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Don't let PE ratio and suppressed ROCE fool you in Screener.1st half was affected by Lockdown where as second half and FY 22 could see substantial recovery in demand from many sectors with operational and financial leverage both kicking in
Many stocks seems to appear Optically Expensive (Case To Case). Forward Eps growth and improvement in ROCE is what drives stocks prices.. Investor must analyse whether their portfolio companies can deliver incremental earnings growth and improvement in ROCE going forward..
If answer is yes then staying invested for long term always is a better option than timing the market. Good Days and Bad Days are part and parcels of the game.. Stay Grounded Stay Humble Stay Happy Stay Safe
To add API Sector provided a low risk opportunity (case in point Aarti Drugs) a competent mgt which was available at a mcap below its Annual Sales. Capacities were already in place.Sudden burst in demand of API benefitted the market leaders which had ready capacities available
End results were stock delivering huge gains in short time period. Point again to analyse can the company deliver incremental earnings growth. Such situations happen rarely. Something similar again started playing in housing theme.
Most players in housing ancillary which rarely reported earnings growth in last few years are benefitting now. Their margins and ROCE are slated to increase. Maximum alpha is generated by investing where a sector going from headwind to tailwind and stock from low to high ROCE
When it comes to the PE multiples. Then market at good times rerate the stock by extrapolating the earnings before it accrues and the same market at bad times doesn't even discount a decent earnings due to headwinds or low confidence among investors. Case In Point Sector - IT
So keep eyes and ears open and focus on opportunity as and when it comes snap on to it.. Dont try to predict anything.. Pandemic was an one off where economy came to a halt.. All depends how one behaves during the crash.. Comparing pre covid and post covid era is like BC and AD
Long term market takes it own course.Individual stocks will continue creating huge wealth going forward. No investors in these world have made huge wealth without bearing pain of corrections. So stop worrying about the market crash instead focus in building a robust portfolio
