15/15 perfect ratio

I had bought Cera Sanitaryware at 30 Rs in 2009 and sold it at 60 Rs in the same year.

Then I bought it back again at 300 Rs because the ROE metrics and market share was improving. I held it until 2015 and sold this time around 2000 Rs.

https://lifeandequities.wordpress.com/2010/10/04/cera-sanitaryware-ltd-is-a-buy/

Now Cera grows at ~15% and sells at 50 times earnings.

cera

My opportunity cost now is 3.5% dividend yield company with 45% ROE (if you exclude cash) at 15 PE, 10-15% growth. Same business, tiles and bathroom fitting, only better because its products are more aesthetic and wins Reddot and IF design awards.

Does have 60 Million GBP pension liabilities as a negative but smashing business at reasonable price. 150 Million dollar market cap at 10 million dollar profits. The acquisitions started are becoming assimilated and the growth momentum may sustain.

Wonderful products and brands indeed, including Johnson Tiles.

https://www.norcros.com/our-businesses/united-kingdom/johnson-tiles/

Annual Report: https://www.norcros.com/investor-centre/reports-and-presentations/

Not invested as of today but may invest in the future.

Then there is a very cheap company going at 4 PE multiple, no debt, MNC parentage, and 10% dividend yield in one of the pacific islands, but zero revenue/profit growth for the next few years. It is not going to go to zero ever. Does it really matter in this case if there is no growth? Don’t I get all the money back in 4 years if I were the owner at 4 PE multiple, and then can sell the business to a private buyer in the fifth year? Can’t name as I may have to kill.

Then there are a whole bunch of companies growing at 15-30%, selling at 30-100 PE. Not pressing my buttons, these ones.

For now I am neither going with 4 PE nor 50 PE, as it goes with clear vision 20/20 I like the PEG 1 at 15/15 model (15% growth at 15 PE). Before the music stops, you also want your portfolio to be full of 15/15. I can’t help but wonder what will happen to those holding 10/70 or 10/50 stocks. We underestimate the madness (forgetfulness) the new generation brings to the markets, to learn the lessons.

Disclosure: Invested in positions discussed. Views are personal notions and do not represent any organisation or company. Investment in stock market can (and many a times do) result in loss of principal capital.

http://www.elevendimension-funds.com