Thursday, 11 May 2017

Porinju Veliyath Recommends Two Multibagger Stocks in Housing & Infra Sector

Porinju knows that novice investors cannot be allowed to venture into Dalal Street unescorted. They will invariably buy junk stocks and burn their fingers.


So, to aid the thinking process, he has drawn attention to two top-quality stocks, namely, Everest Industries and Ramco Industries.
Both stocks are powerhouses with top-quality managements, though they are presently not in fancy amongst investors.
He opined that both stocks will do well given the huge boost that the housing and infra sector is going to get in the foreseeable future.

Everest Industries

About


EVEREST INDUSTRIES LTD – KEY FUNDAMENTALS
PARAMETERVALUES
MARKET CAP(Rs CR) 429
EPS – TTM(Rs)[*S]1.60
P/E RATIO(X)[*S]173.75
FACE VALUE(Rs) 10
LATEST DIVIDEND(%) 50.00
LATEST DIVIDEND DATE21 JUN 2016
DIVIDEND YIELD(%)0.39
BOOK VALUE / SHARE(Rs)[*S]225.94
P/B RATIO(Rs)[*S]1.23


Pros:

- Company has been maintaining a healthy dividend payout of 24.37%

Cons:

- Company has low interest coverage ratio.
- Company has a low return on equity of 8.46% for last 3 years.
- Contingent liabilities of Rs.136.27 Cr.
- Company might be capitalizing the interest cost


Wednesday, 26 April 2017

How an investment of Rs.10000 grew to Rs.535 Crores in 34 years




Courtesy: getricher.in

WiproIf I had the technology to send a message back in time, I would tell my father in 1980 to “Use Rs.10,000 to buy 100 shares of Wipro as an one-time investment and never sell it for the next 30-35 years.” If he had done that his investment would now be worth about Rs.535 crores. Yes, you read that right. Crores, not thousands or lakhs.

Rs.10,000 to Rs.535 Crores

Lets just assume that you bought 100 shares of Wipro each at a face value of Rs.100 in the year 1980. Total investment: Rs.10,000. You don’t touch it at all, no profit booking or buying more shares. Occasionally companies provide benefits to its shareholders by way of corporate actions. They could provide bonus shares for shares that you hold, they could do a stock split where a high face value share would be broken down into smaller face value shares but number of shares increases proportionately, etc.
Wipro has done various such bonuses and stock splits in its history of 1980-2014. 
Wipro Investment growth
YEARACTIONNUMBER OF SHARES
1980Initial Investment100
19811:1 Bonus200
19851:1 Bonus400
1986Stock split to FV Rs.104,000
19871:1 Bonus8,000
19891:1 Bonus16,000
19921:1 Bonus32,000
19951:1 Bonus64,000
19972:1 Bonus1,92,000
1999Stock split to FV Rs.29,60,000
20042:1 Bonus28,80,000
20051:1 Bonus57,60,000
20102:3 Bonus96,00,000
After the year 2010, there were no more bonuses or stock splits. But with just that initial investment of Rs.10,000 (100 shares) you now would end up with 96,00,000 shares of the company because of all the stock splits and bonus shares. Current stock price of Wipro is about Rs.557 per share, as of 7 April, 2014.
Rs.557 × 96,00,000 = Rs.534,72,00,000 or about Rs.535 crores. That is a CAGR (Compound Annual Growth Rate) of 47.39%. Does any of your bank FD give you 47% annual interest rate? It was all possible because of the free shares that the company gave to its shareholders as an incentive for investing in their company. If you immediately needed to liquidate this entire holding today (urgent need for >Rs.500 crores?), you can do it and you would have to pay a grand total of 0% tax on your profits, because long-term capital gains in equity is tax-free.

