Everyone expects inflation to go down with liquidity crunch but my concern is more about demand supply impact with ban of 500 and 1000 Rs and impact of Donald Trump’s reforms in USA.
The real economy is completely at a stall and everyone has cut down on expenses to save lower denomination notes that they have managed to withdraw from banks and ATMs.
Cash is being sucked out from the hands of people and is getting deposited into the bank accounts but there is very little that you can withdraw currently from your bank account.
Steps taken may be right but I am more concern about the process to bring back liquidity to normal levels. If banks allow withdrawal of 20k per week as the highest withdrawal limit, in 50 days or 7 weeks you can withdraw 140k which is quite low compared to the amount being deposited.
So according to me, this will be a tough time for Indian consumer goods and FMCG companies where end user deals everything in cash but this will be really good time for investors to accumulate these stocks in 2017.
Next, 6 months will be very challenging and every individual will face trouble while purchasing basic items like vegetables, clothes, groceries etc. So it can mean that Indian economy will have a big impact in the next few quarters but it can be an awesome opportunity for investor investing for 3 years+ time horizon.
The 2017
In the midst of exchanging notes from banks, we have all forgotten about Donald Trump being the new president of US. When 500 and 1000 Rs. notes saga subsides, Donald Trump will be in action to bring back US economy out of recession. He will work on lowering tax rates and other reforms that can make the flow of money from emerging market back towards the USA.
It can mean markets will provide better opportunities in 2017.
Why I Avoid Banking Sector?
Bank’s in 90’s with few working hours can still manage to operate profitably. So a bank can never go out of business due to lack of operational excellence but it is always for bad debt.
Infusion of so much liquidity into banking sector is considered good for banks but according to me if banks had NPA’s earlier, they can have more NPA with the new money and so I don’t buy the liquidity as a reason for investing in banks.
The older NPA still exists for PSU banks and private sector banks will dominate over the PSU banks more and more going forward. So PSU banks are a complete no for me.
There will be enough liquidity in the system to push the interest rates down. I am not sure how it may impact the complete banking sector as a whole.
There is so much of ifs and buts for me to consider investing in banks at this moment.
Apart from that my investment checklist has a criteria to be investing in unique business and bank’s don’t offer any unique product that other banks can’t. On top of that banks’ always have high debt to equity ratio and I am not so well qualified to understand why a business that deals with money has debt in the first place.
Stocks I am Considering
Everyone expects inflation to go down due to liquidity crunch but what about demand supply chain. If there isn’t ample supply and if there is no way people can transact and deliver goods, the prices will skyrocket. Have already seen salt being sold at muvh higher price in my locality.
So here is the list of stocks that I plan to add in 2017 to my portfolio and keep them in my portfolio for next 3 to 5 years or so.
- Ashok Leyland – I want to start accumulating Ashok Leyland and it is one stock that I may invest even before 2017.
- Pidilite Industires – I have invested heavily in Pidilite Industries already but if I find suitable levels, will add more. My accumulation range will be 620 to 580 and below.
- Britannia Industries – I have Britannia Industries in my portfolio from the BREXIT day crash where I managed to enter in at around 2600 but now plan to add more around 3000 levels.
- Zydus Wellness – Small cap will be beaten more than mid caps and large caps and I hope it provides me an opportunity to add more Zydus wellness to my portfolio in 2017.
- Marico Ltd – This has always been one of my favorite stocks that I could not add to my portfolio due to very rich valuations but will keep a keen eye on Marico to see if I can add Marico to my portfolio. Have no levels as such because historically I have not seen this stock correct much.
- Jubilant Foodworks – Jubilant Foodworks has a declining profits and increasing sales which I love. So I will keep my position intact and add more at around 50PE (if it gets there).
- Asian Paints – I really love the management of Asian Paints but have always been an investor in Hitech Plast over Asian Paints because Asian Paints has many competitors with similar product lines and Hitech Plast is a unique player by the same awesome management.
Conclusion
What stocks are you considering to invest in 2017? Sharing your stock ideas can help others understand more about it and help you verify your understanding. The best stock discussions always happen in comments and so share your stock ideas below.
