STILL AT PE MULTIPLE OF THREE DIGITS

Are there still some equities with PE multiple of theree digits even after the mayhem of stock market?

Yes, there are. Some equities are still commanding that much of confidence (?) from investors. When most of the front line companies have corrected themselves to reasonable PE, the somewhat obscure or traders favourite companies are still there at that unreasonably high position.

Followings are few companies

Mineral and Metal Trading Corp.
Essar Oil
Reliance Natural Resources
Ispat Industries

It is hard to find justification for such high valuations.

More reading at Link The Economic Times

WHERE TO: INDIAN STOCK MARKET?

We dangerously hovering in some place from where we can see neither upside nor downside?

The statement from our PM, "cloudy sky", not that confident Rakesh Jhunjhunwala in CNN IBN yesternight and global scenerio has made me to reconsider my decision to be bull at least for near term.

Where to Indian Stock Market?

We small investors has more responsibility to protect our capital than to multiply it. Withdrow, your capital but keep your profit part there well parked in good stock.

What comes down will definitely go up. It is only matter of time.

PREPARE FOR PICKING STOCKS

It is always difficult to be sure in stock market. The days before, when I did put down my opinion as “it is probably not the right time to pick up stock for small investors”( LINK), many of my friends were at serious difference with me.

I had my own reasons to come up with a statement like that.

As always the small investors tend to pick up stocks at higher price. How many of us could pick up our stocks at bottom, yesterday we came to know about the turn around of the market a tad later, by the time, it wheezed past many a miles, certainly we lost some good ground.

But again, the yesterday’s rally was the turn around of the market?

Probably not, the market again went down today for some reason that we could not think of. It seems the market will behave in weird way for some more time.
Or to me, till the liquidity re-injected from the refunds of Reliance Power IPO. That means after a week time. We can wait for some more time till a clear picture.

There are many a stocks which are at very attractive price right now. But the stocks which were at their best before the slide may not go back to the original position at the same rapid stride. History has many instances. Zoom your attention to the stocks with good fundamentals and which has prospects to grow, stock market always pays premium to growth story.

I have identified few stocks for picking up when the market stabilizes, but again I am suffering from liquidity crunch like most small investors.

Powergrid

GMR infra

PetronetLNG

ONGC

IFCI

RNRL

Nagarjuna Fertilizer

RPL

May be it is the right time to buy as per the market pundits, but listen to your inner self too. Most of the time, in such situation the gut-feelings presents the answer.

The loss or gain is yours, so nobody is going to shoulder responsibility but everybody will claim credits.

POWER STOCKS: IDENTIFY THE WINNERS-II

There is a lot of hullabaloo about the valuation of power stocks in the Indian stock market. Being bullish (earlier post: here and here) in this sector made me to have a rethink. The power stocks passed a long period of sluggishness due to some archaic laws . There is a severe shortage of power in our country and with very conservative estimate the supply shortage to demand will remain until for at least another decade. Now government is putting emphasis on infrastructure and power. Logically power stocks are best bet to invest with a long term horizon.

The valuation of REL, NTPC, Power Grid, Tata Power are in the forties of their annualized sustainable earnings. Neyveli Lignite Corporation, Gujarat Industries Power Company, Lanco Infratech and GVK Power have higher valuations than a year ago. Power equipment manufacturers like BHEL, Cummins, Crompton Greaves are also have high valuation.

It seems that the power sector is in a different platform right now, which reminds me of the IT stocks a year back. The IT stocks justified their high PE with sustained earnings for a long period. Can the power stocks repeat the feat of IT stocks? Debatable! May be power stocks may correct to some extend in the days to come and to me that will be an opportunity to pick up some value stocks for some long term investment.

Some really attractive IPOs are coming in this sector. Reliance Power, NHPC and REC will present small investors a chance to pick them up at good valuations.

What about the recent listing Surjyachakra Power and IndoWind Energy? Surjyachakra Power has a tie up with a Chinese company to for a coal-fired project in Orissa. They are also good pick for small investors as they still have to find their groove in Market.

