What do you think about people like them? Citi believes there could be very strong market share gains, margin expansion and value synergies with HDFC Life. What is your view on this group of stocks?
The insurance sector usually has a large deficit in the last year. This became a very speculative sector when the markets in general were not doing so well because people were afraid of the story of failure, marginal improvements etc. believed the conditions of growth that they actually deliver have not even been revealed.
Margins have also not improved or profitability has improved as expected, leading to underperformance as the public sector was overvalued. Now correcting the post, I still think SBI Life is a bit overpriced but HDFC Life seems to have some value and we have seen that stock doing well. ICICI Prudential Life was heavily traded after touching a high of around Rs 620. Now it’s back to around 450-460 levels. So on the percentage earning potential, I would think that ICICI Pru currently offers the greater potential.
Much has been said about how this is the worst IPO in a decade. The stock is down 75% but we are starting to see some upside for other new age companies as well. There is a great movement in Policybazaar. What is your strategy in all these new age companies – don’t fall under the knife?
Yeah, basically the strategy is to watch their prices on a daily basis and then be glad I didn’t buy it the day before, so I think that strategy continues for now. That may change sometime in the future where I might actually buy one of these stocks but I’m not sure when.
What about L&T? Does this remain constant in the portfolio and will you add anything else in the asset area?
L&T should be in the portfolio because we have entered a phase of huge growth in terms of capital expenditure in the country and also in some other parts of the world where L&T has a good presence. They’re getting orders that have exceeded analyst expectations, so I think as execution unfolds we’ll see them improve and they’ve also focused on reducing their leverage on the balance sheet which has been a concern for a while now. L&T should definitely be one of the big bets in the big segment of the portfolio.
“ Back to the recommended stories
Every day the stock prices of new age companies are falling. I know you don’t own it but then you said that this might change and you might start owning some or at least one; which ones?
Not in the radar and. At some point, they will be bought because they have business models that I think are sustainable and they have a growth paradigm that can make them profitable in the future. Now the management should focus on this. They should focus on business and move into free cash flow within the next two to three years. When we see definite signs of that, it will be time to look at these stocks.
While Nykaa makes money, my only concern is the way this whole bonus issue has been handled by the Nykaa developers. Falguni Nayar has been a banker and he understands what the markets want and the markets don’t like the way the whole bonus issue is being handled. Also, does the CFO resigning leave a lot of bitter taste?
Yes, it is and that’s why the stock is so low and that’s after bonuses and dividends. I told the public that the administration should stop these scammers. They should just focus on performance because the 5:1 bonus was also amazing because one stock holder gets 6 stocks this account was for retail investors. It is not easy for retail investors to understand what happened.
I think it leaves a bitter taste in the mouth in the short term, but longer term, people will forget about it if the company delivers. This is what we need to watch.