Thursday, August 18, 2011

Cravatex June 2011 results

I don't forsee Cravatex to be limited to just FILA in future, even though thats a "big enough" opportunity.

Also, company has spent 3.8 Crores on Advertisements in 2011 vs 1.7 Crores in 2010, again doing all it can. 

Operating and Net profit margins grow more than topline. Even though that is not evident. While the standalone sales have grown around 100% the bottomline has grown even more than 100% from operating business. For getting actual bottomline from operating business you have to substract 1 Crore from 2011 and 2010 quarters which accrues by virtue of rental income. 

FILA size in India is very small with just 15 EBO vs 900 for Adidas. That does not justify full front page advertisement.

However, FILA is #2 in Market Share in Korea after Nike.  Adidas has been trailing it at #3 position for the past 5 years, that proves what focus can do. 

Globally they are 1/20th the size of Nike and Adidas. 

Wholly owned subsidiary: Its out of the blue and a positive development. Who can expect a company with 3 crore quarterly revenues and 1 crore quarterly employee overhead to break even in first quarter. Therefore, consolidated net profits are down for now. Its a long term development.

Positives: Fila Korea is reviving business and with Acushnet takeover, will provide company more strength. Their focus is Korea where they have captured #2 spot and their focus is to revive business in US, recently tied up with 13 billion $ Kohls Corp for the US market. India should benefit soon with increased focus and wider range of offerings. Cross selling of FILA products in proline stores. Value of property (??) and rental 4.5 crores per annum to provide cushion. Even Korea has 10 times more FILA stores than India with 7 crore population.

Concerns: Business still in nascent stage, franchise model still not established. Working capital requirement is high. Rentals may touch 7 crores next year from 5.5 crores this year on Proline Fitness stores.

Heads I don't lose much, tales I win.

Disclosure: Invested

Tuesday, August 16, 2011

Investing Mistake

I wrote briefly here on investing mistakes:

If we could see people's mental body, it would be a hilarious experience. Someone would have giant hands with more athletic personality, someone with less will power will appear pale, another person with can appear to possess a tiny stomach but a enormous head.

Worst part of all is the late diagnosis of such problems until its hopefully not too late. We are all experiencing one form or other disease if not physical then partly mental and one could say definitely some spiritual.

One of the lessons I want to nail down pertains to exiting a stock. Most season players will offer you explanations like:

- When original premise of buying stock has proven wrong
- When you need money for yet another security which is more attractive
- Fundamentals of the company have deteriorated.

What confounds me is HOLD rating on a stock. What is HOLD in the name of bull ! its a BUY or SELL.

Those same people will make the following statement, time and again.

"Those invested at cheaper rates may continue to hold the stock but do not make new entry at this price".

Lynch makes it crystal clear when he writes, "If you are not going to buy more of a certain security, you should be selling it".

Therefore every single day/quarter the stock has to be evaluated for a BUY or SELL against available opportunities, there is no HOLD. I know I have strong opinions and other techniques may work but this works for me.

Friday, August 12, 2011

Two Stocks in my dream duality of Maya

Just a quick post. If I were forced to limit my holding to just two stocks and I were compelled to keep up with my peer performance for next 12-24 months, though not value stocks by conventional yardsticks, those two stocks would be:

a) Cravatex @ 400 (Already a four bagger in last 9 months since I entered, refer here)

b) Page Industries @ 2500 (I've made mistakes last year in trading in and out of it)

The results will not be disappointing. I feel very strongly about both companies and they can be 5 baggers from here again in less than 1800 days (5 years). In case of Cravatex upside will be even more strong if and when funds show some mercy on creeping crawlies like us. I see no reason Cravatex should not command 1000 Crore market cap in a few years (96 crores today). Page is discovered but will continue to compound.

I know there are always some gnarly issues vexing an investor, promoter selling, loss making subsidiary, undergarments by Fruit of the Loom, Hanes, DKNY in India - Nike and Reebok wiping out minnows like FILA and oh my ! the list is endless. That is exactly where you come in and I walk out, I will leave it to you to solve those questions!

What I do know is even B grade company like Relaxo will be around 1000 Crores in sales and market cap, I spoke many years back about it overtaking Bata in revenues,  Money is limited, ideas too many, bet hard !

PS: Cravatex has not announced any news for Acushnet's golf brands yet. If they do get these brands, it would be time to back up the truck. When I visited sports stores across the region I found them dominating their categories. I now have the numbers for market shares of those two superlative brands, Titleist golf balls have 69% market share in United States and Footjoy shoes have 57% market share in United States.

Sunday, August 7, 2011

How To Trade In Stocks - Jesse Livermore

In this concise book Livermore draws upon his natural ability as a speculator and boy plunger and bares open his genius Livermore Market Key to success.

It is no easier to become the best trader than it is become successful surgeon. Mind has to lend itself to pliability and humility - for market is always right, pride and chutzpah is better left locked up in the basement.

A successful trader has his almanac speaking to him back loudly, while he can't predict what will happen, he listens to the screen unassumingly, always respectful of market madness. People continue to make the same mistakes as they make in the past.

He strongly advises to keep away from all insider information and "inside tips" will break a man. He urges to to be decisive, for success rides on the hour of decision. If one continues to exercise patience until the facts are general knowledge, the opportunity would have past us by, its imperative to make a decision with in sufficient information.

The fine line is thin between an experienced trader and a long term investor, as a successful trader evolves to hold stocks for long term multi year upwards moves aka trends rather than play on daily moves. Recommended reading.