Saturday, August 22, 2009

Market Watch: Opinion Piece

Market is range bound these days as investors are very cautious to go long. Though Excess liquidity helps the upward movement, any sort of bad news pulls the market back significantly. Also traders and Foreign Institutional Investors book profit at higher levels and this will continue till the global cues form a definite direction.

IPO View

IPO season has also started and personally I am not investing in IPO’s. I believe that money is made in secondary markets better than in primary markets these days. Though pricing of recently announced IPO’s were reasonable, I thought the prices were not in line with the market scenario. It seems they price it as if the condition is back to normal but we have a long way to go. I think stocks like Reliance power and NTPC are better plays than Adani Power and NHPC. I would be interested in IPO’s only if the IPO price offers significant discount to the prevailing market price of concerned peers. Oil India IPO is next in line and I would buy only of the price is at least 10 - 15 % discount to the ONGC stock price. My contention is if the price of Oil India is going to be the same as current trading price of ONGC, then what is there for us to try our luck? I would rather buy tried and tested ONGC.

Stocks with Reasonable Valuations

I have published many posts with stock names and most of them are priced in and it is very hard to find good stocks at a great price in the current market scenario. At the present valuations, I would consider the following stocks for accumulation rather than digging deep to find “Hidden Gems”.

Reliance Power

With planned capacity of 33500 MW, Reliance Power is going to be the giant in power space in the next 6-7 years time period. If we assume that Reliance Power maintains the same efficiency as that of TATA Power, then the stock is going to be trading at least 10 times the current market price. Even in worst case scenario, it would be at least trading at 5 times the current stock price. Notwithstanding the Congress Government’s biased attitude towards ADAG group, current market price (Rs. 156) offers reasonable entry point for accumulation (Great if you had bought it at Rs. 100 or even less than that). It is available almost 50% lesser than the IPO Price (If we revalue the IPO Price by including the initial bonus shares). This is strictly for long term investors who intend to have concentrated portfolio.

Accumulation Range: Anything less than Rs. 175




PSL Limited

Largest producer of HSAW pipes, they have significant operations and orders from US and UAE. With the booming infrastructure sector in few months time, this company is going to attract more orders for oil, gas and water transmission. One should have bought this at lower levels, but current market price is not bad either considering the company fundamentals.

Accumulation Range: Rs.100 – Rs.150

Gitanjali Gems

Largest diamond jewellery manufacturers in the country, they operate in three segments namely diamond jewellery, lifestyle products and SEZ’s. Gitanjali Group’s SEZ business has not started yielding anything. With an improved disposable income among consumers in a year or so, this stock is going to do well in the long term. Closest competitor Titan Industries is trading at a PE Value of 30. Current market price of Rs. 107 is not attractive but a fair price considering the fundamentals and growth prospects.

Accumulation Range: Anything less than Rs.125

3i infotech

With all other large IT Companies trading at peak valuations considering Market situation, we are left with only midcap IT plays. 3i Infotech is Trading at about 5 times the FY2011EPS (Rs.17) and I think this stock is Available at a discount to her peer’s. High debt is a concern but ICICI Bank being the promoters, they are in decent hands.

Accumulation Range: Anything less than Rs.100


Madras Cements
This company is the fifth largest cement manufacturer in the country with 10 million tonnes of production capacity. They also operate in wind power and ready mix concrete segment. Ramco Super Grade is one of the most popular cement brands in south India with a good brand presence. One of the very few companies with captive power plant that reduces the production costs significantly. Increased infrastructure spending in the coming years will help this company grow at a decent pace. Again current market price is a fair price if not great to accumulate this stock.

Accumulation Range: Anything Less than Rs.110


Parekh Aluminex

Parekh Aluminex is the largest producer of Aluminum Foil Containers and I personally feel that this business is going to be growing at a faster pace than ever. I very much like this business and the stock is trading at a mere 3.3 times the current EPS. They supply the product to the well established clients like Indian Railways, Air India, and Singapore Airlines. This stock is available at a decent price and long term investors can accumulate.

