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Will buy pharma only on correction; wary of metals: Quantum

Pharmaceutical shares are expensive because earnings growth don’t justify the valuations, says IV Subramaniam, MD & CIO, Quantum Advisors. Besides there are regulatory and product related risks as well, he says.

“Unless we see some significant correction in them I don’t think we will invest in pharmaceuticals,” he says in an interview to CNBC-TV18.

Metal stocks are cheap, but there are no triggers that could imporve valuations, he says.

“We need to see some triggers for these stocks to unlock value and that triggers could be improvement in global sentiment, business, economy etc and there we think it will take some more tim,” he says.

Below is the transcript of IV Subramaniam’s interview with CNBC-TV18’s Anuj Singhal and Ekta Batra

Anuj: Big surge in pharma names over the last five or six days. Do you think this is the leadership sector now and would you put incremental money to work in pharma stocks?

A: I will not put incremental money to work in the pharma stock right now, the reasons being that I still find it very expensive. So bear in mind that at Quantum we are very value conscious, we focus on valuations and most of the pharmaceutical companies at this point I still find them expensive. There are risks, there are regulatory risks and new product launch, those we are willing to account for but even if we account for that and we look at the earnings profile of these companies we find them expensive. So, unless we see some significant correction in them I don’t think we will invest in pharmaceuticals.

Ekta: Would you share that about maybe the metal space as well just for the opposite reasons?

A: Yes, for the opposite reason you are right that metal space does look cheap. So, we do have some stocks in our portfolios but we may not add a lot because we need to see some triggers for these stocks to unlock value and that triggers could be improvement in global sentiment, business, economy etc and there we think it will take some more time. So, unless it becomes more cheaper and I am able to average my existing stocks and bring down the average cost then we may be willing to put more money but otherwise we are quite happy with what we have at this point in time. But valuation wise we definitely think they are much more cheaper and also even if you look at the historical numbers of these companies the valuation definitely looks on the lower side but there are no immediate triggers for these stocks to do well. So, I would wait a little before adding on.

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