning and I can see what knowledge has done for you.

I will surely try to incorporate these principles when I research other companies.

mahima said...

What a lovely co-incidence this brand is one of my favorite ones to shop. Strangely enough I never though about finding out more about it. I'm beginning to understand what you mean when you say pay attention to companies around you.

And thanks for making us smile. :-)

I'll surely try to attend the event on Saturday.

rajdeep said...

I am glad that you focus on the psychology part of investing and wealth creation. Very few people do that, and I feel once we are able to understand that we can do it too.

Thanks for the lovely report too. Just got it.

dilip said...

I agree with you Rajdeep and also I find the company shared very attractively priced. I agree when you talk about the downside risks and the strategy we can use for other companies too.

ashok said...

This stock can easily double in price in the next one year according to me. Next five years can be a huge multibagger.

Great stock picking skills!

sameera said...

Great company will buy it tomorrow. I have shopped here in Bombay, so can speak form personal experience too.

harmit said...

Just went through the report. Really liked the way you explained the balance sheet and how to study it closer. I like the way you are teaching us to fish rather than just giving us fish!

umesh said...

A great pick once again Yogesh.

kapil said...

Thanks Yogesh for this wonderful report. You have an uncanny talent of expressing ideas with simplicity, making it so much fun.
You emphatically stated that you would like us happionaries to learn the knack of researching companies ourselves.
Could you direct us to books, links and resources to help us get started?
Thanks in advance. I would love to take lead in this initiative to benefit all of us.

The Happionaire™ Blog said...

Hi Kapil,

Thanks for the lovely words, God is great. All of us have the talent to do what we want, and I feel all we need to do is do whatever we do with love.

One book which I feel everybody should read is The Intelligent Investor. I have shared it also in ITHW. Another thing you should do is check out the Annual Reports of Berkshire Hathway.

I'll put up the links shortly and also put a post on it. You can also Google it!

Keep smiling and spreading the love!

Yogesh

Anonymous said...

Hi Yogesh,
As this company has very high debt, doesn't it will create problems in servicing the debt as interest rates are high these days.

Amit

The Happionaire™ Blog said...

Hi Amit,

I am glad you studied it further. The point of these reports is to study and learn more.

Yes you are absolutely right. The high debt will pose as a very big challenge since interest rates are rising. However, I feel that the price it is being offered at does offer a lot of value. Only time will tell and I am going to be patient.

Thanks and keep sharing your ideas!

Yogesh

Anonymous said...

Hi Yogesh,
I couldn't agree with you more. Now the Risk rewad scenario was too good to ignore, so i bought few today at price point of 53.
Also companies are shut down only in extreme circumstances. Companies generally do some innovations, cut down their expenses during these times and get by somehow. Real Estate prices could correct a bit, but still company can retire about 50% of debt from the money received from it.

Risk reward is very much in favour now.
Disclosure - I bought some stocks today at 53.

Yogesh can we have a section where Happionaires can discuss the stock ideas. I am sure many of us will have some very good ideas.

Amit

Anonymous said...

Hi Yogesh
Please publish more educational reports like this which will benefit long term investors.I have purchased all your educational reports and found them to be useful

Thanks

Anonymous said...

Hi Yogesh
Is this still recommended as a long term investment? Lot of rumours going on about this.Please advise.

The Happionaire™ Blog said...

Hi Anonymous,

The interest burden and loss are a negative development. This means the risks of owning it are up conventionally speaking.

The FCCB is Rs. 101.50 which is much more than the present stock price. I know there are lots of rumors going around, however after looking at the assets the company owns I am not selling.

Several times in the markets there will be rumors to create panic and confuse investors.

I have the patience to hold on. As I said earlier - time will tell.

Hope I have been of help!
Keep smiling.

Yogesh

Anonymous said...

Hi Yogesh
Thanks for your reply.Since I have not much knowledge about stock markets and dont know to read and comprehend annual reports,i was confused.

