Investment FAQs with Parimal Ade (Investment Satsang- 09)

3 min read

Here are some questions asked by the viewers in the Investment Satsang dated 11th June 2021. These questions can provide you insights on some grounds. Please read these questions for knowledge purposes only and make any investment decisions only based on your research or the advice of your financial advisor.

Q When is a stock premium valued vs overvalued?
Parimal Ade:

• The sector whose growth opportunity is quite good i.e. around 15% to 20% and here if any company is beating this category average, then these stocks might trade in premium valuation compared to their peers.
• When the stock’s PE ratio is trading more than 1yrs,3yrs,5yrs, and 7yrs Or When this stock is trading more than the traditional PE ratio then we can say it to be overpriced. But if we see the stock trading nearer to the 1yr,3yr,5yr, and 7yr median PE ratio even though it is at 40 to 50 PE ratio then at that time we will say it is a premium valued company.

Q Is it good to invest in the market when the market is at an all-time high?
Parimal Ade:

• A staggering way of investment is a good way to invest in the market. The allocation should be made in the next 6 months to 12 months.
• It might feel the market is elevated. This thought process is all about behavior management not timing the market.

Q Is CDSL risky?
Parimal Ade:

• The valuations are a little stretched for CDSL or CAMS.
• Earning visibility is good, the kind of penetration is seen and it is also growing.
• The next 5 years are good for this company.
• Markets are irrational in short term but they will be rational on a longer horizon.

Q How to deal with funds that were 5 stars 5 years ago but now had become 2 stars?
Parimal Ade:

• If the fund is beating the benchmark, category average, and expectations then there is no need to see the star rating given.
• It is not required to change fund if it is betting the above factors.
• If any fund is not able to beat the above-mentioned 3 parameters for 5-6 quarters consecutively, then it might be time to change the fund.
• Consistency is what we need to focus on.

Q View on Abbott for 10 years?
Parimal Ade:

• The company is overvalued.
• Results are quite in-depth.
• Earning visibility is good and growth high single-digit to lower double-digit.
• Valuations are elevated. There is also a high risk.

Q Redeemed mutual fund to switch from regular to direct should the investment be staggered or at once?
Parimal Ade:

• This is a restructuring thing so it is better to invest on an immediate basis.
• The objective is to reduce the expense ratio.
• So staggered way will not be appropriate for investment.
• If it is restructuring then it should be completed as early as possible.

Q View on Hindalco?
Parimal Ade:

• It is one of the leading companies.
• If cyclical is understood about this company then only it is good to invest.
• Currently, aluminum demand is more and it is also proposed to be in electric vehicles.
• Valuations and factor reading have already happened.
• Need to see practical implementation.

Q Any global high volatility event?
Parimal Ade:

• Global Volatility event would be 10-year G-Sec of US government bonds.
• If it crosses 2% then it will be a big event for a lot of markets.

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