Review And Outlook:
Third quarter has been mixed quarter of sorts as far as corporate earnings were concerned. While the economy continues to drag with high inflation and low growth, Mr. Market is in a very happy mood as he thinks that Mr. Modi will will the next elections and he would be able to bring in positive changes to the economy. His enthusiasm has started pushing many midcaps into limelight. Midcaps made handsome gains in price terms due to this general happiness of Mr. Market.
While the market is generally not over valued yet, the current valuation is high compared to the current inflation and the economic cycle. Most of the businesses continue to be overvalued with very low expected returns in the future. In some cases, the prices have increased substantially while the net profit of the company has shown degrowth.
When the market is in a cheerful mood, it becomes difficult for us to hunt for bargains. If the current mood persists, we will have lot of difficulty in finding any new ideas with adequate expected future return and margin of safety. Most of the businesses in our portfolio has grown handsomely since Mar13 qtr. On portfolio level, our business market value grew by around 34% while the sensex growth was at 8%. Most of this is attributed to valuation growth by the market. In pure intrinsic or networth growth terms, our business business grew by 20% which is great.
