Follow the fundamentals......

Friends,
Again I have to write on front page.Looks like readers are not able to understand the basics of stock market.
I write it again here, read each and everyword of my post.Read 2 times, read 3 times ...and even more untill you understand what I am saying.Even after you think you understood what I wrote still have one more read of each post.You may find some other angle to what I am saying.
Well, the reason to write this is, still readers keeps on asking me about stocks which need not be asked.
In last 3-4 days I got queries for stock which I never covered here at my blog.
Lakshmi Energy,Chembond,A.K Capital, Sarla Performance,JSW Energy,FSL Ltd,Piccadily Agro,Visaka Ind etc etc.
I have written recently that buy stocks which have

1)good fundamentals,
2)which have excellent product line
3)the management is good and
4)Co should be able to passon the cost escalation to consumer.

Had anyone followed this parametres?
Those readers who are following me for 3-4 months needs to read my back post as well.On the right side to my blog there is a " Blog Archive" and below that what post I have written every month are shown as title.
Click each and every post and read those post for every month and then after completing for 2011, go for 2010 and read those post.
I am just giving a simple example.I wrote on EPC Ind on 9th Feb, means this month only.Mahindra and Mahindra is taking over this Co and they have bought the stake at Rs 66.I gave the call when it was in 30's or perhaps in 20's.
Now even after that post of mine, EPC Ind has gone up from 66 to 78.EPC Ind is in producing of drip irrigation system parts and they have collobaration with Israel which is pioneer in drip irrigation.
With commodities becoming dearer, farming becoming attractive,India having vast uncultivated land yet to use,management of M&M taking over , what else one need to invest in this stock?
I still can write some more stocks which I have discussed and have come down drastically which have excellent management and excellent fundamentals and product line.....but I haven't seen anyone talking of those stocks.
Instead they keep on asking me some new stocks which I feel are not worth a look as either the price are still high,or is not in good sector.
The 4 parametres that I have written, learn by heart.Write these on a piece of paper.When market is jittery and everyone is selling , try to invest in stocks which have excellent management and excellent earnings with good sector.Understand what is the meaning of each and every point.
One needs to able to forsee where the future of the Co lies.EPS is not everything.P/E is not every thing.
One needs to able to see where the Co can go.
When I work so hard to find stocks and then track them for each and every info to gather, why can't you work hard atleast to go thorugh my all past post and read them.
You get ready dish from where you all can eat but I can't come and put the food in your mouth.
So, read my past post one by one.Try to understand what I have written in each post.
I write no nonsense.Each and every word and sentence has meaning.
Read my reply for any comments or queries asked.Sometimes one can get even a good info when I give a reply.

Friends,
On Thursday market tanked in big way.It was over 500 points.Well market was up next day, Friday, but I feel that still market is not out of woods.
I wrote recetly that market can still go down to touch 16k and looks like it should come.Midcaps and smallcaps are sold lock stock and barrel.Looks like there are no takers for them.But that happens when market tanks.There is nothing new.Investors sell to buy later.
If one remember I wrote , market always favours BEARS.I remember I wrote on front page that Market favours bears.When everyone wants to sell and no one wants to buy, prices keeps drifting down and down.
It is a human nature.Trying to save whatever amt they can and when selling starts it is like capitulation and that makes bears work more easy.
There are margin calls as well and brokers sell holdings of clients to make up their loss in F&O.
The unrest in Middle East which started from Egypt and has now gone in other countries like Libiya which are OIL producing countries has put the crude oil at record high recently at $100 which is sending jitters to world MF managers.
The talk of $220 for Crude has already been prijected by Nomura and that is making market more on shaky state.
I has always said , buy in trenches.Buy 10% every time if one feel that fundamentals are still good.
Wiser council should prevail sooner or later.Scores of stocks are making newer and newer lows.
The silver lining here in India is growth is still intact.I know that with crude prices going up will hamper the growth but still I don't see why 8% growth rate of GDP for India shouldn't remain there.
I am seeing that FII's are selling in big way as there will be no tommorow but they have to come back here to invest again in Indian market.After all India has long way to go.
If bears are saying that they went right in prediction then one needs to remember that they took over 1 year to prove right and that too after market going from 12k to 21k.They anyhow missed the rally and lost the money while shorting the market whole time.
If someone proves correct after one year and 9k points I don't think that is a good prediction.
There is no point in boasting of coming true.
Bears who made huge money in shorting the market in 2008 lost everything they earned in 2009 and 2010.
No one is par excellence(Batrish Laxshono) in market.No one can time the market.That is the bottomline.No one is above market.We have to take the gyration in our own way and that is the order of the day.........
Let us see how budget comes on Monday and how marketman reacts on it......
What I will write is, this is an excellent chance to lappup good stocks at very cheap valuations.Find those stocks and start buying them slowly.If one have no money and can't buy anything then remain on sidelines.Don't do anything.I keep on writing that don't invest with borrowed money.That will put you in awkward situation.No one know when market will take U turn and no one knows when the stock one hold will run.Make sure that you have income which can run your routine without any problem.
Always remember the above paragraph.
I know it is difficult to swim against the tide but that is how money is made.
Buy when fear is there and sell when greed is prevailing.It is easy to speak then act but one needs to learn it.
Up and downs are part of market and one needs to learn to digest it.

