Stocks for the long and short term portfolio

[jamit_05]

Hi amit,

your take on Exide industries.?

Tks for bringing it up. A very good pick. :clap: :clap: :clapping: :clapping:

 

[jamit_05]

I am not a rich man, but would like to be. Hence, will dedicate most of allocation to growth stocks and cyclical stocks in down-cycle.

Growth Stocks:
------------------

1) Petronet LNG
2) Gruh Finance
3) HDFC Bank
4) Axis Bank
5) Cummins India
6) Greaves Cotton
7) Gujrat Gas
8) Swaraj Engines
9) Exide Inds

Cyclical Stocks currently in a downcycle
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(to be bought in corrections)

1) ACC
2) BHEL
3) Engineers India
4) IDFC
5) Gail
6) Maharashtra Seamless

Companies to buy in sharp corrections (not otherwise)
-------------------------------------
These are fundamentally sound companies, but with EPS stagnating. These may not EVER touch their all time lows but only correct

1) Hind Zinc (at and below Rs.95)
2) Graphite India (betw Rs40-Rs20)
<More to Come>

Speculative at super low prices
------------------------------
1. Balrampur
2. Sail
3. Nalco
4. Hind Copper
5. Union Bank
6. Maharashtra Seamless
7. Concor
8. NMDC


Commodities
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1. HDFC Gold
2. SBIN Gold

 

[jain.er]

Hey Amit

Your opinion on Jagran prakash specially in the light of an increasein ad spends due to coming elections

 

[seetharamank]

amit ur opinion about shanti gears

 

[shreeux]

Tks for bringing it up. A very good pick. :clap: :clap: :clapping: :clapping:

What about MCX....?
I am holding the stocks...but I placed sell order in 625...its came upto 622...after that major fall...your opinion..?

 

[jamit_05]

Hey Amit

Your opinion on Jagran prakash specially in the light of an increasein ad spends due to coming elections

Its fairly newly listed on the exchange. Numbers are not consistent. Has increasing debt, with a BIG jump a year or two ago. It likes to give out high dividend. Div Payout is > 50% in some years. Meaning, it is not keen on growth.

There are better companies out there.

 

[jamit_05]

amit ur opinion about shanti gears

Looking at its most recent annual report tells me that. This is NOT a growth stock. It is a cyclical one, tied to the growth of Indian Economy. Therefore, waiting for price corrections it advised.

Overall, the company is a stable one. It has posted profitable past 10 years.

The recent times have been tough. The working capital requirement has sharply risen, meaning the payments are coming in ever so slowly. This is expected to take toll on the margins as well. And rightly so.

What is interesting is that it is a leader with 30 years of presence. It makes pretty intense industrial gears etc. Have a look at its website. I will dig deeper to find out whether this line of work has high entry barriers. If so, then Shanthi Gears will be an excellent purchase and lower (much lower) prices.

The profit margins and EPS have sharply declined, meaning the share price is about to take a dive.

It has eliminated Debt in the past 3 years. That is a great sign.

FCF has been positive in the last 10 years. Meaning, the people behind the screen know how to do business. They are not newbies, who are often easily blinded by prospects.

No Eq.Dilution, Zero Debt, Positive FCF are all signs of a good management. It is a debt free company with accumulating FCF.

Promoter holding is 70%, that is a plus.

I am certain that this company is to be bought only after sharp corrections.

 

[jamit_05]

What about MCX....?
I am holding the stocks...but I placed sell order in 625...its came upto 622...after that major fall...your opinion..?

MCX has politicians and scamsters involved. It is no place for an Aam Investor.

 

[poolspan99]

Honestly, I have been interested in Exide and Amaron both, but not completely.

My logic is that, India is a growing economy and in such an environment anything energy related is bound to "sell". Be in natural gas or secondary.

Exide is the leader, chased by Amara Raja, in this sector and is hence best positioned to capture any upcycle in the auto industry, which is closely connected to the cycles of the economy, which is believe is and will be down for about 5 years. In the meantime if Exide correct comfortably then it will be a candidate for purchase.

Opinion on the Management:

It has it has a good head on its shoulders. This is shown by the figure of Free Cash Flow. Even before calculating it I knew what to expect. It has posted a positive and a strong figure of Free cash Flow. It is not consistently growing, which is very tough keeping in mind the down cycle.

Management is wise to invest a portion of this Free Cash Flow into expansion and not rely on debt or Eq.Dil.

Moreover, the debt has been almost eliminated in the last three years. Whereas, its competitor Amara Raja has 1/3rd of its Sales revenue and a fairly decent debt (of 77 Cr) to service, which eats into the profits. But, exide has no such problem.

Opinion on numbers:

1) Although sales have almost doubled there has been no equity dilution in the last 5 years. This is a big plus. Most well positioned mid sized companies fall for the trap of Eq. Dil. and lose investor charm.

2) The business model is a stable one. Company has met its sales target and has a good grip on the finance. Inventory days and debtor days are stable.

3) A big plus: It has focused on reducing debt, bringing it down to almost zero in the last three years. Meaning, the management is its head on level shoulders. It has chosen not to take radical steps like foreign acquisitions and multiplying production capacity by taking on more debt. It wants to grow organically. This one single reason makes Exide outshine most others in the mid-cap section.

4) Its Net Profit margin is mediocre around 7%. Thanks, but no thanks, to Amaron.

All in all, I think Exide is a company with a good product and in the hands of a sensible management. Now, the question is of purchase price.

Currently, Exide's PE is 6. It has seen a PE of around 24 in better times. Meaning, Exide is out of investor charms. Not because of a scam, bad management, increasing debt days or liquidity issues (unlike other leaders like OCIL, Sintex) , but because of the cyclical nature of the industry. This makes Exide vulnerable to sharp down moves like the one it saw in the month of Jan '14

It is my belief that Mid-Caps fall hard, really hard. When they start to collapse the price sees no support it just goes crashing down. This is because the Equity is small and cannot absorb the selling momentum of FIIs. I will wait for such a crash. I see two good supports

1) Rs.100
2) Rs.40


Rs.100 was touched this Friday. But, I think it is too early to buy ANY mid-cap now. The worst is yet to come. Lets wait and watch. But, one will have to invest atleast 50% of his allocation when Nifty reaches lower levels.


PS: I wish Exide stopped giving dividends entirely for the next few years. Investors are already disenchated and it is pointless using precious FCF on luring them. Instead use that money on aggressively trying to oust Amaron and boost the Net profit margin to atleast 15%.

Thanks Amit. You are really wonderful. Thanks a lot..

 

[poolspan99]

Tks for bringing it up. A very good pick. :clap: :clap: :clapping: :clapping:[/QUOTE

I am in turn clapping for you. Its your wisdom n thought that has made me look for losers n all time low stocks for past some weeks.

I neve thought that there wud be winners in losers as well. All praise to yu