Stock Analysis Online: February 2010

Some of the (Sometimes most of the) stock market experts and retail investors believe in grouping the stocks into Trading stocks, Short term stocks and Medium / Long term stocks. It is in fact contrary to what Warren Buffet believes. He has mentioned in multiple forums that if you are not comfortable owning a particular stock for another 10 years, then do not own it. Of course he can go to that extreme as he is investing in Billions and buying the entire business. But as retail investors we can still try adopting that with little bit of modifications to suit our own expectations and requirements. It is true that some stocks are really volatile and give short term trading opportunities, but if you are a real investor who wants to build a nice portfolio then you still need to research about stocks that you can own for at least 3-5 years time. I sort of tried to see if there are stocks that can be considered for good gains irrespective of the time period and eventually I did see some stocks that can be considered at this point of time (February 5, 2010) for reasonable gains through short / medium / long term. I have listed these stocks in this article.

Indian Market Outlook

We saw the SENSEX trading at 17,700 just a fortnight back and has comedown 11% since then. It is a significant decline and it can decline some more too. But rather than trying to outwit the market, it is better to realize the opportunities we have and try to grab it in both the hands. Sure, the market has declined. But honestly I do not think this has anything to do with performance of some of the companies. Mostly the Q3 (December 2009 Quarter) earnings of various Indian companies have been good and definitely not to the tune of how the markets reacted. It is purely because of the bad global cues and Foreign Institutional Investors (FII’s) selling in heaps. I really believe that India’s growth is very strong and we have to take advantage of all the opportunities that come in our way. Almost all the studies starting from IMF and World Bank to our own domestic institutions predict at least 7% growth this year and even more in the coming years for India. What more do we need? A reasonable growth, increasing middle income population thus the disposable income and favorable investment outlook for FII’s do auger well for Indian equities in the coming years and who ever takes advantage of this will not rue their decision later on for sure.

Stock Suggestions

I have selected these stocks because I believe that these stocks offer good value over short, medium and long term. Some of these stocks are even good for trading.

Videocon Industries

An electronics conglomerate with Rs. 10,000 crore revenue, expected EPS of about Rs.25 and book value close to Rs.300 is just trading at Rs.210. There are not many stocks that offer greater value than this and I personally believe that this stock will give serious returns if one holds it for another 3- 5 year period. Some experts believe that Videocon’s oil business itself would fetch the Rs.210 Valuation. Just my thoughts!

Educomp Solutions

This company is an education solution provider and was commanding valuation of about Rs.5000 per stock just 3 months back. Even accounting for stock split (Had stock split of 5:1 in Nov 2009), this should be trading at Rs.1000 if one considers that kind of valuation. But the stock has come down significantly and it is trading at Rs.650 now. This stock is particularly good for short term gains as you can see from the price volatility. 15-20% gain is always on the cards even at this price over a shorter time period.

Brandhouse Retail / Koutons Retail

Indian middle class population has started spending on branded items and both of these apparel retailers have huge potential to deliver good returns for investors. Both are undervalued when compared with Pantaloon Retail.

Surya Pharmaceuticals

An emerging Pharmaceutical player with interests in education and healthcare, this company is undervalued for sure. Revenue of around Rs.800 crore and an expected EPS of Rs.50 would definitely fetch more than the current stock price of Rs.148.

Venus Remedies

Another emerging Pharmaceutical company with good numbers and has the potential to give good returns.

ICSA India Limited

A software solution provider for the power, oil and natural gas industry, this company’s revenue stands at Rs.1100 – 1200 crore per year. This is trading at Rs.140 right now and can give good returns over any period of time.

Praj Industries

Very good short term stock. If you look at the price volatility chat, you can’t count how many times it came down to Rs.80 and then went up to Rs.110 only to come down later. This has the potential for long term returns too.

Bartronics India Limited

This Smart Card manufacturer has been experiencing rapid growth and has bagged several government orders recently. Definitely worth more than what it is trading now.

Amar Remedies

Company is an ayurvedic and herbal product manufacturer. If you look at the number and do a bit of research, you will understand why I have listed it here.

Usher Agro / REI Agro

Both the companies are involved in processing and marketing Basmati and other rice varieties. Can give good returns.

Parekh Aluminex

I have mentioned this stock in many of my previous posts. This is a serious money spinner over the long term.

Micro Technologies

This company provides security solutions and is currently undervalued for its potential. How undervalued? Some of your research time will tell you that.

Adani Power

If you believe in India power story, do believe in this stock for serious gains over the long term. I know it does not have long operating history. But that’s the risk we need to take if you need a multibagger. Think about this way. Any company worth Rs.23000 crores does not go down that easily and more over it is not a financial institution. This is a power producer with own coal trading ability and own transmission lines.

I have listed all these stocks as I thought the market has given some opportunity to buy. Even if the market goes down and the prices of these stocks go down, I honestly think that one can accumulate more and more. India at 2015 or 2020 is going to be lot better than what it is now. So, believe in that.

Note: I know there are some better stocks than some of the stocks mentioned here. But they do not fit into short term category. The stocks I have mentioned fit into all these categories and it is a real help in someways. For example, you are buying one of these stocks strictly for short term purpose and for some reason it started going down. You can keep for more time for sure to make some gain. Some might say, Reliance Communication offers great value. Well, it might offer long term value, but over the short term, just show your back. It has been under Rs.200 for almost 5 months. So, the stocks I have listed here are what I thought fit into all three categories (Short / Medium / Long Term).

Kumaran Seenivasan
http://www.stockanalysisonline.com/