Friday, November 18, 2011

AAA Stocks

I regret the fact that I did not write anything for sometime albeit with some valid reasons. Several stocks are at March 2009 levels (thanks to the European debt crisis) even though SENSEX and NIFTY are reasonably holding because of few good stocks. In my previous articles I have mentioned about 2011 being a year of opportunities and sure it turned out that way. If anybody had the feeling of missing out in 2009, here is another opportunity to buy some quality stocks at reasonable prices. Personally I made some grave mistakes of trying to find "Undervalued" stocks when the SENSEX was at 20000 levels and bought some ordinary stocks like Lakshmi Energy, IVRCL Infra, NCC etc. Its true that most of the stocks have crashed to 52 week lows, but the fall associated with some of these stocks like KS Oils, Educomp Solutions, Everonn Education etc. would have happened in any case irrespective of the market conditions.

The past 3 years have provided enough opportunities to learn a lot (though hard lessons) and one lesson that I learned for sure is not to invest in stocks with dubious corporate governance no matter what and how big the potential is. Most of the market participants including the Foreign Institutional Investors ignore the corporate governance in a bull market, but as soon as markets reverse direction and situation gets tough, governance issues comes to the light and stocks of the respective companies are dumped like a trash of worthless securities.

Mid caps and small caps of course offer multibagger opportunities but at the same time companies in this segment are the ones involved in illegal practices and we fall victim to these unfair practices whenever the news comes out. So it is better to invest in companies with good management, good corporate governance, low debt, no pledged shares and fundamentally strong business even if these stocks demand higher price. The reason is that we can confidently average on these stocks in times of market crash and expect to get a good return over long term. With this in mind, I have given AAA rating to selected stocks which I will share below.

I was not able to buy all of these stocks as these stocks traded at higher prices, but they are all available at reasonable prices now. Buying these stocks currently and accumulating more on every dip will be a good option for everyone who expect reasonable returns. One reader commented that I am giving here the list of stocks but a good analyst is the one who gives few multibaggers. My answer is very simple that those readers are welcome to listen to an analyst who give multibagger recommendations. If anyone can predict multibaggers that precisely, then he / she would have made millions already and would not be in the business of giving recommendations. I am neither suggesting to buy anything nor giving multibagger recommendations. All I am trying to do here is to share my experiences, learning, opinion and educate people who does not have enough knowledge in equity markets to get the basics in the process and get a decent return of about 15-20% CAGR.

Things I learned in 2011

1. Don't buy stocks which look cheap when the market is ruling high without extensive research.

2. Don't buy any company with dubious corporate governance.

3. Avoid companies with high debt and high percentage of pledged shares which are very bad combination's.

4. Avoid companies with fluctuating revenues unless they are industry leaders (Example: Infrastructure companies, Real Estate Companies).


AAA Stocks

I have assigned AAA rating to the following stocks because of their past history of good corporate governance, strong brand image, good fundamental business and future growth. All these stocks are trading at reasonable prices. If we buy these stocks now, then we should be prepared to average in case the prices come down. Of course there are many other AAA stocks but I am not listing them as they are trading at outrageously high valuations even now. (Example: HDFC Bank, Page Industries, Titan Industires, Asian Paints etc.).


Banks and Financial Companies

1. Axis Bank
2. ICICI Bank
3. State Bank of India
4. Yes Bank
5. Indusind Bank
6. Allahabad Bank
7. Andhra Bank
8. Shriram Transport Finance
9. GRUH Finance
10. Mahindra Finance
11. Indiabulls Financial Service (Excellent Dividend History)
12. Cholamandalam Finance


Pharmaceuticals / Chemicals

1. Torrent Pharmaceuticals
2. Cadila Healthcare
3. IPCA Labs
4. United Phosphorus
5. Gujarat State Fertilizer Corporation

Gas

1. GAIL
2. Indraprasatha Gas
3. Petronet LNG
4. Gujarat State Petronet

Diversified / Others

1. Godrej Industries
2. Tube investments / EID Parry
3. Mundra Port
4. Essar Port
5. Adani Enterprises
6. Savita Oil Technology
7. Bajaj Finserv
8. Hindalco
9. Exide industries
10. Opto circuits
11. SRF Limited
12. Torrent Power
13. Larsen & Toubro
14. PTC India

By just looking at this list, most of the readers would understand where I am getting at. Quality of the management, corporate governance and the underlying business is what drives growth and all the companies that I have mentioned have shown good practices in the past and hope they continue to do so in future too.

Kumaran Seenivasan
www.stockanalysisonline.com

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This is a blog about stock market investments, investment strategies, and related topics. Any statement made in this blog is merely an expression of concerned authors opinion, and in no case should it be interpreted as an investment advice to buy stocks, sell stocks, or for that matter advice for any other issues be it money related or not. By using this blog you agree to (i) not take any investment decision, or any other important decisions based on any information, opinion, suggestion or experience mentioned or presented in this blog (ii) verify any information mentioned here, independently from your own reliable sources (for e.g. a registered investment advisor) and thereby check for possible inaccuracies. This blog is to create investment wisdom among general population and the authors are not responsible for
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