Stocks for the long and short term portfolio

[jamit_05]

yes and its actively trading,

What is a balm company doing in Realty!
I guess, the workers would probably be needing the Balm for relief.

Good for workers, good for Zandu. But for investors... i don't think so.

 

[TradeJoker]

Mixed information

Moneycontrol

Zandu Realty is in the Construction & Contracting - Real Estate sector. The current market capitalisation stands at Rs 127.97 crore.The company has reported a standalone sales of Rs 29.04 crore and a Net Profit of Rs 38.51 crore for the quarter ended Mar 2014.

wiki

Zandu Realty Limited (formerly Zandu Pharmaceutical Works Limited)[2] is an international pharmaceutical company based in Mumbai, India.[3] Company's core business of manufacturing and dealing in ayurvedic and medicinal preparations.

 

[jamit_05]

Larsen and Toubro.

It is a Brand Name. It is a leader of sorts. An undisputed champion. However, there are two major points of concern. Annual Reports are screaming HIGH ALERT.

Glitch #1: Negative Operating Cash Flow for the past three years.

Companies use this trick to impress a room full of journalist and keep the attention of investors (who are in a hurry to invest) riveted.

Companies post stronger earnings from preceding years by showing higher Sales Revenues. This figure can easily be manipulated. But, another important figure which is a true reflection of a companies "Earning Power" cannot be easily tampered with. And that is Cash From Operations; This is the TRUE Nett of what cash remains of the payments received and after taking care of all expenses. EBITDA.

And this figure has been negative for LnT for the past three years and burgeoning. It has become serious now.

In 2012 LT had negative Cash From Operations of around 6200 CRORE and in 2013 it was negative 3800 Crore... highest ever in the history of LnT.


Glitch #2: Negative Free Cash Flow

LT has been posting Negative Free Cash Flow for almost a decade! This is a serious weakness. FIIs do not like this at all.

All captital Ex. is deducted from Cash From Operations to find what has remained as Free cash, which can be used for giving Dividends, expansion, paying off Debt etc.

Basically companies that are aggressively expanding have negative FCF, generally seen in mid-size companies. And when combined with huge and growing Debt then it gets really scary. Its like seeing an 80 year Old gentleman riding a bike recklessly like a college kid.

One company that I was tracking had FCF problem and fell from Rs.300 to Rs.25 within two and half years. Since, then I use this COMBO of -FCF and high Debt as a big red flag.


Glitch #3: Enourmous Debt

LT had a debt of 1600 Cr in 2004. Imagine how much debt it has now...........!

A whopping FORTY SEVEN THOUSAND CRORE. This too is highest in history of LT. (In contrast, BHEL has ZERO debt and somewhat of an unpleasant FCF).


Conclusion in next post.

In 2013-14, LT, again, posted a huge figure for negative cash flow. It posted:

Negative 6900 Crores as Operating Cash Flows.

Means, this is the amount its Hard Cash got eaten by. And the reality of life is, ONLY HARD CASH can replace HARD CASH.

Not only that, the cash flow goes further. Inspite of this loss, LT went right ahead and made huge fresh investment in Property, Plant and equipment. Which again is:

Negative 6900 Crores as Investment in property, plant and equipment

How is this big hole, of Rs.13800 Crores, going to be filled?
Obviously, by more debt!


I suppose LT has international presence (read: clout) due to which it can attract so much money each year... but for how long is this going to go on?

As an investor, you decide whether you want so much debt in your portfolio.

 

[Catch22]

Don't read all that speculative gunk, so I have learned. Focus on the discussion about companies. Read those posts. And looking ahead, lets work towards getting some really good business into our portfolios.

As far as the investment process is concerned. I do not wish to discuss the direction anymore, but only good companies and attractive valuations.

T’was just a simple way of saying thanks ,which in no way compares to the valuable time and effort you folks allot each day.
Very kind of you to advice thus . I understand what you meant .Thanks a lot once again.:]

 

[jamit_05]

SAIL is silent but has good potential, and moreso now, because we have a PM who will focus on using PSUs for the betterment of the nation.

