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21 April 2010
Buy Stocks Of Blue Chip Companies At Discounted Price
Buy Stocks Of Blue Chip Companies At Discounted Price
If you were given a special “offer” of a 30 per cent discount on all Tata group shares relative to their current market prices, would you take it? How? Here's the article from The Hindu Business Line explaining how you can get blue chip stocks at discount!
Well, it is exactly such opportunities that you get to capture when you buy the holding or investment arms of India's key business groups. Take Bajaj Holdings and UB Holdings, the holding companies of the Bajaj and UB groups. They hold investment books which are worth Rs 16,000 crore and Rs 5,500 crore respectively at today's market prices. Yet the stocks sport market capitalisations that are at a steep discount to this value, at Rs 6,500 crore and Rs 1,800 crore respectively.
These are not odd cases, there seem to be many more instances where the holding or investment companies of business groups are trading at a steep discount to the real value of their investment book (the Net Asset Value, NAV).
As the Indian market continues to tread higher, investors are finding it harder to spot undervalued bets in the market.
The enormity of information available has also led to most of the undervalued stocks getting re-rated. However, one pocket of stocks which continue to trade at a steep discount to their intrinsic value are investment andholding companies of major business groups. In addition, there are also other companies (such as Ramco Industries and Aditya Birla Nuvo) with large investment books (quoted) which supplement their core business.
Business Line's analysis of these companies indicates that the companies trade at a steep discount to their NAV (ranging from 35per cent to 80 per cent). They have also underperformed (in some cases delivered negative returns) the broader market index over the last four years.
From the investment data in the balance-sheets of listed companies, around 27 companies' market capitalisation is less than their respectiveinvestment book value. Of which, 14 companies are mainly holding and investment companies whereas others (such as Rajapalayam Mills and Binani Industries) also operate separate standalone businesses. The assumption is that these companies have not made material changes to their investment holdings since March 2009.The stock market prices of holding and investment companies are all at a discount to the underlying value of investments they hold — with stock prices amounting to 20-65 per cent of their quoted investment book per share.
If unquoted investments are taken into account, the discount would widen in many cases.
Assuming that the companies have not liquidated their stakes since March 31, 2009, JSW Holding and Tata Investment Corporation are trading closest to their NAV, at a discount of 8 per cent and 24 per cent to their respective quoted portfolios. On the other hand, Williamson Magor (with major investments in Mcleod Russel, McNally Bharat and Eveready Industries) and Nagreeka Capital (with investments in Sterlite Industries) are trading at less than one-fifth of theirinvestment book . Stocks such as UB Holdings and Nalwa Sons are trading at almost half their investment values. The discount seems to be wider for smaller rather than largerholding companies.
The implied discount may be even higher in some cases as the holding and investment companies may have cross-holdings.
For instance, JSW Holdings, apart from the steel portfolio, also has investments in Nalwa Sons, which is already at a discount to its own investment book.
Bajaj Holdings and Maharashtra Scooters have stakes in each other, in addition to investment in Bajaj Group stocks. Where there are multipleholding companies within a group, investors may find the one at a steeper discount a better bet. For instance, between Nalwa Sons and JSW Holdings, the discount in Nalwa Sons is higher as compared to JSW Holdings making it better value. Same is the case with McDowell Holding which is trading at a higher discount to its fair value compared to UB Holdings.
Gaining favour
Though the investment companies are available at an attractive discount, their long term stock performance hasn't been very encouraging. Over the last four years as the broader market index BSE 500 gave a 13per cent annual return, quite a few holding companies and investment companies have given negative returns. JSW Holdings, Nalwa Sons and HB portfolios were exceptions with an annual return of 75 per cent, 27 per cent, and 14 per cent respectively.
However, the market does seem to be turning its attention to these companies. Some investment companies do seem to have gained market favour, delivering higher than market return (BSE 500) in the last one year.
For instance, UB Holdings and Maharashtra Scooters gained 260 per cent and 350 per cent respectively as against the 100 per cent return of BSE 500 index.
Good performance of the underlying stocks has been reflected in the stock price gains of Nalwa Sons and JSW Holdings which hold all the listed companies of the JSW group. HB Portfolio too has gained as it holds JP Associates, a high beta stock.
Analysis also shows that historically the discount on the holding companies narrowed more during periods of market correction (underlying companies' stocks falling) rather than during market highs. That is the underlying stocks have usually outperformed in a rising market and fallen more in a bearish market.
