These are some of the companies which i feel has bottomed out.These are pretty interesting companies with decent busienss models and good fundamentals.So check them out.
1)Aishwarya Telecom:-In my earlier note i said it for no reason desrves a price of 136rs.Just look at the bechara now,quoting at 28rs.Surely bargain hunters would opt for it sooner or laters.So though not 136 but a mere 28 is very feasible for one to have a token position.
2)Asian electronics:-Market i feel has discounted all bad news of the company.Asian electronics at present level of 70 is a good buy.Within the next 6 months asian should rebound bigtime.Battle to regain its lost glory has already begun.
3)Futura polysters:-The court recently sanctioned the demerger scheme.So one is surely entitled to get innovasnyth technologies now.Futura polyster is a steal at present levels of 22.A great buy.
4)Jai corporation:-A huge sucess story being beaten down badly though for some reasons.But still jai corporation doesnt deserve a price of 280.Several funds opted for it,a great company with a solid aggresive,vision oriented owner.He has taken oath to take the company beyond ones reach.A good value buy.
5)Jaiprakash assocaites:I feel pity for these company,a superb company being misunderstood so badly.At 150rs its a must have in anyones core portfolio.You are also entitled to get free shares of JP Infratech.
6)Kemrock industries&exports:-One of my hot favourites of yesteryears.Superb result,great aggresive management.The company supplies its products to the biggies like boeing and all.At 300 i would definately book it for my portfolio.
7)Punj lloyd:-People who feel larsen&toubro is beyond your reach please dont get disapointed.The next larsen in making,the company with over 20000crs of order book is just quoting at 210 levels.Exit out flop ones in the basket to replicate it with a sucess,punj lloyd.
8)Saag rr infra:-The company ended the fiscal with 66crs of topline.It has got a robust order book position of over 410crs.So huge revenue visibility,sunrising sector coupled with great outlook makes it a super buy.The company is quoting at 38rs.
9)Valuemart Info Technologies Ltd:-To start with the company is quoting at "3"rs presently.To conclude-checkout its promotor-the real man with an amazing mind.He has taken a lot at 6rs now its hi-time you book it at the earliest.Valuemart info is a great but at the curent level of rs 3.
10)Walchandnagar Industries Ltd:-My 2nd 50 bagger,my darling,my walchandnagar.Dont be jealous guys though not a 50 bagger but walchandnagar still has the potential to do an encore from the present levels of 200.A quality company at much of a discount.
Monday, July 7, 2008
Mental mistakes in stock markets
[Cause of recent fall in indian stock markets/motilal oswal brokerage and recomendation/zandu pharma news and reason for sharp upmove/10 mistakes which should be avoided/how to be a good stock picker/how to make money through trading/investors make money while traders loose big/what are the nifty levels to watch out for/support and resistance for nifty and sensex/deepak mohoni and prakash gaba bakwas tips/good advisors of indian stock markets/under owned and over owned stocks]
Stock indices have had a huge fall recently.The price cut has been particularly severe in the midcap segment,i.e,in stocks that have a low capital base and relatively low liquidity.It may be the time to step back a bit,book your losses on them and look for fresh oppurtunities in attractively valued stocks that have got pounded despite decent fundamentals.Picking good stock is the key to succesful investing in bull markets.Over-owned stocks pose a higher risk of loss when the markets turn down.
There are so many common mental mistakes investors make,that often lead to losses.Some of these avoidable errors are:-
1)Overconfidence-This can lead to complacency and over exposure.It is the most common mistakes investors make when they are making profits.In equities you can never throw caution to winds.
2)Herd-like behaviour driven by a desire to be part of the crowd or an assumption that the crowd is right-If midcaps are rising people buy these stocks without even knowing anything about the companies.There are so many companies in our markets which only exists on paper,they moves with the winds or faces some unscrulpous activites,the simple gullible investors gets in at the top and that leads to a paralysis when the price suddenly falls and as soon as that happens you are stuck badly unable to take a call on the stock.Look whats happening now.
3)Excessive aversion to loss=Inability to book a loss when an investment goes wrong is the single biggest cause for losses to investors.Unless a stock has been bought on strong conviction of long term value,those who make investments for quick gains must learn to exercise stoploss.
4)Fear of uncertainity-This leads to inaction.If we book profits and the stock still moves higher,we feel bad.Therefore if a stock is moving up most investors refuse to book gains.And many a time this ultimately leads to losses.
5)Fear of making an incorrect decision and feeling stupid-This too leads to inaction.People often opt for inaction when faced with fear of making a wrong choice.However little do they realise that not acting in time too is a choice that they made unknowingly.
6)Reluctance to admit mistakes-This is another behaviourial pattern that leads to incorrect decisions.In markets,we are loathe to admit that we made a wrong decision.However admitting a mistake and taking corrective measures often saves a lot of money.
7)Following tips of self-proclaimed advisors aware of nothing-In a bull market so many self proclaimed analyst grows,they wud just name the company backed by nothing,the scrip moves up 10% and bang he is the next big bull that we all are looking for.This is another classical behavioural patern.Now simple investors would opt for that scrip without having any confidence or conviction and as soon as the price falls down,the villain is there to catch hold of.
8)Exiting out great scrips at lower levels and buying companies which exists on paper at highs-I get a lot of mails in my mailbox daily pertaining to these point,Arunji i entered your suggested great multibagger at these levels, it came down 20% from my level, so in fear i sold out,now it has more than doubled/tripled what to do?Buying into a scrip means you are actually buying a business.Its so hard to start a business and to run it,i mean just feel it, u have to have an office,plants,machiniries,employees so many hassles.But buying a single scrip of any company means you are the owner of a great business.That company is liable to share everything with you,you being the owner of that firm.But investors hardly cares about it..Do u?
9)Failing to accurately assess their investment time horizion-Most investors make investments for the short term but when the trade turns into a loss,they stick to it claiming that it was a long term call.This could often lead to huge losses.
10)Forgetting the powerful tendency of regression to the mean-This is the most important lesson for all investors.All stock prices must ultimately revert to their long term averages.All sharp run ups on dubious companies comes to an end in an most unpleasant manner.
