Anjani Portland Cement Ltd : Midcap Cement Player

                    Anjani Portland Cement Ltd : Midcap Cement Player

CMP : 140

BSE CODE : 518091

Market Cap : 352 Crore

LISTED ON : NSE AND BSE

History of the Company :

Anjani Portland Cement Limited was incorporated in the year 1983 at Hyderabad. In 2014, the company was taken over by Chettinad Cement Corporation Pvt Ltd which now holds 75% shares in the company. Starting with initial capacity of 0.30 million tonnes per annum the company has reached 1.20 million tonnes per annum at present of cement manufacturing.

Manufacturing facilities of the company has been graded ISO 9001:2008 , ISO 14001:2004 and BS OHSAS 18001:2007. Company has an integrated cement plant at Nalgonda, Telangana. Company has access to high quality limestone reserves and an established sales network in Andhra Pradesh, Telangana and Odisha.

Company has 16 MW captive power plant and majority of the units generated are consumed by the company for own use. 

Number of Employees on the roll of company was 287 as per the annual report.

Main Business Activities : 

• High Quality Premium Cement ( OPC 53 Grade, OPC 43 Grade, PPC, RHPC Etc.)

Financials of the Company : 

• Profit After Tax (PAT) for the year ended on 31st March,2019 has been reported  at Rs 23 Crore and turnover at Rs 437 Crore.
• As per the numbers as on 31st March,2019 the company has generated Return on Equity of approx. 10% , Return on Capital Employed of 15% and Return on Assets of 9%
• The company is a regular dividend paying company and has paid dividend for past 3 consecutive years.
• Company is Debt-free as on 31st March,2019
• Company has high Operating profit margins in range of 16-26% since past 5 years

Investment Rationale : Why to Invest in this Stock ??

• Shareholding of the promoters in the company is 75% as on 30th June,2019 which strongly indicates interest of promoters in growth of the company. Pledge of shares by the promoter is Zero.
• Market Cap to Sales Ratio : 0.77  is attractive for an cement company company and also provides a great margin of safety on investing at current rates
• Technically on chart the stock appears to be near support levels and in formation of bottom which is going on since past 1-2 months
• At current price of 140 Rs per share and EPS of 13 Rs on trailing basis , the stock is presently trading at an attractive P/E ratio of 11
• At a forward reasonable P/E of 20 and EPS of 15.00, the stock price may go to Rs 300 and higher levels in future

Disclaimer Note: The above is not a research report but information as available on public domain and it should not be treated as a research report. Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations.

Disclosure: It is safe to assume that I might have Anjani Portland Cement Limited  in my portfolio and hence my point of view can be biased. Readers should perform own due diligence before investing. We do not assume any responsibility or liability resulting from the use of information , judgments and opinions for Trading or Investment purposes on the Blog.

Biases Impacting Equity Investors

Biases Impacting Equity Investors

Introduction :

Fundamental analysis and technical analysis are initial and important aspects of investing in shares. However, they are not the only driving factors. Psychology of individual investor is also equally important in undertaking investment decisions. In fact overall Success or failure of an investor will have a major component of perception and psychology with which he/she approaches the markets involved. A bias is a faulty way of thinking that we have grown accustomed to. Bias is a disproportionate weight in favor of or against an idea or a thing, usually in a way that is closed-minded and normally leads to loss in investing environment. We will share with you a few biases which investors suffer from and have adverse impact on their overall investing performance :

(We have to view all the information just the way it is (without any form of distortion). In this image number appears 6 from one angle and 9 from another angle.However, the context in which the number has been written is very important to understand before deciding whether it is 6 or 9)

• Confirmation Bias : Confirmation bias is the tendency of people to pay close attention to information that confirms their beliefs and ignore information that contradicts it. Confirmation Bias tends to limit our ability to make rational investment decisions. Have you noticed that you put more weight into the opinion of those who agree with you ? Investors do this too. How often have you analyzed a stock and later looked for research reports supporting your thesis ? We all have done this. Solution from this type of bias is that if we come across contradicting information which does not support our investment thesis then instead of directly rejecting it, we can look at facts/information on the basis of which such opinion is generated. If the contradicting information makes sense then it is possible to get out of a bad investment at a small loss or avoid it altogether

