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-   -   Guide: Investing in shares of the automotive sector (https://www.team-bhp.com/forum/indian-car-scene/187607-guide-investing-shares-automotive-sector-12.html)

How does the future fare for Maruti, with Electric cars/hybrids grabbing centre stage? That's the immediate challenge, as I feel it's going to be a level playing field. Tata and Mahindra both have traction in this space.

Thats an eye opener. Especially the comparison with the Germans. Thanks for sharing.
Whats good for consumer may not be beneficial for shareholders :)

Traction could be by M&M and Tata's, but expect the mass produced and affordable EV's from Suzuki-Toyota from 2020's for the Indian market.:)

Check this post for Maruti's EV plans
http://www.team-bhp.com/forum/indian...ml#post4326423

Hi smartcat. Let me start by saying that you are an inspiration and a guide to many here in the forum. Thank you!

I have recently purchased few shares from Minda Industries, after a decent research. And planning to keep this as a long term stock in my portfolio. It is tough to assess the future in automotive industry but can you please provide your insights on the same.

I am planning to add more shares of MindaInd on any dip or price drop.

Like Motherson, Minda too has grown via small acquisitions route. In addition to that, they have taken the JV route to introduce new products that they don't have competence in. Example airbags:

http://www.news18.com/news/auto/toyo...i-1410141.html

However, Minda has already been "discovered" by investors and has seen a bitcoin-like parabolic rise in prices. For a relatively small company, it is trading at close to 50 PE.

All in all, fundamentally solid company but trading at insane valuations.

God level explanation, could not agree more. Valuations are too high.

@smartcat - Please start taking sessions on equities, you shall not need another job.

PS: Any Auto/Auto Ancillary suggestions ?

Thanks, but actually, I don't have another job. I used to run a tiny internet advertising firm long time back. It took me 10 years to realize that I'm a terrible entrepreneur. :confused: And I always knew that I'm unemployable. Hence, I do only stock market investing and trading.

One stock that I really like in auto ancillary space is GREAVES COTTON. It has decent RoE, no debt and is offering a dividend yield of 4%. It is market leader in small diesel engine space. Their products are used in power gensets, agriculture (for pumping), 3 wheelers (Eg: Piaggio) and 1 tonne payload CVs (Eg: Tata Ace).

Negatives: Greaves Cotton is a relatively slow grower - 8% CAGR growth in revenues over the past 10 years. But its networth has grown at 15% CAGR implying the business is generating a huge amount of cash flows.

How about opening a portfolio management advisory!

We would be your happy customers! :)

During a session on CNBC, Ms Latha interviewed the gentleman from Ashok Leyland who mentioned that there was a surprising increase in demand for product in UP. Everyone was elated with the news. I guess a few people must have purchased Ashok Leyland stock after listening to this positive news.

Then in the evening, Ms Latha tweeted that it was brought to her attention that from 1st Jan 2018, only trucks with AC Cabins could be sold and that is the reason for an increase in demand for trucks in December 2017.

Following tweeted by Ms Latha Venkatesh
Ashok Leyland rallies on 79% jump in December sales number.

Hahaha.

So Greaves Cotton, I have held it since 07/25/14 @ 121 PP, it went up and down, never sold it, about a week back, it was trading below 121, was a good buying option, now it has scaled to 142.

I think I shall need to connect with you at some point in time, I have a very bad habit, holding stocks till eternity, only buying and no selling, have to understand what "Booking Profits" is and how and when you should do it.

Once again, Hats Off to you, Sir.

Thank you for this wonderful thread. You inspired me to open a demat account and and invest some amount in Maruti and Tata last year (Yeah, I went against your advice about Tata. But I couldn't resist investing a few thousand rupees there). Now this words have made it even more inspiring.

May be OT, but could you provide your experience and how you managed your finances during the 2008 recession?

This is a very rare and actually a very good habit to have as far as investing is concerned. Please don't connect with anyone to change this.

Just try to buy some quality companies and then forget them if you can..

@SmartCat, what would be your preferred sector in auto among car-manf, 2-wheeler manf, CV manf and auto-parts-anchillaries manf for a 2-3 year investment horizon?

Sell off when fundamentals of the company deteriorate (Eg: significant increase in debt, makes a huge foreign acquisition, falling revenues, consecutive loss making years, constant or falling networth, stopping of dividends etc). Otherwise, you can hold on.

But hold on only if you have less than 50% of your networth (FD + stocks + Gold + real estate) in stocks. If your equity exposure goes over 50% or 60%, you can book profits when companies you own get re-rated and start trading at very high Price to Earnings ratio (Eg: a small or midcap stock trading at 40 or 50 PE)

The goal of 'booking profits' in the above example is to reduce equity exposure. So the proceeds of sale should go to -

- Reducing or paying off any loans you might have taken
- Investing in fixed deposits or debt mutual funds
- Investing in real estate
- Investing in Gold ETF

OR

- Buying a desirable asset like a premium car or expensive gadgets or take a nice long holiday. After all, we are in stocks to enjoy the fruits of investment.

In the first half of the crash, I bought more stocks. Then I ran out of ammunition, so I did nothing during the second half of crash. My portfolio fell 65% from the peak in 2008 but recovered the entire fall by 2010.

Cannot place them in such baskets, because almost all manufacturers have a diversified portfolio. Eg:

- M&M makes tractors, SUVs and trucks
- Eicher makes two wheelers & CVs
- Tata Motors makes premium cars, mainstream cars & CVs
- TVS Motors makes three wheelers and two wheelers
- Bajaj makes two wheelers for India, two wheelers for exports (35%) and three wheelers

You need to look at each of the companies on its merits. However, because of sheer number of companies in auto ancillaries space, it is likely that you will find a hidden gem here.