Stock indices have had a huge fall recently.The price cut has been particularly severe in the midcap segment,i.e,in stocks that have a low capital base and relatively low liquidity.It may be the time to step back a bit,book your losses on them and look for fresh oppurtunities in attractively valued stocks that have got pounded despite decent fundamentals.Picking good stock is the key to succesful investing in bull markets.Over-owned stocks pose a higher risk of loss when the markets turn down.
There are so many common mental mistakes investors make,that often lead to losses.Some of these avoidable errors are:-
1)Overconfidence-This can lead to complacency and over exposure.It is the most common mistakes investors make when they are making profits.In equities you can never throw caution to winds.
2)Herd-like behaviour driven by a desire to be part of the crowd or an assumption that the crowd is right-If midcaps are rising people buy these stocks without even knowing anything about the companies.There are so many companies in our markets which only exists on paper,they moves with the winds or faces some unscrulpous activites,the simple gullible investors gets in at the top and that leads to a paralysis when the price suddenly falls and as soon as that happens you are stuck badly unable to take a call on the stock.Look whats happening now.
3)Excessive aversion to loss=Inability to book a loss when an investment goes wrong is the single biggest cause for losses to investors.Unless a stock has been bought on strong conviction of long term value,those who make investments for quick gains must learn to exercise stoploss.
4)Fear of uncertainity-This leads to inaction.If we book profits and the stock still moves higher,we feel bad.Therefore if a stock is moving up most investors refuse to book gains.And many a time this ultimately leads to losses.
5)Fear of making an incorrect decision and feeling stupid-This too leads to inaction.People often opt for inaction when faced with fear of making a wrong choice.However little do they realise that not acting in time too is a choice that they made unknowingly.
6)Reluctance to admit mistakes-This is another behaviourial pattern that leads to incorrect decisions.In markets,we are loathe to admit that we made a wrong decision.However admitting a mistake and taking corrective measures often saves a lot of money.
7)Following tips of self-proclaimed advisors aware of nothing-In a bull market so many self proclaimed analyst grows,they wud just name the company backed by nothing,the scrip moves up 10% and bang he is the next big bull that we all are looking for.This is another classical behavioural patern.Now simple investors would opt for that scrip without having any confidence or conviction and as soon as the price falls down,the villain is there to catch hold of.
8)Exiting out great scrips at lower levels and buying companies which exists on paper at highs-I get a lot of mails in my mailbox daily pertaining to these point,Arunji i entered your suggested great multibagger at these levels, it came down 20% from my level, so in fear i sold out,now it has more than doubled/tripled what to do?Buying into a scrip means you are actually buying a business.Its so hard to start a business and to run it,i mean just feel it, u have to have an office,plants,machiniries,employees so many hassles.But buying a single scrip of any company means you are the owner of a great business.That company is liable to share everything with you,you being the owner of that firm.But investors hardly cares about it..Do u?
9)Failing to accurately assess their investment time horizion-Most investors make investments for the short term but when the trade turns into a loss,they stick to it claiming that it was a long term call.This could often lead to huge losses.
10)Forgetting the powerful tendency of regression to the mean-This is the most important lesson for all investors.All stock prices must ultimately revert to their long term averages.All sharp run ups on dubious companies comes to an end in an most unpleasant manner.
Sunday, June 29, 2008
Cairn Energy-BUY
Recently a freind of mine who works as an analyst in ubs forwarded me their coverage on cairn energy.Its an interesting report and if cairn comes out with numbers as per UBS estimates-Expect huge upsides on the counter.
Scripscan:Cairn india ltd
CMP:260
Target:374
Traded in:Nse-bse
[Cairn india ltd news,views and analysis/Oil exploration company/turning it on/buy call given by ubs/major beneficary of high crude oil prices/upcoming results/great future prospects/going to do wonders/target price/Hidden gem/Great bet to own/what to do with cairn energy ltd?]
Upgrading to Buy on revision of UBS crude oil prices:We upgrade our rating on Cairn India to Buy (from Sell) and price target to Rs374 (from Rs246) on the back of the upward revision to UBS forecasts for crude oil price. UBS revised the oil price forecasts for all years from CY08 and including the long-term forecast. Given our new explicit oil price forecasts till CY12, we believe the current price reflects a long-term oil price of only $48/bbl.
UBS raises the oil price forecasts including long-term forecast:UBS has raised the oil price forecast to US$ 113.5/120/116/135/155 per barrel in 2008/09/10/11/12 respectively primarily driven by the expectation of supplies falling short of demand substantially pulling down spare capacities. UBS has also raised its long-term oil forecast from $73/bbl to $95/bbl from 2013, on the expectations of higher cost inflation in key upstream projects and GlobalOilCo.
Raising earnings estimates for Cairn India:Driven by the new higher forecasts for crude oil, we raise the earnings estimates for Cairn India in CY08/09/10 by 209%/110%/73% to Rs 1.4/14.0/74.6 respectively. We do not revise any of our assumptions on productions costs in doing so.
Valuation:We change our rating to Buy and raise our target price to Rs 374. Our price target is based on our NAV estimate for Cairn India's E&P assets. We use a DCF to value CIL's stake in Rajasthan, Ravva and Cambay blocks. For the remainder of CIL's assets, we use EV ($)/boe. We also factor in exploration upside by assuming net unrisked reserves of 550 mmboe adjusted by a risk weight of 20%.
Source:UBS
Scripscan:Cairn india ltd
CMP:260
Target:374
Traded in:Nse-bse
[Cairn india ltd news,views and analysis/Oil exploration company/turning it on/buy call given by ubs/major beneficary of high crude oil prices/upcoming results/great future prospects/going to do wonders/target price/Hidden gem/Great bet to own/what to do with cairn energy ltd?]
Upgrading to Buy on revision of UBS crude oil prices:We upgrade our rating on Cairn India to Buy (from Sell) and price target to Rs374 (from Rs246) on the back of the upward revision to UBS forecasts for crude oil price. UBS revised the oil price forecasts for all years from CY08 and including the long-term forecast. Given our new explicit oil price forecasts till CY12, we believe the current price reflects a long-term oil price of only $48/bbl.