For instance, Nalwa Sons and Jindal South West Holdings saw their stocks trading at a premium to their underlying NAV of the stocks during the period January-March 2009, when JSW Steel, Jindal Stainless and Jindal Saw touched their multi-year lows. Why the discount?
Holding or investment companies may be a good way for investors to buy blue-chips at a discount.
However, not all of them may be good investment bets due to the discount factor alone. Here is what investors should watch out for while considering them:
For the holding company to be a good “buy” the underlying stocks should be worth investing in, the prospects of the underlying businesses should figure prominently in the investment decision.
Holding companies are similar to the perpetual close-ended mutual funds which have never paid dividends. Their stocks trade at a discount because the value of the investments is essentially on paper.
It is the promise of value unlocking that can really serve as a trigger for the discount to narrow. This can happen through periodic liquidation of holdings or a delisting of the company itself.
Even the dividends paid out by the holding companies are highly correlated to dividend received in turn from their holdings.
Concentration is another risk the investors have to bear in mind. Investing in a holding arm of a group means holding a number of companies from the same business group from different sectors.
For instance, by holding Tata Investment Corp an investor will end up tracking the whole Tata group portfolio.
However, given the choice investors may not want to bet on all the businesses at the same time. Same is the case with other holding companies too.
Source: The Hindu Business Line
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20 April 2010
Stocks to open higher; RBI move eyed
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MUMBAI: India’s largest software exporter Tata Consultancy Services (TCS) joined rival Infosys in signalling an improving environment for the country’s $60-billion IT industry, as increased spending from top customers such as Citibank and General Electric boosts profits.
TCS is the second major Indian information technology firm to report strong quarterly results, underscoring optimism about a recovery, after a severe downturn crimped margins and profit growth in 2009. Earlier this month, Infosys made a thumping statement on business recovery by forecasting a 16-18% growth for this financial year, awarded wage hikes of 14% and revealed plans to recruit 30,000 employees.
On Monday, Mumbai-based TCS posted the fastest profit growth in three years by reporting a 47% jump in fourth-quarter profit to Rs 1,931 crore. Revenue rose at a more sluggish pace of 7.9% to Rs 7,377 crore.
“The profit growth looks awesome, makes me want to say IT’s back. The revenue growth, however, doesn’t seem that amazing,” said an analyst with an MNC broking house.
TCS’ profit was boosted by Rs 42 crore of gains due to currency fluctuations while a 3.6% appreciation in the rupee impacted operating profit margins by 1.92%.
“While FY10 has been a challenging year, we have used this time to improve efficiencies and generate better returns by boosting margins. Our cost base has remained constant and we have leveraged this to support higher business growth,” N Chandrasekaran, CEO and MD of TCS, said.
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19 April 2010
Dalal St's intermediate uptrend may be over
Dalal St's intermediate uptrend may be over
he market fell during each of the four sessions last week, at the end of which the Sensex finished 1.91% or 341.96 points lower, and the Nifty ended 1.85% down. The CNX Midcap Index lost 1.12%.
Infosys was the biggest winner among index stocks with a 4.0% gain. The other index stocks to go up included TCS, Tata Steel, Hindustan Unilever and Sun Pharmaceutical with gains between 2.8% and 1.7%. HDFC was the biggest loser among index stocks with a 5.9% loss. The other index stocks to go down included ICICI Bank, Reliance Communications and Sterlite Industries with losses falling between 5.8% and 5.4%.
Ruchi Soya Industries was the biggest winner among the more heavily traded non-index stocks with a 13.6% gain. The other non-index stocks to go up included Indiabulls Financial, Valecha Engineering, Balrampur Chini, Unitech, Jet Airways, JSW Steel and Zee Entertainment with gains between 10.4% and 3.8%.
Amrutanjan Health Care was the biggest loser among the more heavily traded non-index stocks with a 27.8% loss. The other non-index stocks to go down included Intrasoft Technologies, Syncom Healthcare, United Spirits, Essar Oil, Punj Lloyd, Kotak Mahindra Bank and IDFC with losses falling between 11.9% and 7.2%.
INTERMEDIATE TREND:
The market’s intermediate trend appears to have turned down with the Sensex breaching its intermediate downtrend trigger level of 17,650, the Nifty going below 5,275, and the CNX Midcap falling below its equivalent of 7,875. These levels are the lows of the previous minor decline, rounded down to the nearest 25.