Accumulation Range: Any price less than Rs. 120

Genesys International Corporation

Company is in a niche geospatial, engineering and IT solution services and it is going to gain strength in the coming years. This stock is trading at 5 times the current EPS with almost no debt. Long term investors can accumulate this stock if they have increased risk appetite.

Accumulation Range: Any price less than Rs.100


All the above mentioned stocks are for long term investors who have the practice of accumulating at every fall. Most of these stocks are under performing currently and that’s why I have picked up these as I see good growth prospects. One may also consider Federal Bank and Value Industries in this list.

If there are other good opportunities, please share it in the comments section.

Kumaran Seenivasan

www.stockanalysisonline.com

13 comments:

Faisal Humayun August 22, 2009 at 11:53 AM  

Hi Kumaran,

A really nice post with good stock picks...I wanted to know your opinion on Subhash Projects & Marketing Ltd....is it a good buy?if yes what wud be your suggested accumulation zone?

Thanks in Advance

Shabu's August 22, 2009 at 11:56 AM  

Dear Kumaran,

Nice post in a worthy dimension. I agree with your IPO views. Parekh, 3i and Value are excellent picks and dark horses with a long term view.

regards
Shabu

Kumaran August 22, 2009 at 4:53 PM  

Faisal,

Thanks for your comments....Regarding Subash,It is in a booming sector and has got lot of space for growth. Though it is trading at a discount to IVRCL, I still think, the valuation is bit high. But if you have a long term view, the stock will still provide decent returns. You can also look at supreme infrastructure as an alternative.

-Kumaran.

Kumaran August 22, 2009 at 4:56 PM  

Shabu,

Thanks for your comments. Though I knew about Value Industries, it was you who told me recently and I looked at it with more attention. Seems, it has got lot of potential.

-Kumaran.

Anonymous,  August 23, 2009 at 12:58 AM  

i am Dr.GANESH.I have grt passion for stock market.it was suprising to see my watchlist matches urs exactly.only i am waiting for a dip to buy.
u can research on oil country,ansal infra ,rei agro and comment.
id:gowriganesh29@yahoo.com

Mahesh August 23, 2009 at 4:18 AM  

Hi Kumaran,

I think you are the only one who demystify concepts in easier manner.

I never miss single post..:).

Please continue this effort and take your own time to write interesting post :).

Thank you so much,

Faisal Humayun August 23, 2009 at 5:36 AM  

Dear Kumaran,

Thanks for providing the name of supreme infrastructure..Did not know about it...Will surely look into it...

Thanks.

Anonymous,  August 31, 2009 at 1:08 PM  

Hi Kumaran,

How would buyback of Gitanjali impact its future pricr?

Thanks

Kumaran September 4, 2009 at 5:15 PM  

Usually Buyback indicates the financial health of the company. In anycase, Gitanjali Gems is a good buy for the long term.

-Kumaran.

Gold Bullion January 28, 2010 at 9:32 PM  

Knowing the current situation of the stock market is crucial especially if you have stocks invested in it. It is better to be up to dated to the situations so that you could know the actions to be taken if some changes in the stock market occur as to secure your stocks to lose. Today, the stock market is unstable so we need to be vigilant to the current market conditions.

Manigandan,  January 29, 2010 at 6:40 AM  

Hi kumaran,
i have found your site recently only, the stocks u suggested from small cap on march 2009 have shown there excellent track records and have given more than 100% returns each, can u suggest me some small cap stocks and mid cap stocks for this year 2010

Gold Bullion February 2, 2010 at 1:45 AM  

I love to read posts that are very interesting especially those topics that are about financial matters, business and stock market conditions. It is good to read those posts for they broaden our knowledge about different issue concerning the business world. Thanks a lot.

Regards,
Gold Bullion

share market May 10, 2011 at 11:06 PM  

I really appreciate your post and you explain each and every point very well.Thanks for sharing this information.And I’ll love to read your next post too.
regards
www.nirmanbroking.com

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