UBS raises the oil price forecasts including long-term forecast:UBS has raised the oil price forecast to US$ 113.5/120/116/135/155 per barrel in 2008/09/10/11/12 respectively primarily driven by the expectation of supplies falling short of demand substantially pulling down spare capacities. UBS has also raised its long-term oil forecast from $73/bbl to $95/bbl from 2013, on the expectations of higher cost inflation in key upstream projects and GlobalOilCo.
Raising earnings estimates for Cairn India:Driven by the new higher forecasts for crude oil, we raise the earnings estimates for Cairn India in CY08/09/10 by 209%/110%/73% to Rs 1.4/14.0/74.6 respectively. We do not revise any of our assumptions on productions costs in doing so.
Valuation:We change our rating to Buy and raise our target price to Rs 374. Our price target is based on our NAV estimate for Cairn India's E&P assets. We use a DCF to value CIL's stake in Rajasthan, Ravva and Cambay blocks. For the remainder of CIL's assets, we use EV ($)/boe. We also factor in exploration upside by assuming net unrisked reserves of 550 mmboe adjusted by a risk weight of 20%.
Source:UBS
Friday, June 27, 2008
Market outlook and Ennore coke-The new kid on the block
[Near term market outlook/cheap and attractive valuations/Investors make money traders loose money bigtime/stock tips to mulitply your money/sensex to hit 10000 levels?]
Market Outlook:So what should investors do now? I believe that the recent correction from 17,600+ levels was very much warranted, the fact that this was primarily a liquidity-driven rally, and was, in many cases,totally out of sync with ground realities.Therefore, with the correction,i have become much more comfortable with the valuations that many stocks are now trading at. At the end of the day, am of the belief that over the long-term, stock prices move in tandem with fundamentals.Therefore, the best way to make money in equities is to invest in fundamentally strong companies having good management capabilities, a strong market positioning and good future prospects. Most importantly, of course, buy such stocks at good valuations, of which there are many stocks at current levels. At the end of the day, it is the process of investing that will multiply your money in the long-term. Happy investing!
[Ennore Coke Ltd news,views and analysis/small player/results/future prospects/bagged orders/Analsyt buy call/valuations/ fundamentals and technicals of Ennore Coke Ltd/can be a great buy if performs/Target price/penny stock idea/multibagger potential/coke play/sunrising business/belongs from the sriram group/What should be done with Ennore Coke Ltd]
Scripscan:Ennore Coke Ltd
Code:512369
Cmp:29
Story:-The new coke kid is on the block for you guys now.Ennore coke is an unique story and has already been a great favourite to some operators.The scrip in the present market condition fell drastically from the recent highs of 70 rs.Some times back the company has been taken over by great business minded guys having long experience in the coal and coke trade business.Now it belongs to the 16000crs shriram group.If market rumuors are to be beleived then the company is going to do wonders in the coming days.The buzz in the bourses is that the company is going to report a turnover of over 30crs from nothing last year.The Raw material (Prime Quality metallurgical coal) supply has been tiedup with a foreign company.The company has also signed a MOU with Eco securities Mumbai for Carbon credits.The coke prices is expected to reach new highs which is expected to provide further push to the bottomline of the company.Since there are not many direct coke plays many investors are betting on it as a steel end-user proxy play.Though it should be keenly watched how the things materilizes but already the company seems to be finding lot of takers among the investors fraternity.So if you have got a brave heart filled with lot of risks apetite,Go for it.
Market Outlook:So what should investors do now? I believe that the recent correction from 17,600+ levels was very much warranted, the fact that this was primarily a liquidity-driven rally, and was, in many cases,totally out of sync with ground realities.Therefore, with the correction,i have become much more comfortable with the valuations that many stocks are now trading at. At the end of the day, am of the belief that over the long-term, stock prices move in tandem with fundamentals.Therefore, the best way to make money in equities is to invest in fundamentally strong companies having good management capabilities, a strong market positioning and good future prospects. Most importantly, of course, buy such stocks at good valuations, of which there are many stocks at current levels. At the end of the day, it is the process of investing that will multiply your money in the long-term. Happy investing!
[Ennore Coke Ltd news,views and analysis/small player/results/future prospects/bagged orders/Analsyt buy call/valuations/ fundamentals and technicals of Ennore Coke Ltd/can be a great buy if performs/Target price/penny stock idea/multibagger potential/coke play/sunrising business/belongs from the sriram group/What should be done with Ennore Coke Ltd]
Scripscan:Ennore Coke Ltd
Code:512369
Cmp:29
Story:-The new coke kid is on the block for you guys now.Ennore coke is an unique story and has already been a great favourite to some operators.The scrip in the present market condition fell drastically from the recent highs of 70 rs.Some times back the company has been taken over by great business minded guys having long experience in the coal and coke trade business.Now it belongs to the 16000crs shriram group.If market rumuors are to be beleived then the company is going to do wonders in the coming days.The buzz in the bourses is that the company is going to report a turnover of over 30crs from nothing last year.The Raw material (Prime Quality metallurgical coal) supply has been tiedup with a foreign company.The company has also signed a MOU with Eco securities Mumbai for Carbon credits.The coke prices is expected to reach new highs which is expected to provide further push to the bottomline of the company.Since there are not many direct coke plays many investors are betting on it as a steel end-user proxy play.Though it should be keenly watched how the things materilizes but already the company seems to be finding lot of takers among the investors fraternity.So if you have got a brave heart filled with lot of risks apetite,Go for it.
Simple thinking and simple suggestion for all
[Warren buffet story and tips/Whitney Tilson/broker tips/panic buying and selling/market volatility/diverse analyst views/udayan mukherjee and his stock market knowledge/Peter Bernstein/what to buy what to sell which time to buy and what no to buy/Arbitrage on Stocks permitted??/SBI - Is it good to enter for long term?/KLG CAPITAL SERVICES and its reason for huge upmove/When is 23000 level of sensex expected?]
Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ.Once u have ordinary intelligence,what u need is the temperament to control the urges that get other people into trouble in investing"-Warren Buffet.
Coming from the legendary investor,this piece of advice should serve as the guiding post for all those who want to be successful investors in equities.The world"s most successful investor believes that emotions play a major role in influencing investors into making grave errors which are then compounded by taking further rash actions.This creates the kind of market fluctuation that we are now witnessing.
