'Stocks in media, aviation sectors looking cheap'

Soumya Kamath        Print Edition: November 2011

Ramesh Damani, a well-known individual investor, says investment in equities should not be for short-term gains.

What is your view on the stock markets?
It will be very difficult to time the markets over the next few weeks. But from a three-year viewpoint, I am very bullish. India's GDP growth will be on track.

Stock markets have always been cyclical. It's like sunset being followed by sunrise. I have sold some consumption stocks which I thought had reached their fair value. I will buy again if I find value in them.

Are you concerned over global economic developments?
Europe is dominating headlines nowadays. However, I am confident that the world will solve these problems.

Do you think the worst is over?
The markets must be lived forward but understood backwards.

Have you churned your portfolio in recent times? What are the changes you have made?
As I said, I have sold some consumption stocks. Technically, there is no sector that I have sold as such. I have sold stocks which had reached their fair value and I will buy them when they appear cheap again.

Is it time to remain in cash? How much percentage of your personal portfolio are you holding in cash?
Well, I have maintained 10-12% of my portfolio in cash for using it when extraordinary opportunities come up. Cash is also a source of comfort.

Which sectors are you are bullish on and which are the ones you are exiting?
I think that the media space offers a lot of opportunities. They are cheap. Media penetration will increase, and with improving literacy, I think media stocks will benefit. But it's a 5-10 year view.

Are you taking a contrarian call on certain stocks? If so, which ones?
As I said, stocks in media and aviation sectors are looking cheap. Media stocks have been very cheap, but the Cable Digitisation Bill and the GDP growth signal that good times are around the corner for these stocks. Airlines have been committing hara-kiri by going for constant price cuts.

However, I believe that growth will take care of the fall in prices and fees for baggage, etc, will improve the bottomlines of airlines. Further, FDI in aviation will strengthen balance sheets.

What are the criteria you adopt to identify good companies from the bad ones?
I look at the industry and try to understand the business of a company. I look at its balance sheet, its operating history, the quality of management and how the management is managing its capital.

The management should respect capital in the sense that it should not go for unnecessary dilution. I also look into the dividend policy and the cash flow, income tax paid, etc.

What investment strategy will you recommend for retail investors at this point?
Investment is a long-term business. When you are buying a stock, think that you are buying a part of the company's business. View it over a period of time and don't look for investment as a source of short-term returns.

Are you buying other assets such as commodities, especially gold and silver?
I have investment in gold, but it's like insurance. Since central banks are destroying paper money by injecting more money, gold will be a hedge against inflation.

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