I am keenly looking at Realty Sector to invest at lower levels as I feel we can get some multibaggers in it ! Need to identify proper stock with care.
I have always avoided real estate stocks because they are always cash crunch and have leveraged positions. Any purely real estate stock that has very low debt should be your first choice of stock.
how do you know undervalued stocks.what is the concept of undervalued stock n why it is use.can you explain it
I prefer to buy good businesses at fair price than fair business at good price and so I don’t find undervalue stocks but good businesses and then buy them in dips.
I prefer to value business with checkpoint that I have shared here – http://shabbir.in/investment-checklist/
Automobile industry might be affected due to the rupee ban. Wouldn’t that impact Ashok leyland ?
I don’t think so because Auto sector does not deal in cash and big trucks definitely not.
Hi Shabbir,
Thank you very much for your stock ideas. I would like to know your view on control print and Pennar Industries pls.
Control Print – Looks quite unique large scale printer solutions and I don’t think there are many players in the niche. Looks promising.
Pennar – It is yet another business company and I don’t see much value in it unless you can share some USP about them.
I have one bad experience with control print, when they one bonus stock for two stock, I had 15 stocks so I got 7 stock as bonus, and one stock in cash, but they took more than 6 months to give me that cash amount.
But when it was declared, you should have either made your stock go up to 16 or reduced it to 14. You need to be a little more active than you had been.
Yes its also my mistake.
But transport business does, seen photos of many trucks standing. No money for diesel though short term impact
Manappuram Finance
Bought it around 27 during jan 20th 2016 and reached a high of 106 last month and crashed yesterday to 90.10(11/11/2016). Seems to have an EPS of 4.01 and a profit making company. My suggestion is to accumulate on dips as gold investment increase in 2017.
Great suggestion
This business works more on cash, demonetization will effect badly.
Thanks for the article. I am re-reading your Technical analysis materials. Please send me if updates are there.
I am basically a Fundamental Analyst and an Investor for short to long term.
In 2017, I am bullish on the following stocks.
1. Top Stocks in IT / Software : TCS, Infosys, HCL Tech, Wipro, Mindtree. I also invest in other stocks like NIIT Technologies; Mindtree ; Nucleus Software; Persistent Systems
2. Top Stocks in Pharma : Sun Pharma; Lupin; Torrent Pharma; Merck; Cadila Healthcare; Divi’s y;
The IT and Pharma stocks are down as of now – due to macro parameters and in some cases due to stock-specific reasons. But this is the right time to enter into some of the stocks as mentioned above. When going is good, we cannot enter into any of the above stocks as valuations will be too high. Second as per theory of Natural Cycles – the up wave is very likely in the mid of 2017 for the above stocks.
3. Oil India; ONGC; PFC – are the other promising PSU stocks – whose valuations are attractive now. I will enter into BPCL around 500 levels and HPCL around 400 levels.
4. FMCG Stocks – HUL around 760 levels ; Emami around 940 levels.
5. Other stocks : Apollo Hospitals around 1200 levels ; Tata Investment Corporation around 480 levels; Pfizer around 1700 levels; Bayer Cropscience around 3200 levels; Monsanto India around 1800 levels.
All the stocks mentioned above are fundamentally strong and liquid.
I thank you for your regular communication.
(Rajagopalan Ramesh) (9677728145)
The pleasure is all mine but you have good list of stock but then investing in all of them I would prefer a mutual fund than investing in all of them.
Shabbir,
To me mutual funds are very passive. Though I have a large portfolio, I am able to turn it over when market opportunities are good and suitable to me. My actions involve sell the stocks once they reach a target price (according to my calculations) and re-enter the same when they touch low-price alerts. Mutual funds will have a tendency to sit on their investments irrespective of the reactions in the market. I too invest in Mutual Funds – but only in Balanced Funds and debt-funds. Thanks and regards,
Selling stocks at target levels and then re-entering is a good ploy and I agree MF keep them in hold but then they do a switch of sectors to outperform the underlying index as well.
