Friday, August 25, 2006

Indian stock market.........valuations revisited!

Be cautious on India among emerging markets seems to be the theme these days, both according to domestic and international fund houses. According to them, India is among the more expensinve emerging markets today in terms of equity valuations. But are current valuations really expensive? NSE has the P/E, P/B and the Dividend yield data for the NSE Nifty index going back seven years, ie. from 1 Jan 1999. Following are the charts reflecting these:

Each of the above three valuation parameters are not too far from their seven years average levels. One can, therefore, say that Indian markets are currently fairly valued. Definitive moves from here on will have to necessarily be driven by higher earnings accumulation.....not just growth. Till such time I think the markets will consolidate and stay at around current levels, within a band of say 5-10%. I had done a similar study a few months ago.

Thursday, August 24, 2006

Update: New investment - Ankur Drugs & Pharmaceuticals

grI recently wrote about my new investment: Ankur Drugs & Pharmaceuticals. Here's a small update that further reiterates my belief that the company is headed for good times. The promoter of this company - Purnandu Jain has been an active buyer of his company's shares in the recent months. The quarterly shareholding pattern available for this company on the BSE indicates this. Check these links 1,2 and 3.

Promoters buying shares from the secondary market is a fairly strong signal. This is because unlike selling , buying is a voluntary decision. People can end up liquidating some of their holdings for reasons like buying a new house, repayment of some loan, etc. The bottomline is selling can be a forced decision. Whereas buying shares (making investments) is mostly voluntary, unless you are a large steel manufacturing company. Noteworthy is the fact that pple make investments only when they think that the investment they are making is the one that CAN yield the highest return for them at a reasonable risk.

Therefore, I for one am quite bullish over the fact that Ankur Drugs is a). recording robust growth in its business and b). the promoters in the company too feel the same. Not just promoters, Reliance Capital (one of the largest and best performing mutual funds) too feels the same. It picked up a 9.5% stake in Ankur Drugs in November last year.

Disclosure: I've a long position in the company bought at Rs.92 per share. I bought these 2-3 days prior to my blog entry on this company. The stock has since moved by over 45% and is currently trading at around Rs.137. I expect the company to report a PAT of over Rs.20 crore for the fiscal 2007. Discounting this by a multiple of 8-10 times gives me an approximate price target of Rs.180-200 per share.

More updates: Dilution of equity due to the conversion of FCCBs

I had done some rough computations on the likely effect of the conversion of the 16,000 FCCBs (amount: USD 16 million) issued by the company in May this year. Here's how they look:

1).Assuming the FCCBs get converted at a price of Rs.100 per share.

2).No. of additional shares would amount to around 7.4 million shares.

3).Current shares outstanding is 9.5 million.

4).Shares o/s post the conversion would amount to 16.9 million.

5).With a NPAT of Rs.42 crore (as claimed by the company's head), year end EPS would stand at Rs.24.9 per share.

Tuesday, August 15, 2006

Independence Day wishes to all & some nice articles to read

31 states, 1618 languages, 6,400 castes, six religions, six ethnic groups, 29 major festivals, 110 cr pple (approx), 1 country - India. Proud to be an Indian. Happy Independence Day to all the Indians living within and outside of India.

Found some nice articles to read:

1). IBM's India Plan Shows Need to Boost Talent by Andy Mukherjee.

What Trading Teaches Us About Life by Brett Steenbarger.

3). Trader Performance: What Contributes to Profitability? by Brett Steenbarger.

Monday, August 14, 2006

An Eye on Three Commodities

Three interesting commodities to keep an eye at... for various reasons

1. Rice (USD/100 pounds)

Has risen ~56% from its Jan/Mar 05 lows and threatening the 2004 highs. More consumers lesser land available (China, USA) and ofcourse our old friend the Weather.