Tuesday, 25 April 2017

JHS Svendgaard: Update

This is to inform that the on-going disputes at various courts between the company (JHS Svendgaard) and various group companies of Procter & Gamble Inc. in India, have been settled with mutual consent and concluded positively for JHS 

Real Multibagger : Update

Freshtrop fruits recommended for Rs.60 now @ Rs.106.5

JHS Svendgaard recommended for Rs.38 now @ Rs.58

Sunday, 6 November 2016

REASON BEHIND THE BEAR MARKET

IN THE RECENT PAST WE HAVE ALSO SEEN HOW MARKETS IGNORED BREXIT AND REXIT AND MOVED FORWARD

Image result for bear market
NOW LET US LOOK AT THE EVENTS WHICH WILL CAUSE UNCERTAINTY AND MAKE PEOPLE BELIEVE THAT RALLY WONT SUSTAIN
  1. U.S ELECTIONS
  2. Q2 EARNINGS ARE MIXED 
  3. FED RATE HIKE IN DECEMBER
  4. ITALIAN REFERENDUM
  5. GDP DATA OF WORLD DURING JAN
  6. BUDGET AROUND JAN FEB
  7. U.P ELECTIONS 
  8. WITHDRAWAL OF LONG TERM CAPITAL GAINS TAX
  9. GAAR IMPLEMENTATION
NOW THESE ARE THE HEADWINDS WHICH WOULD KEEP THE NEAR TERM OUTLOOK UNCERTAIN AND MEDIA WOULD HYPE EACH EVENT TO GAIN T.R.P

Saturday, 5 November 2016

Multibagger of 2017 : JHS Svendgaard


JHS Svendgaard Laboratories may be a multibagger stock in 2017. The stock looks good for a buy on declines for a long-term investment portfolio.
It has all the qualities that investors and traders look for in a multibagger stock such as debt-free status, good management, operating capacity, strong brands etc.
Image result for jhs svendgaard

Business

Starting with manufacturing of only Toothbrushes the company widened its scope to Toothpastes, Mouthwash and Denture Tablets and today is an oral care product manufacturer and exporter. Apart from working on its own brands the company also offers Contract Manufacturing Partnership to brands in the domestic and the international market. One of the most prominent brands manufactured under the company’s name is Dr. Gold which was launched in April 2009 with economy, mid economy and premium
Toothbrush categories.Some of the prominent brands partnered with in the domestic market are P&G, Amway India Enterprises Pvt. Ltd., Dabur India Limited, Elder Health Care Limited, J. L. Morison’s India Limited and in the international market are – Dr Fresh
Tano mauritius,the private equity firm which got a great success ratio, bought shares worth 25crs at 98rs around 2010
JHS SVENDGAARD is a  perfect fmcg proxy.The largest toothbrush manufacturer from India(300 million tooth brushes).It caters to the need of 1 trillion Proctor and gamble in our country.The company has got number of amazing tax and excise benefits. Replacement cost of its assets would be minimum 300-400crs. Present market-cap is only 75crs.
JHS has a client base of strong & leading players in the Industry.
  • Proctor & Gamble : JHS manufactures ‘ORAL B’ toothbrushes for P&G.
  • Pantaloon : ‘SACH’ brand for toothpaste & toothbrush.
  • Dr. Fresh : ‘Dr.Fresh’ is the largest selling oral care brand in America.
  • Himalaya : Leaders in premium dental cream market.
  • Dabur : Owns big brands like ‘Promise’, ‘Babool’, ‘Dabur Red’, ‘Meswak’.
  • Elder Healthcare : Sells mouthwash & other dental care under ‘AMPM’ brand.
  • Aquawhite : Sells premium category mouthwash & dental whitening gel.
  • Lavoris : One of the leading oral care brands in America.
Another big news is patanjali is in talks with jhs for contract manufacturing as it has huge spare capacity and good quality control

Promoters hike stake

Recently, total warrants of Rs 3.3 crore were issued. Out of this Rs 1.2 crore have been converted which is promoters and non promoters both in accordance with the SEBI guidelines allowed by the promoters.
After the warrant conversion, the promoter holding in the company goes up to 38 percent of the total equity. The Company gets Rs 11 crore in the form of converted stocks.
JHS Svendgaard Laboratories already has about Rs 5.5 crore of the warrant money.
The promoter holding will go up from 38 percent currently to 43 percent on full conversion.

