Tech Stocks | Bank Stocks: New era technology companies are still very risky; 2 mid-cap bank stocks to bet on now: Gurmeet Chadha | Rare Techy
What about locking in these new-age technology companies? Most of them have expired because a year has passed on their list, but it is a great continuation. After the correction wave, is it possible to keep some of these stocks on the radar?
In my opinion it is very dangerous. When it comes to companies whose path to profitability is still unclear, this market is not very rewarding. I don’t want to put everything in one basket in terms of all new age companies. There are a few companies that are on our radar; Delhivery is one.
We are very constructive in terms of logistics. Our packages are delivered within 10% of China. In fact, the new platform migration led to some delays that caused the numbers to be soft in Q2 and that’s something we’re looking at.
We need a clearer way of benefiting. One cannot make a single digit loss or profit and command a market of several billion dollars. The market penalizes wallets that have either no profits or very high value multiples.
I think there is still a lot of opportunity in banking and manufacturing where earnings multiples are reasonable and the biggest barrier is profit growth. The higher the revenue growth, the higher the margin of safety and that’s what we need to protect against.
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How would you look at secure names like, ? They have done well, one cannot call them very cheap now but do you still think there is an element of safety there?
I think so. For example, SBI had a big positive surprise last quarter. After a long time, I saw one percent return on assets and almost 16-17% ROE. Among the metrics was performance, NIM expanded 30 basis points, costs were only 33 bps. I have not seen this kind of quality in SBI performance.
Also, the cost of deposit is a very important parameter for banks. We recently saw Bharti raising funds at 8.50-8.75%, many NBFCs raising funds at 8%. The cost of deposits will go up. For SBI, it was only 8 basis points higher and SBI has almost three and a half billion of treasury next year and most of these loans are linked to MCLR and ECLR and have three months, six months repayment. means the pre-payment of the loan. The bigger impact will come in the second half which is likely to lead to an expansion of NIM. At book value 1.3, 1.4, not too expensive either.
Some PSU banks plus ICICI Bank continue to do well and may be more sustainable. There may have been some revaluation so banks should be consistent and buying on dips may be a better strategy.
What are the banks you will be looking at? comes with maybe Rs 5 crore plus a book in your security pocket. But out of about 1lakh crore and 2 lakh billion what kind of books or medium banks would you look at?
A bank that we followed that is
First. They changed the loan book. Now 70% is retail; the legacy infra book is now only 4%. We are tracking some stress assets. If this continues, they will do well. Also, in the next two to three years, they have legacy costs, high cost deposits and they will be replaced by lower deposits, which could mean some pressure on the liability side as well. have a positive effect on both. on NII and NIM.
We also love Union City. These two banks are in the middle for us.