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Friday, 31 December 2010

Annual Result 2010

2010 comes to an end. Sensex started the year with 17,473 and closed the year 20509. It touched a high of 21,108 and a low of 15,651. On an annual basis the gain in Sensex was 21.38%.

My portfolio which started this year has returned a 43.40%. That is a little more than double that of Sensex. Hoping for a better 2011.

Saturday, 25 December 2010

Balaji Amines: An Update

Balaji Amines has moved down from around Rs 56-58 the current levels of Rs 40-42. I am actually expecting it to do better than 7 EPS for Fy11. Pre-split my expectation was around Rs 35-38 for FY11 and Rs 44-46 for Fy12. ( I would not be very surprised if it does a little better than that). That means an EPS of 7-7.6 in FY11 and 8.8-9.2 in FY12.

Balaji's core business is doing well. Realizations have improved and the new product Morpholine is likely to enjoy better margins as it may attract anti-dumping duty in India.

This stock is a good candidate for attractive returns for the medium term (2-3 years) with a tentative price target of 70-80 by Mar-Apr 2011 and 95-100 by Mar-Apr 2012.

Thursday, 23 December 2010

Goodbye to 2010. Getting Ready for 2011

Its that time of the year when you sit back and take stock. Of the year gone by and plan ahead for the one that is to come. 2010 was in a way a great year. The Indian stock market nearly scaled back to previous all-time highs before giving up some of its gains to catch its breath.

International financial news was dominated by the PIGS (no not the animal variety, but the countries of Portugal, Ireland, Greece and Spain). The domestic economies were on the verge of imploding for these countries. They are still not out of the woods, the problems are now known (atleast I hope so!!) and steps are being taken to bring their economies back on track.

Throughout the year we saw tension between US and China on the currency front. Going by past record, that is one problem that is not going to be sorted out any time soon.

The commodity cycle seems to have reversed in the last 12 months. A lot of commodities including rubber, copper, zinc, steel, gold and silver scaled new highs or are tantalizingly close to their old highs. This may continue and oil may also join the party. The consumption boom in India and China is not going away anytime soon, so commodity prices in my opinion will remain in an upswing in the future.

2010 was an interesting year overall. I am sure 2011 will bring in its own share of ups and downs. It promises to be an interesting year for me as I formally start my portfolio management initiative.

Wishing all a great year ahead :-)

Happy New Year.

Thursday, 9 December 2010

Profit from Mr. Market

Recently, Mr. Market seems to be in a bad mood. He is coming and offering ridiculous prices for some good mid cap and small cap companies. The reason he is angry is that some brokers allegedly were trying to rig prices for some companies without or without the management's approval.

The initial reaction for most people when they see Mr. Market behaving like this is to take the price offered and run for cover with their hard-earned money. It is understandable as stock prices for some of the "named" companies have fallen by 40-50% in the last few days. Now, as retail investors we need to understand what is happening around us and why we have invested in the first place. If our time horizon is for the long term (I don't know why it should be otherwise for investing in equities), then these mood swings of Mr.Market is a fantastic opportunity to pick up good, solid businesses in the mid cap and small cap space. Question is can they go lower? Sure they can. But neither you nor I have the faintest idea what will happen tomorrow. So, instead of wasting precious time and effort in trying to predict tomorrow, it is better to be focused on the stock price. If you think you are seeing value in a business, then go ahead and start buying. And follow my golden rule. NEVER BUY OR SELL IN ONE GO. Always stagger your buying or selling.

Happy Investing.

Friday, 3 December 2010

Sintex - Good Long Term Pick

Sintex is a solid company and has been in business for nearly 80 years. They are primarily known for their rooftop water storage tanks. Today, the tanks business is a small part of the overall company. Sintex has moved to becoming a major player in the infrastructure and plastics segment.

