Time to Buy

A lot of quality stocks have corrected steeply in the last few sessions. With all due regard to fundamentals, there are some stocks which can be bought purely from an immediate upside perspective.

SBI -> Rights Issue + Reverse-Merger with subisidaries

BHEL ->Bonus issue + Chance of dividend given the surpluses + potential upside from the nuclear business, if India and US sign the 123 agreeement

Larsen Toubro -> De-merger of Larsen Toubro Infotech and chance of bonus or split issue given the high reserves as a proportion of paid-up equity capital and high stock price.

ONGC -> Profitability from overseas exploration assets by OVL and the next round of NELP Blocks on Lease.


(I own all the stocks listed above either in my own personal capacity or as advise to clients, given their strong fundamentals)

Accumulate IT: TCS, Sasken, Patni

I would like to take a contrarian view to the IT Stocks. They seemed to have fallen out of favour, and nobody knows the reason why.

Some lame excuses:
1. Rupee appreciation: Other export sectors worse hit, This sector has dealt well, esp. INFY and TCS

2. Energy sector has better outlook: Yeah, but nobody seems to attach a risk premium to the execution risks. Besides if X does well, gives no reason why you push down Y.


Buy rationale:

1. TCS:
a. Looks poised for growth with entry into the multi-billion dollar deal arena after the Neilson Deal
b. Better handling of hedging options as compared to other IT firms
c. Productization(Bancs), Alliance based solution offerings(eg, with Siemens and Airlines Solution) will lead to quicker non-linear growth adoption
d. A company with 30% per annum growth Rate and 20% + operating margins post tax, cannot be expected to trade at less than 20 PE, especially in a market which itself is trading 26 PE.


2. Sasken, Patni
a. Sasken has shed more than 50% on disappointing earnings
b. Product based offerings, should pickup in next quarter as Cellphone Co's ship in more products(quantitywise)
c. Already corrected by almost more than 40%

d. Patni: Correct largely, accumulate below 310.
e. For people with high risk appetite, favourable trigger in terms of acquisition in queue


PS: A min. requirement that all these 3 companies fufill is good quality management demonstrated over time.

Patience Pays: Time to Accumulate

The correction has taken time coming, but the investors who had saved the cash for such a correction would have been amply rewarded.

Time to start accumulating now.
L&T, BHEL amongst Capital Goods.
and largecap banks like ICICI Bank, SBI look good.

Rationale: High growth momentum of CG companies to sustain. Unlike power companies, which start making profit later on, these guys are making profit now and growing around 30-50% year on year.That will continue, so prefer CG over Power. Power is a very long term view.

The recent depreciation of rupee(last 2 days) and fall in markets will dissuade the RBI from taking a CRR hike now, coming this month end. So CRR should stay firm, so also interest rates, dont see any directional move being taken now.

Any upmove will hurt sentiments and is extremely unlikely. Any downmove will coz extra profits for stock scavengers. So make your choice and go on!

Patience Pays: Time to Accumulate

The correction has taken time coming, but the investors who had saved the cash for such a correction would have been amply rewarded.

Time to start accumulating now.
L&T, BHEL amongst Capital Goods.
and largecap banks like ICICI Bank, SBI look good.

Rationale: High growth momentum of CG companies to sustain. Unlike power companies, which start making profit later on, these guys are making profit now and growing around 30-50% year on year.That will continue, so prefer CG over Power. Power is a very long term view.

The recent depreciation of rupee(last 2 days) and fall in markets will dissuade the RBI from taking a CRR hike now, coming this month end. So CRR should stay firm, so also interest rates, dont see any directional move being taken now.

Any upmove will hurt sentiments and is extremely unlikely. Any downmove will coz extra profits for stock scavengers. So make your choice and go on!

Time to rationalize holdings

Market looks top heavy, might sway a bit and go down before emerging up again(sometime during muhurat trading, i believe).

For all those invested, cut your exposures in:
1. Mid and small caps
2. Sell stocks like IT to the extent of 25-33%.

