Analysis of Titan -- a great time to buy? | Akshat Shrivastava

Summary

In this insightful video, Akshat Shrivastava, an ex-management consultant and seasoned investor, discusses the recent 7.5% drop in Titan's stock price and whether it presents a buying opportunity. He cautions against investing solely based on a stock's fall, emphasizing the importance of reasonable valuation. With Titan's market cap at 2.92 crore, Shrivastava questions the stock's potential to double in the next few years. He compares Titan's situation to HDFC Bank, suggesting HDFC is at a more reasonable valuation. Titan's growth, he explains, was largely due to the transition of India's jewelry business from unorganized to organized sectors, a trend that has played out. However, with gold prices, a significant contributor to Titan's profits, unlikely to double again, and intense competition from established and expanding players, Titan may face challenges in maintaining its market leader position. Shrivastava also highlights the stock's high PE ratio of 84, indicating a sentiment-driven, rather than a fundamentally supported, valuation. He concludes that Titan appears overvalued and a substantial correction could occur, recommending investors wait for a more sensible entry point.

Takeaways

• 📉 Titan's stock has recently fallen by approximately 7.5%, raising the question of whether it's a buying opportunity or should be avoided.
• 💡 The speaker, Akshat Shrivastava, is a former management consultant with experience in finance and portfolio management, offering a professional perspective on the stock market.
• ❌ Avoid investing in a large company with an unreasonable valuation, even if the stock has recently fallen significantly.
• 📈 Titan's market cap is 2.92 crore, and the speaker questions whether it can double in the next 4-5 years, which is a critical factor for potential investment.
• 🔍 Historical growth, such as the investment by Rakesh Jhunjhunwala in 2002-2003, should not be the sole basis for current investment decisions.
• 💎 Titan's growth was tied to the transition of the Indian jewelry market from unorganized to organized, and the rise in gold prices significantly contributed to its recent rally.
• ⚖️ The speaker suggests that gold prices, which have doubled in the last 4-5 years, are unlikely to double again, impacting Titan's potential for growth.
• 📉 Titan faces macroeconomic challenges, including competition from other strong players in the jewelry market, which could affect its market share.
• 📊 Titan's market dominance in its most profitable business segment is declining, as evidenced by recent data.
• 🚫 The speaker considers Titan's current valuation to be overvalued, predicting a potential 30-40% correction for the stock to become a sensible investment.
• ⏳ If Titan does not experience the expected correction and instead rebounds, the speaker is willing to miss out on the rally rather than invest at an overvalued price.

Q & A

What is the current situation with Titan's stock price?

The stock price of Titan has fallen by approximately 7.5% as per the speaker's tracking of the market.

Why should one be cautious about considering a stock just because it has fallen significantly?

One should be cautious because if the valuation of a large company is not reasonable, it's generally advisable to avoid it, regardless of the recent drop in price.

What is the market cap of Titan as mentioned in the video?

The market cap of Titan is mentioned to be 2.92 crore, which the speaker refers to as a fairly big company.

What is the primary factor to consider when evaluating if a stock like Titan is a good investment opportunity?

The primary factor is whether the market cap of the company can double in the next four to five years, as that would likely lead to a doubling of the stock price.

What is Akshat Shrivastava's background and how does it relate to his expertise in finance?

Akshat Shrivastava is an ex-management consultant who worked with a top-tier management consulting firm, studied finance at INSEAD business school, and now manages a sizable portfolio and is starting his own hedge fund.

What is the historical context of Titan's growth mentioned in the video?

The growth of Titan is tied to the transition of the jewelry business in India from an unorganized to an organized sector, which was a trend that Mr. Rakesh Jhunjhunwala capitalized on.

Why might the speaker be skeptical about Titan's ability to double its market cap in the future?

The speaker is skeptical because Titan's growth has already been significant, and the market cap is already high. Doubling from the current valuation seems unlikely without substantial market expansion or growth.

What is the speaker's view on the potential for gold prices to double in the next few years?

The speaker estimates that gold prices will not double in the next four to five years. They expect decent growth but not a doubling of gold prices.

What macroeconomic problem does Titan face according to the speaker?

Titan faces a macroeconomic problem due to the shift in the jewelry industry and increased competition from organized sector players. It is unlikely that Titan will dominate all segments of the market.

What is the speaker's view on the current valuation of Titan?

The speaker believes that Titan is currently overvalued and suggests there could be a correction of about 30-40%, making the valuation more sensible.

What is the risk associated with investing in Titan at its current price, according to the speaker?

The risk is that the stock could potentially fall by 30-40%, which would make the valuation more reasonable for investment. The speaker also mentions the high PE ratio as a sign of sentiment-driven, rather than fundamentally-driven, valuation.

What is the speaker's recommendation for investors interested in Titan?

The speaker recommends waiting for a substantial fall in the stock price before building a position. He also suggests that if the stock bounces back and goes up, it's okay to miss out on the rally.