Some points for Sintex:-
* Promoter Holding has increased in the last 2 quarters (from Mar 2010 to Sep 2010) from 30.20% to 33.77%
* Has been paying dividends uninterrupted for 77 years
* Dividend paid is 5.98% of Net profit
* By 2012, India is expected to emerge as the world’s third largest plastic consumer after the US and China, consuming 12.5 mn tonnes annually and attracting US$80 bn fresh investments

Strategic developments, 2009-10
* Invested 137.89 crores in its standalone operations to enhance production and operational efficiency
* Established a new plant in Nalagarh while Nagpur and Namakal plants are under construction
* Nief Plastics acquired two companies named SICMO and SIMOP, increasing the European customer base; these companies are specialised in making and testing metallic moulds for plastic injection and light metal alloys
* Incorporated a wholly-owned subsidiary, Sintex Infra Projects Ltd to capitalise on the growing domestic infrastructural developments
* Acquired Esveegee Steel (Gujarat) Pvt. Ltd (100% equity stake) and renamed it Sintex Oil and Gas Pvt.

Building Materials Division:-
* 65% of sales
* Monolithic Concrete Housing Solutions, Prefabricated Structures, Liquid Management Solutions and Waste Management Systems
* Pioneered the manufacture of a range of panels used as roofing and wall materials. Energy Conservation Building Code (ECBC) 2007 is expected to drive energy-efficiency discipline in future, increasing sandwich-panel demand.

Core custom moulded products:-
* During 2009-10, Sintex initiated a project with Rafael, an Israel-based Company, supplying carrier cases for missile components

Areas of Future Growth:-
* Monolith construction, prefab construction
* The Company anticipates huge opportunities in the feeder pillar box segment owing to the growing popularity of underground cabling.
* Increasing focus on FRP transformer fencing, which is expected to generate enormous returns and volumes (received approvals in Gujarat and is likely to enter Uttar Pradesh)

On a consolidated basis, EPS for FY11 is expected to be around Rs. 30 (Rs 15 on the new FV of Rs 1) with a target of Rs 250-300 in the next six months. I am expecting the company to grow at an average of 20% over the next 3-4 years. With its existing consolidated PE at around 16, I do not expect any major re-rating to happen, so the growth in the stock price will come from the earnings growth.

Saturday, 27 November 2010

LIC Housing Finance-Scam and Life thereafter

By now, everybody is aware and discussing about how people who earn so much and have such respect in their industries can stoop to such low acts as taking bribes!!! I will not dwell on the moral low that our leaders (both in the corporate and political world) seemed to have sunk to. Our job is to look at LIC Housing Finance as a business and a stock.

So, what really has happened here? A couple of people have allegedly taken bribes and given out loans to companies. LICHF's share in this is approximately 300 crores. For a company with assets of 38,000 crores and a net profit of 662 crores (FY10), the amount is not back breaking. Also, let us not jump to the conclusion that all of the 300 crores would end up as NPA. The company is operationally sound and is unlikely to go out of business. After six months, people will forget about this scam (the sad truth is that in this country nobody gets punished for white collar crimes!!!) and LICHF will continue to do well.

The stock has come down from 1300 to around 930 in a span of 3 days. So, what should you (or I for that matter) do? Well, I would think that this might be a good long term opportunity to BUY!!

The situation reminds me of the American Express situation when Buffet bought into it. So, if you have the courage of conviction and your wallet supports you, it might not be a bad idea to be a contrarion and buy LICHF now.

Thursday, 25 November 2010

Indian Markets - Crystal ball gazing: Update

On October 2, I had a post on my guess on the market direction. (To read it click here).

Here is what I had written back then:-
  1. Sensex/Nifty will make a dash for the all-time high sometime soon (maybe as early as October end)
  2. Either breach it or turn back just short of it.
  3. A bout of profit booking follows. Indices go down 10%-15% (back to around 18K-18.5K)
  4. Main indices remain sideways for the next couple of quarters.
  5. Mid caps move up from now as the last few weeks the valuation gap has widened.
  6. Sometime after 2-3 quarters, the next up move starts for the main indices. By that time, PE is down to about 22 (which is still high but certainly not hitting the roof).
I am happy that for one my sense was correct (till now that is). The markets have exactly followed the first three points. Now, it remains to be seen if the remaining points play out as I expect them to.