New Year – Investment ahead


Key Learning’s from 2006:

Be ahead of the curve:

Real estate valuation is still being debated. Anybody who could understand the same and value the Land banks was a winner. While valuation of core real estate surged…. Many companies started unlocking value from their land holdings as well. While, for every good story their traded 2 hyped stocks. Value was made by the discerning investor.

We had been positive on the real estate sector.

Blockbusters for 2006 were Unitech, Jai corp. 

Learn to invest in Growth stocks – When markets are trading at premiums, it is less likely to find value picks than growth picks. Also one need to adapt to changing valuations as while we look for absolute gains, valuations are relative. So it makes sense to invest in relatively cheap stocks instead for waiting for cheap stocks.

Some sectors are glamorous and so are valuations : The Lisiting of some of the Real estate and Emerging sectors (, Educomp colution, ENIL (Radio Mirchi)  saw glamorous valuations. Mainly because normal valuation models did not apply to these stocks, sectors were not understood and the possibility of making alpha gains.

Always invest before demergers – Case in point – Reliance, TV18, ZEE  Telefilms

Stocks are mispriced. Demerger unlocks value. Find good hidden plays and sit tight. Valuation thumb rule. Anything below 40% of assets with a slight potential of value unlocking is a good buy. But do not invest in pure holding companies.

Also in a growth market pick up stocks which have great management, show good execution and are no.1 players….. Bharti, ICICI Bank, EKC, AIA, Suzlon, ENIL etc.  

Sectors to watch out in 2007: Real estate (Value recognition to hidden plays)  , Media (Economy driven) , IT (Higher visibility).  NBFC (insurance (wow stock), housing finance, Auto loans, personal loans)

If some part of your portfolio is not in Gold. You are exposed to global risk. 

All above views are subject to hindsight bias.


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