One should not worry for the power stocks in their portfolios as they are long term winner and outperformers in Indian Stock Market.

POWER STOCKS: IDENTIFY THE WINNERS

The buzz word in the Indian stock market at present is “Power”. Being bullish in Indian stock market, more so in the power sector (earlier post: Power shows: Market this week) made me to have a look in this particular direction.
The recently introduced BSE Power Index is just an indication of aspiration the market have in this particular sector. This sector was neglected so far due to some prevailing draconian rules. With the development of economy and overall living standards of our country, Government can’t effort to ignore this sector. Let’s have a look at those power stocks which had entered into Indian stock market this year

Power Finance Corporation
Power Grid Corporation
Surjyachakra Power
Indowind Energy

All have done well so far in the market for their unique business models. To me these four stocks are yet to have a proper valuation and so they still have some upside left to be realized. If we consider the demand supply mismatch of power in our country the power stocks are most likely to appreciate and be outperformers to index. We have already seen some actions in this sector.

Some real big players are poised to enter our stock market in near future. Entry of these companies will further strengthen this sector. The noticeable will be the followings:

Reliance Power
Rural Electrification Corp.
NHPC
BGR Energy

We already are in the midst of a very good Bull Run of our market. The market may correct itself in a stock specific way, every time after a very good run. The concern for small investors for a proper area to park their profit may well be answered by stocks in this particular sector.

A good selection of mid cap power stocks at this juncture may yield some multibaggers. Fundamentally good power stocks are for some really long time hold, at least for a decade or till the demand supply mismatch will be shorted out (till 2017 as per investment bank Artherstone).

GREAT MONTHLY RETURN IN STOCK MARKET

It is heartening to see the present Bull Run of Indian Stock Market propelled some stocks to new highs. I have come across the following table in the Paisa Builder portal of IDBI, and found the portal is beautifully designed and many features are free (link here). Only hic-up for me till now, is the charting centre, which is Java based. It look me some time to download the charts, may be connection was slow at that time. The site is worth trying.
I have included the PE of the stocks in the table for our benefit.

The fast moving scripts generally poses a problem to small investors; we tend to book profit as the earliest. Part profit booking is the prescribed method here. I generally take out the cost of my total investment and be safe (i.e. I sell 50% of my holding if the stock appreciates 100% in three month time). One can think about his own way to be in safer position as the volatility of the market will be there for some more time.

Today’s Slogan: Better to be Safer.

RULES & RUES

I have a set of rules for the RSHI, the Really Small and Helpless Investors.

1. The first is to cut losses.
2. The second is not to forget the first. With the small capital at his disposal a RSHI can not effort to lose his money.
3. The third is to find out what the herd is following, I can jump in the band wagon and jump out of it taking some profit, before anybody’s guess. Trick is not to be greedy there. The herd, in most cases, follows some tips which may not sustain for long.
4. The fourth is not to convert a losing trade to investment. Investment is something different, needs a through study on fundamentals. But in trade, it needs the study of the market sentiment. By Jove, some gut feelings too. Yes it is true “Do not follow the herd”. But swimming against the current needs lot of strength in wallet.
5. The fifth is to think about the consequences of a losing trade.

Now, to my previous investments, my first stock Cummins is going up and seems to go on and on. Already it has achieved my target. Now I am in dilemma? If I follow the market pundits I should book part profit after achieving the first target. But with that small numbers of stocks booking part profit means nothing. Again I can not effort to lose the profit if the market goes down. My gut feelings says the market will go up further, as it did not correct itself even after the mega issue of DLF, as most RSHI anticipated (influenced by prime time TV experts?). Should I wait for another week? These thinking occur to most RSHI, as they do not have the access to correct information and research.

It occurs to me now why most RSHI loses his money in stock market. Either they tend to sell the stocks when the stock has not reached its correct valuation or when the market goes down. Most cases they do not sell the stock in down market as they have to lose profit and they turn their trade to investment. Then they wait for agonizingly long period of time.

My case, I will ask my free advisors for their valuable tips. I have time as market is going to open on next monday. It seems I can not do away with market tips.