In this article series, you’ll find the complete review of Market Gurukul (by CNBC Awaaz) Webinar Sessions:
SESSION 1:
Ashish Chaturmohta (ED & Fund Manager, JM Financial Services Ltd): Stock Picking via Fundamental Analysis
17+ years of experience in the markets, technical & fundamental analysis expert, expert in picking long term trends in different assets classes.
Global Equity, currency payer, good base in commodity & reversal, running PMS in JM financials, & got India’s Best Market Analyst Equity award (2011).
Many concepts in this overall webinar will get repeated for deep understanding.
The main factor here’s earning growth.
This session focussed on qualitative (management quality, company’s governance, industry dynamics) & quantitative aspect (PnL statement analysis, B/S analysis, cashflow statement analysis, studying different ratios) and valuation study.
As per Ashish, ideal portfolio size (40-50 stocks: upto your tracking limit). Fusion investing (fundamentals & technicals) plus market dynamics & psychology are needed to understand Indian markets. He gave one of the example with the launch of GIFT city in Gujarat (market got actually disrupted when the liquor of worth ₹500 CR was removed - so here the fundamentally married market dynamics)
A) In the last few years, govt. has immensely focused on defence & railways (showed amazing EPS growth in those stocks). After COVID, people got a psychology to live at higher standards & quality life as there’s no predictability (demand hike in house, & hospitality).
B) Market will give high PE & growth when the opportunity size is really big. Good governance in any co. can be identified with a good track record of management decisions with high promoter holding. EBITDA is more important than PAT (according to Peter Lynch - earning, growth & momentum are vital).
C) Businesses are divided in 4 parts - Good Business Good Cycle, Good Business Bad Cycle, Bad Business Good Cycle, Bad Business Bad Cycle. As 60% of India’s population is youth so consumption is a long term cycle of 10 years. You need to learn how to pick the cyclical stock with right parameters in a competitive sector
D) As per Ashish, more than 60% of portfolio should be long term. Here’s what operative leverage means:
- A relationship between revenue growth & profit growth degree to which a co. cost structure is fixed.
- When the bottom line increases more than the top line, we can say the co. has experienced a good operating leverage. Higher the earning growth, there’re higher chances of increasing the stock price
E) If you see a co. increasing its net profit, strong promoter holding, decreasing the liabilities consistently and increasing fixed assets via retained earnings, it is a high quality stock. As per Warren Buffet, cash is the king (how much cash the co. has in hand). A good co. shows cashflow from operating activity 50% of net profit. The lesser cash conversion cycle tells that a co. easily sells the inventory in less time.
F) In cyclical stocks, higher the PE lower will be the earnings. Cyclical stocks are purchased when the PE is high (as soon the cycle comes & earnings increase, you book your profit).
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