The Research Head felt that nobody would be interested in a remote South-based kitchenware company. Over the next 8 years, the stock almost became a 100-bagger moving from Rs.77 to Rs.7,000. There is a larger message for investors. When you get an investment insight from the supermarket or the mall, it makes sense to dig deeper. Here is how you can actually pick up investment stories at the supermarket.
Where is the retail investing shelf space focused
There is a simple rule to follow. Most product manufacturers can only buy shelf space up to a point. After that, shelf space has to buy space for itself. What does that mean. Go around 4-5 malls and check out which product is seeing a lot of retailer enthusiasm in offering shelf space. Normally, the shelf space is the biggest asset of any retailer and they would give it the fastest selling products. It could be a crockery brand, or a line of jeans or even sanitary ware. In fact, back in 2013 sanitary ware stocks became big stock market stories but the indications were available in the amount of shelf space they were getting at outlets. Don’t miss that signal.
What is selling like hotcakes
That is an idiomatic expression to describe products that move really fast. A classic example is La Opala that makes crockery for Indian markets. Back in 2013, the stock was almost languishing as a penny stock. Then the company changed its strategy, worked on brand positioning and visibility. Soon, La Opala was available in almost every store and buyers saw value for money. By 2015, the stock had become a 30-bagger. Here again, you would have been lucky not to lose the lesson of the supermarket.
Which is the top brand recall at the superstore?
This was best exemplified in the case of Maggi, which went through a rough patch post 2014 due to the ban. For over 25 years, Maggi had been the undisputed king of the noodles market. When the product went off the shelves post the ban, many other brands tried to enter the space and establish their brand with limited success. The stock of Nestle languished for almost 3 years at sub-5000 levels. Once Nestle got over the crisis and reintroduced Maggi, it was clear that people were still flocking to buy Maggi with a vengeance. One had to only see this trend in any store to go and buy the stock of Nestle. Over the next 3 years, Nestle India almost became a 4-bagger, quite an achievement for a steeply priced stock. The message was again at the store.
Where do buyers gravitate towards
What type of companies command a premium in the stock market? The answer is to check where people gravitate at the store; which is determined by top-of-the-mind recall. We saw that amply in the case of Maggi Noodles. When you talk of quality washing, the choice is either a HUVR product or a P&G product. In oral hygiene, it is usually Colgate Palmolive. It is this top-of-the-mind recall that determines premium valuations.
How many translations from display to cash counter – value proposition
How do you judge if a product at the superstore has a value proposition. It has to translate into sales. As you walk around the superstore, check for two things. Check out what are the products that the sales personnel are aggressively pushing. Also check how many of these sales pitches are actually translating into sales and ending up in the shopping bags of customers. That is the acid test. The more the translations, the better the value proposition and better the chances of the entire chain translating into market value.
It happens so often that we dismiss the very fundamental insights that we may get at the supermarket. It could be a specific product recommended by your wife or a product that is demanded by your kids. Above all, it could be a product insight that you have picked up at the supermarket where you see a sudden surge in buying interest or brand recall.
These are your triggers for delving into the stock in greater detail and understanding if there is a story in it. The legendary fund manager, Peter Lynch, once said that he had picked more of his stock ideas from the neighbouring supermarket than from all the analyst meets that he had attended. That is a sure positive affirmation of the superstore theory!