Sometimes back i read an article, i assume its a couple of years ago when i was 17,it struck me a lot..It was by Whitney Tilson,which said "Peter Bernstein in "Against the Gods" states that evidence reveals repeated patterns of irrationality,inconsistency and incompetence in the ways human beings arrives at a decisions and choices when faced with uncertainty.
It means that when we are faced with uncertainty,like in the stock markets where different opinions exists,the decision making is often irrational and inconsistent and such errors are most likely repeated by individuals. While after every debacle most investors seems to believe that they have now learnt their lesson,but many of them repeats the same mistakes.
Almost everyone in the equity markets makes huge mistakes.They often buy dud stocks,Invests on rumours despite knowing that it is not advisable,refuse to sell when prices fall etc.Examples are in numberable check in our very own orkut stocks community itself.However only those who are able to avoid repeating their mistakes are ones who succeeds.Such individuals are very,very few.This also reinforces the buffet advice that it does not need extra brilliance to make profitable investment decisions but it needs a lot of discipline.
I know these article of mine would find a lot of people who would be influenced after going through the full coverage.But to be very frank and honest most would find it like an ind ultion.Still i am making these points because i believe that we are headed for volatile times in equity markets over the next few months.Even a bit of discipline and caution may prove to be a world of good for all.Times would come where investors would be torn between fundamentals and strong newsflow.High crude prices,over expensive valuations,FII trend will create uncertainty.The indices could swing wildly as bulls and bears will slug it out according to their faith.
Amidst all this,investors could swing between extremes of panic buying and selling.In such times,it would be important to remember Buffets"s advice."Avoid herd mentality and keep your own counsel.
Extra labouring over market volatility,diverse analyst opinions and unsolicited broker advice would confuse investors.It would be important that they maintain balance and avoid panic reactions while buying or selling.
Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ.Once u have ordinary intelligence,what u need is the temperament to control the urges that get other people into trouble in investing"-Warren Buffet.
Coming from the legendary investor,this piece of advice should serve as the guiding post for all those who want to be successful investors in equities.The world"s most successful investor believes that emotions play a major role in influencing investors into making grave errors which are then compounded by taking further rash actions.This creates the kind of market fluctuation that we are now witnessing.
Sometimes back i read an article, i assume its a couple of years ago when i was 17,it struck me a lot..It was by Whitney Tilson,which said "Peter Bernstein in "Against the Gods" states that evidence reveals repeated patterns of irrationality,inconsistency and incompetence in the ways human beings arrives at a decisions and choices when faced with uncertainty.
It means that when we are faced with uncertainty,like in the stock markets where different opinions exists,the decision making is often irrational and inconsistent and such errors are most likely repeated by individuals. While after every debacle most investors seems to believe that they have now learnt their lesson,but many of them repeats the same mistakes.
Almost everyone in the equity markets makes huge mistakes.They often buy dud stocks,Invests on rumours despite knowing that it is not advisable,refuse to sell when prices fall etc.Examples are in numberable check in our very own orkut stocks community itself.However only those who are able to avoid repeating their mistakes are ones who succeeds.Such individuals are very,very few.This also reinforces the buffet advice that it does not need extra brilliance to make profitable investment decisions but it needs a lot of discipline.
I know these article of mine would find a lot of people who would be influenced after going through the full coverage.But to be very frank and honest most would find it like an ind ultion.Still i am making these points because i believe that we are headed for volatile times in equity markets over the next few months.Even a bit of discipline and caution may prove to be a world of good for all.Times would come where investors would be torn between fundamentals and strong newsflow.High crude prices,over expensive valuations,FII trend will create uncertainty.The indices could swing wildly as bulls and bears will slug it out according to their faith.
Amidst all this,investors could swing between extremes of panic buying and selling.In such times,it would be important to remember Buffets"s advice."Avoid herd mentality and keep your own counsel.
Extra labouring over market volatility,diverse analyst opinions and unsolicited broker advice would confuse investors.It would be important that they maintain balance and avoid panic reactions while buying or selling.
Several ways of picking stocks
[Several ways of picking stocks in indian stock markets/value investors and growth investors/fundamental approach and technical analysis/Who is managing the company/where the sensex company stands/bottom of market/Market Rumour/inflation numbers/Technical Analysis of Market with Charts/TRADING IN DELISTED SHARE SCRIPTS /sensex at 10000,SHANKAR SHARMA SAYS SO/what is GARP investing/How market can recover ???/motley Fool"s theory/what is discounted cash flow/PE and PEG ratio/dividend yield of the company/how to choose a company/current assets and current liabilities/how wealth can be created/bse,nse,nifty/how long will bear market continue/personal finance and investments/human psycology and irrational behaviour/relation between trader and investor,earnings growth and dividend yield]
When one thinks of personal finance and investments,stock is the first thing which strikes the mind for quick accumulation of wealth.Its quite explicable the first love for stocks as stock market is the most exilerating place to delve in.If any one stands at the Flore of the stock markets and observe the scrolling up and down of stocks,he may feel of the anxiety surrounding in its environment.But on the financial merry-go-round rise,we all want to experience the ups without the downs.
Though,the world of stocks sounds interesting and pleasing,yet,it would be unwise to jump into these without any knowledge or understanding of the subject.Here i will explore the stock picking techniques based on the tested and pr oven theories of investments.The criteria for the selection of stocks are based on so many factors that it is nearly impossible to construct a formula that will predict success.There is no watertight system,which assure you arriving at a rate of interest that is greater than the markets overall average.
At this point,you may ask yourself why stock picking is so important.Why worry so much about it?Why spend hours doing it?The answer is simple-Wealth.A good stock picker can increase his personal wealth exemplarily.Mind you even your"s truly of 19 years has struggled a lot over the years in applying theories in stock picking.
Any stock is picked on the basis of company's creditability over a period of time.The quantitative aspects of a company,such as profits,balance sheets and report on its agm are easy enough to find.However one can never guess on the qualitative aspects of any company such as company's staffs,its competitive advantages,its reputation and so on?One ma find such sort of in formations highly intangible that cannot be measured.The divergence between tangible and intangible aspects of any company makes the task of stock picking highly off-centered and instinctive process.
