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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-7.html)

anandpadhye 16th August 2017 10:21

Re: Guide: Investing in shares of the automotive sector
 
Excellent thread.
What's the take on WABCO India, ZF Steering Gear and Tata Motors?

In case of Tata Motors, it has fallen quite a lot now, are all -ves factored in and is it a buy? Also, I read that it is better to buy DVRs as they have higher dividend yield?

SmartCat 16th August 2017 11:49

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by arit.mondal (Post 4252074)
Hey I tried checking moneycontrol but their the P/E shows to be 51. Consolidated it's PE is 11 which might be due to lower valuation of associated business units?

Yes, ignore standalone PE. You should always look at consolidated numbers.

Quote:

Originally Posted by anandpadhye (Post 4252354)
What's the take on WABCO India, ZF Steering Gear

Both look very expensive on traditional parameters of valuation. WABCO has good growth visibility though (majority of cars have ABS now, ABS might be made compulsory on commercial vehicles)

Quote:

In case of Tata Motors, it has fallen quite a lot now, are all -ves factored in and is it a buy? Also, I read that it is better to buy DVRs as they have higher dividend yield?
Tata Motors might be a good value buy. JLR continues to do well and future of India passenger car division looks good, thanks to Nexon, Tiago and new AMP platform.

Tata Motors will never be a great dividend player. So buying DVR will only give you some extra pocket change. It's better to buy Tata Motors instead of Tata Motors DVR, because the discount between the two shrinks and widens depending on market mood.

Viju 16th August 2017 13:37

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by smartcat (Post 4252425)
WABCO has good growth visibility though (majority of cars have ABS now, ABS might be made compulsory on commercial vehicles)

Hello smartcat

Thank you for this valuable thread.

Just adding my 2 cents. As far as I know, WABCO does not make ABS for passenger cars (major players being Bosch, Continental, Nissin, Advics, TRW and Mando).

Moreover, ABS has been mandatory for commercial vehicles in India since the past couple of years.

http://www.team-bhp.com/forum/commer...les-india.html

sahibrain 17th August 2017 13:19

Re: Guide: Investing in shares of the automotive sector
 
Just read the impressions of the Tesla on Team-Bhp. Electric seems to be the future!

I think the awesome-ness of the electric car, coupled with governments (world-wide) push towards electric cars, i think it would be good to look at companies which would have a play in this area.

Can you suggest any suitable companies we can look at in the below areas:
1. Battery manufacturing -
2. Charging station creation -
3. Power companies - i think Tata Power and Reliance Power are suitable here, but please give your view as well.
4. Any other relevant companies in this area.

SmartCat 17th August 2017 13:38

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by sahibrain (Post 4253181)
Can you suggest any suitable companies we can look at in the below areas:
1. Battery manufacturing -
2. Charging station creation -
3. Power companies - i think Tata Power and Reliance Power are suitable here, but please give your view as well.
4. Any other relevant companies in this area.

IGARASHI MOTORS will be supplying components to Tesla
https://www.bloombergquint.com/marke...parts-to-tesla

JSW Energy plans electric vehicles manufacturing by 2020
http://economictimes.indiatimes.com/...w/60021092.cms

Viju 25th August 2017 17:29

Re: Guide: Investing in shares of the automotive sector
 
Hello smartcat

What is your opinion on (TYO: 7203) Toyota Motor Corp, Japan? I am considering a long-term investment (minimum of 5 years). Toyota seems to have paid investors better dividends as well, compared to other Japanese auto manufacturers.

P/E ratio is around 10, and dividend yield is 3.41%. (I am focusing on dividend yield as well, since bank FD interest rates here in Japan are too low for any real returns).

It is a slow giant, but I believe it holds great potential in the coming years, when the world transitions to EVs and autonomous driving.

What do you think? Thanks in advance.

SmartCat 25th August 2017 21:12

Re: Guide: Investing in shares of the automotive sector
 
1 Attachment(s)
Quote:

Originally Posted by Viju (Post 4257934)
What is your opinion on (TYO: 7203) Toyota Motor Corp, Japan? I am considering a long-term investment (minimum of 5 years). Toyota seems to have paid investors better dividends as well, compared to other Japanese auto manufacturers. P/E ratio is around 10, and dividend yield is 3.41%. (I am focusing on dividend yield as well, since bank FD interest rates here in Japan are too low for any real returns). It is a slow giant, but I believe it holds great potential in the coming years, when the world transitions to EVs and autonomous driving.