FSL Ltd ...cmp..Rs 18.15..CASE STUDY

Friends,
Ashok Mahajan asked me about FSL Ltd and I am pasting his post here and the answer for it will be below it......
Read On:


ashok mahajan said...



Rajiv ji

please send your view on FSL.i receive a report in my mailbox


Barclays to drive Q3 revenue growth
Stake sale: The probability of stake sale by ICICI Group along with two other large institutions – Temasek's Aranda Investments and Metavante Investments – has been an equity overhang on the stock. ICICI Group, Temasek and Metavante currently own 21.2%, 20.04 and 18.2% respectively in FSOL. Since the listing of FSOL, Temasek diluted its stake by a little over 2%. ICICI Group brought down its stake from 26.74% in March 2009 to 21.2% at present.


FCCBs: FSOL currently has outstanding FCCBs of US$ 212.4 mn with maturity of Dec 2012. As the current stock price is much lower than the conversion price of Rs 92.3, we have assumed that the FCCBs will not be converted into equity. Hence, FSOL will need US$ 296 mn to repay these FCCBs in 2012. FSOL currently generates cash of US$ 40 mn every fiscal and it will have cash of US$ 75 mn by end-3QFY11E. This means that the company will have US$ 150 mn of cash on its books by Dec 2012. The management seems confident about refinancing the balance amount of ~US$ 150mn.


Valuation: FSOL to achieve 2-3% QoQ revenue growth in constant currency. This would be largely led by revenue from the Barclays project, which kicked off last month. EBIT margins are likely to see an impact of 60-70 bps for the quarter as a result of ramp-up costs associated with the Barclays project and due to fewer working days.


FCCBs as debt and our adjusted EPS estimates for FY11/12 are largely unchanged at Rs 2.15/Rs 2.92. We maintain our Outperformer rating on the stock.


February 21, 2011 5:56 PM


 
My Answer:
 
