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Betting on Turnarounds, Consumption Boom Myth, and More... - Views on News from Equitymaster

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The Equitymaster Research Digest

Betting on Turnarounds, Consumption Boom Myth, and More...
Nov 24, 2015

Currently, 2,563 companies trade on the BSE. But are you, the investor, truly spoilt for choice?

I have been in the profession of screening stocks for more than a decade, and I have never had this luxury. I have always been on a team that errs on the side of caution. Companies without respectable track records get automatically filtered out. Meaning a vast majority of the listed companies never made it to our recommendations. And the vast majority of today's listed companies won't either. So the universe of stocks to invest in remains limited.

But one thing has changed. And that's our ability to bet on turnarounds.

Does that mean in the past we didn't bet on business with turnaround prospects? Of course not. Our first ever recommendation on Titan Industries in Februray 2004 was a classic turnaround bet.

Titan was then predominantly a watchmaker struggling to diversify. The company had problems in managing debt levels due to its working capital cycle. And despite its strong brand power, Titan was unable to leverage its distribution network. We saw the company's brave foray into branded jewellery (the first player to do so) as a game changer. This along with the balance sheet restructuring was enough for us to bet on the company's turnaround.

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