• Recency Bias : Recency bias is tendency to overvalue the most recent information available to us, because that information is fresh in our minds. If we recently heard about a company doing really well or having trouble, we may over rate that information and ignore everything that happened before. Solution from  this type of bias is to not ignore the past information and assign equal weight to both old and new information for decision-making in investing

• Loss Aversion Bias : Loss aversion is a tendency where investors are so fearful of losses that they focus on trying to avoid loss than on making gains.Research on loss aversion shows that investors feel the pain of a loss more than twice as strongly as they feel the pleasure of making a profit. Many investors don't acknowledge a loss as being such until it is "realized". Therefore, to avoid experiencing the pain of a real loss , they will continue to hold onto a investment even as their losses from it increase. Negative effect of this is that investors often continue to hold onto investments much longer than they should and end up suffering much bigger losses than necessary. Solution from this type of bias is to have a stop-loss in place for investments are well as for trading

• Availability Bias : While researching a company, investors tend to focus on data and information which is easily available to them. This is called Availability Bias. Instead of looking for important piece of information which may not be easily available, investors having this type of bias formulate their investment thesis on the basis of information which is easily available but may not be actually relevant from decision-making standpoint. Solution from this type of bias is to identify list of important information at the beginning of research and then start looking for the same

Technical Analysis : Trend Following for Investment as well as Trading

Technical Analysis : Trend Following for Investment as well as Trading 

Technical Analysis : 

Technical analysis assumes that all information studied by fundamental analysis is already reflected in the PRICE of given stock. It is a method employed to evaluate stocks by analyzing statistical trends gathered from trading activity, such as price and volume.

• In technical analysis historical data of stock is used to understand pattern of price movement and to evaluate stocks strength or weakness on the basis of the same.

• Technical Analysis has 3 major assumptions :

1. Price moves in Trend
2. Patterns tend to repeat 
3. Everything is factored in the PRICE

• Technical analysis is of great assistance for timing the entry and exit in investment or trading decisions.

Trend Following : What is that ?

There are forces of nature which function with their own characteristics. Eg. Gravity. It is an invisible force which ensures that everything stays down on earth. Anything thrown up in the air simply falls down due to gravitational force. Similarly in investing and trading price trend is an important force. Surprisingly price trend is the cause as well as the effect impacting prices.

Movement becomes effortless or with least resistance when one goes in the direction and in sync with various forces at play. Stock prices move in trends. Trends can be majorly of 2 types : Uptrend and Downtrend. Sometimes when market is not trending it can be said to be flat.

It makes sense to follow something that works. That is why Trend Following !

           HH=Higher High                                                        LH=Lower High
           HL=Higher Low                                                         LL=Lower Low   

Trends can form on all time-frames namely Hourly , Daily , Weekly, Monthly. From an investor perspective it is important to analyse and study trends on higher time-frames like weekly and monthly charts. From a traders perspective as the horizon is smaller it will make sense to study hourly or daily time-frame charts. Price trends on higher time-frames have more impact on the stock prices in the long-run.

Uptrend :

In uptrend stock price tends to make a series of Higher High(HH) and Higher Lows(HL).

All the Lows are higher than the previous Lows indicating that there is constant demand at declines which eventually leads to higher prices in future.

As the natural momentum is upward the stock price which is in uptrend moves effortlessly on the higher side.  Investors must invest only in those companies which are in uptrend on higher time-frames of weekly and monthly charts.

Downtrend :

In downtrend stock price tends to make a series of Lower High(LH) and Lower Lows(LL).

All the Highs are lower than the previous Highs indicating that there is constant supply at upsurge which eventually leads to lower prices in future.

As the natural momentum is downward the stock price which is in downtrend moves effortlessly on the lower side.Investors must always avoid investing in those companies which are in downtrend on higher time-frames of weekly and monthly charts.

Trend is your friend until it bends !