Human element is considered to be highly irrational and when this human element gets involved into the volatile stock markets,it can turn out to be a highly dangerous place to play on the bourses.Emotions are an integral part of human element,which are highly unpredictable just like the bourses on the bourd.And when emotions becomes overbearing it can turn the confidence into fear.During such time,it is the emotions only which can either make one flourish or devastate depending upon his state of mind.
The credential of any company is known by its management and the way it functions.Ultimately,it is the people at the strategic decision making positions determines the fate of any company.A strong management plays a crucial factor in the success or failure of any company.To assessthe strength of management and company,investors can simply ask the standard five stuffs-Who,where,what,when and why.
Who is managing the company?
You must know about the management structure of the company and also must keep a close eye on the persons positioned in that structured.If you opt for a company which has got college dropout aspirants like me decent trouble awaits you for sure.Lolz,jokes apart.Do a proper research work about who is the companys ceo,cfo etc.The educational qualification and professional experiences of the people appointed at the highest position in the company must also be verified.The purpose behind is to see whether they are competent enough for the post held by them.
What the company does and how it makes money?
Another important factor to consider about while analyzing a company"s qualitative factors is it products and services.Whats the actually activity of a company?In other words,the company earns its profits from which source?Knowing how a company's activities will be profitable is fundamental to determining the worth of an investment.Try to explore the growth potential of the company.Any customary company in a great industry can provide a solid return,while in a poor industry it is likely to shrink your portfolio.Market share is another important factor.Assessing a company from a qualitative standpoint and determining whether you should invest in it are as important as looking at its sales and earnings.
Where the company stands?
An important factor to look upon-where the company is standing within the industry.Whether the company have any positive points that provides an edge to the company over its competitors.A company's fundamental helps one to pick up a good stock as it enables to find out the "intrinsic value of any company.If the intrinsic value is more than the current share price,your analysis is showing that the stock is worth more than its price and that makes sense to buy the stock.
When does the management take decision?
Now what is the philosophy of management?It is the style in which management intend to manage the company.You can get a glimpse of the style of management by looking at its past performances or going through the annual report"s MD&A section.If a company is showing negative results,one of the actions taken is management restructuring.Which is often termed as "change in management structure" due to poor results.But if a company performs continuously poor then its a warning sign to switch over to other investment options.Altough restructuring may be due to the poor performance of the management,it does not necessarily mean that the company is going through a downfall.Management restructuring might be a positive sign,which shows that the company is endeavouring hard to change its outlook for good cause.
Why?
Finally,an investor must investigate over the capabilities of managers appointed t decision making levels.Never hesitate to ask questions like does this person's the qualities you believe are needed to make someone a good manager for this company?Has he or she has been hired because of past successes and achievements or has he or she acquired the position through questionable means,such as self appointment after inheriting the company?
Merely knowing the strength of company and its management is not enough to guarantee a success in investing.There are certain theories to be looked upon before taking any final decision.If any decision is taken without considering these theories and principles,the investor may end up with losses.
Greater fool"s theory
A company is worth the sum of its discounted cash flows.This means that a company is worth all of its future profits added together.Though several analysts evaluate it by their own means but to me its just what got defined now.Now its up to you to go with me-the teenager kid or not.Anyways the continuation of DCF-These future profits must be discounted to account for the time value of the money.One of the assumption of the DCF theory is that people are rational,nobody would buy a business for more than its future DCF.Since a stock represent ownership in a company,this assumption applies to the stock markets.Now you may ask,why do then stocks exhibit volatile movements as it doesn't make sense for stock price to fluctuate so much when the intrinsic value is not changing every minute?Well the the fact is that many people do not view stocks as represention of DCFs,but as trading vehicles.Misanthropists have labelled it as the "Greater fool"s theory".Since the profit on a trade is not determined by a company's value but about speculating whether you can sell it to some other investor(the fool.On the other hand,the trader would say that investors relying solely on fundamentals are leaving themselves on the mercy of the market instead of observing the trend and the tendencies.
Value investing:-
Stocks carrying strong fundamentals attract value investors the most.A strong fundamental may include earnings,dividends,book value and cash flow-that are selling at a bargain price,given their quality.Value investing doesn't mean just buying any stock that fall off and therefore seems"bargain basement priced".Vale investors have to do their homework and be confident that they are picking a company that is cheap given its high quality.A value investors considers the supremacy of a company to double up his profits.He believes in forseeing the company's potential rather making profit through trading.He does not care much about the external factors affecting the company but determines the worth of the underlying value of its assets.The factors like market volatility or day to day price fluctuations are not coherent to the company and therefore are not seen to have any effect on the value of the business in the long run.
While the efficient market hypothesis claims that prices are always reflecting all relevant information therefore are already showing the intrinsic worth of the companies,value investing relies on a premise that opposes that theory.Value investors also disagree with the principle that high beta necessarily translates into a dicey investment.A high beta does not scare off value investors.As long as they are confident in their intrinsic valuation,an increase in downside volatility may be a good thing.
Growth investing:-
Growth investing could be defined By contrasting it to value investing.Value investors look for stocks that are trading for less than their apparent worth.Growth investors focus on the future potential of a company,with much less emphasis on its present price.Unlike value investors,growth investors opt for companies which are trading higher than their intrinsic worth-but this is done with the belief that the company's intrinsic worth will grow and therefore will exceed their current valuations.Growth investors are concerned with a company's future growth potential,but there is no absolute formula for evaluating this potential.Growth investors use certain methods or criteria as a framework for their analysis,but these methods must be applied with a company's particular situation in mind.
The first question a growth investor should ask is whether the company,based on annual revenue,has been growing in the past.Projected 5 year growth rate of at least 15-20%,although 25% or more is ideal for investors like me.These projections are made by analysts,the company or other credible sources.When a growth investor sees an ideal growth projection,he or she before trusting this projection,must evaluate its creditability.This requires knowledge of the typical growth rates for different sizes of companies.There are many examples of companies with staggering growth in sales but less than stupendous gains in profits.High annual revenue growth is good,but if EPS has not increased proporitinately,its likely due to a decrease in profit margin.By putting side by side a company's present profit margins to its past profit margins and its competitor profit margins,a growth investor is able to gauge quite accurately whether or not management is controlling costs and revenues and maintaining margins.A good rule of thumb is that if a company surpasses its previous five year average of pre-tax profit margins as well as those of its industry,the company may be a good growth candidate.