I am for long term investment and can easily wait for 5-10 years.I only invest the amount i dont need for next 5 years in the stock markets.Your words were very reassuring.Thanks again.

kapil said...

Hi Yogesh and Anonymous,

I got some good insight from your discussions here.
I'm trying to interpret the FCCB price a little more. Some questions:
Who decides the FCCB price?
How close is it to real, true value and how should it be interpreted (critically speaking)?

Can the Book value provide some insight as well?

Please advise, comment.

Thanks,
Kapil

Rakesh said...

Hi Yogesh,
I liked this company when you shared it, but i did not buy it then. I personally wanted to go to their store and get a feel of their business, before i invest in it.

In the mean time the markets turned volatile and with rising interest rates, i wasn't sure of the impact it would have on their growth. Till date i have not bought into it as my doubts continue to remain.

So of the questions i have are

1. How are the loans to these companies structured and how severe is the impact on the growth and expansion of this company.

2. Is their growth plans still intact. I see that their number of stores are the same for a year now and they are no where close to their expansion target for early next year.

3. Being a niche segment player or a premium segment within the sector, inflation does take a toll on people's spending on premium/luxury products and am wondering if the sales figures just confirmed that.

4. They recently did a huge discount sale on their stocks in Bangalore(It was not an in-store sale, but one that was held at an marriage hall). This puzzles me and i would like to find out the reason for such a sale(Though all discount sales might not bad).

5. The story is of growth and expansion and i am curious to know if the story is still alive.

I would like to find answers to these question and like to enter the stock now based on the findings.

I would really appreciate if you could help us on these answers or give some pointers on where to find these information, it would be really great.

I loved reading your book and i now pass it to everyone i know and recommend them to read it. Pls continue to share your ideas and educate us.

Thanks,
Rakesh

Kapil said...

Rakesh, Yogesh,

My thoughts:

1. If the company had good recent performance, it would not be available dirt cheap as it is today. That said, there is obvious risk of ownership, on the higher side.

2. The question I'd like to ask is, do we have enough belief in the management to salvage the current crisis and come out a winner?
I dont have an answer, so I'm taking a neutral stand and playing wait and watch.

Yogesh,
As a non-professional, individual investor - How can I research the quality of the management (beyond what is available through google) ?
Your help and advise would be immensely valuable.

Thanks and hope this helps.
Kapil

Anonymous said...

Yogesh,
I had baught your "retail and reality play" recommendation, and was convinced by your logic. I had baught that stock at 80, and still holding it. As you know, this stock has come down very much, could you be kind enough to share with us, is the growth story still intact with this company, or sometime our picks can go wrong? Kindly guide me, as I am scared of sitting on a huge loss.
Hope you will answer.
Mahesh

ROMIYO T M said...

mr yogesh

pl reply to mr mahesh's mail dt 16.10.2008.I am also awiting for your reply.

with thanks & regards

ROMIYO T M

gaurav said...

The company does have a sizeable land bank, however the main challenge is debt and now due to liquidty crisis debt is getting very dangerou. That will take it some time to recover. Personally I am holding on, because I believe in its long term.

kabir said...

The main reason is Lehman brothers was holding this stock. They had seen the value in it, but they went on fire and that is why Pioneer fell.

Now as investors either people can panic and say "Hey its falling.Run." or say "hey why is it falling?"

Anonymous said...

Hi Kabir,
Lehman might have sold it because they have their own problems.
Instead of focusing on what lehman did and why we can focus on what Promoters are doing.Promoter holding has come down by 25% in last quarter.It means People who are running it are not optimistic about the business. And most importantly, we should focus on company's results.And their results are pretty bad.

Even at this price point i will not suggest anybody to buy it as company is in bad shape.

But all said and done,if somebody has bought it around 100 or so, there seems to be hardly any point in selling now.

I also bought this stock at 45 but knowing the risk i never invested more than token amount which for me is less than 1% of my portfolio.
Amit

Anonymous said...

hi Yoheshji
still recommending this for the long term timeframe ?pls advise.