I have not written for a long time because there was nothing which was happening much in the markets. I mean the markets were at stretched valuations. Then in the last month, the values of businesses collapsed and they are again cheap. Some good businesses like Axis Bank, Noida Toll Bridge and Vaibhav Global have
become worth buying. I have bought some shares in these three businesses, in the last one week.
As I have written earlier also, the markets give at the most 10 buying days in an year during a bullish phase. The patient intelligent investor deploys his money at that time. The rest of the time he attends to his work, passion or occupation.
In his book The Most Important Thing, Howard Marks, Chairman of Oak Tree Capital, says “Patient opportunism –waiting for bargains—is often your best strategy…..You’ll do better if you wait for investments to come to you rather than go chasing after them. You tend to get better buys, if you select from the list of things sellers are motivated to sell rather than start with a fixed notion as to what you want to own. An opportunist buys things because they are offered at bargain prices. There’s nothing special about buying when prices are not low.”
Please remember extraordinary returns are a function of buying right and then sitting tight. Patient Opportunism is painful. The markets may ignore your businesses for long, making you wonder about your decisions. But if the business is fine, the price will eventually follow the value.
A lot of people ask me the reasons for my belief in Noida Toll Bridge, what with risks of government making it a free toll road, other bridges being built in vicinity, farmers agitation, etc etc.
My answer is, the business is generating huge free cash flows. This cash will be distributed to shareholders only as dividends. The government is unable to get road projects off the road because of its wayward terms and conditions, businesses don’t invest in ventures where the dice is loaded completely against them. Other bridges in vicinity will not take away the business of DND Tollway because the number of vehicles have increased exponentially and another bridge will only meet part requirement. The Metro is bursting at seams in peak hours. So, commuters will still use the DND toll way for a smoother and faster ride. And at Rs 24 a share with dividend of Rs 3. It is a bargain deal with an assured 12% return on investment, even if share price does not move for 10 years. In the last 4 years I have taken Rs 0.5+1+2.5+3 ie Rs 7 as tax free dividend per share. At my purchase price of Rs 21 it is a decent return. The share price has yo-yoed between Rs38 and Rs 23 in the interim. What do I do ? I add more at Rs 23-25 range and think of it as a Tax Free Bond.
Just an out of the box thought — If you have Rs 2.5 Million and are thinking of buying a house, purchase 100,000 shares of Noida toll bridge and leave them for 10 years. You will start getting Rs 25000 per month as tax free rent. (dividend of Rs 300000 per year). That’s far superior to the Rs 24000/- my friend gets on his 3 BHK apartment in Gurgaon, purchased for Rs8.5 Million. And the problem of finding tenants, maintaining the house, paying taxes etc is not a botheration any more.
Go there and be brave, if the market falls another couple of thousand points, just buy some good juicy businesses. ITC below Rs 300/- is again a falling knife I would love to catch.