'Get Out Of The Old' — Ajay Srivastava's Investment Advice For The New Year

Ajay Srivastava: Worried? Do you think anybody is worried? I can't believe anybody's worried about this party. 

Ajay Srivastava: So, oh my God. You know, I have God's grace and I think about what's happened to all of us. I think the equity investor had a good deal in the last two years. This year has been exceptionally well, of course. Therefore, you know, one should take the glass half full and say we made a lot of money. Let's go and enjoy ourselves rather than worry about what's going to happen next year.

I'll tell you what's going to happen next year. Next year, the U.S is going to do extremely well. It will take the world economy up. We will have our own set of problems. But as always, the economy is different, the market is different. So if you're a stock market investor, I don't think you need to worry about anything next year. The changes we're seeing in our economy makes our stock market a little more impervious from what's happening with the general economy.

So yes, growth is down, but your portfolio will do well because why my portfolio too well? Because you are investing in the companies which are changing the market structure today. So it doesn't matter. Economy can grow 5%, your companies are going to grow 40%.

Ajay Srivastava: Without recommending any company, let's give a very simple example. The quick service companies, which are coming into whatever you want to call them, whichever way, including home catering, right? What are they doing? They're replacing your kirana markets. Now kirana are hundreds and millions of people who operate small shops everywhere. Now, as they get replaced, there are millions of people who will drop out from the consumption line, who are earning a decent living, but now need to go back to the dole or whatever. But the companies who are consolidating this whole move, they are going to make tonnes of money.

If you are invested in those companies, you gain a lot. So you know, the same market structure, change of consolidation of quick deliveries into your homes, which will hurt, unfortunately, hurt millions of people who run kirana stores, and therefore cannot. In fact the economy, on the other hand, has a reverse impact on a portfolio. You're going to make money because the companies doing this work are going to make a serious amount of money. So the same thing, you know, which is very bad for millions of kirana is going to be very good for some other company, that if you invest in those companies, you got to be making dividends out of it.

The second point is, these companies are well capitalised. That's the more important point that you know they've got capital, the ability to bring in more capital. They're growing, they are new ideas, therefore, you are seeing an exponential growth rate, not only in terms of the business volume, but in terms of acceptance, main line. You see how Bitcoin has come up 100,000. It took a long while for Amazon to hit new highs globally. It was in the dumps for a long time. Same has happened to our companies. Hardly anybody invested in the company, worried about the losses, New Age, don't understand it enough and so on and so forth. Gradually you are accepting it. People are saying, yes, I think we need to get away from cement and steel and all the old foggy companies and dodgy companies, and say, go on to the New Age.

So therefore, if your portfolio is geared toward newer companies, newer age companies, raising serious capital, and new IPOs, you will do much better than the general market. Nifty 50, by and large, is fuddy-duddy at this point of concern, if you're focused there, I think you are in the wrong place in the market.

Ajay Srivastava: Not at all. It's been three years, I've touched a consumer stock. I will not touch them. I told you, it's fuddy-duddy, it's old age. You don't go back to Fiat, right? Do you want to own a Fiat? No, you don't want a Fiat. You want to own an electric car at this point of time, as I said very clearly, you know, the economy will do its own thing. It's got a problem. Economy's got a serious problem and you know, there's no mystery, it doesn’t matter which political party has to give doles or helicopter money to get the votes, because a lot of these developments are passing by millions of people at the end of the day. They're not invested in the market and if you're not invested in the market and you don't own gold and you don't own real estate, I think you're in a terrible place thanks to inflation. So therefore, you know, by nature, without passing you know what's equity, not equity. But the reality is that if you're owning equity, if you're owning gold, if you're in real estate, you're on the winning side of the market. So don't worry about the economy not doing well.

Capital expenditure, the biggest theme for the last two four years, is gone. Government's growth of capital expenditure cannot be more than five-10%. So what was growing 40% two years back is going to grow 10%. So if you're still in the infrastructure stocks, your returns may come, but it will be much, much lower, because government cannot keep spending the money and the money which is required to give, you got new elections coming up in UP etc, by the time the toll of this 2,500 rupees per person goes out, I don't know how much we left to spend on development. So our worry is always that this fiscal profligacy of giving out doles is going to haunt us one day. Now, it may not haunt the equity investors, but certainly going to haunt the economy. 

Ajay Srivastava: If you don't own it, you got to be living under a bunker somewhere at this point of time. I'm not recommending you go buy today, please. I can't recommend it. But if you told all these companies, where have you been living, my friend, are you in a bunker with the Second World War? You know the point is, again, the same point that if the economy grows by 5% or 6% or whereabout,  how much can a cement industry grow? How much steel can a steel grow? If the government's capex budget cannot grow more than 10%, companies downstream cannot grow more than 15%, 20% 15%, 20% but companies reordering the market structure, newer age companies, the new engineering companies coming on board. You know, it's amazing.

I tell you something, I've never seen a more vibrant equity market than the last 12 months. So many new themes are coming up today. What today or tomorrow? We are opening an issue called Indian Geological, I'm not recommending it again, which is called rating of diamond. Last, when did you think of these companies coming? Koreans, they are minting money out of this country, but it's horrible to see them taking money out. But that's the reality of the market, that Rs 18,000 crores Hyundai, Rs 15,000 crore LG Electronics. You know, there are so many names and themes. I tell you something, if you're still in the old companies, get out. My friend, the world out there is beautiful. 

Ajay Srivastava: Okay, no, there is one largest sector which we have, the Hospitals. We have a fairly large investment in hospitals. We have added up in this year significantly And again, the same theme is that at the end of the day, as wealth goes up, as population ages, you need to go for health services. Now, the government is not spending enough on health. We all know that. You saw the budget numbers. There's not enough hospitals for people there, and if you try to get a bed in the hospital, any of you, unfortunately, you realise how much of a shortage there is in the market.

So yes, I call the Hospitals the New Age because that's the way they run these companies. They're running for utilisation. I hate to use the word, but they do run it to make money for investors. Now, patients may hate it, because you may do four procedures instead of two, but the fact is, for investors, it's a good time. So hospitals are the biggest sector that we are in among "old age". But primarily the question is, everything that we've got, 80% of the portfolio got and recommend at this point of time is companies which have been in the market less than three years.

Ajay Srivastava: It's an insane season. One listing is happening just now for a life sciences company, a crazy listing. I can't understand how anybody's paying but where people are paying for it. So it's okay, you know. So listing again, back to the point that you know, you need to be opportunistic about listing. We just had a new sge company listing, literally at the issue price, and then through the next four days, it flew 20%. So it gives you a chance to get in, but you got to be careful where you're buying it. If you're buying it from an old business guy in a new model, that's the bad place.

CDMO, you know, it's okay, but nothing very great about it, it's not going to give you exponential growth or any kind. So even in listing companies, you have to be careful what you're doing, and you will not do a new theme, like a company I just mentioned, I don't know enough about it, so please have not done research. But prima facie, when the guy might be a guy told me that this is a company doing geological certification. It's a new company. You don't have a competition. It's the kind of stuff which new things do. So perhaps something like this is good in a portfolio.

So you know, you have to choose your listing that the company is new in a true sense of the word, not old age guys as a new company. I think there's no old logic that everybody put dot.com once upon a time, every putting AI right now. So you got to be careful of that, as long as you care for it.