Hi GUYS, let’s do some quick stock-specific discussion: DMART
– Our community would have made good money on this stock already (25%+ gains) in less than a year.
– The stock is trading at its average PE now.
– The PE for the firm size seems huge now (125)
– Earnings of the firm is growing at a decent rate (EPS is still growing)
– The price has been consolidated
– From a technical perspective: good stock right now.
Pros:
– DMART has a very strong business model. And, can ride the storm (as it has shown)
– A very clear competitive advantage for the firm is owning (most) of its store. This will never really jack up inflation for them
– As inflation picks up in the economy (which will happen); the profit growth rate will become high
– This is a very clear candidate for growing faster than the economy (and that too safely)
Cons:
– PE is way too high; the stock can correct 20% just due to PE correct at any point
– If the technicals of the stock become weak: correction can happen.
– Even when results are good- the stock can correct.
– The stock’s PE is unlikely to grow from this point; in fact, PE will come down; it might trade at Nestle PE after a few years.
What I’m doing:
– I am holding my positions (80-85%), booking 15-20% profits as safety.
The rest of the bet remains in the market from a long-term perspective.
Not an easy decision to buy more/sell
If you are looking to add diversification to your portfolio (eg. in my case, I am 80% finance stocks), holding this stock makes sense.
Should you buy more NOW?
In the short term: it depends.
You can wait for the breakout on the technicals, and then buy.
If the technicals are sustained, there is a 35% more gain on the stock (short-term).
This can very well happen after elections.
I have presented a complete picture, now its your call what you wish to do with it 🙂
Thank you for this.