update : 9-Jul
I did not expect a flood of emails and several comments on this post. It was my mistake in not specifiying a limit on the numbers companies per email or comment. As a result i have a list of around 300 companies now to analyse and growing :)
To make it manageable for me, i would request you to limit the number of companies to 2-3 per comment or email. You can select your top 2-3 companies and hopefully i would be able to cover the entire list in 2-3 posts.
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I get emails and sometimes comments asking for my opinion on stocks. I am thinking of doing, twice a month post, analysing all such stocks sent to me via emails or comments.
Please feel free to leave the stock names through either an email to my id – rohitc99@indiatimes.com or via a comment. I will consolidate the names over 2 weeks and post a quick analysis on each one of them.
However you have to keep in mind the following filter criteria I use to analyse stocks. Stocks which don’t meet these criteria are generally rejected by me without spending too much time on them.
1.Debt/ equity ratio <= 1
2.ROE over a 3-5 year period of more than 12%
3.No losses for more than 1 year in the last 5-7 years
4.Mcap of more than 20-30 Crs (can be relaxed)
5.No obvious fraud by the management in the past
6.PE not more than 40
If the fundamentals are poor, or valuations too high I tend to move on and not spent too much time on it. If like me, you need 10-15 stocks in the portfolio, there is no need to spend time in figuring out a difficult idea when there are easier ones available. A lot of times stocks may have good fundamentals and may be slightly undervalued. In such cases I tend to put the stock on a watch list and would follow it till it becomes undervalued (50% of intrinsic value).
Some of the stocks you may mention may land in such a bucket. It does’nt mean that I don’t find value in the stock, just that it is not cheap enough for me. So please leave names of stocks you want me to look at. If I get sufficient response, I will try to make it a regular effort on the blog.
17 comments:
Hi Rohit..
This is a cool idea ..
It will help the readers to cross check if they have missed out on any information :)
Compact Disc is one stock that I liked (and am invested in)
This is an animation outsourcing company. Earlier, this company was involved in manufacturing CD's, which ended up in losses (stock had been beaten down to 6 last year)
+points
low debt
600% PAT growth in 05-06
50% PAT growth in 06-07
PE of less than 3
in a high growth Animation Industry
-points
small market CAP of 56 Crore
competition if it ventures into producing movies.
I am no expert in forecasting or DCF analysis, but with a discount rate of 21% and cash flow growth of 15% per annum, the intrinsic value came out to be 163.
Thanks for your time :)
Hello Rohit,
Really love your post, its good to read. I have a few question for you. You said you have 10-15 stocks in your portfolio.
1) Do you mind sharing them that would be really helpful for your followers?
2) Do you revamp your portfolio every quarter ?
3) Do you give portfolio advice if I send it to you? i.e. Not in detail but atleast whats good or bad etc.
Thanks in advance
Nitin
Thanks
Nitin
vijay - i will have a look at the company and post about it in a future post.
nitin - most of the companies in my portfolio are analysed on the blog itself. my major holdings are balmer lawrie, novartis, gujarat gas, NIIT, Patni, BEL and a few other smaller positions.
I dont revamp my portfolio on a fixed cycle. My approach is to look at the difference in price and self calculated instrinsic value. If the price hits intrinsic value, i sell otherwise i do nothing. Also if i find a better stock then i may end up removing something from the portfolio which is not as attractive
I dont provide portfolio advice. you can list you stocks in the comments and i provide my views in a future post. however i will not provide specific buy/sell recommendations
regards
rohit
Hi
Just as a reply to Vijay's comment above, Compact Disc has decided not to venture into film production. This was disclosed as a part of their full year results, month or so back.
cheers
Venkatesh
Can you provide an opinion on following companies:
Automotive Axle
Banco Products
Savita Chemicals
ZF Steering Gear
Lloyd Electric
Navneet Publications
Emami
Hi Rohit,
Here's my list:
1)Some of the good companies at good price:
Ashok Leyland, Punjab National Bank, Canara Bank, Ambuja Cements, ACC, Grasim, Hindalco, ITC, Indian Hotels, Maruti, Siemens, Pfizer, Orchid Chemicals
2) There are some risky bets ( beaten down heavily ) - LIC home finance, BPCL, HPCL, Wockhardt Pharma
Thanks,
Vikas
Hi Rohit,
Nice to know that you got a great response :)
Here is one more to add to that list of 300 companies ;)
Orient Paper and Industries:
CMP 32:
In the business of manufacturing paper (tissue paper), cement, fans (and planning to venture into Compact Fluorescent Lamps CFL business).
