Stocks for the long and short term portfolio
- Thread starter jamit_05
- Start date
Bonds.
Considering shifting cash from Fixed Deposit to Bonds. The motivation is straightforward.
1) Bond Yields have become smarter.
Bond yields are constant, and decided in Rupees at the time of bond issue. So, the lower a price one pays to buy a bond, the better return on capital one gets. And now is such a time.
Stock prices are soaring, due to money flowing into equity from bonds, and bonds have gotten cheaper. Making Bond Yields much smarter.
2) This will invert. Stocks will get cheaper and Bonds will get expensive. Which is what I am counting on as a value investor as I intend to buy stocks only in a sustained bear market. In the meantime, if I am able to get 13% pre-tax from Bonds as compared to 8.5% pre-tax from FD, then its attractive, right!
3) Liquidity is good enough. Whenever I wish to, I can sell these bonds in the secondary market and book the speculative gains and collect dividends/yields as long as i hold them. In other words, since, Bond prices and Stock prices are inversely proportional, I am bound to get either of the following two:
a) Book speculative gains in Bonds, when the price rise, which will happen when stocks fall making them good enough for me to buy them as a value investor.
OR
b) If that doesn't happen, then I wait for bond to expire in 2016 and collect 13% pre-tax returns.
In either case, I am in a win-win situation, than sitting in FDs.
==========================================================================
There are Bonds listed in the secondary market on the NSE website, that give attractive returns when compared to FDs. Check out a few:
India Infoline
Yield: 13.5% Expiry: 2016
Yield: 14.0% Expiry: 2018
Shriram City Union Finance Limited
Yield: 11.5% Expiry: 2016
Shriram Transport Finance Company Limited
Yield: 11.00% Expiry: 2017
I am sure you may have several questions. So I will keep it simple...
Very concisely, the deal is this, if you buy one of these then you could choose to hold them till expiry. There are won't be any tax benefits, just like in FDs, unless it is specified (some bonds are tax free).
You also have an option to sell them before expiry, as they are listed in the secondary markets. Then, this would then fall under speculative income. It'd be just like buying equity/shares.
Considering shifting cash from Fixed Deposit to Bonds. The motivation is straightforward.
1) Bond Yields have become smarter.
Bond yields are constant, and decided in Rupees at the time of bond issue. So, the lower a price one pays to buy a bond, the better return on capital one gets. And now is such a time.
Stock prices are soaring, due to money flowing into equity from bonds, and bonds have gotten cheaper. Making Bond Yields much smarter.
2) This will invert. Stocks will get cheaper and Bonds will get expensive. Which is what I am counting on as a value investor as I intend to buy stocks only in a sustained bear market. In the meantime, if I am able to get 13% pre-tax from Bonds as compared to 8.5% pre-tax from FD, then its attractive, right!
3) Liquidity is good enough. Whenever I wish to, I can sell these bonds in the secondary market and book the speculative gains and collect dividends/yields as long as i hold them. In other words, since, Bond prices and Stock prices are inversely proportional, I am bound to get either of the following two:
a) Book speculative gains in Bonds, when the price rise, which will happen when stocks fall making them good enough for me to buy them as a value investor.
OR
b) If that doesn't happen, then I wait for bond to expire in 2016 and collect 13% pre-tax returns.
In either case, I am in a win-win situation, than sitting in FDs.
==========================================================================
There are Bonds listed in the secondary market on the NSE website, that give attractive returns when compared to FDs. Check out a few:
India Infoline
Yield: 13.5% Expiry: 2016
Yield: 14.0% Expiry: 2018
Shriram City Union Finance Limited
Yield: 11.5% Expiry: 2016
Shriram Transport Finance Company Limited
Yield: 11.00% Expiry: 2017
I am sure you may have several questions. So I will keep it simple...
Very concisely, the deal is this, if you buy one of these then you could choose to hold them till expiry. There are won't be any tax benefits, just like in FDs, unless it is specified (some bonds are tax free).
You also have an option to sell them before expiry, as they are listed in the secondary markets. Then, this would then fall under speculative income. It'd be just like buying equity/shares.
Is there risk involved in repayment when the bond expires?
I am looking for an answer to this question. I want to know whether there have been cases where the company has not made payments or delayed payments after the bond maturity.
At the face of it, it seems unlikely. In case of bankruptcy, the company has to pay the bond holders first as they are lenders, and then comes equity holders as they are partners.