ashok,

First thing I do not like about FSL is HUGE eq. 430 cr Eq  is HUGE.
Now just take an example.For this Co to post an eps of 10, it will have to earn 430 cr as Net Profit.
Now try to think, with the orders of even Barclays bank also, will FSL be able to earn NP of 430 cr for whole year or even 215 cr for whole year?
So that the eps comes to 10 if it earns 430 cr and eps comes to 5 if it earns NP of 215 cr....
Remember here that FSL is making profit of 20-22 cr every qr now and if it wants to makes 430 cr for whole year then the profit should be atleast 100 cr every qr and that will be 5 times from what it is making.Is that possible?That means that the growth will be 500% in one year?Can it be possible?
Ask question to yourself?Think over it.Ye ho sakta hai?Pucho apne ap ko.......aur phir invest karo....
Friends, the reason I write this on front page is I want all of you to know how to analyse things at stock market.
These are simple parametres that I have written.But investors forget the basics time and again and get carried away with a call or tip from friend.
I don't say one should not listen to them.Listen to them but before buying do your homework and that is also not hard.One need to follow the basics which I have written here.
Under no circumstances the FCCB will get converted at 93.They will have to pay back the FCCB money just like Venus Remedies has to.
And remember here that Venus Remedies is having an EPS of 50 and stock quoting at 216 , means available at below 5p/e......then imagine what can happen with FSL Ltd if they have to payback the FCCB money?
  Usually, when a brokerage house comes out with a report their clients has already had bought those stock way ahead and then when the report comes out it is their PMS clients time to sell.
Another thing we need to remember is that, any FII's Co report or any brokerage Co report , when one read one needs to remember that they are for 20-30% return in a year that is the maximum while here at my blog I talk of multibagger return.
Don't get carried away with research report from brokerage.....rest your decision....you all are very smarter then me......
 

Sunil Hitech...&....Lumax Ind.......Excellent results.....

Friends,
Sunil Hitech:
I know many readers were not sure about this Co.Some have even taken big stake after I gave the call and then it went down and down and they even asked me that whether it is still a hold or not?
The concerns were the office was raided by IT offcials etc and hence prima facie the management was not trustworthy and I remember very well that what my answer was.
I wrote that in India that is part and parcel of business where even Wipro office is seacrched.
I donno, but I was bullish on this stock due to their service and product line.
Moreover the Mcap was favouring sales which was also a positive point for me to give a call.
Sunil Hitech has come out with excellent nos for Dec qr with eps of 8 for Dec qr.That is an excellent results by any standard.

Lumax Ind:
Another stocks that has come out with excellent result is Lumax Ind.When I gave the call at Rs 95, the Co was making loss but still I went ahead and gave a buy call.
The Np of Lumax Ind has gone up from 2.65 last year to 6 cr this year and that is more then 100% jump in NP which gives an eps of 6.43 for Dec qr.
So as I wrote at that time when I gave a call of Lumax Ind that results will follow lateron which came out perfectly true and to my understanding.
I am still bulliish on both of the above stock.
There are other stocks as well which has given stupendous results and which I have given call in past  which I am not writing here as I want my readers to find them out and write me if they wants to or can silently start accumalating those stocks.

What will you do now?

Friends,
Market ended positive on Friday.Scores of stocks has come down drastically at abysmal level.Now the trick is one don't need to buy stocks which have high P/E.
Find stocks which have strong management, strong fundamentals and the productline is excellent.The future of the product is excellent.In that one needs to include the inflation,commodities prices , or raw material prices going up and still Co can make excellent profit.The demand of the product should be such that they can easily pass on the increase in price to consumer.

I like one of the sentence of Warren Buffet very much and that is:

"Even if stockmarket get closed for 10 yrs , you need not have any problem"

That is absolutely correct for anyone who wants to think in investing in stock market.One should have no problem holding stocks for 10 yrs and still able to run the house or daily routine.
Make sure you have enough money coming to you even though these money invested in stocks gets jammed for 10 yrs.
I still say, making money in stock market is not easy.
Then the other trait comes from Warren Buffet is buy at right price.Buy so cheap that even small profit makes huge difference.
Selection of stock is very important and it is a learnig process as we have seen even Warren Buffet has made mistake and Rakesh Jhunjhunwala has made mistakes.
Don't get disheartened if you have chose a wrong stock.Rectify the mistake.That is what is needed to be done.Know how to cut losses.Be vigil.Be constant in touch with market.After all it is your hard earned money.Don't buy on TIPS and perticularly when one is seeing nothing there and is a penny stock , don't buy it.Only 1 out of 1000 outperform the market and gives huge return and one needs to be very LUCKY to have that one.If one is investing in penny stock then be ready to lose all the amount.If you are not ready for that then please don't buy penny stocks.Not all stories gets successful.