Today's papers talked of SAIL infusing billions to increase capacity. It takes time for big plans to become reality. In the mean time, if investors are blessed with a correction, then SAIL will provide a great opportunity.

SAIL is attractive because it is safe, if price of investment is competitive. It is here to stay, won't disappear in the next decade. There are very few large caps that have the potential to grow ones investment multi-fold.

 

[jamit_05]

Earning Per Share for the Index of Nifty is around 385;
Nifty is trading at 7800;

This gives us a PE of 20.25; Historically speaking, it is in the higher bracket. But it can go higher. It has touched 25 and 28 within the last decade.

Keeping the Earning constant, if PE were to touch 27, then Nifty will trade at 10385;

Therefore, Nifty touching 10K, as what the news-mongers are blaring, is not so insane a possibility

However, I have observed that in both those instances the PE went below 14 before scaling the 25 plus mark. This is just not a statistic, there is logic to it. Allow me to elaborate and present my theory.

Only when the prices become ridiculously cheap, this happens when PE goes below 14, that the dormant investors, who have parked serious money in Debt instruments or other such safe havens, change their stance. They see stocks as low risk, low enough to compare them with Debt, and shift money from Debt instruments to Equity. This huge influx of fund reduces the "floating shares" as they purchase for good. With the reduced number of shares being traded makes it possible for Nifty to touch insane levels of 25+ PE. It makes the kite light enough to fly.

To support my theory, I have also observed that when Nifty trades below the PE of 15, it is not a prolonged stay. Price spikes back up. The levels get rejected, price bounces off. This is a big event in nature because below 15, there is tremendous pessimism prevailing, equity is being sold in huge volumes; left, right and center. To absorb this pessimism and print a spike on the chart requires even more buying volume. Nothing short of it will do. It is almost the same above 24.

 

[jamit_05]

http://imgur.com/xz1VD8T

 

[saivenkat]

Amit .. thanks a lot for good explanation.. about PE of nifty..

So.. the ideal point of buying for investment would be when PE of nifty around 15, industry PE must be somewhere around the same levels of 15( Is it correct to assume like this?) and market cap of the stock should be ideally over 3000 crores..

Btw where can one get access to the PE of nifty and the sensex.. Pls share us the site?

 

[jamit_05]

Amit .. thanks a lot for good explanation.. about PE of nifty..

So.. the ideal point of buying for investment would be when PE of nifty around 15, industry PE must be somewhere around the same levels of 15( Is it correct to assume like this?) and market cap of the stock should be ideally over 3000 crores..

Btw where can one get access to the PE of nifty and the sensex.. Pls share us the site?

http://nseindia.com/products/content/equities/indices/historical_pepb.htm

 

[maneverfix]

Waiting for that day, till then keeping most of my funds in FD.

Earning Per Share for the Index of Nifty is around 385;
Nifty is trading at 7800;

This gives us a PE of 20.25; Historically speaking, it is in the higher bracket. But it can go higher. It has touched 25 and 28 within the last decade.

Keeping the Earning constant, if PE were to touch 27, then Nifty will trade at 10385;

Therefore, Nifty touching 10K, as what the news-mongers are blaring, is not so insane a possibility

However, I have observed that in both those instances the PE went below 14 before scaling the 25 plus mark. This is just not a statistic, there is logic to it. Allow me to elaborate and present my theory.

Only when the prices become ridiculously cheap, this happens when PE goes below 14, that the dormant investors, who have parked serious money in Debt instruments or other such safe havens, change their stance. They see stocks as low risk, low enough to compare them with Debt, and shift money from Debt instruments to Equity. This huge influx of fund reduces the "floating shares" as they purchase for good. With the reduced number of shares being traded makes it possible for Nifty to touch insane levels of 25+ PE. It makes the kite light enough to fly.

To support my theory, I have also observed that when Nifty trades below the PE of 15, it is not a prolonged stay. Price spikes back up. The levels get rejected, price bounces off. This is a big event in nature because below 15, there is tremendous pessimism prevailing, equity is being sold in huge volumes; left, right and center. To absorb this pessimism and print a spike on the chart requires even more buying volume. Nothing short of it will do. It is almost the same above 24.