Newsletter dated 29th April, 2009

NIFTY
Yesterday Nifty (spot) closed at 3362 which is below its 9DMA of 3396 and 200DMA of 3380. This is not a comforting sign. But today Nifty is likely to open gap up. This opportunity should be used to exit your long position and initiate shorts. Nifty is finding difficult to sustain at higher levels. Nifty would face resistance at 3442, 3472 levels. On lower side, the support could come around 3380, 3354, 3339 levels.

RELIANCE INDUSTRIES
Yesterday it closed just below its 9DMA, giving indication that it may top out. Today it may open gap up which should be used to exit longs and initiate shorts. At higher levels it would face multiple resistance at 1784, 1792, 1798 and 1808.

BHARTI AIRTEL
Although Bharti is trading above its 9DMA, but we expect it to come close to its 9DMA is very as broader market is not looking very good. It might open gap up today. A short position could be initiated. At higher levels it would face stiff resistance at 749, 758, 762 levels. It would take support at its 9DMA currently at 711.

Note: The above mentioned strategy is just an indication. Do your own homework before initiating any trades based on above information. The online calls are given to our paid clients only via messenger and sms.

Anurag Dujari
Mobile: 92308-92309
E-Mail- anurag130@gmail.com
Yahoo Messenger ID - trading_picks

Disclaimer and Terms of Use: Stock market is subject to risk. High risk high gain is the key to stock market. We are not responsible for any loss or profit associated with stocks mentioned on this site/ by us. Under no circumstances will we be held liable for losses incurred due to information presented anywhere on the site or given through yahoo messenger or SMS. Please do your own research before establishing an equity/ derivatives position in a company. Not all stocks recommended by us are suitable for your investment needs. Carefully evaluate your own risk appetite. Any error in this document cannot be claimed by anyone. The articles on this site are not written by a registered investment advisor. The author may or may not be holding a position in companies that are being analyzed. More likely than not, the author will have an interest in the stock mentioned....

Lakshmi Energy & Foods - Ready to energise

Lakshmi Energy & Foods Limited (LEAF) is the largest manufacturer of non-basmati rice in India. This North-India based fully integrated company has an outstanding track record with its revenues growing at 41% CAGR & profits at a rocketing 164% CAGR over FY03-08 period; this growth primarily being led by increasing expansion & increasing integration (ergo, increasing margins). Going ahead we see LEAF maintaining its accelerating pace of growth as it progresses with its ambitious expansion plans while maintaining integration. Forward integration into packaged & branded goods and investments in biomass energy add flavour to LEAF`s strategy to cash in from the present & somewhat sustainable agri-boom.

Founded in 1982 by its CMD Mr. Balbir Singh Uppal, LEAF is one of the leading non-basmati rice producers in the world with a current capacity of processing 3 Million Metric Tonnes (MMT) per annum of paddy. LEAF is undisputed leader in paddy production worldwide. LEAF already has the largest integrated processing plant for paddy in the world.

LEAF is located in the paddy-growing region of Punja, situated at 45 km from Chandigarh and 50 km from Ludhiana. Punjab despite primarily a wheat consuming state, is also a key producer of rice with the highest yield per hectare, on account of its edge in terms of climate, soil quality & irrigation facilities. Lakshmi is a key supplier of rice to Food Corporation of India (FCI) for its Public Distribution System (PDS) and is located in close proximity to FCI warehouses (1 km) and railway yards.


LEAF has come a long way from rice trading & refining of raw rice to became an integrated player operating from sourcing paddy to manufacturing finished rice with solvent extraction & refinery capacities in place for its by-products.


Now looking at the company financials we notice that company has achieved a turnover of more than 1070crores in last 4 quarter which is highest turnover ever achieved. It has made a net profit of 110 crores which is healthy more than 10% net profit margin. It converts to EPS of 17.4 and P/E of less than 4.5 discounting at current market price of Rs78. There is huge institutional holding of 39% and public holding is just over 6%. The company is standing at a comfortable Debt/Equity ratio of 0.97.

Seeing its strong net profit margins and diversification into energy segment we may give it a reasonable P/E multiple of 8-9. So its fair value comes to 140-156. Still I am reducing the target by 20% to Rs112 seeing the bleak economic scenerio. It still holds potential return of more than 43% from current levels of 78. We may expect this price within a month time. Since the market has run up quite a bit and there is possibility of bad news coming globally or domestically, so I recommend a stop loss of 69 in the stock.