I have not come across companies that the govt/sebi has allowed to issue Bonds and has gone bust. I am sure there must be some instances, but surely rare.
The companies that are possible candidates for bond purchase are finance companies that are into the lending business. The acquire money from the bond market and lend it at a higher interest.
One should study these companies, check out their health before putting in money. Muthoot finance, Shriram, India Infoline, Religare Finance.
I am looking for an answer to this question. I want to know whether there have been cases where the company has not made payments or delayed payments after the bond maturity.
At the face of it, it seems unlikely. In case of bankruptcy, the company has to pay the bond holders first as they are lenders, and then comes equity holders as they are partners.
I have not come across companies that the govt/sebi has allowed to issue Bonds and has gone bust. I am sure there must be some instances, but surely rare.
The companies that are possible candidates for bond purchase are finance companies that are into the lending business. The acquire money from the bond market and lend it at a higher interest.
One should study these companies, check out their health before putting in money. Muthoot finance, Shriram, India Infoline, Religare Finance.
It would make sense to look for the companies' ability to pay interest, as we would be lenders if we buy bonds.
SHRIRAM CITY UNION FINANCE LTD.
Net Interest Margin 12%
Return on Assets 2.8% (this is more than most Banks can achieve)
NPA 0.8% (doubled from 0.4%, a noticeable negative)
SHRIRAM TRANSPORT FINANCE LTD.
Net Interest Margin 18%
Return on Assets 3.1% (this is more than most Banks can achieve)
NPA 0.8% (doubled from 0.4%, a noticeable negative)
Muthoot Finance
Net Interest Margin 9.50%
Return on Assets 3.4% (this is more than most Banks can achieve)
NPA 2.0% (more than tripled from 0.6%, a noticeable negative)
Apparently, the lending business is facing NPA-problems.
SHRIRAM CITY UNION FINANCE LTD.
Net Interest Margin 12%
Return on Assets 2.8% (this is more than most Banks can achieve)
NPA 0.8% (doubled from 0.4%, a noticeable negative)
SHRIRAM TRANSPORT FINANCE LTD.
Net Interest Margin 18%
Return on Assets 3.1% (this is more than most Banks can achieve)
NPA 0.8% (doubled from 0.4%, a noticeable negative)
Muthoot Finance
Net Interest Margin 9.50%
Return on Assets 3.4% (this is more than most Banks can achieve)
NPA 2.0% (more than tripled from 0.6%, a noticeable negative)
Apparently, the lending business is facing NPA-problems.
Had purchased SBIN at 1800 a few months ago. I saw the price to be great and the Bank was well founded. However, I misjudged the impact of NPAs on the Share price and the estimate of NPA%.
I now believe the PSU banks have tremendous amount of correction left in them. The NPA% are growing. It is much more than what is published. Banks are rationing it on the balance sheet so as to not cause a nationwide panic. Hence, have exited SBIN as it was opportune.
I now believe the PSU banks have tremendous amount of correction left in them. The NPA% are growing. It is much more than what is published. Banks are rationing it on the balance sheet so as to not cause a nationwide panic. Hence, have exited SBIN as it was opportune.
Jamit Sir.
as you are the master of fundamental analysis, i need your valuable comment and suggestion On "Redington India Ltd" is good buy?
it has low PE,
five year sales increase
five year profit increase
FII holding
Mutual fund holding
bulk deals activity
decrease in dividend, book value and EPS.
your suggestion and guideline for what else factor to be check while looking the company?
as you are the master of fundamental analysis, i need your valuable comment and suggestion On "Redington India Ltd" is good buy?
it has low PE,
five year sales increase
five year profit increase
FII holding
Mutual fund holding
bulk deals activity
decrease in dividend, book value and EPS.
your suggestion and guideline for what else factor to be check while looking the company?
Redington (India) is basically a company which channels IT hardware products from companies like HCL, Intel etc to consumers. A super distributor/ dealer.
I do not like the business. There is nothing special about the company and the EPS is very likely to hit a ceiling . I say this because it requires more money to increase sales. Its profits are thin and hence cannot support organic growth.
I have not looked at the share price and I suggest the same to you. Skip this company, there are much better stocks in Nifty itself.
I do not like the business. There is nothing special about the company and the EPS is very likely to hit a ceiling . I say this because it requires more money to increase sales. Its profits are thin and hence cannot support organic growth.
I have not looked at the share price and I suggest the same to you. Skip this company, there are much better stocks in Nifty itself.
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