Debt Free

JHS Svendgaard Laboratories would be a debt free company as on March 31st 2016. It will have no debt on books whether it is in form of secured or unsecured loan.

Profit making

The losses have started coming down in FY17 because as the Company improve the capacity utilisation it has a huge asset base and needs to churn out production from that asset base.
JHS Svendgaard Laboratories is expected to become profitable in the first quarter of FY17. It is working hard and trying to make it as soon as possible.

Revenue Growth

In the last two years JHS Svendgaard Laboratories has grown almost 80-85 percent on revenue basis. If it is able to utilise capacities, it should be at least between 30 -35 percent this year also because the baseline has almost tripled as compared to the last two years.

USE ALL THE DECLINE IN THE MARKETS TO BUY THIS STOCK SOME DAY MARKET AND SENTIMENTS WILL TURN AND DURING GOOD TIMES WE WONT GET THIS STOCK AS THE STOCK IS DEBT FREE AND BUSINESS IS GLOBAL AND REPLACEMENT COST OF THE SAME IS BETWEEN 300 TO 400 CRORES WHILE MARKET CAP IS JUST 75 CRORES 


Technical Terms of the day : Bottom Fishing

DEFINITION of 'Bottom Fishing'

Investing in stocks that are cheap because of a problem with the company or the economy. A bottom-fishing investor speculates that the stock's depressed price is temporary, will recover and make for a profitable investment. Bottom fishing is a risky strategy because the company's stock price is depressed for a reason and may not bounce back.
Image result for fishing


BREAKING DOWN 'Bottom Fishing'

Here are some examples of bottom fishing: 
  • Investing in the stock of an aluminum company when aluminum prices are depressed.
  • Buying the stock of a container shipping company during an economic depression.
  • Investing in a print media company when the Internet is putting such companies out of business.
  • Buying shares of a bank during a financial crisis. 
In each of these cases, it is unclear when or if the stock's price will recover. 

Courtesy: investopedia.com

Thursday, 13 November 2014

How to Buy Stocks – Simple Strategies

I was shopping yesterday and was curios to know the price of onions (which turned out to outperform most of the Index Stocks of late.
Onions have been trading around Rs 50 per kg down from Rs 90 per kg a few weeks back.
One did not look at Buying MORE Onions when the price touched Rs 80+ .  Families which purchased 2 kilos of onions purchased only 1.5 kilos or even lesser.I just wanted to show a very important aspect of Behavioral Finance
In fact one looked at alternative choices, like the hotels which served cucumbers or cabbage for onions
When it comes to the Stock Markets it is the opposite
When the Sensex touched a new high of 28000 everyone were queuing up to buy stocks.
When the markets corrected a few weeks later no one looks at buying the  same stocks
If one uses the Onion approach to buy Stocks we will be very successful in creating Wealth in Equities

Sunday, 2 November 2014

Freshtrop Fruits: Updates

Freshtrop Fruits recommended @ Rs.60, currently trading around Rs.90.

Link to article Click here

Thursday, 30 October 2014

What is a Dividend?




A Cash Distribution by a Company to its shareholders.


For Example, Let’s look at XYZ footwear, for the first shop XYZ gathers money from the investor and issues shares, it become hit and sales are skyrocket. XYZ footwear increases the retail shops more and more. Soon the footwear shops are competing each other this is called as Market Saturation. Instead of opening more shops XYZ focus on keeping sales strong on existing shops. Profits continue to roll-in. XYZ having choice of investing his profits or simply paying it to the share holders. So XYZ sells footwear and not thinking he can cook profit by investing so he decided to payout some profit regularly as Dividend to share holders. He holds some profit in case of emergency and pays out all the cash doesn’t need to run the business as Dividend. It can increase or decrease yearly according to the XYZ business performs.