Screening for value stocks
Altough value stocks can be located anywhere,they are often located in industries that have recently fallen on hard times or are currently facing market overreaction to a piece of news affecting the industry in the short term.Keep in mind that these are the guidelines used by value investors and these are not hard and fast rules.
Share price should be no more than 2/3 of intrinsic worth.
Look at companies with PE ratios at the lowest 10% of all equity securities.
PEG should be less than 1
Stock price should be no more than tangible book value
There should be no more debt than equity(D/E Ratio<1)
Current assets should be 2 times current liabilities
Dividend yield should be at least 2/3 of the long term AAA bond yield.
Earnings growth should be at least 8% per annum compounded over the last 8-10 years
The PE and PEG ratios
Value investing is not simply about investing in low PE stocks.Its just that stocks that are underrated will often reflect through a low PE ratio,which should simply provide a way to draw a distinction between companies within the same industry.Another popular gauge for valuing a company's intrinsic worth is the PEG ratio.It is calculated as stocks PE ratio divided by its projected year-over-year earnings growth rate.In other words,the ratio measures how cheap the stock is while taking into account its earnings growth.If the company's PEG ratio is less than 1,it is considered to be undervalued and is a growth pick for value investor.
An investor should also use margin of safety concept which is simply the practice of leaving room for error in the calculations of intrinsic worth.If the stocks intrinsic value were lower than that of what the investor estimates,the margin of safety should avert investor from paying too much of the stock.
In the nutshell,an investor should try to look at basic principles of investment and should not be carried away by biases like windfall gain but rather concentrate on the company's fundamentals,its management and other theories guiding towards right investment.
Remember that’s its your money at stake-so pick stocks wisely.
When one thinks of personal finance and investments,stock is the first thing which strikes the mind for quick accumulation of wealth.Its quite explicable the first love for stocks as stock market is the most exilerating place to delve in.If any one stands at the Flore of the stock markets and observe the scrolling up and down of stocks,he may feel of the anxiety surrounding in its environment.But on the financial merry-go-round rise,we all want to experience the ups without the downs.
Though,the world of stocks sounds interesting and pleasing,yet,it would be unwise to jump into these without any knowledge or understanding of the subject.Here i will explore the stock picking techniques based on the tested and pr oven theories of investments.The criteria for the selection of stocks are based on so many factors that it is nearly impossible to construct a formula that will predict success.There is no watertight system,which assure you arriving at a rate of interest that is greater than the markets overall average.
At this point,you may ask yourself why stock picking is so important.Why worry so much about it?Why spend hours doing it?The answer is simple-Wealth.A good stock picker can increase his personal wealth exemplarily.Mind you even your"s truly of 19 years has struggled a lot over the years in applying theories in stock picking.
Any stock is picked on the basis of company's creditability over a period of time.The quantitative aspects of a company,such as profits,balance sheets and report on its agm are easy enough to find.However one can never guess on the qualitative aspects of any company such as company's staffs,its competitive advantages,its reputation and so on?One ma find such sort of in formations highly intangible that cannot be measured.The divergence between tangible and intangible aspects of any company makes the task of stock picking highly off-centered and instinctive process.
Human element is considered to be highly irrational and when this human element gets involved into the volatile stock markets,it can turn out to be a highly dangerous place to play on the bourses.Emotions are an integral part of human element,which are highly unpredictable just like the bourses on the bourd.And when emotions becomes overbearing it can turn the confidence into fear.During such time,it is the emotions only which can either make one flourish or devastate depending upon his state of mind.
The credential of any company is known by its management and the way it functions.Ultimately,it is the people at the strategic decision making positions determines the fate of any company.A strong management plays a crucial factor in the success or failure of any company.To assessthe strength of management and company,investors can simply ask the standard five stuffs-Who,where,what,when and why.
Who is managing the company?
You must know about the management structure of the company and also must keep a close eye on the persons positioned in that structured.If you opt for a company which has got college dropout aspirants like me decent trouble awaits you for sure.Lolz,jokes apart.Do a proper research work about who is the companys ceo,cfo etc.The educational qualification and professional experiences of the people appointed at the highest position in the company must also be verified.The purpose behind is to see whether they are competent enough for the post held by them.
What the company does and how it makes money?
Another important factor to consider about while analyzing a company"s qualitative factors is it products and services.Whats the actually activity of a company?In other words,the company earns its profits from which source?Knowing how a company's activities will be profitable is fundamental to determining the worth of an investment.Try to explore the growth potential of the company.Any customary company in a great industry can provide a solid return,while in a poor industry it is likely to shrink your portfolio.Market share is another important factor.Assessing a company from a qualitative standpoint and determining whether you should invest in it are as important as looking at its sales and earnings.
Where the company stands?
An important factor to look upon-where the company is standing within the industry.Whether the company have any positive points that provides an edge to the company over its competitors.A company's fundamental helps one to pick up a good stock as it enables to find out the "intrinsic value of any company.If the intrinsic value is more than the current share price,your analysis is showing that the stock is worth more than its price and that makes sense to buy the stock.
When does the management take decision?
Now what is the philosophy of management?It is the style in which management intend to manage the company.You can get a glimpse of the style of management by looking at its past performances or going through the annual report"s MD&A section.If a company is showing negative results,one of the actions taken is management restructuring.Which is often termed as "change in management structure" due to poor results.But if a company performs continuously poor then its a warning sign to switch over to other investment options.Altough restructuring may be due to the poor performance of the management,it does not necessarily mean that the company is going through a downfall.Management restructuring might be a positive sign,which shows that the company is endeavouring hard to change its outlook for good cause.
Why?
Finally,an investor must investigate over the capabilities of managers appointed t decision making levels.Never hesitate to ask questions like does this person's the qualities you believe are needed to make someone a good manager for this company?Has he or she has been hired because of past successes and achievements or has he or she acquired the position through questionable means,such as self appointment after inheriting the company?
