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Wednesday, July 9, 2008
TIL Ltd
Tuesday, July 8, 2008
Stock-Picking Strategies: Value Investing
Value investing is one of the best known stock-picking methods. In the 1930s, Benjamin Graham and David Dodd, finance professors at Columbia University, laid out what many consider to be the framework for value investing. The concept is actually very simple: find companies trading below their inherent worth.
The value investor looks for stocks with strong fundamentals - including earnings, dividends, book value, and cash flow - that are selling at a bargain price, given their quality. The value investor seeks companies that seem to be incorrectly valued (undervalued) by the market and therefore have the potential to increase in share price when the market corrects its error in valuation.
Value, Not Junk!
Before we get too far into the discussion of value investing, let's get one thing straight. Value investing doesn't mean just buying any stock that declines and therefore seems "cheap" in price. Value investors have to do their homework and be confident that they are picking a company that is cheap given its high quality.
It's important to distinguish the difference between a value company and a company that simply has a declining price. Say for the past year Company A has been trading at about $25 per share but suddenly drops to $10 per share. This does not automatically mean that the company is selling at a bargain. All we know is that the company is less expensive now than it was last year. The drop in price could be a result of the market responding to a fundamental problem in the company. To be a real bargain, this company must have fundamentals healthy enough to imply it is worth more than $10 - value investing always compares current share price to intrinsic value not to historic share prices.
Value Investing at Work
One of the greatest investors of all time, Warren Buffett, has proven that value investing can work: his value strategy took the stock of Berkshire Hathaway, his holding company, from $12 a share in 1967 to $70,900 in 2002. The company beat the S&P 500's performance by about 13.02% on average annually! Although Buffett does not strictly categorize himself as a value investor, many of his most successful investments were made on the basis of value investing principles. (See Warren Buffett: How He Does It.)
Buying a Business, not a Stock
We should emphasize that the value investing mentality sees a stock as the vehicle by which a person becomes an owner of a company - to a value investor profits are made by investing in quality companies, not by trading. Because their method is about determining the worth of the underlying asset, value investors pay no mind to the external factors affecting a company, such as market volatility or day-to-day price fluctuations. These factors are not inherent to the company, and therefore are not seen to have any effect on the value of the business in the long run.
Contradictions
While the efficient market hypothesis (EMH) claims that prices are always reflecting all relevant information, and therefore are already showing the intrinsic worth of companies, value investing relies on a premise that opposes that theory. Value investors bank on the EMH being true only in some academic wonderland. They look for times of inefficiency, when the market assigns an incorrect price to a stock.
Value investors also disagree with the principle that high beta (also known as volatility, or standard deviation) necessarily translates into a risky investment. A company with an intrinsic value of $20 per share but is trading at $15 would be, as we know, an attractive investment to value investors. If the share price dropped to $10 per share, the company would experience an increase in beta, which conventionally represents an increase in risk. If, however, the value investor still maintained that the intrinsic value was $20 per share, s/he would see this declining price as an even better bargain. And the better the bargain, the lesser the risk. A high beta does not scare off value investors. As long as they are confident in their intrinsic valuation, an increase in downside volatility may be a good thing.
Screening for Value Stocks
Now that we have a solid understanding of what value investing is and what it is not, let's get into some of the qualities of value stocks.
Qualitative aspects of value stocks:
The P/E and PEG Ratios
Contrary to popular belief, value investing is not simply about investing in low P/E stocks. It's just that stocks which are undervalued will often reflect this undervaluation through a low P/E ratio, which should simply provide a way to compare companies within the same industry. For example, if the average P/E of the technology consulting industry is 20, a company trading in that industry at 15 times earnings should sound some bells in the heads of value investors.
Another popular metric for valuing a company's intrinsic value is the PEG ratio, calculated as a stock's P/E ratio divided by its projected year-over-year earnings growth rate. In other words, the ratio measures how cheap the stock is while taking into account its earnings growth. If the company's PEG ratio is less than one, it is considered to be undervalued.
Narrowing It Down Even Further
One well-known and accepted method of picking value stocks is the net-net method. This method states that if a company is trading at two-thirds of its current assets, no other gauge of worth is necessary. The reasoning behind this is simple: if a company is trading at this level, the buyer is essentially getting all the permanent assets of the company (including property, equipment, etc) and the company's intangible assets (mainly goodwill, in most cases) for free! Unfortunately, companies trading this low are few and far between.