Stay atleast 30% - 33% cash. All stocks look heavy now, expecting a downward bias. Maybe now, maybe after Infy results. But stay atleast 30% in cash by cutting holdings to reduce your losses and take advantage of opportunities now.

Disclosure: I have cut my exposure in Tide Water Oil to 0%, after it touched a high on 49XX and again came down to 41XX, got time to sell as it was not on circuit yesterday.

Planning to sell 1-2 more midcaps.

New Ideas: Zicom

Zicom is subdued nowadays, but seems to have completed its downtrend on the charts is consolidation. So can Start ACCUMULATE.

Only concern that I faced was low holding of promoters(19%), rest looks good, sound model and domestic focus. Increased security concerns spell good for this company.

Chart attached:

Tide Water Oil: Unexplained Rise

I have been holding Tide Water Oil for quite some time. Earlier it was sparked by the rumor of mergin with ONGC.

But remained stagnant after Subir Raha's departure

Hit quite a few 10% upper circuits recently, though do not know what fuelled the latest growth. Check Chart here:

Buy Signals for coming days

Bharat Bijlee tested its 52 week-high in an Intraday move. The company seems to be well poised on 2 fronts:

1. The industry it operates in , is doing well. The IIP is hitting the roof.
2. The company holds plenty of Siemens Shares @ book value of 73 approx.

Not done a detailed fundamental valuation of the company, but looks good even on a casual look.

Strong BUY for Bharat Bijlee
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Buy on Declines:

LnT, SBI, ONGC

LnT - Again good IIP Numbers/Great stock if Nuclear Energy is to be taken as next generation growth engine for India/Great stock if allowed to enter the heavy electrical equipment business monopolized by BHEL

SBI - Good Reward - Risk Ratio. Chances of Rights/FPO, mergers with subsidiaries to boost valuations.

ONGC - Grossly undervalued. This stock will benefit because of lower subsidy burden. Rising ruppee would have capped the losses of oil marketing companies. So ONGC might have to share a lesser burden.

With all the profit it earns, its a gold mine once set free from government policies, Accumulate at declines, esp. if you have a good long germ view.

But ya, all said and done, do save money to invest in the PowerGridCorporation IPO.
Expected Premium around 11-12 Rupees on listing

Time to Accumulate Begins

Markets have corrected a decent bit. Certain sectors look attractive with a few cautions whcih can be tied down with hedged buying in other sectors.

For eg.

IT Sector Frontlines are at good levels, if rupee does not appreciate further. So, Big 4(TCS, WIPRO, INFY, SATYAMCOMP) are Accumulate.
But what if rupee appreciates?
Well, lock in the Accumulation with complementary accumulation in Oil Segment(GAIL, HPCL, IOC, ONGC).

Both sectors combined give an awesome risk return profile(Rupee Appreciation helps Import Driven Oil Sector, Depreciation Helps S/W, both are at rock bottom prices now, with current exchange rate).

BUY, SELL, ACCUMULATE? WHAT?

The Growth Story is Strong. The High P/E is not. Markets rebound today as expected, on back of strong performance by US markets on Friday and East Asian Markets today morning.

But somehow, not very comfortable with the market levels:

1. Political Turmoil in India
2. Core issue in sub-prime not addressed, only temporary relief in terms of Interest Rate Cut by Fed
3. Chances of Interest Rate Hike in Yen.

Hmm....
Definitely not a buy mode, preferably Accumulate, or stay with your hands in your pockets. Long term investors need not sell.

But wait... atleast till August 23, that will decide which way the market tide with turn.

Pick for Accumulation:
JP Hydro, Reliance Energy(Energy Pack to benefit from mega projects)
SBI(Strong Fundamentals, FPO, Subsidiary Amalgamation, low cost of funds)
ONGC(Fundamentally undervalued, strong growth in Subsidiary, growing international presence, government interference to stop retail OVL gas stations/petrol pumps has acted as a boon in disguise)

Sell on Rises:

Cut in Fed interest rates has made IT unprofitable.Cut exposure by around 1/3rd of your holding.
(Exception: TCS(diversified), Sasken(taken quite a beating already).