Merely knowing the strength of company and its management is not enough to guarantee a success in investing.There are certain theories to be looked upon before taking any final decision.If any decision is taken without considering these theories and principles,the investor may end up with losses.
Greater fool"s theory
A company is worth the sum of its discounted cash flows.This means that a company is worth all of its future profits added together.Though several analysts evaluate it by their own means but to me its just what got defined now.Now its up to you to go with me-the teenager kid or not.Anyways the continuation of DCF-These future profits must be discounted to account for the time value of the money.One of the assumption of the DCF theory is that people are rational,nobody would buy a business for more than its future DCF.Since a stock represent ownership in a company,this assumption applies to the stock markets.Now you may ask,why do then stocks exhibit volatile movements as it doesn't make sense for stock price to fluctuate so much when the intrinsic value is not changing every minute?Well the the fact is that many people do not view stocks as represention of DCFs,but as trading vehicles.Misanthropists have labelled it as the "Greater fool"s theory".Since the profit on a trade is not determined by a company's value but about speculating whether you can sell it to some other investor(the fool.On the other hand,the trader would say that investors relying solely on fundamentals are leaving themselves on the mercy of the market instead of observing the trend and the tendencies.
Value investing:-
Stocks carrying strong fundamentals attract value investors the most.A strong fundamental may include earnings,dividends,book value and cash flow-that are selling at a bargain price,given their quality.Value investing doesn't mean just buying any stock that fall off and therefore seems"bargain basement priced".Vale investors have to do their homework and be confident that they are picking a company that is cheap given its high quality.A value investors considers the supremacy of a company to double up his profits.He believes in forseeing the company's potential rather making profit through trading.He does not care much about the external factors affecting the company but determines the worth of the underlying value of its assets.The factors like market volatility or day to day price fluctuations are not coherent to the company and therefore are not seen to have any effect on the value of the business in the long run.
While the efficient market hypothesis claims that prices are always reflecting all relevant information therefore are already showing the intrinsic worth of the companies,value investing relies on a premise that opposes that theory.Value investors also disagree with the principle that high beta necessarily translates into a dicey investment.A high beta does not scare off value investors.As long as they are confident in their intrinsic valuation,an increase in downside volatility may be a good thing.
Growth investing:-
Growth investing could be defined By contrasting it to value investing.Value investors look for stocks that are trading for less than their apparent worth.Growth investors focus on the future potential of a company,with much less emphasis on its present price.Unlike value investors,growth investors opt for companies which are trading higher than their intrinsic worth-but this is done with the belief that the company's intrinsic worth will grow and therefore will exceed their current valuations.Growth investors are concerned with a company's future growth potential,but there is no absolute formula for evaluating this potential.Growth investors use certain methods or criteria as a framework for their analysis,but these methods must be applied with a company's particular situation in mind.
The first question a growth investor should ask is whether the company,based on annual revenue,has been growing in the past.Projected 5 year growth rate of at least 15-20%,although 25% or more is ideal for investors like me.These projections are made by analysts,the company or other credible sources.When a growth investor sees an ideal growth projection,he or she before trusting this projection,must evaluate its creditability.This requires knowledge of the typical growth rates for different sizes of companies.There are many examples of companies with staggering growth in sales but less than stupendous gains in profits.High annual revenue growth is good,but if EPS has not increased proporitinately,its likely due to a decrease in profit margin.By putting side by side a company's present profit margins to its past profit margins and its competitor profit margins,a growth investor is able to gauge quite accurately whether or not management is controlling costs and revenues and maintaining margins.A good rule of thumb is that if a company surpasses its previous five year average of pre-tax profit margins as well as those of its industry,the company may be a good growth candidate.
Screening for value stocks
Altough value stocks can be located anywhere,they are often located in industries that have recently fallen on hard times or are currently facing market overreaction to a piece of news affecting the industry in the short term.Keep in mind that these are the guidelines used by value investors and these are not hard and fast rules.
Share price should be no more than 2/3 of intrinsic worth.
Look at companies with PE ratios at the lowest 10% of all equity securities.
PEG should be less than 1
Stock price should be no more than tangible book value
There should be no more debt than equity(D/E Ratio<1)
Current assets should be 2 times current liabilities
Dividend yield should be at least 2/3 of the long term AAA bond yield.
Earnings growth should be at least 8% per annum compounded over the last 8-10 years
The PE and PEG ratios
Value investing is not simply about investing in low PE stocks.Its just that stocks that are underrated will often reflect through a low PE ratio,which should simply provide a way to draw a distinction between companies within the same industry.Another popular gauge for valuing a company's intrinsic worth is the PEG ratio.It is calculated as stocks PE ratio divided by its projected year-over-year earnings growth rate.In other words,the ratio measures how cheap the stock is while taking into account its earnings growth.If the company's PEG ratio is less than 1,it is considered to be undervalued and is a growth pick for value investor.
An investor should also use margin of safety concept which is simply the practice of leaving room for error in the calculations of intrinsic worth.If the stocks intrinsic value were lower than that of what the investor estimates,the margin of safety should avert investor from paying too much of the stock.
In the nutshell,an investor should try to look at basic principles of investment and should not be carried away by biases like windfall gain but rather concentrate on the company's fundamentals,its management and other theories guiding towards right investment.
Remember that’s its your money at stake-so pick stocks wisely.