The Margin of Safety
A discussion of value investing would not be complete without mentioning the use of a margin of safety, a technique which is simple yet very effective. Consider a real-life example of a margin of safety. Say you're planning a pyrotechnics show, which will include flames and explosions. You have concluded with a high degree of certainty that it's perfectly safe to stand 100 feet from the center of the explosions. But to be absolutely sure no one gets hurt, you implement a margin of safety by setting up barriers 125 feet from the explosions.
This use of a margin of safety works similarly in value investing. It's simply the practice of leaving room for error in your calculations of intrinsic value. A value investor may be fairly confident that a company has an intrinsic value of $30 per share. But in case his or her calculations are a little too optimistic, he or she creates a margin of safety/error by using the $26 per share in their scenario analysis. The investor may find that at $15 the company is still an attractive investment, or he or she may find that at $24, the company is not attractive enough. If the stock's intrinsic value is lower than the investor estimated, the margin of safety would help prevent this investor from paying too much for the stock.
Conclusion
Value investing is not as sexy as some other styles of investing; it relies on a strict screening process. But just remember, there's nothing boring about outperforming the S&P by 13% over a 40-year span!
The value investor looks for stocks with strong fundamentals - including earnings, dividends, book value, and cash flow - that are selling at a bargain price, given their quality. The value investor seeks companies that seem to be incorrectly valued (undervalued) by the market and therefore have the potential to increase in share price when the market corrects its error in valuation.
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Before we get too far into the discussion of value investing, let's get one thing straight. Value investing doesn't mean just buying any stock that declines and therefore seems "cheap" in price. Value investors have to do their homework and be confident that they are picking a company that is cheap given its high quality.
It's important to distinguish the difference between a value company and a company that simply has a declining price. Say for the past year Company A has been trading at about $25 per share but suddenly drops to $10 per share. This does not automatically mean that the company is selling at a bargain. All we know is that the company is less expensive now than it was last year. The drop in price could be a result of the market responding to a fundamental problem in the company. To be a real bargain, this company must have fundamentals healthy enough to imply it is worth more than $10 - value investing always compares current share price to intrinsic value not to historic share prices.
Value Investing at Work
One of the greatest investors of all time, Warren Buffett, has proven that value investing can work: his value strategy took the stock of Berkshire Hathaway, his holding company, from $12 a share in 1967 to $70,900 in 2002. The company beat the S&P 500's performance by about 13.02% on average annually! Although Buffett does not strictly categorize himself as a value investor, many of his most successful investments were made on the basis of value investing principles. (See Warren Buffett: How He Does It.)
Buying a Business, not a Stock
We should emphasize that the value investing mentality sees a stock as the vehicle by which a person becomes an owner of a company - to a value investor profits are made by investing in quality companies, not by trading. Because their method is about determining the worth of the underlying asset, value investors pay no mind to the external factors affecting a company, such as market volatility or day-to-day price fluctuations. These factors are not inherent to the company, and therefore are not seen to have any effect on the value of the business in the long run.
Contradictions
While the efficient market hypothesis (EMH) claims that prices are always reflecting all relevant information, and therefore are already showing the intrinsic worth of companies, value investing relies on a premise that opposes that theory. Value investors bank on the EMH being true only in some academic wonderland. They look for times of inefficiency, when the market assigns an incorrect price to a stock.
Value investors also disagree with the principle that high beta (also known as volatility, or standard deviation) necessarily translates into a risky investment. A company with an intrinsic value of $20 per share but is trading at $15 would be, as we know, an attractive investment to value investors. If the share price dropped to $10 per share, the company would experience an increase in beta, which conventionally represents an increase in risk. If, however, the value investor still maintained that the intrinsic value was $20 per share, s/he would see this declining price as an even better bargain. And the better the bargain, the lesser the risk. A high beta does not scare off value investors. As long as they are confident in their intrinsic valuation, an increase in downside volatility may be a good thing.
Screening for Value Stocks
Now that we have a solid understanding of what value investing is and what it is not, let's get into some of the qualities of value stocks.
