Stocks for the long and short term portfolio

[jamit_05]

Personally i think its a no-brainer ! Amit, awaiting your views on the same.

It is a good scrip. All the numbers add up and everything looks good. But, there is one serious problem... and you guessed it right...

Its NPA% almost DOUBLED from last year. An innocent figure of 1.32 became 2.26 this year. If this is the trend then its dangerous. And Gov Banks have the tendency to do this. They are less competent lenders than their private counterparts.

Its RoA is around 1%, so a 2.26% of NPA means around 2.5 years of income is about to vanish...

Moreover, its EPS fell from 40.00 to 36.45, that is around 10% fall. Will this trend continue too!

Both these things have rightly spooked the investors and hence the stock is cheap. And cheap is not always good. Cheap can also get cheaper. (See Opto Circuits).

Regarding Financial Services companies, I would want solid numbers all around. Hence, I am very aggressive in buying Union Bank, whereas I would buy Axis more easily. HDFC too, but it seems super expensive right now.

But, its a good start. After you study 10 stocks, you may like 1

 

[jamit_05]

Hi Praful,

This is at best a stable stock. Hence, although IB may perform at par its share price will stagnate. However, we want stocks that have the potential to grow their EPS by atleast 10% every year. If that doesn't happen and EPS is falling then, we want a super good bargain. And IB just might give-in.

If you have read one of my previous posts regarding the potential a good investment holds, you will see that a good investment can grow our Invested money by around 20% every year! And that should be our target. We may fall a little short. Can IB do the job? If you don't think so, then look elsewhere. While you keep an eye on good stock like this.

Being a little speculative, I would say that looking at its rise in NPA and reduced RoA this stock should fall another at least another 50% before consolidating.


PS: Am doing a deeper study into one Stock. It looks like a GEM! Will make a post soon...

 

[praful.arora]

This is undervalued currently due to bearish market for Banks and due to all the factors that you mentioned in detail. However, i think this is fundamentally a strong company by principles and it will not drown. Now the important question is what price to buy at.

Whether this will see such a huge correction of 50% i am slightly skeptical, but i can think maybe another 10-20% correction. That can be averaged out by buying SIP.

Seeing all the pros and cons, i think this is overall a good pick and it should appreciate in value by at least 25-50% in 1 year, or whenever a bull run comes around. Rest time will tell

I have had good experience with Engineers India, gave me 21% appreciation within 1 month. Similarly with NMDC 20% in 1 month and SesaGoa also 25% within few days (maybe because i luckily caught the spike in each of these).

But in Banks im a little confused. I see the same thing happening for Indian Bank, Dena Bank as well as Allahabad Bank.
At one point the charts of each of these banks started to look exactly the same to me and it feels like these all are taking a beating and getting very undervalued. Will take a good learning from these if nothing else.

Cheers !

 

[jamit_05]

This is undervalued currently due to bearish market for Banks and due to all the factors that you mentioned in detail. However, i think this is fundamentally a strong company by principles and it will not drown. Now the important question is what price to buy at.

Whether this will see such a huge correction of 50% i am slightly skeptical, but i can think maybe another 10-20% correction. That can be averaged out by buying SIP.

Seeing all the pros and cons, i think this is overall a good pick and it should appreciate in value by at least 25-50% in 1 year, or whenever a bull run comes around. Rest time will tell

I have had good experience with Engineers India, gave me 21% appreciation within 1 month. Similarly with NMDC 20% in 1 month and SesaGoa also 25% within few days (maybe because i luckily caught the spike in each of these).

But in Banks im a little confused. I see the same thing happening for Indian Bank, Dena Bank as well as Allahabad Bank.
At one point the charts of each of these banks started to look exactly the same to me and it feels like these all are taking a beating and getting very undervalued. Will take a good learning from these if nothing else.

Cheers !

A wise man said, to the effect, that if you find a stock that you think is cheap... then ask God... "Why me?"

Surely, Indian Bank, alongwith Union, Allahabad and several others we know won't drown. And that is not a concern with most banks and companies with numbers well within reason. We are on the look-out for growth.

The question that needs answered is, which bank is better positioned

1) To burn-out.. fall less, when Banks are crashing.
2) And rise well, whenever the tide comes back.

Clearly, you are seeing something right which is why you were able to get EiL etc. So, if you think IB ranks TOP on both these points then you must buy it.

If you ask my opinion, then I'd would say that IB is not a growth stock. It has a very low level of borrowings. Meaning, it is operating from deposits. Which means, it does not have the "inner drive" to grow. Else why wouldn't it borrow funds and seek expansion? Look at the private counterparts.

Ing Vysya, Yes, Axis for ex. They have a high (16 plus) Borrowings/Deposits ratio. Whereas IB's is at 4.04. Low borrowings, low growth.

In conclusion, you spotted IB well. It is a good stable bank. Investment won't vanish. But, return will be muted at best.

If you want a banking growth stock, then wait for a sharp correction in Yes, Ing and Axis bank! You will grow your money several times over.