In zero interest rate environment, high dividend yield stocks are a no brainer kind of investment. Whatever Japanese stock you pick, make sure it has a long (Eg: last 10 years) and consistent track record of paying high dividends. If a company has skipped dividend (especially during bad times like 2008), you have to skip that stock and move on.

Coming to Toyota, the financials look good -

Market cap: $180 billion
P/E Ratio: 10.3
P/BV Ratio: 1.03 (market cap is equal to networth)
Dividend yield: 3.5%
Return on equity: 10.1%
Debt to equity ratio: 1.06
Net profit margin: 6%

Now analysts expect Toyota's earnings to grow at 7% CAGR over the next 5 years, which again is a good sign
http://www.nasdaq.com/symbol/tm/earnings-growth

Do a Google search for 'Toyota analyst report' or 'Toyota stock research report' to read up on what large financial institutions have to say about the future earnings potential of the company.

However, do keep in mind that over a very long period of time, Toyota is likely to grow its earnings at 3 to 4% CAGR - roughly equal to world GDP growth rates. That's because Toyota is a $180 billion company with presence in all major economies of the world. And we can only expect Toyota to incrementally introduce better products over time - rather than something revolutionary (like Tesla or Apple). Basically, over a long period of time, you can expect 3 to 4% per annum capital appreciation and a further 3 to 4% returns per annum via dividend, netting you a total of 6 to 8% CAGR returns over a long period of time.

But, with some smart timing, you can give a further boost to your returns. See, after you make an investment now, you can expect the stock to move like this in future too - with large falls and recoveries.

Attachment 1669700

Eg: Let's say tensions rise between China and Japan, and there is a call for boycott of Japanese brands in China. You can expect Toyota stock to crash big time. Now that is an opportunity to buy more Toyota stock.

This is how you should proceed -

1) Invest a decent sum in Toyota right away, say $10,000 (I don't have the Yen symbol on my keyboard :) )
2) At the end of every month, look at the market value of the investment.
3) Top up if the market value falls below $10,000.
4) Do nothing if market value goes up.

Eg:

Aug 2017, market value of your Toyota investment is $10,000
Sept 2017, market value of your Toyota investment is $9,500. Invest $500 more.
Oct 2017, market value of your Toyota investment is $10,100. Do nothing
Nov 2017, the short fat guy fires missiles close to Guam and orange guy orders sinking of a ship, the market value of Toyota investment crashes to $8,000. Invest $2,000 more.
Dec 2017, tensions ease, market value of Toyota investment is now $13,000. Do nothing.

This way, you will get an extra returns kicker - even on a $180 billion market cap stock.

bluevolt 27th August 2017 14:22

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by smartcat (Post 4213323)
UTI Transportation & Logistics Fund[/b]. This
This is what their portfolio looks like. The fund manager will decide which stock to buy/add more/sell a bit or exit completely.

Hi smartcat,

I am planning to buy a dedicated mutual fund for auto companies. I am considering UTI Transportation & logistics fund.

I want to take your opinion again on this fund. How good is this fund and are there any other related funds as well?

How good is to invest through this fund instead of directly buying equities of 2-3 select auto companies?

View is long term (min 5 years).

Viju 27th August 2017 17:19

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by smartcat (Post 4258036)
In zero interest rate environment, high dividend yield stocks are a no brainer kind of investment.

This is how you should proceed -

1) Invest a decent sum in Toyota right away, say $10,000 (I don't have the Yen symbol on my keyboard :) )
2) At the end of every month, look at the market value of the investment.
3) Top up if the market value falls below $10,000.
4) Do nothing if market value goes up.

This way, you will get an extra returns kicker - even on a $180 billion market cap stock.

Thank you smartcat!

I don't think investment advice could be made any simpler!

I just managed to open a demat account here in Japan. Since everything from the application forms to the web-page is in Japanese (of which I can read very little), it is much more difficult than it was in India. But since I am thinking of long-term wealth creation, I intend to take it slow and keep putting in small amounts in fundamentally good companies like Toyota.

