Value Investing :What it is and why you should do it ?

"Price is what you pay. Value is what you get." -  Warren Buffett

Investing is very dicey topic especially in today's world when lots of information keeps flowing around; be it online, on television , newspaper, or any other media source. Primary objective of investing is capital creation and thereby increase income generating assets. Stock market/Equities come to our mind when we think about investing in risky asset. Stock market has fascinated everyone, but not everyone has been able to make money out of it.

Two things can be done in Stock Market : Trading or Investing

Time and again it has always been proved that it is the investor who makes money and not the traders in the long-term.The logic is very simple, to be successful in trading your decisions are bound to be correct day in & day out or more frequently which is highly unlikely as the market is not structured in such a manner. The odds are stacked in the favour of market and not in favour of trader. Investing on other hand has a greater probability of yielding success as the number of decisions to be taken are less frequent in nature.

What is VALUE INVESTING ?

"Value Investing is the strategy of selecting stocks that trade for less than their intrinsic values" as defined by Investopedia. 

In simple terms if we understand value investing, it is paying less than fair value for a stock. The concept was introduced by Benjamin Graham, also known as the father of value investing. It involves actively searching stocks of companies that are believed to be undervalued or available at discounted rate on the basis of various simple parameters like Book value (Net worth) , P/E Ratio , discounting of future expected cash flow,  market cap to sales , cash by market cap etc.

The difference between discounted value and fair value can be called "Margin of Safety". It protects investor from errors involved in judgment of fair value, provides high-return opportunities and minimizes the downside risk of an investment. Value investing can provide good profits once the market inevitably re-evaluates the stock and raises its price to fair value over a period of time.

Determination of VALUE is an important aspect of stock selection.Financial parameters like return on equity, return on assets , operating profit margin , debt to equity ratio , promoters holding etc help in determining whether underlying stock has some value or not. Qualitative characteristics like  Business model, history of promoters, sector performance etc also help in determining whether there is value in the stock of the company.

Why you should do it ?

Value investing is a timeless principle and has proven to be very successful over a period of last 8-9 decades. Warren Buffett, World's No 1 successful equity investor firmly follows the principle and owes his wealth to the same. The benefits definitely out weigh the negatives of the strategy as the nature of strategy is "Defensive". It's better to take a calculated risk with value investing rather than blind risk while investing in capital markets.

Good Day !! :)

Hinduja Global Solutions : A Multi-Bagger Stock

                    HINDUJA GLOBAL SOLUTIONS LTD : A Multi-Bagger Stock

CMP : 520-530

BSE CODE :532859

Market Cap : 1082 Crores

       LISTED ON : NSE AND BSE

TARGET : 975/1060

TIME-FRAME : 12-16 Months

History of the Company :

HGS is a leader in optimizing the customer experience and helping clients to become more competitive. HGS provides a full suite of business process management (BPM) services from traditional voice contact center services and transformational DigiCX services that are unifying customer engagement to platform-based, back-office services and digital marketing solutions. By applying analytics, automation, and interaction expertise to deliver innovation and thought leadership, HGS increases revenue, improves operating efficiency, and helps retain valuable customers. HGS expertise spans the telecommunications and media, healthcare, insurance, banking, consumer electronics and technology, retail, and consumer packaged goods industries, as well as the public sector.

HGS operates on a global landscape with around 44,200 employees in 68 worldwide locations delivering localized solutions. For the year ended 31st March 2017 HGS had revenues of US$ 555 million. HGS, part of the multi-billion dollar Hinduja Group, has more than four decades of experience working with some of the world’s most recognized brands.

Products:

Hinduja Global Solution Ltd's services are used at present in following :

• Automotive
• BFSI
• Consumer Electronics and Technology
• Consumer Packaged Goods
• Health Care
• Public Sector
• Retail
• Telecom
• Travel and Hospitality

Financials of the Company : (Consolidated)

• Profit After Tax (PAT) for the year ended on 31st March,2017 has been reported  at Rs 42.71 Crore and turnover at 940 Crore.
• As per the numbers as on 31st March,2017 the company has generated Return on Equity of approx. 9% , Return on Capital Employed of 11% and Return on Assets of 9%
• The company is a regular dividend paying company and has paid dividend for past 10 consecutive years.
• Debt to Equity ratio is below 1 and is reasonable in nature
• Dividend yield offered by the company at present rate is approx. 3%

Investment Rationale : Why to Invest in this Stock ??