 

[Govind99]

Hi jamit sir can you pls tell About Sintex industries I think it can become multibagger

 

[jamit_05]

Hi jamit sir can you pls tell About Sintex industries I think it can become multibagger

No Sir... Sintex is in deep trouble.

It has a great product, manufacturing is good etc... all is well... but what is the meaning of all of it... if it cannot raise cash!

It is running a huge negative Free Cash Flow. It is not getting payments from debtors. Which is the only reason why the stock tanked.

To be honest. I am following this stock. I am looking for the following points in the future:

1) Long Term Debt reducing.
2) Working Capital Reducing.
3) Positive Cash Flows.

Then I will buy this stock blindfolded!

 

[Govind99]

Thank you very much Jamit sir

 

[jamit_05]

SINTEX Industries Ltd.​

I feel Sintex, as a business, has spread itself in more directions than desirable. A good company focusses on its strength. It feels Sintex is still in search for a stronghold, by the way of which it can become big on national level and at least noticeable on the international level. For that it couldn't continue selling roof-top tanks! Hence, it tried to diversify. Now, we will know in the coming years whether the acquisition and diversification decision played out well.

As for now, things are grim.


Cons:

1. Increased debt by almost 1000 Cr last year. A high figure in its history.
2. Main promoter, BVM, pledged 15% of its stake in Sintex.
3. Has made a few foreign acquisitions. Only time will tell whether they contribute positively. We know Eu and US both are not doing too well.
4. Its main business of Monolithic Concrete Construction, is doing poorly as the entire construction industry is suffering.
5. Its plastics side may also perform poorly in the coming quarters as it caters to automotive and realty sectors.
6. It is generating negative Cash Flow. On second thought, this could be taken lightly as Sintex is on aggressive growth stance. Every growing company will fund expansion and not aim to collect cash and give dividends.

Sintex must be given cool down period so that it can reflect on its acquisition decisions which it took in very favourable times. It do not expect its Earnings to show any interesting growth. In fact, it may show de-growth.


Pros:

* The Share price is Cheap. Only recently Institutions were given shares in form of QIP at Rs.65! Employees were given ESOP at Rs.45. Promorters increased stake at Rs.65. But, it could get cheaper; much cheaper.

* Sintex is now well positioned to capture future growth, just has to learn to balance cash, growth and stability. It must not stretch its balance sheet so much. In its defence, nobody foresaw such a prolonged recession.

* The Management is well experienced and ambitious. It has the hunger, which is apparent after reading the Director's Speech in the latest AR.

* Product line is diversified. And has plenty of room for growth.
* Manufacturing capacities can cater to the growth.
* The industry has good scope.


Recommendation: Wait for fundamentals to improve. Sintex might see major cash crunch in the coming years. In the meantime, if share price goes sub-Rs.10 then it will be well supported as it has over 10 years of price range. Sintex is a long term winner.

 

[shreeux]

No Sir... Sintex is in deep trouble.

It has a great product, manufacturing is good etc... all is well... but what is the meaning of all of it... if it cannot raise cash!

It is running a huge negative Free Cash Flow. It is not getting payments from debtors. Which is the only reason why the stock tanked.

To be honest. I am following this stock. I am looking for the following points in the future:

1) Long Term Debt reducing.
2) Working Capital Reducing.
3) Positive Cash Flows.

Then I will buy this stock blindfolded!

Dear sir

I read your thread ...fine...

How to find and check, above said your 3 points.....


What about JP Associates, i am holding 200 shares price is (Rs.38=100+Rs.48=100) for more than two months...kindly suggest...

 

[jamit_05]

Sintex Industries Ltd.

Additional Notes:

1. Long Term borrowings increased from 1272 (F.Y. 2011-12) to 2459 (F.y. 2012-13). That is an increase of 1187 Crores. Now, that is a big number for a company that has the potential to earn about Rs.300 Crores each year.

Source of this New debt is important.

360 Crores is from Banks. There would be a pressing need to pay this off when its due. Since, SiL has capacity to earn Rs.300 Crores each year, this debt is well covered. This has higher interest than FCCBs.

760 Crores is from FCCB. Positives of FCCBs.

1. Attractive interest rate of 5.25 YTM.
2. FCCB are in Dollars and rate has been fixed to Rs.55 against the Dollar. Good foresight of management.
3. Bondholder has a choice to convert to Equity at a set price of Rs.75. CMP is Rs.20! This makes me think, SiL may be at a steep discount right now. Then again, the previous set of FCCBs were fixed at Rs.290
4. This amount is used to pay-off Short Term Borrowings of Rs.1100 Crores early to get 27 crores of benefit.
5. SiL has been deferring Tax Payments. Meaning, it deducts Tax from Profit-Before-Tax (PBT) but does not pay it. It adds that figure to account heading of "Deferred Tax". It has almost 350 Crores in that account heading.


The above points tell us that the Management has tried to be efficient and smart when it comes to debt. Hence, one could conclude that as long as status-quo is maintained SiL won't have any problems. It remains to be seen how the numbers round up in the quarterly reports.