Qualitative aspects of value stocks:
- Where are value stocks found? - Everywhere. Value stocks can be found trading on the NYSE, Nasdaq, AMEX, over the counter, on the FTSE, Nikkei and so on.
- a) In what industries are value stocks located? - Value stocks can be located in any industry, including energy, finance and even technology (contrary to popular belief).
b) In what industries are value stocks most often located? - Although value stocks can be located anywhere, they are often located in industries that have recently fallen on hard times, or are currently facing market overreaction to a piece of news affecting the industry in the short term. For example, the auto industry's cyclical nature allows for periods of undervaluation of companies such as Ford or GM. - Can value companies be those that have just reached new lows? - Definitely, although we must re-emphasize that the "cheapness" of a company is relative to intrinsic value. A company that has just hit a new 12-month low or is at half of a 12-month high may warrant further investigation.
- Share price should be no more than two-thirds of intrinsic worth.
- Look at companies with P/E ratios at the lowest 10% of all equity securities.
- PEG should be less than one.
- Stock price should be no more than tangible book value.
- There should be no more debt than equity (i.e. D/E ratio <>
- Current assets should be two times current liabilities.
- Dividend yield should be at least two-thirds of the long-term AAA bond yield.
- Earnings growth should be at least 7% per annum compounded over the last 10 years.
The P/E and PEG Ratios
Contrary to popular belief, value investing is not simply about investing in low P/E stocks. It's just that stocks which are undervalued will often reflect this undervaluation through a low P/E ratio, which should simply provide a way to compare companies within the same industry. For example, if the average P/E of the technology consulting industry is 20, a company trading in that industry at 15 times earnings should sound some bells in the heads of value investors.
Another popular metric for valuing a company's intrinsic value is the PEG ratio, calculated as a stock's P/E ratio divided by its projected year-over-year earnings growth rate. In other words, the ratio measures how cheap the stock is while taking into account its earnings growth. If the company's PEG ratio is less than one, it is considered to be undervalued.
Narrowing It Down Even Further
One well-known and accepted method of picking value stocks is the net-net method. This method states that if a company is trading at two-thirds of its current assets, no other gauge of worth is necessary. The reasoning behind this is simple: if a company is trading at this level, the buyer is essentially getting all the permanent assets of the company (including property, equipment, etc) and the company's intangible assets (mainly goodwill, in most cases) for free! Unfortunately, companies trading this low are few and far between.
The Margin of Safety
A discussion of value investing would not be complete without mentioning the use of a margin of safety, a technique which is simple yet very effective. Consider a real-life example of a margin of safety. Say you're planning a pyrotechnics show, which will include flames and explosions. You have concluded with a high degree of certainty that it's perfectly safe to stand 100 feet from the center of the explosions. But to be absolutely sure no one gets hurt, you implement a margin of safety by setting up barriers 125 feet from the explosions.
This use of a margin of safety works similarly in value investing. It's simply the practice of leaving room for error in your calculations of intrinsic value. A value investor may be fairly confident that a company has an intrinsic value of $30 per share. But in case his or her calculations are a little too optimistic, he or she creates a margin of safety/error by using the $26 per share in their scenario analysis. The investor may find that at $15 the company is still an attractive investment, or he or she may find that at $24, the company is not attractive enough. If the stock's intrinsic value is lower than the investor estimated, the margin of safety would help prevent this investor from paying too much for the stock.
Conclusion
Value investing is not as sexy as some other styles of investing; it relies on a strict screening process. But just remember, there's nothing boring about outperforming the S&P by 13% over a 40-year span!
Wednesday, June 25, 2008
FIND THE BOTTOM FOR SEN- SEX
THIS IS THE JOURNEY OF SENSEX FROM 2002-2008 PREDICT THE BOTTOMMAJOR SUPPORT FOR SENSEX -13600-13300-13000-12500.10700
MY PREDICTION -SENSEX MAY TUCH 12500 BEFORE DIWALI
HAPPY TRADING. DONT CARRY ANY SCRIPS DO INTRA DAY IF POSSIBLE
Tuesday, June 17, 2008
Denisons Hydraulics India Ltd
The company is having exclusive rights to sell the `DENISON` Brand
Products in India. However, with the changes that have taken place in
the ownership of `DENISON`, USA., and other places, the `DENISON`
products of foreign origin are likely to be marketed in India with a
different Brand name, which situation is likely to affect market for
company`s products in India. In the changed scenario, it is
expected that the products which can be offered at very competitive
price only can survive and the profit margins are likely to be eroded
to a greater extent.