• Shareholding of the promoters in the company is 67.54% as on 30th June,2017 which strongly indicates interest of promoters in growth of the company.
• Cashflow positive for past 3 financial years
• Book value of the stock stands at 654 Rs per share. At current share price it is trading at almost 20% discount to the book value.
• With the Indian economy poised for growth and increased emphasize on digitization of various business functions the company is going to gain immensely out of the same.
• Market Cap to Sales Ratio : 0.29 ( Considering March 2017 sales and current market cap) is very attractive
• At current price of 525 Rs per share and EPS of 86 Rs , the stock is presently trading at an attractive P/E ratio of 6.
• At a forward reasonable P/E of 10-12 and EPS of 100.00, we expect the stock price to soar higher atleast to 1000 and higher levels in coming time.

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 Hinduja Global Solution Ltd  in my portfolio and hence my point of view can be biased. Readers should peform own due diligence before investing. We do not assume any responsibility or liability resulting from the use of information , judgements and opinions for Trading or Investment purposes on the Blog.

Good Luck India Ltd : A Multi-Bagger Stock

                                 Goodluck India Ltd : A Multi-Bagger Stock

CMP : 88-90

BSE CODE :530655

Market Cap : 192 Crores

       LISTED ON : NSE AND BSE

TARGET : 225/250

TIME-FRAME : 12-16 Months

History of the Company :

Established in the year 1986, Good Luck India Limited is an ISO 9001 certified organization, engaged in manufacturing and exporting of a wide range of galvanized sheets & coils, towers, hollow sections, CR coils CRCA and pipes & tubes. We also specialize in providing Telecommunication Structures, ERW Steel Tubes, ERW Steel Pipes, and Galvanized Black Steel Tubes. These are acclaimed for high tensile strength, long service life and higher efficiency.

Products:

GoodLuck India Ltd's Product Range includes the following :

• Galvanized Pipes
• Square & Rectangular Pipes
• CDW Tubes
• CR Coils & Sheets
• Forgings
• Fabricated Steel Structure
• Transmission & Telecom Towers

Clients:

Company’s clients are spread over several industries and includes large clients like –POWERGRID, ABB, BSES, Reliance group, Tata group,NTPC, BHEL,EIL,BMW, Audi, Mahindra group to name a few.

Financials of the Company :

• Profit After Tax (PAT) for the year ended on 31st March,2017 has been reported  at Rs 21.96 Crore and turnover at 1185 Crore.
• As per the numbers as on 31st March,2017 the company has generated Return on Equity of approx. 17%.
• At present an EPS (Earning per share) of 10 Rs, the share is currently trading just at a P/E ratio of 9.
• The company is a regular dividend paying company and has paid dividend for past 10 consecutive years.

Investment Rationale : Why to Invest in this Stock ??

• Shareholding of the promoters in the company is 60.46% as on 31st March,2017 which strongly indicates interest of promoters in growth of the company.
• Cashflow positive for past 3 financial years
• With the Indian economy poised for growth and increased recognition at global platform the demand for company's product is bound to increase.
• Market Cap to Sales Ratio : 0.16 ( Considering March 2017 sales and current market cap) is very attractive
• At current price of 90 Rs per share and EPS of 10 Rs , the stock is presently trading at an attractive P/E ratio of 9.
• At a forward reasonable P/E of 15 and EPS of 15.00, we expect the stock price to soar higher atleast to 225 and higher levels in coming time.

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 Goodluck India Ltd  in my portfolio and hence my point of view can be biased. Readers should peform own due diligence before investing. We do not assume any responsibility or liability resulting from the use of information , judgements and opinions for Trading or Investment purposes on the Blog.

Swasti Vinayaka Art & Heritage Corporation Ltd : A HIDDEN GEM

       Swasti Vinayaka Art & Heritage Corporation Ltd : A HIDDEN GEM

CMP : 4.14

BSE CODE :512257

Market Cap : 16 Crores

       LISTED ON : BSE

TARGET : 10/12/16

TIME-FRAME : 12-16 Months

History of the Company :

Swasti Vinayaka Art & Heritage Corporation Ltd was incorporated way back in 1985. It considers itself custodian of Indian art and craft heritage and aims to preserve , nurture and revive priceless historical traditions , via rare pieces of aesthetic beauty that are individual and exclusive.

The company deals in couture jewellery that transverses the territory of mere ornamentation into that of high art. The company also deals in signio paintings that throw the spot light on the distinctive Indian miniature technique, via canvases that tell tales of Hindu epics, as well as Islamic histories and chronicles.

Off late the company has also entered into segments like corporate gifting, gemstone carving, taking part in various art fairs. The company has taken efforts to reach global markets and is also exporting various articles like signio paintings, miniature art , gemstones etc. to countries like UK and USA ; where it is able to built a loyal base of customers gradually.

