Sunday, October 30, 2005

DSP Merrill Lynch

DSP Merrill Lynch is currently valued at 1195 rupees. The NCA of the stock is 164 rupees with a profit per year of 59 rupees. The interesting part is the good dividend payout of 24 rupees on the 10 rupees stock. This is dividend yield of 2%. I would suggest a buy when the stock reaches a price of 600 rupees. Not before.


I would like some help here. Reliance Energy numbers stun me. The scrip is available at a CMP of 500 rupees, with an NCA of 144 rupees and a cash of 320 rupees per share (THREE HUNDRED AND TWENTY rupees).

Now the flip side. The dividend declared by the company last year was only 4.7 rupees on the ten rupee share. The question arises – what is the company planning with so much of money? (afterall it is not what any thinking company should, give the money back to the shareholders). The profit per year on LY numbers is 30 rupees per share which at current CMP is a handicap.

This is a news driven stock on account of the huge cash reserve, so look out for any announcements made by the company and invest likewise. I would suggest people to have a wait and watch approach here.

Friday, October 28, 2005

Marketer of a company

Modestly apart, most organizations have started brandishing their quarterly financial staminate with "words of progress" with common use of words like exceptional, superlative, fantastic etc. I picked up an article (read: advertisement) this Friday by Indiabulls which was none short of self-aggrandize. On Sunday, PNB displayed it's annual statements in flying colors - Raising benchmarks, exceeding targets.

These may be great companies but more often than not, the primary reason behind such statements is the increasingly prevalent progression towards a short-term rise in shareholder wealth. As more organizations are looked after by professional management and with a more informed and demanding investor community - maintenance and increase in share prices become inevitable.

My request to all is -
- turn a blind eye to any such messages (by the organization or otherwise). As investors, we should invest by numbers rather than news
- be conservative. Always treat such messages with suspicion (whether they may be right or wrong). Any company worth it's salt (like HLL, ITC, Britannia) will never resort to such practices. The value will speak for itself.

Thursday, October 27, 2005

LIC Housing Finance

Definitely a buy!!! Meet these specs -
[a] The NCA of the scrip is 128 rupees per share
[b] Cash in the company is a good 27 rupees per share
[c] Current dividend is 5 rupees off a 10 rupee share. The dividend yield is 2.5% p.a. I expect the company to continue with the 5 rupee per share dividend policy

The profit per year numbers are at 14 rupees which is fairly OK though not one that breeds too much of confidence but the 15000 ton bridge for a 10,000 ton truck gives me enough confidence to raise a buy on this stock.

Apcotex Lattices

The scrip has a CMP of 63 rupees and an NCA of 42 rupees. Interested?

A company which has growing sales, has almost zero debt and a book value of 90 rupees per share. The cons to the scrip can be the utterly low dividend yield (1.80 rupees per 10 rupee share) and the low PAT.

I would recommend this stock over a long run but be wary of quarterly numbers and the PAT of the company. Any increase to the same should trigger a buy.

Wednesday, October 26, 2005

GTL Limited

Global Telecommunications is as crazy a stock you can find. The NCA of this scrip is 81 rupees per share with a CMP of 106 rupees. The cash in the company is a wonderful 72 rupees per share. In pure Grahamian terms, if the stock price were to go below rupees 72 and you had enough money - you should simply buy up the entire company, go to the bank and write a cheque in your name (typical GESCO takeover case). Since it's not the case, I would suggest a confident BUY on the stock just on the basis of the current intrinsic value of the scrip.

If you are wondering why the stock has not yet been raided by others, GTL was one of the K-10 (Ketan Parikh 10) companies.

Tuesday, October 25, 2005

Tata Power

Tata Power needs to kept in the radar due to the following numbers –
[1] It has an NCA of rupees 92 per share which is very interesting and puts the price (CMP = 400) at 4.34 times NCA. This is a bit high.
[2] The dividend payout is at 7.5 rupees for a ten rupee share. The dividend yield would thus come to 1.88% which is also a bit low for comfort.
[3] The profit per year is 20 rupees per share.

Tata Power has not yet been drawn into what would be termed as a value buy. I would consider the share in the foll circumstances – a marked fall in the price to rupees 320 rupees which would entail a div yield of 2.5% (i.e. if quarter profit numbers don’t go down).

Himatsingka Seide

Himatsingka Seide is not exactly what I would categorize as a “Grahamian” Value Buy but more of a Warren Buffet-like cheap stock. Here are the reasons, why –
[1] At a face value of Rs.5 per share, the net current asset per share (inclusive of investments) equals 47 rupees. So at a CMP of Rs. 125, the stock is available at 2.66 times the NCA
[2] The dividend shelled out by the company last year was a good Rs. 10 on a 10 rupees share. If the dividend payout is to remain the same, it would amount to Rs. 5 per share which is a dividend yield of 4.00 %
[3] The profit per year arrives at 11.24 rupees per share. Providing for status quo, the stock should grow by 11.24 rupees for the next 10 years. That’s a growth of 9% per year.
[4] The investments on the balance sheet have been invested in short term and liquid MFs. The management thus is a thinking one and understands the nuances of the trade.

I would consider the stock a buy on the above basis and to be kept on a “Buy and Hold” framework.

Saturday, October 22, 2005

The cost of learning

Investing is a never-ending learning curve. Ever since I started investing in the Indian equity market (April 30th, 2004), the market has willfully expressed a number of emotions. Various moments of reckoning like the drop on May 17th 2004 when the BP government was going down in the exit polls, or when equities went into a frenzy by jumping from 7000 to 8500 in a trance only to slip back from 8900 to 7900 in half a month. In the process, I've been 40,000 rupees down, 180,000 rupees up and again down by 110,000 rupees. This is tamely called tuition fees which each investor has to pay at some point in this fascinating world of equities.

Over the last 18 odd months, I am putting some of my learning –
a) Always back your way of investing. I follow value investing and had always been a great believer in the buy-and-hold strategy but used to sell precious stocks for as little as 100% profit. Today if I would adhered to that strategy, I would have been atleast five times as rich.
b) Always diversify. You can sleep better knowing that you donot lose much if one company conks than knowing that all what you have to gain is on the performance of one company.
c) Never go in for penny stocks. I have currently two stocks in my portfolio which are negative profits stocks. My earning on both have been –48% and –52% respectively.

In the next few days, we shall go through a number of recommendations on the basis of value investing on some very interesting stocks in the Indian market.