Safir Anand on contra buy in a post-Covid world | Economic Times

When you look at your portfolio, you cannot be just driven by momentum and what is in the thick of things, says the strategist and investor. As an investor, are you brave enough to contra buy right now? There is distress in the economy and segments like travel and tourism, hotels, aviation, multiplexes. Is this the time to buy? Whenever the economy recovers, these stocks are bound to do well?Absolutely. When you look at your portfolio, you cannot be just driven by momentum and what is in the thick of things because no matter what I see, I could be wrong and that is the nature of the world, the world transforms before we know. Every investor knows that there is something called reversion to mean. The question is whether the reversion to mean is going to happen in six months, one year or two years but since it is the nature of Nifty for example, or the Sensex to outperform, it is very difficult for an investor to keep coping with that in order to beat the market. There has to be a consequence in your portfolio that you believe will bounce back. Now the first criteria is that the business should not be destroyed. As an example, I turned bullish on the auto segment several months back and the argument was logical and I do not say it is illogical that there is a disruption there which among other things has to do with e-vehicles. Tesla has proven that what e-vehicles are doing but at the same time, because of the migration to rural areas, people use things like motorcycles and scooters to commute a lot. Some of the European countries for reasons of social distancing are also moving to scooters. Many parts of Europe are very fond of scooters and motorcycles. That balance will always be struck between the price of a company and the opportunity, if you believe that is going to be destroyed. When you come to hotels, the largest listed company is Indian Hotels. The Indian Hotels market cap is about Rs 6,000-7,000 crore and that seems to be ridiculous. But you know that they may not sell their hotels. They have at the same time comforted you with the fact that they are not going to buy more hotels. So, as and when they generate cash, it is not going to be put into buying assets. They are reinventing the model. Tata SATS which caters to all the airlines is now not doing so well because the airlines are not doing well and they are migrating that business into the equivalent of a Cloud kitchen and just developing an app which is called as Qmin which is quick minutes. Obviously, Tatas have the bandwidth of TCS and some of their other companies to understand technology well and now they have come and say we deliver the food to your home. The contra argument is going to be that some part of the business will come back, but it may be so expensive that I may occasionally do this and not frequently. But if the business moves towards Tata SATS and they come and say we are using our Cloud sort of business to deliver, then are you trying to say that the market cap of some of the QSR businesses will not get bridged if not equated because these guys will hopefully do a great job than their new businesses. So that form of innovation will always happen and at some point of time later you will come and say look I am so sick of sitting in my home that I am just waiting for Covid to get over and then I am happy to go into a hotel. They have rules in some parts of India that if you book a hotel, you have to book it for five days if you are going on vacation so they are guaranteed five days of stay no matter what! The other work from home beneficiaries if one can term them that is Zerodha and other platform companies because of the rise in hobby trading or Robinhood traders. But the other ones like the laptops, TVs, Netflix and other OTT platforms, telecom consumption and a lot of ancillaries stand to benefit from the work from home models?Absolutely and that is why I said that the market has got a dichotomy; there are businesses that are doing phenomenally well and there are businesses that are struggling and if you look at an entire pie and you reshuffle the money that exists in that pie, then you discover that it is clearly moving towards one side of the market vis-à-vis the others. But the moves appear to be a frenzy and only time will tell is also somewhat justified by the migration of a way of life. The very fact that we transact, watch Netflix. An ordinary housewife because of the need for her to reinvent the food and to continue to have a social interaction, we have seen the amount of innovation that is happening in food. That is exposing India to newer levels of food that they perhaps had not experimented with. All that goes well for the economy, for consumer companies because they have substituted some part of their eating out budgets into buying these newer kind of food, cheese, olive oil to experiment at home. At the end of the day, man is a social animal. We are going to have to bridge the gap between humanity and social at some point of time and we will again have new businesses -- whether they are entertainment, collaborative or preventive and whether we will allow somebody to come into your home and set up a nice entertainment but at a certain price!