Invest In What You Know - Applying Peter Lynch Ideology to Indian Stock Market

Invest In What You Know Approach

Peter Lynch coined the famous investing ideology – “Invest in what you know”. As the manager of the Magellan Fund at Fidelity Investments between 1977 and 1990, Lynch averaged a 29.2% annual return, consistently more than doubling the S&P 500 stock market index and making it the best-performing mutual fund in the world. During his 13 year tenure, assets under management increased from $18 million to $14 billion. When he ran Magellan, he says, one of every 100 Americans was invested in it

Lynch got a lot of ten bagger ideas from buying stocks whose products he and his wife and children used frequently and liked them. How Peter Lynch’s wife Carolyn helped him spot a six bagger stock.

L’eggs is the perfect example of the power of common knowledge. In the early part of that decade, before I took over Fidelity Magellan, I was working as a securities analyst at the firm. I didn’t find L’eggs in my research, my wife found it by going to the grocery store. It was easy enough to find out that L’eggs was made by Hanes and that Hanes was listed on the New York Stock Exchange. Once Carolyn alerted me to Hanes, I did the customary research into the story. The story was even better than I’d thought, so with the same confidence as the fireman who bought Tambrands, I recommended the stock to Fidelity’s portfolio managers. Hanes turned out to be a six bagger before it was taken over by Consolidated Foods, now Sara Lee.

I will try to apply Peter Lynch’s approach to investing to Indian Stock Market. I will try to list down the companies whose products we use in our day to day life and are listed in the stock market. Do keep in mind that liking a product from a company should not be the only reason to invest. You should also look at the company financials before deciding to invest in it.

Investing In Indian Companies Whose Products You Use Frequently

FMCG Sector

Hindustan Unilever Limited(HUL)

Segment	Market Share	Brands
Oral market care	15%	Pepsodent, CloseUp
Soaps market	40%	Lux, Pears, Rexona, Dove
Laundry care	40%	Surf Excel, Rin, Wheel
Shampoo market	50%	Dove, Sunsilk, Clinic Plus
Cosmetics	20%	Lakme, Fair & Lovely, Vaseline, Pond’s
Branded Tea	20%	Brooke Bond, Bru, Lipton

ITC

Segment	Market Share	Brands
Cigarette	84.27	Gold Flake, Classic, Wills, Flake and Navy Cut
Packaged wheat	30%	Asshirwaad
Cream biscuits	25%	Sunfeast
Chips market	30%	Bingo
Notebooks market	25%	Classmate

Godrej Consumer Products

Segment	Market Share	Brands
Household insecticides	50%	Good Night, HIT, Aer
Hair color segment	30%	Godrej expert, Godrej Nupur
Soaps	10%	Cinthol, Godrej No. 1

Marico

Segment	Market Share	Brands
Coconut oil	59%	Parachute, Hair & Care, Nihar
Premium Edible oils	73%	Saffola
Oats	25%	Saffola
Hair gels and creams	60%	Livon,Set Wet

Dabur

Segment	Market Share	Brands
Toothpaste	10%	Dabur Red
Honey	50%	Dabur Honey
Ayurveda tonics	60%	Chyawanprash
Juices	45%	Real Juice
Digestives	50%	Hajmola
Amla hair oil	60%	Dabur Amla Hair Oil

Nestle

Segment	Market Share	Brands
Noodles market	60%	Maggi
Infant cereals	96%	Nestle Ceregrow,Nestle Nangrow,Nestle Milkmaid
Instant pasta	65%	Maggi
Chocolates	60%	Kitkat, Munch, Milakybar, Polo
Instant coffee	50%	Nescafe

Procter and Gamble

Segment	Market Share	Brands
Diaper	50%	Pampers
Sanitary Napkins	50%	Whisper
Shaving market	50%	Gillette
Shampoo	25%	Head & Shoulders, Pantene
Laundry Care	20%	Ariel, Tide

Britannia

Segment	Market Share	Brands
Biscuits	38%	Tiger, Time Pass, Good Day, Jim Jam, Marie gold, Little Hearts

United Spirits

Segment	Market Share	Brands
Hard Liquor drinks	50%	BagPiper, Signature, Royal Challenge, DSP Black, McDowell’s No.1, Romanov, Black Dog

United Spirits

Segment	Market Share	Brands
Beer	50%	Kingfisher

Banks

• HDFC Bank
• ICICI Bank
• SBI Bank
• Axis Bank
• Kotak Mahindra Bank
• IDFC First Bank
• Bandhan Bank

Consumer Durables

• Whirlpool
• Bajaj Electricals
• Havells
• Crompton
• Voltas
• Blue Star
• TTK Prestige

Retail Stores

• Avenue Supermarts - D’Mart Chain of stores
• Future Retail - Big Bazaar
• Reliance Industries - Reliance Fresh, Reliance Smart, Reliance Digital
• Trent - Westside
• Future Lifestyle Fashions - Central, Brand Factory

Clothing

• Aditya Birla Fashion and Retail Limited - Louis Philippe, Peter England, Van Heusen
• Future Lifestyle Fashions - Lee Cooper, Indigo Nation, John Miller
• TCNS Clothing - W, Aurelia

Cars and Commercial Vehicles

Maruti Suzuki

• 50% market share in passenger vehicles category
• Brands: WagonR, Alto, Swift, Grand Vitara, Dzire

Mahindra & Mahindra

• 40% market share in tractors, 7% in passenger cars and 25% in commercial vehicles
• Brands: XUV, Verito, Scorpio, Xylo, Thar

Tata Motors

• 45% market share in commercial vehicles, 5% in passenger cars
• Brands: Jaguar, Land Rover, Tata Tiago, Tata Tigor, Tata Harrier, Tata Nexon

Bikes

Eicher Motors

• 90% market share in premium bikes category
• Brand: Royal Enfield

Bajaj Auto

• 20% market share in bikes in India
• Brands: Dominar, Avenger, Pulsar

Hero Motocorp

• 50% market share in bikes in India
• Largest two-wheeler manufactirer in the world
• Brands: Splendor, Passion, Pleasure

TVS Motor Company

• 18% market share in Scooters
• Barnds: Apache, Jupiter

Tyre Brands

• Apollo Tyres
• CEAT
• JK Tyres
• MRF
• TVS Srichakra

Paint Companies

• Asian Paints - >50% market share
• Berger Paints
• Nerolac

Telecom

• Reliance Industries - Reliance Jio
• Bharti Airtel - Airtel

Flights

• Interglobe Aviation - >50% market share with Indigo
• Spicejet

Some other brands worth a mention

• PVR and INOX – Movies
• Titan - Tanishq
• Tata Consumer Products - Tata Salt, Starbucks and Tata Tea
• Jyothy Labs – Ujala
• Emami – Fast relief, Boro Plus, Fair & Handsome
• Colgate
• VIP and Safari – Luggage and travel bags
• TTK Prestige and Hawkins cooker
• Cera Sanitaryware and Kajaria Ceramics