Will be back with more questions, may be on some other stock! :) Thanks again!

sgiitk 27th August 2017 17:49

Re: Guide: Investing in shares of the automotive sector
 
With the changeover to electric on the cards, i will steer clear of the entire automotive and petroleum sectors. I just do not know, it may go up, or die. Remember what happened to Kodak after the digital cameras came in.

SmartCat 28th August 2017 16:19

Re: Guide: Investing in shares of the automotive sector
 
1 Attachment(s)
Quote:

Originally Posted by bluevolt (Post 4258632)
I am planning to buy a dedicated mutual fund for auto companies. I am considering UTI Transportation & logistics fund.
I want to take your opinion again on this fund. How good is this fund and are there any other related funds as well? How good is to invest through this fund instead of directly buying equities of 2-3 select auto companies?
View is long term (min 5 years).

UTI Transportation & Logistics Fund has done well so far. If you had invested Rs. 1 Lakh in 2005, it would be worth Rs. 11 Lakhs now in 2017 - which works out to be a return of 22% per annum. Since 2013, the fund has really outperformed NIFTY/SENSEX - because there was a bull run in all automobile stocks.

Attachment 1670358

If you are new to the markets, allocate majority of your funds (say around 75%) to mutual funds. Remaining capital can be used for stock picking. Couple of things to remember:

1) Stock picking may not necessarily beat mutual fund returns. Mutual Fund managers are professional stock pickers and fund houses are incredibly process oriented.

2) Mutual Fund Vs stock investment decision is equivalent to hiring a driver Vs self-drive decision. You invest in stocks directly if you develop a liking for the process of stock selection. Just like how we prefer to drive the car ourselves - since we like the driving experience.


Quote:

Originally Posted by Viju (Post 4258687)
I just managed to open a demat account here in Japan. Since everything from the application forms to the web-page is in Japanese (of which I can read very little), it is much more difficult than it was in India. But since I am thinking of long-term wealth creation, I intend to take it slow and keep putting in small amounts in fundamentally good companies like Toyota.

Do you intend to settle down permanently in Japan? If no, isn't it simpler to invest in Indian stocks? I guess you will face some currency (INR JPY exchange rate fluctuations) risk if you invest in India though.

driverabhi 29th August 2017 12:27

Re: Guide: Investing in shares of the automotive sector
 
I had been monitoring TVS Motors since january 2017 when it was around Rs. 380-400. I always thought that when it will go down, will buy then. Missed the train big time. The shares are at 598/- right now and the highest they have gone is 611/-.

I was really feeling awkward buying the shares at current price having seen it rising from that level. Although, I took a plunge today and purchased 100 shares of TVS Motor at 598. I hope the prices will go up in the future.

They are also working on electric vehicles. Their mopeds and auto-rickshaws sell like hot cake. TVS XL Super is any delivery boy's vehicle. Apache series bikes also sell pretty good. Next is Akula in line. Could they be the next Bajaj in the buyer's market and in the stock market?
What are anyone's views on this script?

deepv 29th August 2017 13:22

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by driverabhi (Post 4259710)
... TVS Motors since january 2017 when it was around Rs. 380-400. ...

The fundamentals (esp. P/B of 11+) for TVS Motors does make investments at this level fairly expensive, however its growth trajectory has been very good so much so that minor blip after disappointing Q1 results have been bought into.
It 'should' continue its trend forward unless we see any market-wide downside.

vishal9999 29th August 2017 23:21

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by smartcat (Post 4219950)

The rows to look at are - Operating Profits, Interest costs and Dividend Payout Ratio - for each year. To begin with, the dividend payout ratio of Amtek Auto was only around 10%, which in itself is a bad sign. You should insist on atleast 15 to 20% dividend payout ratio.
TACH]en!

Hi Smartcat,
Thanks for superb insight.I am not able to find Dividend payout percentage of companies on moneycontrol.com. What is mentioned in P& L is
Equity Dividend
Corporate Dividend Tax
Equity Dividend (%)
How do i find Dividend payout on Money control.com
Thanks

hothatchaway 29th August 2017 23:31

Re: Guide: Investing in shares of the automotive sector
 
Quote:

Originally Posted by vishal9999 (Post 4260096)
Hi Smartcat,
Thanks for superb insight.I am not able to find Dividend payout percentage of companies ....

Try www.screener.in. You will find the dividend payout % under Annual results. I find screener very effective for a quick scan of fundamentals.


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