Financials of the Company :

• Profit After Tax (PAT) for the year ended on 31st March,2017 has been reported  at Rs 2.57 Crore against PAT of Rs 2.09 Rs for March,2016.
• As per the numbers as on 31st March,2017 the company has generated Return on Equity (ROE) of approx. 30%. At an EPS (Earning per share) of 64 paisa the share is currently trading just at a P/E ratio of 6.
• The company is a regular dividend paying company and has paid dividend for past 10 consecutive years.
• Current year the company has declared dividend of 20 paisa per share which at current price of 4 Rs per share generates a dividend yield of approx. 5.00% which is tax free and very attractive in nature.

Investment Rationale : Why to Invest in this Stock ??

• Shareholding of the promoters in the company is 51.00% as on 31st March,2017 which strongly indicates interest of promoters in growth of the company.
• With the Indian economy poised for growth and increased recognition and awareness of art the management is confident of delivering better results in the future.
• It is the only listed player in the segment. The company has gained experience in the sector and will be able to leverage the same in future to generate super profits from the sector that is in growing stage in our country.
• Debt to equity ratio has gradually come under control as company has repaid debt in past 3 years.
• The company has dividend yield of 5.00% at current price. The history of company profitability is great and has paid dividend for past 10 years consecutively.
• At current price of 4.14 per share and EPS of 0.64 , the stock is presently trading at an attractive P/E ratio of 6.
• At a forward reasonable P/E of 15 and EPS of 1.00, we expect the stock price to soar higher atleast to 15-16 levels in coming time.

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 Swasti Vinayaka Art & heritage Corp  in my portfolio and hence my point of view can be biased. Readers should peform own due diligence before investing. We do not assume any responsibility or liability resulting from the use of information , judgements and opinions for Trading or Investment purposes on the Blog.

How to save your Portfolio from a Stock Market Crash ? Is it possible ?

Stock Market crash and how to save your portfolio

Stock market crash is the only major fear that is faced by investors in equities. Stock market crash when happens, results in erosion of wealth of investors to the tune of billions. Equities is one of the asset class which provides a superior return in the long-run when compared to other well-known asset class. The exponential growth potential that equities provide is not available in any other asset class. 

How beneficial it would be if one could take benefit of investing in equities along with safeguarding portfolio against a crash ?? Is it possible ??

The answer to above question is YES. Just like we have insurance for our home, life, car etc. similarly it is possible to have insurance for our portfolio. The technical term used in financial markets for insurance is called "Hedging". Hedge means a fence or boundary formed by closely growing bushes or shrubs for protection from any external threat. There are many methods and instruments available for purpose of hedging. 

Mutual Fund managers/ HNI investors / FIIs whose portfolios run into tens of thousands of crores use hedging strategies to reduce the risk of portfolio to a great extent and are protected from a stock market crash majority of the time. 

The most effective and cost efficient mode of hedging is purchase of PUT OPTIONS in our opinion.

There are two types of options : Call option and Put option.

A put option is an option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time. This is the opposite of a call option, which gives the holder the right to buy shares.

Example of using Put option : 

Suppose you own a portfolio of stocks worth Rs 100. You purchase put options in index (Nifty) of Rs 2 to protect your portfolio from crash. In case a crash happens and your portfolio and or index both experiences a decline of 40%. The new portfolio value will be Rs 60 from Rs 100. However the value of put option in index will have increased from Rs 2 to somewhere around 30 or may be more. So the overall value still remains Rs 90 ( Rs 60 of portfolio + 30 Rs of Put option).

Incase you had not purchased Put Option , your portfolio had declined to Rs 60 from Rs 100 as per the above example. 40-50% loss is substantial and can gravely affect achievement of long-term goals of growth. In scenario that the market crash does not happen by the time of expiry of put option, the Rs 2 invested in put option becomes worthless. However the same is more or less compensated by increase in the value of portfolio incase the market had soared higher instead of crashing.

Purchasing appropriate Put Option is a WIN-WIN Situation for equity investors because it gives protection against sudden unprecedented stock market crash. It is like an insurance premium. If the stock market crashes the protection is available, if it does not the premium is gone.

Conservation is pre-condition to growth. If you can conserve your portfolio and protect it from crash, the growth will be great in the long-term and there will be no disasters. 

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Note: Put option is a derivative instrument. Options are of different strike prices and different expiry and may have different outcomes. You can contact us or your financial advisor before purchasing put option and have a practical understanding of the same.