Create your own level of competency.Try to make decision on your own and try to invest that way.If you find you made a mistake, sell it and buy something else.Mistakes are bound to happen.
One of my call, PSL Ltd has underperformed in a big way.
That is bound to happen.No one is GOD here.We are all humanbeing and therefore mistake is going to happen.But as Rakesh says, make mistake but it shouldn't be so big that you start hating stock market and you are out of it.
Coming to market, I wrote last time that market if breaks 18500, it can go down to 17k and may go to 16k.Even after friday upmove market can still go down and break 17k level.
But I don't see the repeat of 2008 Oct as according to me we haven't seen any euphoria , people becoming mad to buy stock in market.Market should stabilize in due course and may happen that after Budget market may start consolidation and then upwarsd movement.
Lots of stocks that I have discussed have been down by 50% or even more.Find those shares and find out which is most fundamentally strong, have excellent management and have excellent product line and then start buying.......

India fiscal deficit is Rs 1,76,000 cr and

the money estimated for
1) CWG corruption is Rs.40,000 cr
2) 2G scam is Rs.70,000 cr.
3)S-Band scam is Rs.2,00,000 cr
and the total sum of all these 3 is Rs.3,10,000 cr
which is much much higher then the whole fiscal deficit! Wow! That is great!And over and above that we are not counting those money that has been in Swiss Bank and other banks on other countries which is also as big as our fiscal decifit.
I donno, what politicians wants to do with this country.
I know many readers don't like my this writing, but I am helpless. I can't resist myself writing on it.THE BLOOD BOILS.Atleast my blood boils.Whenever I see TimesNow channel I feel what is happening in India!
Just imagine with all these money, we become ZERO deficit country and where we can stand.
That is the basic difference between America and India.Warren Buffet and Bill Gates lives for their country.The are real country lover.They love their country very much.
Imgaine Warren Buffet giving over 90% of his wealth for Philanthropic and Bill Gates doing the same.
I remember couple year back (2008)when Hollywood famous actor Paul Newman died.at the age of 83.He started a food product Co and all the profit was given for Philanthropy.By 2006 the franchisee donated $250 mn.Can anyone do it in India?
The entire profit was given back to the society.Americans live for their country.They want America to stand up tall in comparision to world.They wants to see America helping other countries.
I know everyone likes money.But how much?and for how much lenght of heirs?Son,grandson, grandgrand son, grandgrandgrand son,grandgrandgrandgrand son......that is 5 .....make it 7 grandgrandson....for that how much one need.
I remember one Kabir duha when I read and see news like this!
Agar put(son) kaput to kyon dhan senche, agar put(son) saput to kyon dhan senche........

The meaning is , if son is bad why we need to save money as he is bad he will spend it all in one life and will not keep for his sons and sons and if son is good then he will earn by himself what he is suppose to, then why to save money?
Bottomline is, in both ways, either Son is bad or good there is no need to save money for them.
But what I am trying to tell here is, will there be any limit for making money?Looks like our politician has no limit.Yes, there is NO LIMIT..........100 cr, 1000 cr,5000 cr, 10,000 cr, 40,000 cr, 1,00,000 cr, 2,00,000 cr........these are really a scaring figures.
Sat (7) pedhi ke liye kitna chahiye?If anyone wants to make money for 7 generation , what can be the criteria?How much is needed for a person who wants to gather the money for 7 generation so that after his death , next 7 generation have not to work at all?
700 cr will be eough?Rs 100 cr for each generation?But these above figures is saying something else!I think Rs 100 cr should be enough for anyone not to work for his whole life and still can live luxorious LIFE.........
I think there need to be a revolution like we saw in Egypt.The 30 yrs dictatorship of Prez Hoshni Mubarak came to an end when 10 lacs Egyptian gathered at Tahrir Square at Cairo.
If a small country like Egypt can do it why can't we?
Time for the people of India to pressurize government to eradicate corruption totally from India.....
Will it Happen?If the answer is YES then only India can make it BIG otherwise forget the growth and forget becoming India a force to reckon with.
A golden chance for India to wipe out the entire deficit is getting aborted.If this is how Corruption is going to come up then when will the deficit will get less?
FII 's invest here keeping in mind that while selling the 2G Indian government will get this much of exchequer, from S-Band it will get this much revenue and hence after 5 yrs the fiscal deficit will come down to 50% of what it is now.But instead of getting those revenue in government kitty it is going somewhere else.....