2. Cocoa (GBP/mt)

The recent sell-off on Cocoa - basically attributed to speculators closing positions has it down ~24% from highs but the geo-political situation (Ivory Coast) and the weather could leave the demand/supply situation lopsided

3. Rubber (JPY/kg)

First down ~20% since June highs which helped all users (Continental, Bridgestone), then the rally (Production fears) and now the fall of ~8% again in a couple of weeks seems there is a bounce in this commoditiy.

PS: All screenshot from Bloomberg.

Saturday, August 12, 2006

New investments - Ankur Drugs & WS Industries

I recently added two new scrips to my portfolio. They are - Ankur Drugs & Pharmaceuticals and WS Industries. I expect the two to perform exceedingly well in FY 2006-07. I expect these investments to yield returns in excess of 50 per cent over the next 6-8 months.

Ankur Drugs & Pharmaceuticals is a small company which primarily does contract manufacturing for large pharma companies in India. The company recently commissioned a new plant in North India, impact of which can be seen in its recent quarterly performances. Sales and profits grew by over 200% in each of the last two quarters.

WS Industries is a leading manufacturer of high voltage electro-porcelain transmission and sub-station insulators in India. These are primarily used in the electrical transmission and distribution sector. The company is expected to do well in the wake of the current investment boom. I am still studying the company and its business. But, from whatever I've read so far, WSI looks promising. I've made a token investment in this company for now. Will up the ante after a detailed study.

My current folio includes:

1).Man Industries
2).Rajasthan Spinning & Weaving
3).Morarka Finance
4).Dishman Pharma
6).Jyoti Ltd
7).Deccan Gold Mines
8).Ankur Drugs
9).WS Industries

I've written about my investments in the past: 1, 2 and 3.

Update: Both Ankur Drugs and WS Industries ended up today (14-Aug-06), 1.3% and 10% respectively.

Friday, August 04, 2006

Warren Buffet errs too...but what the hell he is and will remain the best ever!

Here's an article on the Sage of Omaha that appeared on Bloomberg today. It talks about some of the bets that went wrong for Warren Buffet. Here's an excerpt:

Billionaire investor Warren Buffett, stung by $955 million in losses from foreign-currency investments in 2005, slashed his bet against the U.S. dollar this year, just before its steepest decline in 18 months.

Berkshire Hathaway Inc., his Omaha, Nebraska-based insurance and investment firm, had $5.4 billion in foreign- currency forward contracts at the end of March, down from as much as $21.8 billion in 2005, according to the company's earnings statements. The U.S. Dollar Index, used to measure its value against six major currencies, fell 5.1 percent in the second quarter.

Btw, for better insights into the world of investment there's no better reading material than WB's annual "Letter to shareholders". They can be found here.

Toyota > 2 * (General Motors + Ford + Daimler Chrysler)

Toyota reported a stellar performance for the quarter ended June 2006. Net profits increased by 39.2 per cent to 371.5 billion yen ($3.23 billion). The sharp rise in PAT came on the back of 13 per cent growth in topline to 5.64 trillion yen ($49 billion). Read the full article here. Toyota is the world's most profitable car manufacturer. At the end of 2005, it produced 7.1 million cars, the second most. General Motors produced the most (9.04 million cars).

The top five producers are:
1). General Motors - 9.04 million
2). Toyota - 7.1 million
3). Ford - 6.4 million
4). Volkswagen - 5.17 million
5). Daimler Chrysler - 4.3 million

However, by market capitalisation the equation is a little different (well, actually a lot different):

Toyota > 2* (GM + Ford + Daimler Chrysler)

Toyota's mcap = USD 173 bln
GM's mcap = USD 18 bln
Ford's mcap = USD 13.2 bln
Daimler Chrysler = USD 52.2 bln

Thought: With a mcap of USD 6 bln, what will it take for one of India's largest auto companies - Tata Motors to make a hostile bid on Ford Motors, which has a mcap of a mere USD 13.2 bln. for thought for Mr. Ratan Tata. Silly many will think.....but why should any Indian company - be it Maruti Suzuki or Tata Motors not make this bid?????