Denison Hydraulics India Ltd has informed that an Extra Ordinary General Meeting (EGM) of the members of the Company will be held on June 16, 2008, to approve the issue of 4,50,000 (Four Lakhs Fifty Thousand Only) Equity Shares of Rs 10/- each for cash at par aggregating to Rs 45,00,000 (Rupees Fourty Five Lakhs Only) on a rights basis to the existing shareholders of the Company in the ratio of 1 equity share for every four equity shares held on the record date.
it has an equity of 1.8 cr and it has posted performance like
2006 it has posted35 cr turnover and net profit of 5.80 cr e.p.s at -32rs
2007 posted 51cr turnover 8.97 cr net profit e.p.s at 50 rs
2008 posted for half year (sep year ending) 28cr turnover 4.5cr .vs. 13.62turnover1.97cr
expecting 15cr for full year.ep.s of 83 rs
current price at 465rs trading at 5.5 p.e only
great buy. at current level
Products in India. However, with the changes that have taken place in
the ownership of `DENISON`, USA., and other places, the `DENISON`
products of foreign origin are likely to be marketed in India with a
different Brand name, which situation is likely to affect market for
company`s products in India. In the changed scenario, it is
expected that the products which can be offered at very competitive
price only can survive and the profit margins are likely to be eroded
to a greater extent.
Denison Hydraulics India Ltd has informed that an Extra Ordinary General Meeting (EGM) of the members of the Company will be held on June 16, 2008, to approve the issue of 4,50,000 (Four Lakhs Fifty Thousand Only) Equity Shares of Rs 10/- each for cash at par aggregating to Rs 45,00,000 (Rupees Fourty Five Lakhs Only) on a rights basis to the existing shareholders of the Company in the ratio of 1 equity share for every four equity shares held on the record date.
it has an equity of 1.8 cr and it has posted performance like
2006 it has posted35 cr turnover and net profit of 5.80 cr e.p.s at -32rs
2007 posted 51cr turnover 8.97 cr net profit e.p.s at 50 rs
2008 posted for half year (sep year ending) 28cr turnover 4.5cr .vs. 13.62turnover1.97cr
expecting 15cr for full year.ep.s of 83 rs
current price at 465rs trading at 5.5 p.e only
great buy. at current level
Wednesday, June 11, 2008
Wednesday, June 4, 2008
HINDUSTHAN NATIONAL GLASS & INDUSTRIES LTD
HINDUSTHAN NATIONAL GLASS & INDUSTRIES LTD ( AN ULTIMATE BUY)
A NAME TO RECKON WITH : HNGIL, the largest and most prolific producer of glass containers, operating at present 10 furnaces at five locations (Rishra, Bahadurgarh , Pondicherry, Rishikesh, & Nashik ) with 42 production lines. In addition HNG has acquired a Glass Container manufacturing unit of M/s Haryana Sheet Glass Limited at Neemrana, Rajasthan. A fully integrated Group having its own foundry for casting, well equipped workshop for moulds and spare parts and captive power plants and quarries for sand with fleet for finished goods movement has given competitive advantage to its customers.
A MARKET LEADER : In the 5 ml - 3200 ml segment, HNG Group is the undisputed market leader catering to around 70% of the Domestic Market in the pharmaceutical, beverage, processed food, cosmetic and liquor sectors covering industry majors like, CocaCola, Dabur, GlaxoWellcome, Nestle, Pepsi, Reckitt Benckiser (India) Ltd., Smithkline Beecham, UB Group etc. Exports to South East, Middle East, Africa and First World Countries in Europe & North America.
ON SUPER FAST GROWTH TRACK: Its spirit to ascend newer parameters remains as insatiable as ever. The days ahead are gleaming with promise. With modernisation, upgradation and foresight to meet the emerging and more distinctive demands of the customers, the Group is all set for unprecedented achievements. With projected planned investment of Rs.3000 million in the next three years. Touching life in more ways than one and in total tune with the harmony of nature.
