ITC

"Nobody got fired for buying IBM" == "Nobody lost money buying ITC"

This post is about another one of my darling portfolio holdings - ITC. The stock has been one of the top performers throughout the year. Maybe because most money managers are rushing for safer a.k.a less volatile businesses. ITC is the bluest of the blue chip in one of the most non-volatile sectors - FMCG.

Introduction
ITC is a conglomerate ranging from cigarettes to hotels to consumer goods. The company has completed 100 years in 2010 and over these years has built great businesses and amazing brands. Wills, Classic Milds, ITC Hotels, Fiama De Willis, SunFeast, Bingo, Classmate and PaperKraft - to name a few. It is no doubt that this company touches our lives each day and hence a worthy business to look at.

Investment Thesis
It is difficult to value ITC under any one sector. One approach would be to use a SOTP analysis on separate business divisions. This would be difficult for a lack of data. the other approach would be to apply model on consolidated statements since all the subsidiaries of ITC are 100% owned with minuscule minority interest.

The cigarette business has deep consumer preferences and an amazing brand equity. People willingly buy their favorite sticks never switching because of prices going up. ITC has raised prices of cigarettes each year since 2007 and still there are shortages in the market.

ITC has already captured the second post in the organised biscuits market with its SunFeast brand and the numero uno spot in the chips segment through Bingo.

The agriculture business has been consistently reducing losses on an operating level and will most likely turn profitable in the next fiscal.

The consumer goods business is the only bleeding spot and ITC is finding it difficult to compete against the bell weathers like HUL and P&G. However, ITC has still not thrown in the towel.

ITC hotels report the best margins in the industry and with tourism looking up hotel business would reap in big profits.

The Question
Therefore, on a qualitative front there is nothing wrong in this business. It is a stock that Warren Buffett would kill for. The question is - "Will you buy it at 203 per share" - ah that is the question.