Lets imagine its IPL auction time. Also imagine you are given the responsibility to buy players from IPL auctions this time for a period of 3-5 years (Long Term hmmm...)
The players are categorised in four different classes-
(A) Proven Greats- These are the great players who have proved their worth in international & IPL matches over the years. The likes of Tendulkar, Hussey, Mallinga, Dhoni, Kallis, Gayle, Sehwag fall under this category. However, everyone knows their greatness & so they are available at 30 times their last year's points (calculated for each player based on runs scored, wickets taken & all other stuff).
(B) Probable Greats- These are the players which have done well in the past & seems to be having the necessary skill-set to succeed. However, they have a smaller & less enviable track record as compared to Category A & some of them may turn out to be a dud investment. The likes of Kohli, Rohit Sharma, Uthappa, Ashwin, Rahane fall under this category. Since, their greatness is debatable; they are available at 10 times their last year's points.
(C) Possible Greats- These are the players which have either fallen a a great deal from their past or have a very small track record of good performance and hence betting on them to deliver in the future is a risky bet. Fallen greats- Ganguly, VVS, Murali, Gibbs, Gilly. Small Track Record- Most of domestic Indian players. Because of the obvious risks involved; they are available at 3 times their last year's points.
(D) Costly Idiots- These are the players which got the attention of everyone recently due to 1-2 good performance but they lack the skills to succeed consistently. The likes of Ravindra Jadeja, Yusuf Pathan, Levi. But due to recency bias, they are selling at 30 times their annualised points.
So what's going to be your strategy?
Investing is kinda similar.
In Class A, we have Titan, HDFC, CRISIL, Page, Nestle, ITC selling at 25-40 times earnings.
In Class B, we have a lot of stocks like Mayur, Nesco, Eclerx selling at 8-12 times earnings and some of these will turn multibaggers.
In Class C, we have most of small & mid caps & some of these may turn multibaggers.
In Class D, we have a number of commodities selling at exorbitant valuations like RPower, RCom, Powergrid, Strides Arco & some of these will turn multibeggers.
Which one would you pick?
I find myself studying mostly in Class B & one or two lectures in Class C.
Also, the big aim is to avoid Class D & duds in Class C and Class B.
The players are categorised in four different classes-
(A) Proven Greats- These are the great players who have proved their worth in international & IPL matches over the years. The likes of Tendulkar, Hussey, Mallinga, Dhoni, Kallis, Gayle, Sehwag fall under this category. However, everyone knows their greatness & so they are available at 30 times their last year's points (calculated for each player based on runs scored, wickets taken & all other stuff).
(B) Probable Greats- These are the players which have done well in the past & seems to be having the necessary skill-set to succeed. However, they have a smaller & less enviable track record as compared to Category A & some of them may turn out to be a dud investment. The likes of Kohli, Rohit Sharma, Uthappa, Ashwin, Rahane fall under this category. Since, their greatness is debatable; they are available at 10 times their last year's points.
(C) Possible Greats- These are the players which have either fallen a a great deal from their past or have a very small track record of good performance and hence betting on them to deliver in the future is a risky bet. Fallen greats- Ganguly, VVS, Murali, Gibbs, Gilly. Small Track Record- Most of domestic Indian players. Because of the obvious risks involved; they are available at 3 times their last year's points.
(D) Costly Idiots- These are the players which got the attention of everyone recently due to 1-2 good performance but they lack the skills to succeed consistently. The likes of Ravindra Jadeja, Yusuf Pathan, Levi. But due to recency bias, they are selling at 30 times their annualised points.
So what's going to be your strategy?
Investing is kinda similar.
In Class A, we have Titan, HDFC, CRISIL, Page, Nestle, ITC selling at 25-40 times earnings.
In Class B, we have a lot of stocks like Mayur, Nesco, Eclerx selling at 8-12 times earnings and some of these will turn multibaggers.
In Class C, we have most of small & mid caps & some of these may turn multibaggers.
In Class D, we have a number of commodities selling at exorbitant valuations like RPower, RCom, Powergrid, Strides Arco & some of these will turn multibeggers.
Which one would you pick?
I find myself studying mostly in Class B & one or two lectures in Class C.
Also, the big aim is to avoid Class D & duds in Class C and Class B.
Hi,
ReplyDeleteVery interesting post. Relating it with cricket which is the most followed game in the country makes it more clear on how one should build up his/her portfolio.
Good work :-)
Regards
Yogesh Bang
www.fingerscrossedideas.blogspot.in
nice post dude. A lot of times value investors suffer from consistency and commitment bias (likeability bias as well) and discard any other methodology.
ReplyDeleteYour strategy is spot on to concentrate on class b and class c.
I concentrate on building a portfolio of class A and use Monthly/weekly EMA crossovers for entry and exit.
durable moats are difficult to find and once they are established last for decades all together. EMA crossover based entries into companies like colgate, asian paints, nestle, P&G, dabur, VST HUL etc would beat the benchmark index hands down as i have witnessed.