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he market fell during each of the four sessions last week, at the end of which the Sensex finished 1.91% or 341.96 points lower, and the Nifty ended 1.85% down. The CNX Midcap Index lost 1.12%.
Infosys was the biggest winner among index stocks with a 4.0% gain. The other index stocks to go up included TCS, Tata Steel, Hindustan Unilever and Sun Pharmaceutical with gains between 2.8% and 1.7%. HDFC was the biggest loser among index stocks with a 5.9% loss. The other index stocks to go down included ICICI Bank, Reliance Communications and Sterlite Industries with losses falling between 5.8% and 5.4%.
Ruchi Soya Industries was the biggest winner among the more heavily traded non-index stocks with a 13.6% gain. The other non-index stocks to go up included Indiabulls Financial, Valecha Engineering, Balrampur Chini, Unitech, Jet Airways, JSW Steel and Zee Entertainment with gains between 10.4% and 3.8%.
Amrutanjan Health Care was the biggest loser among the more heavily traded non-index stocks with a 27.8% loss. The other non-index stocks to go down included Intrasoft Technologies, Syncom Healthcare, United Spirits, Essar Oil, Punj Lloyd, Kotak Mahindra Bank and IDFC with losses falling between 11.9% and 7.2%.
INTERMEDIATE TREND:
The market’s intermediate trend appears to have turned down with the Sensex breaching its intermediate downtrend trigger level of 17,650, the Nifty going below 5,275, and the CNX Midcap falling below its equivalent of 7,875. These levels are the lows of the previous minor decline, rounded down to the nearest 25.
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18 April 2010
Goldman Sachs Fraud - Effects On Stock Markets
Goldman Sachs Fraud - Effects On Stock Markets
Securities and Exchange Commission in US has filed a civil suit against Goldman Sachs accusing of securities fraud on Friday. World stock markets dropped considerably after this news. How is this going to affect Indian Stock Markets?
On Friday,it was reported that Goldman Sachs was sued by SEC, with the US market regulator alleging that Goldman had created and sold a complex investment product related to housing finance that was secretly devised to fail.
The news of the suit pulled down Goldman and other financial services stocks,which in turn affected the Dow Jones Index also. the Dow Jones industrial average was down 125.90 points (1.13%), at 11,018.66, while the Standard & Poor's 500 Index was down 19.54 points, (1.61%), at 1,192.13. The Nasdaq Composite Index was down 34.43 points,or 1.37%, at 2481.26.
Effects of Goldman Sachs Fraud on Indian Stock Markets
How much could this affect Indian Stock Markets? The sensex had rallied over 10% to above 18000 after budget in February 2010, but this week it has lost nearly 350 points to close at 17,591 on Friday. The stock brokers expect some profit taking on Monday. I believe it could be in tunes of 1 - 1.5% which translates into 170 - 200 points correction.
Stock market research analysts also feel the stocks of companies in which Goldman Sachs holds stake, could witness heightened selling on Monday. According to data collated by Bloomberg, the top five holdings for Goldman Sachs Invest Mauritius were LIC Housing Finance, Lanco Infra, CESC, United Phosphorus and Educomp Solutions.Goldman Sachs' total investments in Indian stocks could be worth more than Rs 2,000 crore.
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News RoundUp
EW YORK: Two Indian corporate giants, Tata Group and Reliance Industries, have made to a new list of world's 50 most innovative companies, but it is US-based Apple Computer sitting on the top.
Between them, Tata Group is better placed as the world's 17th most innovative compared to Mukesh Ambani-led RIL's 33rd position globally in this league.
Having brought Mac computers, iPod music players and the new sleek touch-screen laptop iPad to this world, Apple has retained its top slot, while compatriot internet giant Google remains the "silver medallist" in the latest edition of annual rankings prepared by BusinessWeek magazine in collaboration with global research firm Boston Consulting Group (BCG).
But, the US supremacy on these rankings is under threat due to Asia's fast rise. There are as many as 15 companies from Asia on the list, as against five in 2006.
Besides, for the first time since the inaugural list in 2005, the number of companies from the US has fallen below that of the non-US entities among the top-25.
India, however, has limited role in Asia's growing clout. There are five companies from Japan, another five from China and Taiwan, three from South Korea and just two from India.
Besides, both Indian entities on the list have moved down from their previous year rankings. In 2009, Tata group was ranked at 13th place, while Reliance Industries at 15th.
This is despite innovative being seen as a key for the country's economic growth, as per the survey conducted by BCG and BusinessWeek for compilation of the rankings.