Wednesday, 29 October 2014

Investor or trader: which suits you better?

If you are a new entrant in the stock market, you will come across some stock market jargons which will confuse you. One of them is related to the identity and the behaviour of the stock market participant.
Sometimes a participant is referred to as a stock investor and the next day same guy becomes a stock trader. These two terms are often used interchangeably, resulting in a lot of confusion. We will try to keep this confusion at bay by figuring out the personality and behaviour of stock investors and stock traders here.
Stock investor vs stock trader
We can differentiate between the two on the following parameters:
Return objective and number of transactions
Stock investors and stock traders basically approach the stock market with same objective but employ different modus operandi. Both of them want to maximize their return, but the stock investor tries to achieve this through a single transaction, whereas the stock trader chooses multiple transactions, but in quick succession. The stock investor just buys and holds the stock while the stock trader buys and sells stocks on a continuous basis.
Time horizon
A stock investor has a longer time horizon and is ready to hold stocks in multi-year time frame. A stock trader, on the other hand, has a relatively shorter time horizon and is not willing to hold the stock for more than a month or two. There is a large proportion of traders who do not even hold the stocks post one day or one week.
Selection of stocks for investment
Stock investors consistently look for undervalued stocks for investment. They are very patient and have the tendency to hold stocks till the market realises their actual worth. Stock traders, on the other hand, are least worried about the valuation of the stock. They are simply concerned about the price movement. They are ready to buy an overvalued stock if the price movement suggests so. Similarly, they can short sell undervalued stock if the price movement is in downward direction.
Market segment they are active in

Stock investors are interested in taking delivery whereas traders are not interested in taking delivery. This constraint makes the derivative market more suitable for traders and cash market for investors.
Trading tools
Stock investors rely heavily on fundamental analysis for identifying investment avenues. They employ top down and bottoms up approach together with ratio analysis for stock selection. On the contrary, stock traders use technical analysis to maximize their returns. They are only concerned about historical and current price movements. Based on the price movement, a lot of indicators have been defined using which traders place their bet.
Why should you know the difference?
One should use the above parameters to understand his or her psychology before entering the market. Identifying your personality at the very beginning will enable you to employ the right tools and techniques to be a winner. It's difficult to say which technique is better as we have trend-setting examples in the form of Warren Buffet and George Soros from both the fields. Both of them have made a great fortune following two different paths. Hence, it's not recommended to judge the path as both lead to the same destination. It's only about choosing one based on your psychology. If you are comfortable with speculation, be a trader, and if you are conservative, choose to be an investor

Tuesday, 28 October 2014

12 tenets of how Warren Buffett values a company


Business tenets:
1.      Is the business easy and understandable? The business Warren Buffett looks at must be easy and understandable to him. For example, the business of Coca Cola is very understandable: soft drinks. Geico’s business is insurance. Warren Buffett holds significant shares of both companies.
2.      Does the company have consistent operating history?  Warren Buffett only trusts companies that are in their business for a long time.
3.      Does the business have long-term favourable prospects. In other words, the company’s business must have sustainable favourable prospects.
Management Tenets: management must be smart
1.      Is the management rational in business decisions? For decisions like how to allocate earnings, Warren Buffett like management that’s rational in allocating earnings.
2.      Is the management candid to shareholders?
3.      Can be management resist industrial imperative?
Financial Tenets:
1.      High profit margins
2.      Focus on high return on equity (not earnings per share) & low price to earnings (P/E) ratio
3.      Calculate “owners earnings”
4.      For every dollar retained, make sure the company has created one dollar market value.
Value Tenets:
1.      What is the intrinsic value of the business?
2.      Can the shares be purchased at a significant discount off its intrinsic value (margin of safety)?



Monday, 27 October 2014

How to select stocks for investing

Stock Market investments are risk prone. There is no sure shot formula to succeed in the stock market. Hence, investors at times invest in the market based on broker recommendations, research report, tips from friends or family, rumours, trend or by gut feel. Identifying and investing in good stocks, although not easy, is a must to create long term wealth.