My view is to accumulate stocks and hold them for atleast 2 to 3 years and get good growth prospects before considering profit booking. I do trade and that is completely different where I hit a target or a stop.
Targets don’t stop us from holding multibaggers ?
There may be severe correction after aug.2017.infra will be next bull run
Hi Shabbir, Thanks for your views. I have invested in Bharat Financial Inclusion Ltd @ 425 and it went up to 930 and recently crashed to 695. I am looking forward to add more of them. I have invested in Rattan India Power @ 10.8. Now it is @ 7.5. I am waiting for the company’s performance to improve. I have invested in Tata motors @ 485. Now it is at 510. Hope the company will do well in coming years. Please give your views on my investments. Thanks in advance
I don’t track Bharat Financial and so cannot comment much on it but Tata Motors is a no for me because it has too much dependencies on BREXIT where there is lot of uncertainties.
Enil ( radio mirchi)
Important thing, you mentioned above, sales increasing profit reducing, it’s happening in enil. Because it won many cities in phase 3 allocation of FM radio. The new FM station are launching which not making profit yet, bcz of them revenue is increasing. So when we this station work normally we will see good jump in profits. Radio won’t die, cause like watching video they don’t need much focus and we will keep listening them while cooking driving and other less focused activities. In fact radio will get more personalized like, science, filmy,old song, love song, community radio, like one in Salam namaste movie.
Agree with your analysis but at 50PE, it is more than fairly priced and is valued even more than Sun TV and TV18
Radio don’t take political stance, news channel do, so they safe from revenge type of actions, though enil is connected to times group. I don’t know much about valuation , I will try to research more about it, thanks for pointing. There is no other stock in radio, tv today FM now managed by enil.
Sir google says pe ratio is 34 screener says 47, so at 34 is it worth buying ?
Google says at 701 it is 43 PE. https://www.google.com/finance?q=NSE%3AENIL&ei=w3ouWImFNYuLuQS43ZqgDg
Sir, to justify 50 pe, at what rate that company should grow ?
The cycle is other way round. Its the market that justifies 50PE at whatever rate it is growing and expected to grow.
So sir, how one can decide, x number pe bad, y number pe good ? How to do this calculation ? If we take this example how you decided 50 pe is too much ? From peer ?industry ? How to know this ?
Vakrangee
Is software company doing all work related to e-government, it has white label ATM, it help people in financial transactions, it covers government many project like Jan dhan, aadhar almost all related to finance, it do all transactions based on your aadhar, also it have tie up with Amazon, Mahindra, Indian oil and almost all main banks. It also working on making election commission online. Because of demonetization people will use more vakrangee Kendras for money transaction.
Quite interesting and goes into my stock tracking list.
Yes sir, check their investor presentation & result http://corporates.bseindia.com/xml-data/corpfiling/AttachHis/357DACA7_5B96_4203_971E_ED61E0752818_111004.pdf
Krbl Ltd, Lt foods
first people use to get rice from ration card, now many buy on their own. In many functions I see basmati is used as a premium product, we all are using thing which were Premium in past, so I feel that next step will be people eating more basmati rice. India gate & daawat are market leader in this sector, so 3-5 years horizon is good.
Cupid Ltd,
There are only 4 companies in world which can manufacture women condoms, they are better for prevention of women from STD, it gives women power to protect themselves. Cupid’s mostly business is from Africa, where t
Yes they have a very unique business model and have many innovative products as well.
Sir, the concern their chairman is 75+ in age and his children are not in same business, they settled in abroad, who will run Cupid then ?
I like L T Foods Ltd but has high debt as of now but is doing awesome in operations and marketing and has been always positive and so once I see debt decline, will consider it.
BTW completely agree with your views.
Sir high debt cause they store rice for two years, basmati and wine are same, the old the better. Also they do contract farming they give paddy to farmers, that may be reason of of high debt, basmati is capital intensive business, isn’t it good ? It will be hard to competitor to enter ? What about krbl then ?
Thank you very much for your guidance in simple words.
The pleasure is all mine.