About 89 per cent of executives in India said innovation was key to economic growth, while in the US only 72 per cent said innovation was important, the report said.
At the top of the list, Apple and Google are followed by software giant Microsoft, technology giant IBM and Japanese auto major Toyota in the top five.
Others in the top-ten included Amazon.com, LG Electronics, BYD, General Electric and Sony.
While Asia is growing fast, North America leads the tally with 24 companies on the list. There are 11 companies from Europe and one from South America (Brazil's Petrobras).
More @
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Q4 Earnings
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Every rising phase in the stock market usually has new sectors leading the bull charge. The rally of the past one year too has thrown up its share of new sector leaders. Even as the Sensex itself more than doubled from its March 2009 low of ...
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Src: ET and Businessline
16 April 2010
ET special: India Inc's most powerful CEOs
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Topics:
MUMBAI: THE wait is over. The definitive list of India Inc’s Most Powerful CEOs is here, and Ratan Tata retains his position as India Inc’s top dog. The past year has seen the 72-year-old head of India’s biggest conglomerate re-open The Pierre Hotel in New York, launch the GSM version of his cellular service as DoCoMo and grapple with serious engineering problems in the Nano.
In the eyes of the respondents in the survey, he’s obviously handled the challenges with panache. The 500 respondents interviewed by IMRB for The Economic Times Corporate Dossier magazine not only voted Mr Tata as India Inc’s Most Powerful CEO for 2009, second year running, but also India Inc’s CEO of the Decade.
In a year of uncertainty, starting with the economy in the shadows of the recession but ending on a cheery note of recovery, the vote is apparently one of stability. The next three rankings after Mr Tata — Mukesh Ambani, NR Narayana Murthy and Anil Ambani — also remain the same as last year and most of the names that follow are familiar as well.
Riding on his bold acquisition of Satyam and his selection as the Businessman of the Year at the ET Awards for Corporate Excellence, Anand Mahindra breaks into the top 10, climbing five places to the ninth rank. Representing the comfort of the old order, Rahul Bajaj returns to the top 10, climbing 11 places to the eighth spot. Azim Premji and Sunil Mittal both climb four places this year, possibly in line with the improved market capitalisation of their companies.
In the eyes of the respondents in the survey, he’s obviously handled the challenges with panache. The 500 respondents interviewed by IMRB for The Economic Times Corporate Dossier magazine not only voted Mr Tata as India Inc’s Most Powerful CEO for 2009, second year running, but also India Inc’s CEO of the Decade.
In a year of uncertainty, starting with the economy in the shadows of the recession but ending on a cheery note of recovery, the vote is apparently one of stability. The next three rankings after Mr Tata — Mukesh Ambani, NR Narayana Murthy and Anil Ambani — also remain the same as last year and most of the names that follow are familiar as well.
Riding on his bold acquisition of Satyam and his selection as the Businessman of the Year at the ET Awards for Corporate Excellence, Anand Mahindra breaks into the top 10, climbing five places to the ninth rank. Representing the comfort of the old order, Rahul Bajaj returns to the top 10, climbing 11 places to the eighth spot. Azim Premji and Sunil Mittal both climb four places this year, possibly in line with the improved market capitalisation of their companies.
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Promoter-CEOs dominate list
Not surprisingly, India Inc’s Most Powerful CEOs list has always tended to be dominated by promoter-CEOs. Professional-CEOs, public-sector CEOs, MNC-CEOs do feature on the list, but only a few make it to the top 20.
This year, the three exceptional professional CEOs in the top 20 are OP Bhatt, chairman of SBI, the country’s largest lender; Chanda Kochhar, CEO of ICICI, the country’s largest private sector bank and Vinita Bali, CEO of Britannia and Business Woman of the Year at the recent ET Awards.
To put things in a better perspective, this year’s survey has created two spin-offs. The first is a listing of India Inc’s most powerful women CEOs and the top troika here consists of Chanda Kochhar, Kiran Mazumdar-Shaw of Biocon and Naina Lal Kidwai of HSBC. The second is a listing of India Inc’s most powerful MNC-CEOs, where Ms Kidwai again finds a place, but at number four. The top three are D Shivakumar of Nokia, Nitin Paranjpe of Hindustan Unilever and Ravi Venkatesan of Microsoft.
The Power List of Top 100 CEOs | Full coverage
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15 April 2010
Morning calls
Top 5 picks
Small, mid-cap stocks race past heavyweights
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