+ve points
low PE. Less than 3
Debt / Equity - 0.3
Free Reserves of 22 Rs per share
promoter holding of 33%
-ve points
The company had large debt in FY 06-07. I am not sure how they got rid of it.
The report by Religare puts the target price at 75.
http://myiris.com/shares/research/RSL1/ORIPAPIN_20080423.pdf
Hi Rohit,
Here goes my list:
1. Kothari Products Ltd
0 debt, Avg ROE 16.13, Mcap 350cr PE: 5.76
2. VST Industries Ltd
0 debt, Avg ROE 25.8, Mcap 495cr PE: 8.34
3. Elder Pharmaceuticals Ltd'
D/E=0.70, Avg ROE 13.12, Mcap 585cr, P/E=8.5
(ROE <12 in 2 out of 5 years. Last 2 years>12)
4.Dredging Corporation Of India Ltd.
0 Debt, Avg ROE 19.034, Mcap 1375cr, P/E=8.73
Thanks
Prashant
Hi Rohit,
Good set of filters. Are you sure on the Rs.20-30 cr M Cap or is it a typo? Seems too low to tie in with your broader strategy.
Another point, do you have any parameters to determine authenticity of published figures. Or do you take them on faith. This is a major dilemma for me in analysing fundamentals.
Rohit
While your efforts in answering stock queries is appreciated. On a lighter note, please let us know when flow of such queries dies down. That would be sign of market bottoming out.
Meanwhile, please also answer the query above from Mahendra Naik about determination of authenticity of published figures.
Do you talk to the company managements before taking decision?
Regards
Manish
vijay, prashant - have added the companies you have mentioned to my list and will post on them.
mahendra - i have set the limit to 20-30 crs so as to include microcaps too. reason for including is to look for deep value stocks ..there are some available for less than NCAV or cash too.
manish/ mahendra - i dont take the numbers on pure faith. however in general there are very few cases of outright fraud ..it more of streching the truth or shading it. i validate numbers by look for red flags ..such as the depreciation policy, disclosures of the company etc. however it is a subjective decision and i have dropped some companies based on aggresive accounting. never talk to management for taking decision. two reasons for that - do not have resources or contacts to reach management. also a lot of times you can get a feel of management from their AR, analyst meet and other communciation. however i dont put too much wieght on management quality based on what they say. the numbers and past history should speak for it
regards
rohit
Hi Rohit,
By NIIT you mean NIIT Tech?
Rgds.
Gaurav
I would like to know what ur views are on Grasim/Ultratech cement.I feel cement majors(the ones with a moat) are available at very cheap valuations and their intrinsic value is atleast double their current mcap.So with a 5-6 year horizon do u think they are a good buy?
Hi Rohit,
I would like to know your views on the following companies
1.BHEL {It's near its 52wk low and has a good moat but may still not be cheap}
2.Central bank of India
3.Lyold Electrical { I feel it is trading atleast 50% cheaper than its IV}
I have 4 stocks to Add in order of preference:
#1 Rain Commodities
No 1 Company in world for CPC coke after merging Rain Calcining and buyout of CII carbon USA. Annual sales expected in excess of 1 bn $ (4000 Cr). EBITDA 1000 Cr for Jan-Dec 2008. Available at PE of 3. CPC prices are rising consistently and is expected to remain strong for next 2 yrs.
#2 Indian Glycols: Available at 3+ PE on EPS of 64 Rs. One of the few companies benefiting from rising crude prices. Strong fundamentals and strong growth ahead. Available dirt cheap at 225.
#3 Ansal Housing: Consistent performer on profit and growth over the years. Also in car dealership business which provides cushion to credit crunch faced by other realty companies. Also Mcap to nav is low. One of the few companies in realty space who has reported growth in profits for more than 5 yrs. Available at PE of less than 3.
#4 UB Holding: Available at very attractive levels 220 Rs. Due to crude prices its airlines (KF, Air deccan) are loosing money heavily but in the long term, all smaller airlines will disappear and only strong ones will remain in operation which will remove the pricing pressure. For long term, with high risk, this is my first choice at around 200 Rs.
Hi Rohit,
Another stock has come to my radar = Eastern Silk
Made a Loss in Q1 on account of lower sales. I have not been able to figure out the reason for the loser sales.(I guess this filters it our of your list) ..
But this company has been operating since 1958, trades at a low PE (2.5), and is trading at a 50 percent discount to it's book value. The company has recently completed some capex plans and setup some plants around bangalore.
And it has a low debt Debt/Equity of 0.08.
Looking forward for your posts and comments
Vijay
Hi vijay
i have added the stock to my list and post on it
regards
rohit
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