Anurag Dujari
Mobile: 92308-92309
E-Mail- anurag130@gmail.com
Yahoo Messenger ID - trading_picks

Disclaimer and Terms of Use: Stock market is subject to risk. High risk high gain is the key to stock market. We are not responsible for any loss or profit associated with stocks mentioned on this site/ by us. Under no circumstances will we be held liable for losses incurred due to information presented anywhere on the site or given through yahoo messenger or SMS. Please do your own research before establishing an equity/ derivatives position in a company. Not all stocks recommended by us are suitable for your investment needs. Carefully evaluate your own risk appetite. Any error in this document cannot be claimed by anyone. The articles on this site are not written by a registered investment advisor. The author may or may not be holding a position in companies that are being analyzed. More likely than not, the author will have an interest in the stock mentioned....

Check our another newsletter of 28th October,2008 at www.investmentcalls.blogspot.com

On 28th October,2008 we posted the following message on our blog www.investmentcalls.blogspot.com

or click the direct link given below
http://investmentcalls.blogspot.com/2008/10/price-to-book-value-nos-could-help-you.html

That day Nifty was 2684.60 levels. Day before yesterday nifty made a new recent high of 3517.25. A gain of more than 31% from that levels. At that point of time everyone was bearish and we were the few ones gave contrarian buy and just see the reward we got.

We are pasting that message below. Else you may visit our blog www.investmentcalls.blogspot.com

Price to book value nos could help you in crisis

What is a good yardstick for an undervalued stocks in times of crisis such as the current one? The answer to that, many market watchers say, is price to book value(P/BV). Book value is the measure that each shareholder stands to get, were the company to be liquidated.

Conventional wisdom suggests that there is very little chance of going wrong if an investor were to put his money in a stock with a P/BV of less than one. Already 21 stocks in the BSE-100 index have seen their price to book value fall below one, as a result of the unprecedented erosion in their stock prices.

Stocks that fall into this category include PSU oil marketing companies like HPCL and IOC, and metal stocks like Tata Steel, Hindalco and JSW Steel.

In the case of oil marketing companies, the recent softening of crude oil prices has not helped much. For one, they are still holding inventory purchased at very high prices. Also, these companies also have refining divisions, which are the major contributors to their profitability. Gross refining margins have fallen sharply in line with the slide in regional refining margins, and is likely to weigh on earnings.

In the case of metal stocks, investors are concerned that a global economic slowdown over the next few quarters could adversely hit demand for commodities in general.

Similarly, investor concerns for the growth prospects of the real estate, cement and construction sector over the medium term has resulted in scrips like Grasim Industries and IVRCL Infrastructure & Projects quoting at a price to book value of less than one. At Monday’s close of 4343.2, the broader BSE-100 index trades at a P/BV of 2.06 times.

Says Ramdeo Aggrawal, managing director, Motilal Oswal Financial Services, “Investors would need to look at the fundamentals of each sector over the medium term where stocks are trading at a price to book value of less than one, and decide if there are growth possibilities at the current stock prices.”

Adds Anuj Choksey, co-head, institutional equities, KR Choksey Shares and Securities, “Valuations of metals shares and those connected to the construction sector are trading at ridiculously low levels as investors are assigning pessimistic valuations at the first signs of a slowdown.”

Meanwhile, the Sensex went below 8,000 intra-day on Monday, as there was no let-up in the selling fury that has gripped Dalal Street over the last couple of weeks. This has been a hallmark of emerging markets in general. So how does India compare with them? At Monday's close, the Sensex is trading about 9.5 times trailing 12-month earnings.

In contrast, other indices like the Shanghai Composite Index ended at 1,723 on Monday trade at a P/E of 13.35 times, while the Brazilian Bovespa at Friday's close of 31,481 is trading about 7.5 times. Of course, the Russian stock market index, the Russian RTS Index which has lost nearly 70% since its peak over the last few weeks, trades at an abysmal P/E of 3 times.

source:-www.economictimes.com

ANURAG DUJARI
Mobile - 92308-92309
E-Mail - anurag130@gmail.com
Yahoo Messenger ID - trading_picks
Blog - www.investmentcalls.blogspot.com

Check our newsletter of 28th October,2008 at www.investmentcalls.blogspot.com

On 28th October,2008 we posted the following message on our blog www.investmentcalls.blogspot.com

or click the direct link given below
http://investmentcalls.blogspot.com/2008/10/pe-ratios-of-blue-chips-at-historic-low.html

That day Nifty was 2684.60 levels. Day before yesterday nifty made a new recent high of 3517.25. A gain of more than 31% from that levels. At that point of time everyone was bearish and we were the few ones gave contrarian buy and just see the reward we got.

