Where do you see opportunity in new age tech or the digitisation theme? Also where are you sensing opportunity in large cap IT names?
One of my favourite stocks right now and for a few years has been Infosys. I was really happy with the results it has posted. I know the stock dipped about 3-4% yesterday because the revenues missed some expectations of the Street, but the operating level margin was 24.2% instead of 25%. These things happen.
I have said this before that if one big conglomerate has to come out from India at some point it has to be from IT and within IT, I really like Infosys because it is a very professionally managed company and unlike TCS, which has a legacy business, Infosys is trying a lot of new things. Their digital revenue is about 51% and the EPS has constantly improved from last year’s and has gone up 11% at revenue levels. So why should one look at midcap IT companies when Infosys being so large with so much cash is doing exactly what those companies are doing? Plus it has the money to acquire companies across Europe and the US and they are doing just that.
I personally feel that for many years to come, this stock will give very good returns. This is something which in these markets, every investor should add to their portfolio. One of the problems that a lot of midcap IT will face is that larger IT companies will keep eating into their share because in Covid times, it is really hard for these companies to expand in overseas markets.
The established IT companies have already made a presence there. They already have big offices and big setups there. If they can cut their costs and do the same jobs which a lot of these smaller IT companies can do, then they would probably eat into the share of these smaller companies. So in these markets, if I had to take exposure to IT, I would stick to large IT stocks like Infosys.
Another point that I would like to make is that if pandemics and the lockdowns take stock markets higher, then governments around the world have both the authority and the knowledge to understand that once every four years, announce a lockdown — and it will take stock markets higher. The stock markets are going higher because of low interest rates and a lot of printing of cash and not really because the economy is improving.
How are you looking at some of the MNC stories?
As incremental money comed in equities, you should allocate money in these MNCs — HUL, Colgate, P&G or Marico. The products that they make will be needed at all times. During last year’s lockdown, when markets fell 30-40%, that is hardly visible on a three year chart for HUL. The stock fell about 10-12% at that time and it has gone up again a lot more from the level at which it was trading before it fell.
So companies that make products which are not affected by lockdowns would probably do well. These are very, very safe sectors. We have seen that in previous market crashes that many times FMCG stocks do not erode their margins or total revenues.
So, one can put incremental money within MNCs — HUL, Marico and even Indian companies like Dabur. But for the most part, stick to fixed income, keep some money in the reserves. I have a list of stocks that I would like to buy but not at the price at which they are trading. I am sticking to keeping money on the sides mainly for those stocks .
Why don’t you share that list with us?
I have spoken about some of these stocks before.
is one stock which I really wanted to buy at Rs 300-320 levels and that has been a miss. It is trading much higher today. CDSL is literally a monopoly right now. The other stock I was looking at recently is a real estate company — Brigade Realty. It is a south Indian company with very clean accounts.
In addition,
is something that I added a lot at around Rs 30-32 levels. I would still like to add it at Rs 50-51 level but the problem is when overall markets fall, then financials like IDFC First Bank or all other NBFCs fall in line with that.
CanFin Homes is the other one. As interest rates are low and people are buying real estate, housing finance companies should do very well. But again with so much liquidity in the market, these stocks are already trading at levels where they are difficult to buy. Otherwise, there is no problem with these businesses. These are great businesses to buy when markets go down which it certainly will in the next one, one and a half years. So I am a little worried about buying them right now.
