Value Investing – A vision with reason.
Hope rally is driving Indian as well world stock markets. There is a hope of better earning as well global growth. Domestic money flow is tremendous in Indian mutual fund industry. Smart investors are always looking for value rather following rally.
Mfundz is always trying to find a value based approach for Value Investors, Maybe that is why we are getting an overwhelming response in our VIP even before completion of our website www.mfundz.com.
From last 12 to 15 months Indian Pharma sector is passing through the big pain. Mfundz is looking at the gain in this painful situation.
Overall, Indian pharmaceutical business revenue comes from domestic business is about 30%-35% and remaining 65%-70% is from exports. Nowadays challenges are on both parts.
# Domestic price control by a government on many selected drugs.
# Fighting of generic and branded.
# Price erosion in U.S. market.
# Regulatory problems from USFDA.
# Challenges in the new launch for Indian manufacturer due to plant related issues.
Pharma Sector is passing through these challenges and that is why the top stocks of this sector are also trading below its average historical valuations. Most pain is looking at the prices at this level and expecting pharmaceutical industry to consolidate over next two to three years. Now, let’s look at positive part,
# Domestic business is growing around 15-20% and likely to continue growing at this rate.
# Many other markets like Europe are still enjoying growth as well price acceleration.
# Consolidation phase will help larger companies to acquire small companies and expand market reach.
# Good spend on R&D will help in new product launches and gain market share.
# Lower cost of manufacturing is a strength in global competition.
# Plant related issues may resolve in next 18 to 24 months.
We believe that this sector will come out from these challenges in two to three years. One should look at this sector as a value investing opportunity by starting SIP for next two to three years. By that approach, an investor will get NAV at the lower price and enjoy the return of whole investing when a sector becomes relative value bet.