Bajaj Finance Can Be a Good Trade

Investing

Sorry for a long gap! I was bit lazy. The market was highly volatile. Dilip Buildcon has given a very good return of around 25 percent in the last 2.5 months.

Read the report: https://multibaggerinvestors.com/2018/01/21/is-dilip-buildcon-the-next-larsen-toubro/

Vakrangee: I was seriously wrong and a big learning lesson for me. But seems to consolidate now and may rise from here.

Prakash Industries: The steel cycle is intact and it has recovered fantastically and may give a good return in the next 2-3 quarters.

Now I want you to watch out Bajaj Finance. The stock is at strong demand zone and may be a good buy from this level. It might reach at 1900 level. See the image above to identify levels.

Also, I promise to come at weekly basis where we will discuss our trades and come up with new ideas. I’m also planning to write on cryptocurrency and world news.

Top Microcap Mutual Funds to Invest Part I: DSP BlackRock Micro Cap Fund – Regular – Growth Review

Investing

Investing in microcaps or small caps has always been challenging for investors. The huge return potential always attract them, but the probability of losing capital in the bear market is what make them afraid. Playing with stocks directly is also difficult since they don’t have means to judge the quality of financials. So what’s the way out?

Going via mutual fund route can be a good option for those –as it can help you enjoy the best of both worlds. This minimizes the risk while giving you a good return over a period of long time. Here is a good performing high-quality microcap fund: DSP BlackRock Micro Cap Fund – Regular – Growth

Let’s analyze it from different point of view and what can be the best way than focusing on return. The fund was launched in 2007 and in the last 5-years it has given a good return. Had you invested 100000 INR in 2012; it would have grown to 4 lakh rupees at the rate of 27% CAGR. When invested through SIP mode, it would have compounded your capital at the rate of 21% in the last 5 years.

 

Portfolio Construction

This is the portfolio construction of the fund. The focus is on Industrial products, textile and chemicals, which is one-third of total portfolio. If you see some of the main stock—they have given stunning returns and that’s why the performance of the fund has been very good.

  • KPR Mills: 1200%
  • Finolex Cables: 1500%
  • APL Apollo Tube : 1300%
  • SRF Limited:1300%

Though, it’s not clear at what price these stocks were purchased, but the stock picking has certainly paid off for the fund.

The fund has handled bear phases in 2008 and 2011 quite well and it lost much less than its peers, but later it underperformed its peers in the bull market.

Recently the fund house has stopped accepting lumpsum amount in this fund because of the high valuations of stocks in the midcap space. But you can invest in this fund through the SIP mode with a horizon of 5-7 years.

 

 

Bank Nifty May Jump 400 Points From Here

Investing

 

From the above chart, there is clear possibility that Bank Nifty may rebound and test 25300-25400 level. (See the chart below)

Untitled

I have bought one lot of Bank Nifty Future March expiry at 24919 level. See how it turns out. In order to control risk, I have also sold one lot of Bank Nifty 25100 call 28 March expiry @269.

Now as of now, I’m losing in this trade around INR 7537. Now, the time value of money will dissipate fast and the price of option will go down further in the next 4-5 days and so I’ll gain in this position further. Suppose, it goes down to INR 50, my total gain from this position should be 8400 Rs.

If the Bank Nifty rebounds 300-400 points, It will be at my buying price or cross slightly resulting in some gain.

However, this is an optimistic analysis. What market does will be revealed in the next week and I’ll update whatever will happen honestly with proof.

Will update about the result soon.

Can Nifty Rebound From This Level

Investing

tvc_013ee074a4258e3f33213b14ae8f3bddThere seems to have a strong support for Nifty in the 10175-10300 zone as it is retesting this level again and again. As you can see in the above picture, it has touched this level 6-7 times but rebounded strongly after that.

The latest Nifty chart has clearly given a breakout which has been shown as a blue line. So a trade can be initiated at this stage. I have taken a trade at the price of 10193. My stoploss will be 10150 and I’ll close the trade if it touches 10340-10350. The risk reward ratio for this trade is roughly 2:1.

I’ll update you about the outcome of this trade next week after  it’s closed.

Latest Update: I booked a profit of 9700 Rs in this trade on 13 March.

Want to Benefit From the Nirav Modi Case : Must Read This Post

Investing

Amit Jeswani is fast emerging as a sane and logical voice in the Indian equity market. Unlike other equity advisors who preach value investing, but prefer investing in the real estate and fixed deposits—he puts his own skin in the game by putting his own money in the same stocks. Recently, he shared his candid views on the possible impact of Nirav Modi fallout for Titan.

The fall of Nirav Modi and Mehul Choksy has created a storm of sorts in the country—but does this bring opportunity for Titan. Will more and more players start shifting to Titan because of the reputation it commands in the jewellery market?

Absolutely! tells Amit Jeswani in the Bloomberg Quint during the Hot Money programme. There are three types of risks—business risk, company risk and valuation risk.

75% of the jewellery industry is unorganized and only 25% of the industry is organized stores such as Titan, PC Jewellery and others. Since Nakshatra and Gitanjali Gems are out of business, the shift in the organized jewellery sector will start taking place and existing players like Titan will benefit the most.

Even after demonetization and GST, they are consistently growing at the rate of 35%-38%. But this stock is not cheap at all as it trades on 73 times of FY 18 earnings. So you can get into it after some correction into it.

Why You Should Pay Attention to Debt on the Balance Sheet

Investing

What is the most important thing in the stock market?

