To look at this problem in the Charlie Munger way (by way of inversion), let me see what I would NOT do.
- I would not invest in any company with the following characteristics:-
- Commodity producer
- Capital intensive (one which requires a lot of incremental capital)
- Large debt on its balance sheet
- Company with poor scalability of its core business
- Free cash flow is negligible or negative consistently
- Questionable management
- An insignificant player in its sector
The more I think about this from a top-down approach, the more I get driven towards FMCG, Pharma/Healthcare or Financial sectors. The main aspect for this investment would be that I would not want to lose much of the money. Here are some stocks I would shortlist:-
- CRISIL
- HDFC Bank
- SBI
- Apollo Hospitals
- Cipla
- ITC
- Godrej Industries
- Titan
The specific pick can vary but I think over time the probability that all these stocks will beat inflation (and fixed deposits) is high.
You can add Page to that list - a company that has grown at 30% for more than 10 years now without a single down quarter.
ReplyDeletePage - is a very good company, but I am not very sure of the moat it has. There is hardly any entry barrier in the business it is in. I am trying to use Buffet's yardstick of a sustainable business here. If I have say, a 100cr war-chest, can I compete successfully against Page. I think the answer to that question is yes.
ReplyDeleteHowever, I dont think I can compete with a SBI or HDFC Bank or CRISIL or Titan even with a very large war-chest.
Having said that I believe Page would continue to enrich its shareholders for a while to come.