I am getting frustrated these days.

I had filtered 2-3 stocks and was fairly comfortable with the business and the valuations. So after doing my slow and steady analysis (I have do my detailed analysis!!), I was ready to pull the trigger. On checking the stock price I realized that the stock had jumped 15-20% and had literally run away from me.

Multiple cases
Now, if this happened once or twice I would be fine. However there seem to be too many value investors out there now :). For some reason, a lot of undervaluation is getting corrected across a wide variety of stocks. There have been phases in the market such as in 2007-2008, when real estate or some other sector was hot and people like me could find nice and cheap stocks in the mid-cap, IT or pharma space. No such luxuries now !

Some example
Well, I am not going to let the analysis go waste. So let me list the stocks I came close to buying and then missed. These stocks are in my list and I could buy some in the future if the price is right and the fundamentals still good, but for now its wait and watch

Hawkins cooker – This is one of the first runaway stocks for me. The company is in a duopoly kind of a market for branded cookers. It is also into cookware products. It is fundamentally a strong company, with high ROE, decent growth and a strong balance sheet. The Company has decent competitive advantage via brands, extensive distribution network in its niche and has improved its performance too in the last few years.

I was asked about this stock by prabhakar kudva and found it to be a sound stock. The stock was selling at around 20-30% discount to its fair value then (my estimates) and as result I did not create a postion. The stock has since then gone up by 50%. I do not regret ‘not’ buying this stock as much as it was not cheap enough for me. Ofcourse the counter point can be that my estimates were too conservative.

Mangalam cement – I analysed the company here and placed an order at around 130 levels. I don’t recall the exact price, but my order did not get filled due to a 2-3 re difference. It now gets interesting! I got anchored to this price of 130 and wanted to buy the stock at a discount of 40% to my estimate of fair value.

The market had other plans and the stock suddenly jumped by 8-9% and it now trades in the 160-170 range which is not a price at which I would create a position in this stock

Amrutanjan – –  The company is a 100 yr FMCG company in the business of headache balms, cold rubs etc. The company has a strong balance sheet, with almost 70 crs of cash and investmentd. The company has an ROE on invested capital of around – 30%+ and competitive advantage from the brands and distribution network . The company recently sold off some excess property and has been using the cash to do a buyback and also gave a special dividend. Overall the company has good fundamentals, strong competitive advantage and the management is allocating capital well. Finally the company was available at a PE of 8 (excluding cash) a month back. This was decent stock to buy, but I missed the boat on this one too.

So whats the point ?
Is it a case of sour grapes or a case of wanting to cry in public for missing such nice opportunities to make money 🙂 ?

I do my weeping in private :). The point is this – This risk is not missing these stocks. I am likely to miss such ideas during bull markets as the window of undervaluation closes quickly. The bigger risk is a change in my thought process.

I find myself getting impatient now, once I find a half attractive idea. In past when there was no risk of such stocks running away from me, I would analyse the company in detail and take weeks on end before making a decision. Now due to the above risk, I have done superficial analysis in some cases and later found that I missed some risks in the company. I have been lucky till date that I have not shot myself in the foot due to my impatience, but will have to be more careful in the future.

It is better to commit an error of omission than an error of commission (miss on a good stock than buy a lousy one).

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