Charts for stocks are available free for study on -> (Trading View)

Diversification : Don't Put all your Eggs in One Basket !

Diversification : Don't Put all your Eggs in One Basket !

"Don't put all eggs in one basket" is very well-known quote in the investing community. Objective of the statement is to distribute the risk so that failure of any single investment does not have material impact on overall return of the investor. Technical term for distributing risk is called "Diversification".

Diversification can be done across asset-class like equity, debt, commodity, real estate etc. If you invest in assets that do not move in the same direction at same time and same pace then one can get benefits of diversification. Eg. In 2008 when the stock markets crashed big time, equity portfolios delivered high percentage of negative returns but at the same time debt(bonds) delivered positive returns which mitigated negative return to a certain extent for an investor who held equity and debt both in his portfolio at the same time. In this post we will deal majorly with diversification in respect to equity.

Diversification from Equity Perspective :

Why is there a need for Diversification ? Investment in shares is done after performing the necessary analysis. Analysis may be either technical analysis or fundamental analysis. How much ever detailed analysis is done it is never possible to determine and understand each and every variable out there in the universe impacting share prices. There is always a possibility of analysis turning out to be wrong due to change in known variables, or unknown variables may have adverse impact on the share prices and thus create risk of loss for investor. To reduce the impact of such risk, diversification is done.

Investment in shares provide opportunity for higher growth in long term. However the return from investment in shares is very volatile in nature due to drastic fluctuations in the share prices.

Important Points in respect of Diversification : 

• What type of shares to chose in portfolio of stocks for diversification will depend upon the risk appetite of the investor (Aggressive/Moderate/Conservative). However, stocks from same sector can be avoided in single portfolio from diversification perspective

• As per our understanding not more than 10% of equity portfolio must be invested in a single stock. Maximum of 15 stocks may be held in any equity portfolio. Holding very few stocks will increase the risk whereas holding stocks in excess of 15 is likely to dilute the returns along with the risk

• Warren buffet once said that "Wide(Over) diversification is only required when investors do not understand what they are doing". Wide (Over)- Diversification is time consuming, inefficient and also leads to increase in transaction costs of investor, reducing the returns

• Total Risk in Investment = Systematic Risk + Unsystematic Risk

• Systematic risk is the risk which can impact adversely the entire stock market or financial system as a whole. Eg. Political Instability, Natural Disasters, Change in Tax laws, Economic crashes, Recession Etc. It is difficult to manage or mitigate systematic risk due to it's inherent nature

• Unsystematic Risk is the risk which can impact adversely shares of a specific company or a specific sector. Eg. Change in regulations impacting one industry, Financial Fraud in a company, strike by employees of an airline company etc. Unsystematic risk can be mitigated to an extent with the help of diversification

• Diversification is very important tool available to all the investors which helps them survive in the financial markets and maintain a balanced growth in the long term

Important Parameters for Stock Selection in Investing - FINAL Summary

Important Parameters for Stock Selection in Investing - FINAL Summary :

Preparing a tasty dish requires a perfect combination of ingredients for a good outcome. Similarly for identifying a multi-bagger stock or a stock with good upside potential requires a perfect combination of ingredients which will substantially increase probability of stock turning out to be a good one. Below stated are few major ingredients which will help any investor in identifying and understanding whether the stock has good investment potential or not. Detailed analysis has been done for each point and it is prepared in a very user-friendly language so that even a common man can understand the same. If an investor understands and follows below stated points in his due diligence then chances of failure in investment will be reduced. Further diversification and risk management will also help investor reduce risk to the portfolio even if somehow a bad stock has been selected in the process of evaluation. In future we are going to publish more articles on diversification and risk management. Summary of Important parameters in stock selection process are as below. CLICK HERE has been provided for detailed view of each point

1. Sector/Business -> CLICK HERE

2. Promoters -> CLICK HERE

3. Returns -> CLICK HERE

4. Valuation -> CLICK HERE

5. Expansion of Activity -> CLICK HERE

6. Operating Profit Margins -> CLICK HERE

7. Debt/Borrowing -> CLICK HERE