EPC Ind....Mahindra & Mahindra invests into EPC Industries

Friends,
I have been giving the call on EPC Ind since long around 35 , a drip irrigation Co.
Today even in bad market it is still up by over 100% and M&M is taking stake at Rs 66.00 for 38% and thus becoming the promoters of EPC Ind.I am happy to see that my call is good enough to become a takeover target of an Indian Multinational Co, M&M.......

M&M to acquire 38% stake in EPC Industries



By PTI Feb 09 2011 , New Delhi


Tags: EPC, M&M, Companies


Diversified firm Mahindra & Mahindra (M&M) today said it will acquire 38 percent  stake in EPC Industries for Rs 43.35 crore to mark its foray into the micro irrigation business.

"The board of M&M approved the acquisition of 38 per cent equity in EPC Industries... The acquisition is through preferential allotment of shares by EPC," the auto major said in a filing to the Bombay Stock Exchange (BSE).
The company would be making an open offer to EPC's shareholders for acquiring 20 per cent of the enhanced share capital of the firm, it added.
Micro irrigation is a water efficient technology that reduces the usage of the natural resource, while improving the productivity in agriculture.
"The company would subscribe to 65,58,065 fully paid-up equity shares of the face value of Rs 10 each of EPC, on a preferential basis, at a price of Rs 66.10 per share," the filing said.
On the completion of the preferential allotment and the open offer, M&M would be acquiring the management and control of EPC and would be classified as promoter of EPC.
Commenting on the deal, M&M President (Automotive and Farm Equipment Sectors) Pawan Goenka said: "With rising population and reducing water availability, micro irrigation is an important method to reduce water consumption in agriculture to raise agriculture productivity in the country."
Established in 1981, EPC is currently present in over 12 states and sells many equipments, including dip irrigation systems and industrial pipes.
"A revitalised EPC will now have the opportunity to play a very important role in helping the farmer community to improve yields and manage the water resources more meaningfully," EPC Industries Promoter K Khanna said.

Has Indian Market made a Double Top?.......Patterns....

Dear Friends,
The upmost question that is coming to everybody's mind is has Indian market made a double top?Will it mimick the same pattern it showed in 1992 and 2000?
Let us analyse the situation.In 1992, Harshad Mehta Bull run the market made a top of around 4660 and then went down.Again it made a top of 4660-4700 and went down in 1994 and again made a top of 4700 in 1996 and went down.So of 1992 TOP of 4660 , market made 2 Double Top.Means market tried to attempt to break the TOP of previous high twice.
In 2000 , Ketan Parekh Bull run market made a high of 6156 something and then went in tail spin to touch 2360-2400 in Sep'01 when USA world trade centre was attacked by extremist.
But here the market PATTERN  differs then what happened in 1992 .In 1992 market made a  double TOP twice while in post 2000 top market didn't made any attempt to make a double top TWICE  and come down to the level of 2300.
Analyst are gungho about the market making a double top and then drifting down.The pattern of double top is there but there is no rule to made a low of retracement theory of 68% or whatever it is.One more thing and that is if the pattern is going to repeat then market should be making 2 DOUBLE TOP like in 1992, 1994 and again in 1996.
So here the scenario that comes out is like, market will try to attempt to cross 21k twice and will come down to 8k level twice before crossing the previous high of 21k to forge ahead......
so in simple words, we have made one double top...21k and now it should go to 3200 level and then again 21k and then again come down to 8k and then  only the previous high will be taken off........
That is what should happen if the technicals are right.It should mimick each move step by step of 1992 bull run......
and my simple understanding says that if such pattern is not repitative and market fails to exhibit such pattern then I am not with Technicals.........
I know market didn't mimicked 2000 top......of 6156 like 1992 .Only once market touched 2300 and not the second time it did again....after touching 6156 again....

