Wednesday, December 22, 2010

SESA GOA – Bottomed out

SESA GOA bounced back sharply yesterday from 289 – 290 odd level with pretty decent volumes. Technically the stock seems to have bottomed out 290 level as it has seen a very sharp runup on the rumors of cairn Vedanta deal getting called off.  If rumor of cairn – Vedanta deal  getting called off materializes then it should give big sentiment boost to Sesa Goa script as the company won’t have to shell out its cash which is estimated nearly $2 Billion.  
Short term investors can buy the stock at 304 levels with a 4-5 day target of 320-325. Long term investors can enter with a price target of 340 in 1 month time.

Friday, December 17, 2010

Warren Buffett Investment Criteria

Warren Buffet owned Berkshire Hathaway relies on extensive research-and-analysis team that goes through reams of data to guide their investment decisions. While all the details of the specific techniques used are not made public, the following 10 requirements are all common among Berkshire Hathaway investments:

1. The candidate company has to be in a good and growing economy or industry.

2. It must enjoy a consumer monopoly or have a loyalty-commanding brand.

3. It cannot be vulnerable to competition from anyone with abundant resources.

4. Its earnings have to be on an upward trend with good and consistent profit margins.

5. The company must enjoy a low debt/equity ratio or a high earnings/debt ratio.

6. It must have high and consistent returns on invested capital.

7. The company must have a history of retaining earnings for growth.

Thursday, December 9, 2010

Summit securities listing update

Last year, the RPG Group decided to merge four companies—Summit Securities Ltd, Brabourne Enterprises Ltd, Octav Investments Ltd and CHI Investments Ltd—with RPG Itochu Finance Ltd (RIFL), a 100% subsidiary of RPG Enterprises. Shares of these companies have been suspended from trading since 3rd February due to the proposed merger. In august the company decided to change the name of the merged entity from RIFL to Summit Securities Ltd.

The shareholders of those four companies have received their proportion of summit securities in their demat a/c in august but the merged entity (Summit securities) is still not listed and hence shareholders are not able to sell their holdings. Shareholders are stuck and frustrated and have been looking for several exit options. Many brokers are trying to take advantage of this situatuion asking investors to tender their share of summit securities lying in their demat a/c at Rs. 10/- through off market transaction, misleading them that their investments are of no worth now and they should exit at whatever value they are getting.

The shareholders should stay away from such brokers or people and stay calm for some more time. This is about to get solved very soon. As per the recent conversation with an RPG management representative we came to know that all the approvals have been obtained except SEBI. The approval from SEBI should also come soon as the pressure is equally high on the RPG group as well. RPG group being a 17,000 crore enterprise is not expected to cheat shareholders of such small companies.

As per the latest annual report of summit securities the top 5 quoted investments held by the company are as follows
Company NameNo of shares after MergerCMP as on
09DEC 2010
Value in crores
CESC Ltd2,056,94836074.05
KEC International4,857,790442214.71
Phillips Carbon1,903,11417032.35
Zensar Technology4,444,27616071.10
Harrison Malayalam728,150695.02
                                    TOTAL                                                            397.23

So the top 5 holding iteself are worth approximately 400 crores. On an equity capital of 10.90 crores, the per share value of the above investments comes out to Rs 365/-.
Other quoted and unquoted investments including cash held by the company are worth at least 100 crores.

Considering the above facts it is advisable not to sell any holdings in Summit securities until it is listed and has been traded for 6 months, because it might happen that because of delay in listing some shareholders sell on the listing day itself.
The book value of the company at cost as on 31st March 2010 is Rs. 362/-. Even if we discount the BV by 20%, the shares of summit securities should stabilize above Rs. 300/- within 6 months of listing.

Monday, December 6, 2010

Is the recent correction an Opportunity?

Yes this correction is certainly an opportunity to nibble some of the quality mid and large cap stocks which have fallen with the rest of the markets without any reason. After Satyam saga, the corporate governance has again come into limelight. Any company having any kind of governance issue whether big or small is being punished brutally by the market. Welspun Corp, Akruti city are some of the example which fell like 9 pins on Friday because of news of stock price manipulation in cordination with stock brokers. So one should stay far away from those names and should avoid any kind of bottom fishing. Any company having any kind of news regarding the governance should be completely discarded at this stage. They might rise a bit tomorow but its safer to not invest in tainted companies, as one never knows how greedy is the management and what else has happened in the company which is yet to come out in public. Satyam was a big lesson for every one.

But because of panic some really genuine companies have also corrected in the recent fall. One can look at some of the bluest of the blue chips like NTPC, Bharti, Axis bank etc and start acummulating slowly at each fall. They have got very professional & honest management and are available at reasonable valuation and are expected to perform well over medium to long term. One can also look at some of the quality mid cap companies having good professional management, governance & reasonable valuation like Federal Bank, Firstsource, Zensar Technologies, Godrej Properties etc. But one should avoid exhausting his entire budget for investing in one shot and only invest at correction in small lots.

Wednesday, December 1, 2010

Investment Quotes by Warren Buffet & other Legends

These are not just the quotes, but the experiences shared by some of the most successful investors in the history of stock markets. We can benefit from them if we understand them and remember them while taking investment decisions.

If past history was all there was to the game, the richest people would be librarians.
Warren Buffett

Risk in investment is not knowing what you are doing.
Warren Buffet

The dumbest reason in the world to buy a stock is because it is going up.
Warren Buff

One of the biggest mistakes is to focus on a stock price instead of its value.
Warren Buffet

Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.
Warren Buffett

The key to making money in stocks is not to get scared out of them.
Peter Lynch

Profit in stocks goes to those who buy stocks on sale. There’s no such thing as risk free investment.
Peter lynch

The four most dangerous words in investing are 'This time it's different'.
John Templeton

The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.
John Templeton

Every day I get up and look through the Forbes list of the richest people in America. If I'm not there, I go to work.
Robert Orben

I hate weekends because there is no stock market.
Rene Rivkin

Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.
George Soros

It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong.
George Soros


Warren Buffet, Peter Lynch, George Soros & Sir John Templeton

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