Stocks for the long and short term portfolio

[jamit_05]

Janit i liked your choice of stocks ...some midcap stocks for which i would like your opinion are cotton greaves and navneet publications

Both very nice companies, but currently expensive. I have an eye out for Navneet Publications, for the following reasons

Just a quick summary:

Positives in Navneet

1) Strong Dividend Payout
2) No Debt
3) Sustained ROE > 20% not a spurt; means the business good Branding power. Also an old company.
5) Need for reduced working capital each year. (Will confirm after more study)
6) Positive cash flow from operations, every year! Means it can give "true" dividends not from borrowed money and invest in growth. Hence, increasing CROIC every year. (Google it. Its interesting)

The best thing about Navneet is that it is not a Cyclical Stock and not capital Intensive. At least the management is not aggressive to take huge loans for growth.

I will buy the stock at lower levels.

 

[jamit_05]

Sir, I did not find that they have -ve Cash Flow, I see -ve FCF though. And their Quick ratio > 1, and their debt is close to 8834.21 Crore.

Am I missing something? Please help.

You may have looked at a incorrect source of data or may have looked at the Standalone Statements.

 

[jamit_05]

Janit i liked your choice of stocks ...some midcap stocks for which i would like your opinion are cotton greaves and navneet publications

Greaves Cotton Ltd.

Also a very well managed company with a good reputation amongst investors. However, the next few years will be a little challenging for it. Since, it is in the Eng sector, it will be under pressure for growth. This will give a good chance to get it cheap.

Its a good company, probably best in class. Has NEVER shown a negative figure in Cash from Operations!

More on it later.

 

[jamit_05]

How about datamatics global

Sorry Sir... have no wind of it. If I come across anything interesting, will keep the thread posted.

 

[jamit_05]

Greaves Cotton

Greaves Cotton​

The only Negative about this company is its sector. Engineering sector is down and out. Stocks will get badly beaten when FII decide to sell again.

It is a mediocre company, with a mediocre business but in the hands of excellent management.

The Management is level headed. They are conservative. They have NOT taken up any debt to increase business. They are only growing organically. The Sales have increased at a mediocre pace of 10%. Nothing special. However, ROE > 20%. Meaning, company is re-investing profits, using it as Working Capital. Essentially, the normal way of doing business.

In the last 8 years, it has not posted any negative figures And paid-off whatever little debt it had. Isn't that great!

This is a "Don't Worry-Be Happy" kind of a stock. It may not be a 10-bagger, but is likely to grow your capital at the rate of twice the FD.

It gives around Rs.2 of dividend every year. So, you could buy the company at say Rs.40 and get 5% Yield.

The company is small; 1/10th the size of Bhel. Therefore, is likely to swing wildly. And in one such down-swing latch onto it. This down swing is likely to come in couple of years. Don't hurry. Be patient to buy. Let the EPS fall for a few quarters and you will land an UNBELIEVABLE PRICE.

So, in Capital Goods/Engineering sector we have Short-Listed these stocks:

1) Bhel
2) Siemens
3) Cummins India
4) Engineer's India
5) Greaves Cotton.

All these companies have great balance sheets, great management at the helms, Nil debt, dividend giving and do not believe in capital intensive way of operating. I give them a thumbs up.

So, just wait for this sector to wallow in its lowest lows and then buy.

 

[Einstein]

Hi Amit,

whats your views on cement sector?? looking at the charts its seems like we might see a bull run in cement sector. what are your views on that??

-Einstein

 

[Einstein]

How about datamatics global

Try to stay away from penny stocks. specially when its a software company. its near to impossible to valuate such companies because you cannot predict their future earnings. there is no margin of safety in such companies.

secondly on first glance this don't seems to be growing at all, its like it has come to a plateau and stop there.
2/5

 

[jamit_05]

Hi Amit,

whats your views on cement sector?? looking at the charts its seems like we might see a bull run in cement sector. what are your views on that??

-Einstein

Cement Sector is under pressure. And it makes sense. Sale of cement is tied with Realty, Infra and Industry. All three sectors are down.

Going forward, Cement sector is going to be under pressure. It is showing in their Balance Sheets as well. Take for ex. ACC. It was working with a negative working capital till 2010. Then as the recession came in, Working Capital increased into being positive and still growing. One could argue that Sales is also increasing. But, as we have learned in the past that never go by just the sales figure. It is prone to manipulation.

Look at its ROA for confirmation. You will find a drop from a high of 16plus to sub 10 levels. That is a 40% fall. Clearly shows that the operations are strained.

Nonetheless, I intend to buy ACC at lower levels. My bulk purchase is currently set at 2010 Lows of 640; It may seem far, but ACC has the tendency to correct sharply. In 2007 it corrected 50% from the top.

Take Care.

 

[jamit_05]

In this upleg of Nifty, it moved from Low of 5118 to High of 6142; One Thousand points; Pretty neat.

In that our candidates moved pretty well too:

1. Bhel: 100 to 146; Almost 50% up!
2. EiL: 121 to 189; 50% up again!
3. Axis: 764 to 1174; 50% too!
4. Union: 97 to 142; 50%

So essentially, all these moved pretty well. If one, mythical investor, purchased them at the bottom most tick, his portfolio would be up by 50% in this bad economy! Surreal.

But, is this gain worth paying heed to? Well, turns out NO! The monthly charts are still looking terribly dull. Most of these have not even managed to break Weekly EMA-15 and NONE have broken Monthly EMA-15! (For the uninitiated, EMA-15 is an indicator of short term trend).

Therefore, it is well within the realms of possibility that if Nifty were to fall back lower, then these stocks will breach the starting point to continue their downward journey. Well, at least the fundamentals seem to indicate it.

I have made this post, to tell the investors that the purpose of this liquidity driven price rise is to suck the small investors in. Then make them feel trapped and emotionally drive them to sell lower.

So Buy wise, that is either when the fundamentals become stable or the price becomes too attractive!

For ex. I see no reason why EiL won't touch Rs.60, its 2008 LOW. Its Consolidated Sales dropped by 37% in F.y.13. AND working Capital requirement increased by 28%. That is really bad news. Although, given the track record of multiple decades, EiL is very likely to be soaring in the next upcycle. But, as of now it is in a dismal state.

 

[seetharamank]

Tata Steel touched its 52-week low of 294 rupees today; the stock is currently down about 1 pct to 296 rupees...

7th aug2013 tatasteel touched 195.30 and cmp is 293 the thought process of jamit is right but how many andi wonder how many bought on that day tata steel