Even if we look at the 21k top of 2008 and market going down to 8k, what is the retracement percentage?The market making a bottom from 21k to 8k is a retracement of 62%.
So the percentage keeps varing and technicals analyst keeps on boasting about these theories which they themself do not exactly know  what will be the retracement percentage.That is the biggest flaw in charts theory.At what level one should start buying?
So what pattern we need to follow?
1.When market made 2 double top and went to a low as much as 1800 from 4700 ..
2.Market never made 2 double top of 2000 top of 6156...
3.Market after breaking 6156 in 2005 (not sure about the year exactly) and then crossed that top of 2000 ....so when market tried to attempt to make another double TOP and then retrace of 2000 TOP what was the retracement level?
There is also one more theory of filling the gaps.....the market needs to fill the gap and has to come to that much of retracement percentage and the sensex at what should come back , the targets are real scary.....3600-3200. I donno, whether there should be any pattern like that or not , because if it is there then each and every UPMOVE should follow with retracement value.For every RISE of 500-700 or 1000 points the retracement points should come.......
If these are the targets that are going to get achieved then I think we will get all those stocks at 2500 nifty level or 8k sensex level of 2008 Oct or 2009 Mar or even lesse then that .I have no doubt about it that if 3200 is coming then we don't need to BUY anything now.
But my question still remains that why market didn't made a TWO double TOP of 6156 of KP's bull run and why it made TWO  double TOP of HM bull run?It is all assuming......if it goes wrong they will say it will happen lateron and market goes up by another 5000 points.But it makes no sense if market goes up big way and then one proves right.
Even if for a brief period of time market from its journey from 2300 to 21k made a double TOP of 6156, when it tried to cross,did in second attempt went back as much as it went back in HM bull run?
I think market never went to the level percentage wise that can mimick the same pattern of HM TOP.
Inflation is going up.Over 17% inflation is very very HIGH and Government needs to tame the inflation.
I just read that world  analyst are expecting Commodities prices to go up and up due to higher demand from emerging market and that it will keep on going up untill new production capacity do not occur and that is a scary sign for the world.
This will affect the bottomline of Co in India and all over the world.It has started actually affecting to some Indian Auto Cos.
Well, It is hard to predict what will the BOTTOM of the market.
Our market has become slaves of FII money and if FII has become negative then the flow will be trimmed down and that will not help market any good.
I wrote recently that it will take time for normalcy to come back.The inflation is soaring on the back of high commodities prices and that is not a good news for market as for any market to go up the earning should go up.
Well, but there is always some sectors which stands out from the massacre and I am seeing that if USA  economy is come back to normal then there will be more jobs for IT service Cos and hence IT sector is where one should look on.
Another sector which will have direct relation with commodities will be Commodities sector itself as any price rise in Pulses, grains or Copper, Iron ore,Alu,will increase the profitibility of these Cos.
And now the evergreen sector.....Pharma.....It is an evergreen sector untill one invest in it judicioulsy and upcoming Co.
The rise in Inflation will let people think not to use certain things but Medicine is one such thing that no one can ignore it.One need to be physically fit to remian alive and that is why it is an evergreen sector but the condition is you are there in right stock at right time.
So don't buy anything in market in one go.Market is not in a runaway mode.Prices will go up and will also come down.Best way would be to buy in SIP manner which I always recomend to do.And perticularly when market is trying to find the bottom one need not go for allout buying.

A Small note..............on Siemens Ltd

Friends,
I find a call from one of the well reputed brokerage that Siemens is giving a chance to give shares over the market rate , so one should surrender those shares!
I donno whether he is speaking for Siemens or whether he understand what does it means when parent Co wants to increase the stake from 55% to 75% at 28% premimum.
It is very clear and also written in the text that Siemens wants to increase the share of India's arm then it is obvious that Siemens shares are not supposed to be surrendered in open offer......