Sunday, May 25, 2014

This stock could generate 10% return in a week

In this super boiling market where people are busy scouting for stock that can pop up 10% or even 20% in a day, and why not this has been the trend since past one week, it is very lethal to buy stocks for ultra short term but expecting superb gains. On repeated requests from my readers, clients and friends, though I stay away from the concept of buying stock for a week or so, I think people can put their bet on Punjab Sind Bank at Rs.63 for last week of this month (26th to 30th). 

Few quick reasons for why this stock...

1. Public sector banks are flavor of the month and even elephants (SBI, BOB)  are dancing with 10%, 20% moves in a single day. SBI, having market value of over 2 lakh crores is up 90% from it's low of Rs.1450. PSB is just 67% from it's low till date. Union bank, OBC, BOB, PNB, Indian Bank are up anywhere between 120 - 200% from it's 52 week low.

2. Valuation wise the stock is still trading around 0.4 times FY-16 Book value while other mid and large sized public banks are trading in the range of 0.7 - 1.2 times FY-16 book.

3. The stock broke out on 23rd May (Friday) on above average volumes and closed near 52 week high of 63.4.

4. On market value per branch valuation metric, the bank is trading at 1.1 crores per branch valuation on FY-16 basis while other banks are trading in the range of Rs. 2 - 10 crores per branch.

Considering above factors there is favorable risk reward ratio in this trade where the margin of safety is high in case trade doesen't work while keeping the opportunity open for a quick 10% upmove in a week's time. While getting into this trade, one should not allocate more than 5% of his / her equity portfolio and get out once the target is achieved.

1 comment:

  1. The stock touched a high of 73 today, a sharp jump of around 15% in a day... The trade worked out well and as explained profit booking came in as well... Hope readers have benefited from this trade


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