Knowledge Faqs with Gaurav Jain (Knowledge Yagya- 03)

5 min read

Here are some questions asked by the viewers in the Knowledge Yagya dated 20th July 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 Do you see major correction at this point?
Gaurav Jain:

• As the market was all-time low during covid 1st wave then, no one knew the market will go up seeing today’s prices.
• So In the short term, how much the market will fall could not be told by anyone.
• The correction in the market can happen for several other reasons.
• A major dip in the market can only happen if there is any major problem that is not known to anyone.
• That’s why it is said that it is good to invest in the long term rather than the short term.
• So it is also said that the investment should be in a staggered manner so that if the market falls then it is a good opportunity to buy then or else it is better to invest regularly.

Q View on PI Industries vs Coromandel? (13.53)
Gaurav Jain:

• Both are different companies.
• PI is a very export-oriented company and it is more into crop protection.
• Coromandel is more towards fertilizers and also entering into crop protection and have started exporting from the last 3-4 years.
• PI growth-wise is looking better. But looking at the rural story Coromandel is having a domestic rural story.
• PI does clinical trials related to pesticides. Also, they have a lot of tie-ups with other companies. They outsource R&D and manufacturing. It has a good growth story related to export-related things.

Q View on Wockhardt, AstraZeneca, and other Pharma Companies?
Gaurav Jain:

Wockhardt is an Indian domestic pharma company.
AstraZeneca is an MNC company in India doing well.
• Whichever is domestic Indian pharma companies, Dr. Reddy, CIPLA, etc are focusing more on export business. Due to export, only these companies are having grown in the last 12-15 years.
Abbott India Limited and Astrazeneca have limited performance domestically,
• But in MNC Pharma companies the problem is Pharma products are not allowed to be launched in India. Also, There are a lot of processes in MNC pharma to launch it in India.
• So the products are of these MNCs are of good quality.
• Domestic Pharma Company may witness good growth in the case of acquisition and a decent export share as well.

Q How important is revenue growth versus profit growth?
Gaurav Jain:

• Revenue Growth is very important. If there is no revenue growth then there could not be profitable growth.
• In some cases of chemical pharma companies, the revenue growth is not that good but the profit growth is more.
• Hence people are getting more excited as the PE ratio has improved. As PE ratios are on profits not on revenue.
• But we need to understand if the revenue is not increasing how can the profits going to get increase.
• Hence Profit growth and revenue growth both are important.
• Revenue growth is more important in long term, profit growth is about growth and efficiency.
• So we need to understand what the management is focusing well on profit generation or revenue generation.

Q View on green energy industries specifically solar?
Gaurav Jain:

• Solar is having very good scope, major problems are there and they are also trying to figure it out.
• Big Companies like Tata Power are more focusing on solar power.
• Looking last 5 years the company has focused more on solar as they were initially focusing on wind energy, Now they have converted to solar.
• Solar technology is improving tremendously.
• The price has been reduced. It has become competitive concerning coal and thermal power.
• This is a very interesting sector. But need to choose a good company.
• Don’t invest in the stocks looking at the trend. Need to have a good thought process before investing.

Q Which is better: Power Grid, Tata Power, or IEX?
Gaurav Jain:

• The power grid is a PSU so the issue is the growth prospects are limited as the decision is not centralized by the government but is distributed.
• Due to distributed decisions, it becomes a time-consuming process.
• In Tata power, there are a lot of positives about the company because of solar focus and electric vehicles as well but there is also risk associated with it. As it is a very capital-intensive business.
• IEX is only having the risk right now is about the regulations.
• IEX is the largest power exchange in India and is having more than 95% market share.
• As the government does not want only 1 power exchange they don’t want a monopoly and it is a private company.

Q My Investment in Small-Cap turned to Mid-Cap. What should we do with the allocation (50%-Large Cap, 40% Mid Cap, 10% Small Cap) then, should we again buy a small-cap?
Gaurav Jain:

• Need to make the asset allocation appropriately.
• Sometimes it is felt that this stock could be a large-cap.
• We need to see our asset allocation and also check how much the company is stringent.
• Mostly in this situation, it is better not to be stringent for small and midcap allocation.
• Some stocks are floating between midcap to large-cap.
• So, in this case, we should not be stringent as the markets are changing daily so such kinds of changes are bound to happen.
• So there needs to be flexibility, better to take a company-specific call.

Q What should be Debt, small-cap, mid-cap, large-cap, and other allocations? (40.04)
Gaurav Jain:

• There are no generic answers for this.
• There are some thumb rules which can be used(it varies from person to person concerning age, horizon, current portfolio, and goals. etc).
• The small and mid-cap allocation should not be more than 40% to 50% allocation.
• The gold allocation should not be more than 10% to 15% of the total portfolio size.
• For international funds, it again depends on geographical conditions but it should not be more than 10% to 15%.

Q Which is the better play in terms of electric vehicles M&M or Tata Motors? (46.50)
Gaurav Jain:

• Currently, Tata Motors looks interesting more than M&M
• As M&M is looking more diversified.
• In comparison with these two companies, Tata Motors is for high-growth investors.
• 80% of the revenue comes from Jaguar and LandRover. For conservative growth investors, M&M should be good.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.