Since the stock markets have come into existence, investors have always faced a dilemma in selecting good stocks. Many a times, a stock that is cheap could be undervalued, or it could be nearly worthless and overvalued because of some traders betting on a miracle and some hoping to sell to those people before the company collapses. Similarly, when a stock is highly priced, it may be due to over expectation or hyping on factors not fundamentally right.
In case of stocks which saw a hype, investors have lost heavily believing in their growth story and trying to ride on the price momentum. For instance, a couple of years back, realty stocks were touted to be the next big story based on their land banks. Many of the overhyped sectors have actually delivered superlative returns over a period of time. But now many of these stocks have fallen from their peaks and investors have suffered losses.
Investors must study and analyse before choosing stocks. For those who are not financially savvy, here are some tips on how to do it.
The first and most important thing for any investor to do is, to look at the company's financial statements. It is also advisable to pick stocks from sectors and markets that you know and have experience in. This can give you an added advantage.
Some of the factors investors must look at before picking a stock are:
Earnings Per Share: When you research a stock, the first thing you should look at is the Earnings per Share (EPS). This is the amount of profit the company is making on a per share basis. Market appreciates stocks which have a growth in EPS while it reacts negatively for stocks with stagnant or reduction in EPS.
Dividend yield: A dividend is a cash payout to shareholders, usually an annual payout by profit making entities. A stable or increasing dividend means the company has good cash flow and a positive outlook for the future. A decreasing dividend usually means the company is trying to keep some cash on hand for other expenses, possibly a sign of tough times ahead. One indicator of a good stock to buy is a high dividend yield. The yield is the yearly dividend as a percentage of the stock price. A high yield means you are getting a larger dividend for your investment. Stocks which have a higher dividend yield have better valuation in the market as compared to those with a lower yield. infrastructure stocks like power or telecommunication which normally have a lower dividend yield have a lower valuation as compared to multinational companies' stocks.
Debt: Stay away from companies with high amounts of debt when looking for good stocks to buy. As most investors have found out recently, it can be very difficult for companies with large amounts of debt to survive, especially in recessionary times. In recent times, we have seen the fall in Kingfisher Airlines due to high debt. Pharmaceutical company, Wockhardt, too had similar issues on debt repayment, but it saw a turnaround after restructuring its debt. The profitability of companies with overleveraged balance sheet more often than not are affected by the high interest outgo. These can have cash flow issues too. Any downgrading in credit rating resulting due to cash flow issues can have an adverse impact on stock price.
Future prospects: Understanding future prospects is important as part of financials. You can identify the factors that may influence the future performance of a stock. For instance, good monsoons should help stocks in the fertilizer sector. Future prospects of the company can be enhanced or marred by policy decision. For instance, opening up for FDI can have a positive influence in anticipation of increased capital inflows. However, factors like technology changes can have either a positive or adverse impact. Some of the stocks have been badly affected due to changes in technology and non adaptation to market realities.
Peers: Compare your identified list of stocks against its peers in the same industry or sector. Looking at competing companies and their fundamentals can be a great way to size up a potential investment. It is advisable to invest in a market leader than the second or third rung stocks. Peer comparison is required as the same will help in relative valuation of the stock. Say a stock like Hindustan Unilever may look expensive on a standalone basis but if compare it with the valuation of other stock in the same industry it may look to be attractively priced. Price earnings ratio is usually used for comparing the valuation of a company vis a vis its peers.
Strong brand: Companies with strong brands are likely to perform better in the long run even if they may be less profit making in the short run. Market puts a value to the brands too while valuing a company with strong brands. A classic example of this is a company like Bata India where inspite of muted growth, the share price is high on account of brand value.

Conclusion: Doing proper analysis and due diligence is an important part of investment process. It is an activity that needs to be done before investing. Once you get the methodology, identifying good stocks will not be difficult.