Saturday, October 15, 2011

FMCG - no Pharma - Yes

FMCG, Pharma are both defensive stocks. But I frown at FMCG stocks and prefer Pharma for the following reasons:

1. FMCG has easily duplicatable products. All biscuit manufacturer have cream, marie, butter buiscuits and also take for eg huge player like HUL, which has several soaps. If Liril’s share is increased, it might be eating the Pears

2. Heavy.. very heavy Adv cost in FMCG and brutal price wars

3. People need new products or improved products every week

4. In Pharma the doctor chooses the best product and ppl don’t mind paying price

5. In Pharma even though we’ve generics, Doctor knows whats the best and they choose the leader

6. Unlike FMCG in Pharma there are fewer ppl who decide what to buy, its easy for the Pharma companies to sell to them

Change in my Investment Style

Initially I was investing in bulk per month say 5k/month in a single share – now I’ve changed it to 1k per week – different shares every week
I was initially worried about the loss, I was like if I invest in a share @100 and now it’s is 80, I’ve to invest in a lot more, so that I can average my money. That’s a dead trap, now I’m comfortable looking at the loss and if I believe that the fundamental is still fine I still don’t worry about keeping my loss low. If I find the share interesting I still buy only once a week that too only for 1k, so even if I’m wrong my loss is not substantial.
If the fundamental of the company changesor of the loss is huge – then I book my loss
I’m reasonably good in booking loss, but have not yet booked gains. I believe in staying long term (many many years and exiting only when I need money or if the fundamental changes)
I’ve to work on exit criteria. Should I make 10% stop loss a rule? I’m worried about unnecessary selling and again buying the same share, it will increase my transaction cost. My philosophy is don’t try to manage short term. A good stock even if I bought in 52 week high will still be a good appreciation after 5 years