MILESTONES : In order to keep pace with changing technology and demands, the Group has acquired the Glass Division of L & T at Nashik in October 2005, having one furnace of 320 TPD melting capacity. HNGIL has also entered into a scheme of amalgamation with Ace Glass Containers (ACE) which scheme has been sanctioned by the Hon'ble High Courts of Kolkata and Delhi. Post amalgamation HNGIL's un-audited turnover as on 31.03.2008 stands at a figure more than Rs. 1100 crore.
it has posted 55.88 cr for nine months vs.22 cr last year .for full year expecting after amalgamation
of Ace Glass Containers Ltd turnover could cross 1000cr and profit could be 100cr
it has fallen from 1800 to 617 today .buy for long term target of 1000 rs in next 3months .
HNG Float Glass Limited
HNG group is planning to come up with an integrated 600 TPD Float Glass Project in the State of Gujarat at a capital outlay of Rs.550 crores. The commercial production for architectural processing and building glass will start by 1st quarter of 2008-09.
expecting 1500cr turnover for 2008-09 .and the shortage of glass. opening of more retail stores
and more +ve factors lead the company.
Saturday, May 31, 2008
IFB AGRO ( IMFL STOCK AVAILABLE AT 6.P.E) BUY
Belonging to IFB Group, IFB Agro is engaged in the production of Extra Neutral Alcohol (Rectified Spirit), IMFL and Marine Products. It boasts of having very successful and leading brands like Volga Vodka, Gold Cup Brandy, Blue Lagoon Gin & IFB Select Whisky under the IMFL segment. Company is also a pioneer in 50* UP category with bestselling brands like Baluba Rum, 3 Cheers Whisky & Russki Vodka. On the other hand its marine division, last year, launched its first ready to fry product "PRAWN POPS" and has plan to introduce more such products in the ready to cook and ready to eat segment. Infact its marine division is poised to become an integrated business and serve all the inputs from the farm to the final consumer. Although it reported poor nos for Dec qtr still for the first nine months sales increased by 15% to Rs 156 cr and NP stood at Rs 6.40 cr. Hence it may end FY08 with topline and bottomline of Rs 200 cr and Rs 10 cr respectively i.e. EPS of Rs 13 on equity of Rs 7.70 cr. .
SOURCE:saarthi.blogspot.com
SOURCE:saarthi.blogspot.com
CAPITAL EXPENDITURE AT DISTILLERY
The modernization project undertaken by the Company to ensure captive power, both grain and molasses based spirit whilst confirming to zero discharge norms. Captive Power facility and the facility for zero discharge norms started the operations from September 2006. The grain based spirit production is expected to commence from August 2007.
IFB Agro Industries Ltd has informed that the Company has started commercial production of Grain Spirit at its plant at Noorpur, South 24-Parganas, West Bengal, with effect from September 07, 2007.
PRODUCTS:-Alcohol Division | ||||||||
Situated at the bank of the river Hooghly, near Diamond Harbour at South 24 Parganas, West Bengal, IFB Agro commenced their Noorpur Distillery in 1987 creating a landmark in the industrial resurgence of West Bengal with an installed capacity of 60,000 liters per day based on Molasses. Apart from its existing molasses based distillery, IFB Agro has also set up a new state of the art Grain Distillery based on the latest technology in distillation with a capacity of 60,000 liters per day. The distillery ensures captive power and confirms to zero discharge norms. The usage of Multicolumn Multipressure Distillation Technology removes all impurities from the Alcohol to ensure a perfect rich bouquet of taste and flavour.
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The raw Co2 gas generated from the distillery is processed at a separate plant located adjacent to the distillery at Noorpur, comprising the most modern technology, to produce food and industrial grade Co2 and Dry Ice.
The IMFL Division of IFB is housed at Maheshtala (South 24 Pgs.) West Bengal. At present, the operations of the division are concentrated in West Bengal and the North Eastern States, primarily Assam, Meghalaya and Orissa. The company has targetted business expansions in neighboring states in the near future. All 25 UP & 50UP products are made from Grain Spirit which is sourced in house.
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