Tuesday, June 17, 2008
Southern Online Bio Technologies:-Perform or perish
Scripscan:Southern Online Bio Technologies Ltd
Cmp:28
Bse code:532669
[Southern Online Bio Technologies Ltd news,views and analysis/small internet and biodiesel player/results/future prospects/bagged orders/Analsyt buy call/high valuations/ fundamentals and technicals of southern online bio/can be a great buy if performs/Target price/What should be done with Southern Online Bio Technologies Ltd]
Story:They say, more than a tonne of dirt needs to be shifted to find every single carat of diamond. The same applies to the vast universe of small companies.It is a daunting proposition to sift through an endless list of sectors and industries in the hope of hitting on some gems.The stock which am gonna discuss today has been hyped immensely as the next star performer.So lets check it out buddies:-
Company:Southern online biotech has been providing a wide spectrum of services, which includes basic services like Internet access, E-mail and value added services such as Add on hours.The Company presently provides Internet Services as a Licensed ISP by connecting through Bharti Broadband Backbone,.The Company's services include the following:
* Dial up Services through PSTN
* Web Hosting
* Server Co-Location
* VOIP Services
* Leased Line services (Terrestrial and RE links)
* Dedicated Servers
* Networking Solutions
BIODIESEL PROJECT:The Company's Biodiesel Unit has been established at Samsthan Narayanpur Village & Mandal, Nalgonda District with 40,000 liters per day capacity with an investment of Rs.25.72 crores and the the Company has commenced the sale of Biodiesel from july last year.It has been supplying biodiesel to various well reputed customers like IDEA Cellular, L&T, Airtel, Kirloskar Oil Engines, Toyota Kirloskar, TNT Express couriers, Giatech, Southern Rocks & Minerals etc,.The Company has further plans to upgrade the current Biodiesel unit from 12500 TPY to 25000 TPY,over a period of 3 years.It is also planning to set up a unit of 250 Tons per day capacity at Vizag to have presence in the Global markets.The project cost of the proposed Biodiesel plant is Rs. 75.00 Cr.
Now a question is inevitable,Yeh "BIODIESEL" kya hota hain bhai?
Ans)Well Biodiesel (methyl esters) is a renewable liquid fuel produced from new or used vegetable oils or animal fats.It is typically made by a chemical process called esterfication, transesterification which relies on an alcohol, such as methanol, and a catalyst. It can also be made from Pongamia,Jatropha, cottonseed, peanut, canola (a variety of rapeseed),sunflower oils, waste animal fats,and used cooking oil.
Conclusion:Southern online bio has been quite consistent over the last 5 years as far its topline and bottomline is concerned.The company is striving for more with its full strength.Sales may bloster further but margin pressure would countine to remain.I doubt whether there are more unique plays like southern online bio.An interesting company operating in the field of two sunrising sectors with huge potential.But it should be prudent to note that bio-diesel is still a huge hyper and many small companies which were touted to be dark horses came and at present are struggling for their existence.Dollex,ascent exim,ikf to name a few such companies.It has bagged some recent orders for its biodiesel stuffs and it expects to bag few more in the coming days.On the internet and its allied business i doubt its ability to compete and cope with much bigger players.So risk and returns both seems to be looming large on the company.Only thing which can shape it up in the coming years would be the management"s vision and ther calculated efforts,if any at all.Dilution of equity is again something which am never comfortable talking of but its in nascent stages of a huge boom period,so i give my nod on it.Its of no doubt that because of the potential and prospects,Southern online bio would always be in the reckoning and will find its place in the portfolio of several risk savvy takers but performing bigtime in the bourses may only happen after the deliveration of robust set of numbers.
Cmp:28
Bse code:532669
[Southern Online Bio Technologies Ltd news,views and analysis/small internet and biodiesel player/results/future prospects/bagged orders/Analsyt buy call/high valuations/ fundamentals and technicals of southern online bio/can be a great buy if performs/Target price/What should be done with Southern Online Bio Technologies Ltd]
Story:They say, more than a tonne of dirt needs to be shifted to find every single carat of diamond. The same applies to the vast universe of small companies.It is a daunting proposition to sift through an endless list of sectors and industries in the hope of hitting on some gems.The stock which am gonna discuss today has been hyped immensely as the next star performer.So lets check it out buddies:-
Company:Southern online biotech has been providing a wide spectrum of services, which includes basic services like Internet access, E-mail and value added services such as Add on hours.The Company presently provides Internet Services as a Licensed ISP by connecting through Bharti Broadband Backbone,.The Company's services include the following:
* Dial up Services through PSTN
* Web Hosting
* Server Co-Location
* VOIP Services
* Leased Line services (Terrestrial and RE links)
* Dedicated Servers
* Networking Solutions
BIODIESEL PROJECT:The Company's Biodiesel Unit has been established at Samsthan Narayanpur Village & Mandal, Nalgonda District with 40,000 liters per day capacity with an investment of Rs.25.72 crores and the the Company has commenced the sale of Biodiesel from july last year.It has been supplying biodiesel to various well reputed customers like IDEA Cellular, L&T, Airtel, Kirloskar Oil Engines, Toyota Kirloskar, TNT Express couriers, Giatech, Southern Rocks & Minerals etc,.The Company has further plans to upgrade the current Biodiesel unit from 12500 TPY to 25000 TPY,over a period of 3 years.It is also planning to set up a unit of 250 Tons per day capacity at Vizag to have presence in the Global markets.The project cost of the proposed Biodiesel plant is Rs. 75.00 Cr.
Now a question is inevitable,Yeh "BIODIESEL" kya hota hain bhai?
Ans)Well Biodiesel (methyl esters) is a renewable liquid fuel produced from new or used vegetable oils or animal fats.It is typically made by a chemical process called esterfication, transesterification which relies on an alcohol, such as methanol, and a catalyst. It can also be made from Pongamia,Jatropha, cottonseed, peanut, canola (a variety of rapeseed),sunflower oils, waste animal fats,and used cooking oil.
Conclusion:Southern online bio has been quite consistent over the last 5 years as far its topline and bottomline is concerned.The company is striving for more with its full strength.Sales may bloster further but margin pressure would countine to remain.I doubt whether there are more unique plays like southern online bio.An interesting company operating in the field of two sunrising sectors with huge potential.But it should be prudent to note that bio-diesel is still a huge hyper and many small companies which were touted to be dark horses came and at present are struggling for their existence.Dollex,ascent exim,ikf to name a few such companies.It has bagged some recent orders for its biodiesel stuffs and it expects to bag few more in the coming days.On the internet and its allied business i doubt its ability to compete and cope with much bigger players.So risk and returns both seems to be looming large on the company.Only thing which can shape it up in the coming years would be the management"s vision and ther calculated efforts,if any at all.Dilution of equity is again something which am never comfortable talking of but its in nascent stages of a huge boom period,so i give my nod on it.Its of no doubt that because of the potential and prospects,Southern online bio would always be in the reckoning and will find its place in the portfolio of several risk savvy takers but performing bigtime in the bourses may only happen after the deliveration of robust set of numbers.
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