We are pasting that message below. Else you may visit our blog www.investmentcalls.blogspot.com

PE ratios of blue-chips at historic low

The stock market is in turmoil and share prices of most companies are tumbling as if there is no tomorrow. In the last nine months, things seem to have moved from irrational exuberance to irrational pessimism . Nothing illustrates this better than the level of share prices relative to their underlying earnings.

This ratio is what in market jargon is referred to as the price-earnings (P/E) multiple. In essence, the P/E ratio of a share tells you how many rupees you have to pay for every rupee worth of net profit of the company. Thus, if a company has one crore shares and a net profit of Rs 100 crore, each share commands a profit of Rs 100. If you have to pay Rs 200 per share, the P/E ratio is 2. In other words, for every two rupees you invest, your effective return is one rupee per year.

Of course, you might actually get in hand only a part of this since only the part of profits that is distributed as dividends is handed over to the investor, but even the rest is reinvested in the company, thus adding to the value of your share. It should be clear that this is a fantastic rate of return, considering that to earn one rupee a year from a bank fixed deposit you would need to invest about Rs 10.

Today, share prices have fallen so much that in many cases, the P/E ratio is down to 2 or even lower. That means if you are investing Rs 100 to buy a share of such a company, your investment will earn Rs 50 or even more in one year.

For those who are skeptical about whether the reinvested portion of profits really helps them, here’s the opinion of Warren Buffet, one of the world’s richest men and widely regarded as among the most savvy investors. Buffett believes companies that reinvest the entire amount back are a better bet to put your money in. He has argued that you buy a share because it gives you betters return than investment in other instruments.

If a company is growing, it will need to invest in the future and hence distribute little or nothing as dividend . Such a company is actually enhancing your returns for the future. On the other hand, a company that gives back the entire earning in the form of dividend is effectively telling you it cannot find anything to do with the money , which means it is unlikely to grow and hence likely to yield low returns in future.

On average, good companies with a healthy future tend to earn returns of around 20% on their total investment as against a return on bank deposits of around 10%.

In normal times, P/E ratios of blue chip companies would of the order of 20, though in cases where future earnings are expected to be much higher you could have correspondingly higher P/E. (Of course, it varies from industry to industry, which is why it makes more sense to compare P/Es of companies within a certain industry rather than across industries.)

That brings us back to the abnormally low P/E ratios for several blue chips in the Indian market today (see chart). Take the example of Hindalco Industries. Its annualized net profit on the basis of its first quarter result for 2008-09 would be Rs 2,787 crore. It has 122.65 crore shares. Therefore, every share of the company has an underlying profit Rs 22.64. But a Hindalco share could be bought on Monday for just Rs 40.40. That means, an investment of Rs 40.40 could earn a net profit of Rs 22.64 in one year, a P/E ratio of 1.78. That’s an annual rate of return of over 56%.

Similarly, Tata Steel’s P/E ratio of 2.11 at Monday’s closing price means buying the share gives you an annualized return of over 47%. Including these two, there are at the moment seven Sensex scrips that are trading at P/E multiples of less than 5. In other words, the underlying return on investments in these scrips would be over 20% per annum. Of course, there is a caveat to be added here. These calculations are all assuming that results declared so far are a good indicator of annualized earnings . If earnings in the remaining quarters do not match up to what was achieved in the first quarter, then P/E multiples would be higher even at the same share prices.

Even if the P/E multiples rise to say 10, it would make sense to invest provided the company is growing in the long run. After all, when you invest in equity you are looking not only at returns from earnings, but also at potential capital appreciation.

source:www.economictimes.com

ANURAG DUJARI
Mobile - 92308-92309
E-Mail - anurag130@gmail.com
Yahoo Messenger ID - trading_picks
Blog - www.investmentcalls.blogspot.com

Check our newsletter of 26th October,2008 at www.investmentcalls.blogspot.com

On 26th October,2008 we posted the following message on our blog www.investmentcalls.blogspot.com

or click the direct link given below
http://investmentcalls.blogspot.com/2008/10/dont-miss-bus-invest-now.html

That day Nifty was trading around 2524.20 levels. Day before yesterday nifty made a new recent high of 3517.25. A gain of more than 39%. At that point of time everyone was bearish and we were the few ones gave contrarian buy and just see the reward we got.