Earning money—isn’t it?

Wrong!

Saving your investment capital is the most important thing. Most often those who leave the stock market completely lose their hard earned money. That means they don’t have enough capital left to make money when the cycle turns.

Vishal Khandelwal, the ace investor and one of the most sensible voices in the Indian stock market has made it the mission of their life to guide investors so that they don’t lose money. This is the guiding principle of safalniveshak.com.

He pays a lot of attention to reading the balance sheet of the company since it tells a lot of things about the company in question.

So what does he see in the balance sheet?

‘Leverage’— he answered nonchalantly to Nikunj Dalmia of ET Now. You should keep away from the companies that borrow a lot of debt.

Let’s understand this example.

The Debt/Equity ratios of Ruchi Soya Industries=5.09. This means the company is 5 times more leveraged than equity!

That’s a bad sign, isn’t it?

The company must be borrowing to fund expansion from taking a lot of debt. For example, if you take a lot of loan to run your family or buy a new car—it’s a sure shot recipe to disaster. Ideally, you should do this from your own income.

Similarly, a company should be able to meet working capital expenses and growth plans from internal resources. No wonder the stock of Ruchi Soya industry fell from 69 Rs to 17 Rs in the last five years.

Most people in the stock market are enamored by growth. But ask yourself—at what cost the growth is coming? If a company is borrowing a lot of money, avoid that stock. In general, “one should avoid highly capital intensive stocks.” says Vishal Khandelwal to Nikunja Dalmia.

Similarly, you should avoid companies that need a lot of working capital to run the company.

Companies borrow funds from either shareholders or lenders. Excessive dependence on borrowings is risky. A company is considered financially sound only if a firm depends on its ability to repay principal and interest on borrowings even during bad times.

So how much debt on the balance sheet is permissible? The answer varies. Let’s see what Gods of investing think about it.

According to Benjamin Graham, long-term debt not to exceed current assets (current assets— current liabilities). Company’s cash plus inventory should be enough to pay its both short-term and long-term debt. However, many people consider it very strict.

Warren Buffett wants the company to have the ability to repay its long-term debt with no more than two years of its net earnings. He prefers a company with debt to equity ratio below 0.5.

So what happens if a company messes up by taking excessive debt? Take the example of JP Associates, which is on the verge of defaulting. Between 2006 and 2012, the group invested Rs.60,000 crore in real estate, power and cement by borrowing excessive amount of debt.

Jaypee, Rs.8, 000 crore 1,320MW Nigrie thermal power plant in Madhya Pradesh was funded by debt to the extent of 70%. Similarly the entire 1,000MW hydropower portfolio of Rs.7, 000 crore had a debt-equity ratio of 70:30.

If we apply Vishal Khandelwal’s views, he would simply avoid buying such stocks. Take another example of Bhushan Steel whose debt level started increasing fast.

Initially, company generated enough cash to repay debt but when financial capacity deteriorated its ability to pay debt decreased. It did the same mistake as that of JP Associates. The ratio of debt in the Odisha plant’s ₹19,400 crore expansion programme was funded by debt.

No wonder, it’s in such a mess!

In general, companies with a higher debt to capital ratio are financially vulnerable and they have greater chance of defaulting.

Hope you enjoyed the article. Please put your comments.

This Brilliant Young Investor Has a Secret Stock Picking Formula That Even Rakesh Jhunjhunwala, Dolly Khanna, and Ramesh Damani Didn’t Know—But Now You Can Know For Free

Investing

Lies, damn lies and statistics is a famous saying. Rahul Rathi, the ace investor from the house of Puranartha, has a different take.

“Numbers don’t lie as they are outcome of your actions over a long time.” says Rahul to Ramesh Damani in a free-wheeling chat.

Look the companies such as HDFC, Asian Paints, and Infoys in the Sensex, they have returned more than 250 times since inception. So, observing numbers carefully is very important.

A Puranartha Equity Investment advisor has an enviable track record of generating higher alpha. How do they choose their picks—asked Ramesh Damani who has a great knack for extracting hard-kept secrets.

All novice investors looking to do well in the market should be thankful to him for hiss kind efforts. If you still get loss in the market by investing in low quality stocks in the hope of getting high-returns—only you’re to blame for your miseries.

So let’s come to know his stock selection strategy.

1.High Operating Cash-flow

Any stock that wants to pass the stringent criteria should have at least 11 years of track record, which is a typical GDP cycle in which it has increased, decreased and drifted. A good company should be able to grow its operational cash-flow successfully.

But what about the businesses that generally require high-CAPEX or dividend payment?

The operating cash-flow should be sufficient enough to meet all working capital needs and capex related requirements since this is when ideal debt-free scenario is created.

Amazing! Isn’t it?

2.Strong Volume Growth

After analyzing 160 companies over a period of 30 years, Purantha Capitals found that those companies that doubled their operating cash flow in three years offered maximum return in this period.

3.Invest in Consumer Led Companies

They offer more secular growth and are relatively insulated from the vagaries of GDP growth. They are less volatile.

However, Rahul Rathi was candid to accept his mistake in the J&K Bank. They selected the company because of their monopoly in the state, but soon they come to know this hard truth that recovery mechanism doesn’t work.

So they learned the hard truth that data alone is not sufficient and it should be viewed in the current context.

(This article has been written based on the interview of Mr. Rahul Rathi in Market Wizards by Ramesh Damani )