We are pasting that message below. Else you may visit our blog www.investmentcalls.blogspot.com

Don't miss the bus, invest now

Last chance? Really? This was the reaction of people over the last weekend since the Sensex slipped under the 10,000-mark. Investors are pressing the panic button and getting ready to bail out. There is talk of a further fall being splashed over all the television channels. Even analysts are painting a gloomy picture and advising investors to wait on the sidelines. In fact, a fund manager of one of the largest domestic mutual fund was advising a cautious approach. So, is it really the last chance to buy? Are the experts on TV wrong?

Target audience

The target audience for TV channels (and the advertisers) is the active traders lot which contributes to the Rs 60,000 crores volume on the stock exchanges everyday. The entire effort is focused on finding out where the markets are likely to go the next day. This dilutes their focus from the underlying fundamentals and what all the experts and TV channels are trying to do is pick the bottom. Everyone is trying to time the market. Not a bad idea. Except that one is yet to meet anyone who has done that.

The experts said recently that timing the market was a futile exercise. We were told stories of Warren Buffet and long-term investing, and that equity is the best vehicle and option for the long-term. What has changed so drastically that the long-term prospects are spoiled? And there is no mention of Buffett nowadays.



Wrong picture

The long-term prospects were never as good as the analysts were painting it out to be at the 20,000 levels. But now things are not as bad as many are projecting it to be. The problem with most analysts and a large section of the media is the tendency to take the recent trend and project it into the future. We saw this effect in January.

"Markets rallied from 15,000 to 21,000. India is doing well. We will rally till 25,000." We also saw this effect in the mid-year with oil. "It rallied from $70 to $140. There is no oil available and it will touch $200 soon."



Reverse logic

The same logic is in reverse today. "Markets have crashed. India is facing difficult times. So, we will continue to slide further." But, is India set for a rough ride? There will be many corporates who will reel under the liquidity crunch being faced now. The days of really easy credit are over and many corporates, who had embarked on excessive and aggressive expansions and acquisitions, will be squeezed by the credit crunch.

Political considerations (like the fear of inflation in an election year) have put economic growth priorities on the backburner. India Inc is paying the price for this and the current pessimism about the negative impact is justified.

But this analysis misses a key point. Most of India's troubles are domestic in nature, caused largely by the Reserve Bank of India's (RBI) tightening cycle. This gives us the ability to resolve our issues domestically when the RBI reverses the tightening cycle. With the recent cash reserve ratio (CRR) cuts and the expected rate cuts in the credit policy, the RBI has already begun the loosening cycle. Inflation eases Inflation has dropped below 12 per cent and should drop below 10 per cent in the next two months. Commodity prices have dropped sharply across the world providing relief from the inflation threat. The long-term rates are already indicated lower by the debt market in India. The government securities are quoting at a 10-year yield of 7.68 per cent, as against a peak of 9.4 per cent just three months ago - a drop of more than 170 bps. Thus, India's growth should be back on track over the next six months. The sharp fall in oil and commodity prices will reduce the current account deficit being run up. The fiscal deficit will also be sharply lower than feared as the oil and fertiliser subsidies will come in closer to the budgeted numbers. Sensex's valuation Against this backdrop, the recent fall has made the Sensex cheap by historical valuations and is trading at under times forward earnings. Even factoring in a moderate drop in expected earnings due to a slowdown, the Sensex will still be available at 10.5 times. The drop in markets is temporary as valuations are very attractive and markets will revert back to mean valuations. As India's growth reappears on the horizon and the global situation stabilises, FIIs will buy again. Rallies will be weak and markets could keep falling. But it is unlikely there will be serious damage from these levels. Investors looking to build long-term portfolios should heed Warren Buffet's advice - be fearful when others are greedy (think of Sensex at 21,000 level) and be greedy when others are fearful (how about right now?). source:- www.economictimes.com Anurag Dujari Mobile - 92308-92309 Messenger ID - trading_picks E-MAIL - anurag130@gmail.com Blog - investmentcalls.blogspot.com