Dear Subscribers,
We had earlier suggested a stop loss at Rs 15.79, but we would now like you to update it to Rs 16.57.
-Team MPS
-Team MPS
Monday, August 31, 2009
Sunday, August 30, 2009
Instant Profit Stock Reco : Ram Kaashyap Investment Ltd (BSE Code : 511652)
Buy Ram Kaashyap Investment Ltd (BSE Code : 511652) around Rs 16.63 - 17.46; SL @15.79; TGT#1 Rs 20.20, TGT#2 Rs 22.2
Previous day data:-
CMP = 16.63 (+0.79) +4.99% on 28 Aug 2009
Volume = 2,04,800
Prev Close = 15.84
Day's H/L (Rs) = 16.63 - 16.63
52wk H/L (Rs) = 16.63 - 9.28
Mkt Cap (Rs Cr) = 9.62
Latest News:-
Aug 22nd - Ram Kaashyap Investment Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on August 28, 2009, inter alia, to consider and decide the following subjects:
Volume = 2,04,800
Prev Close = 15.84
Day's H/L (Rs) = 16.63 - 16.63
52wk H/L (Rs) = 16.63 - 9.28
Mkt Cap (Rs Cr) = 9.62
Latest News:-
Aug 22nd - Ram Kaashyap Investment Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on August 28, 2009, inter alia, to consider and decide the following subjects:
- Draft notice calling AGM, the date, time and venue to convene the AGM of the Company.
- Raising of funds through various resources i.e. preferential allotment of equity shares, warrant, rights issue, GDR / ADR / FCCB / QIP etc.,
- The proposal of change of name of the Company.
Saturday, August 29, 2009
Small Caps at an advantage over large caps
Very recently I read an article about small cap stocks are doing far better than large caps. According to the data available in the past one month, the BSE Mid-Cap Index, which consists 221 actively-traded second-rung stocks, climbed 6.5% while the 464-stock Small-Cap Index shot up 12.4%. The BSE 30-share Sensex was up 2.6% during the period. This data is not just true for 1 month. If one is able to pick a good small cap or large cap company at reasonable valuations, then over a longer period of time, his portfolio is bound to give a higher return than the one consisting of only large caps.
In fact, according to Ibbotson Associates, a firm that tracks long term data (of companies listed in USA), small caps have increased in value by an average of more than 12% per year between 1927 and 2007. Meanwhile, large caps have increased just over 10% during that same time period. A differece of 2% per year compounded annually can make a huge difference to the end value of his portfolio.
Well, this performance advantage is no coincidence. In fact, small caps have several advantages that large caps simply can't match. They being :
Temporary Valuation Disconnect
Small caps may outperform larger companies over time, but the operative words here are "over time". That's because smaller companies, primarily because of their lack of visibility within the investment community, often experience a disconnect between their stock prices and their fundamentals. This discrepancy between price and fundamentals presents a tremendous opportunity that small cap investors can take advantage of.
Thin Market
Small caps tend to be thinly traded and, while this is a characteristic that can slice both ways, it often presents a huge opportunity for shrewd investors. As the company grows its revenues and earnings over time and the public becomes more aware of its existence and future growth prospects, demand for the stock inevitably perks up. And when a large number of investors start to clamor over a very limited amount of stock, this gives small cap stocks the potential to rise quite rapidly.
Lack of Analyst Coverage
We all have observed, that how various analysts keep track of earnings of large cap companies. They keep making estimate about future earnings of big companies(although they mostly fail), but no one cares about small cap companies and their earnings potential. The analysts start tracking such companies only when they have already grown by 40-50 times. Thus, if one jumps in early into a small cap company at its nascent stage, a lot of money can be made.
Institutional ownership
You must have often observed in our reports, that most of the stocks recommended by us, do not have any holding of major financial institutions or mutual funds. Well this scenario proves to be quite beneficial, as it can present a huge opportunity particularly for investors who get in early. Later on when major financial institutions start investing, then there happens P/E expansion for such companies, thereby giving good returns.
Adaptability
Eric Schmidt, who headed up Novell (Nadsaq:NOVL) and later moved on to Google (Nasdaq:GOOG), once said in a conference call that big companies were like aircraft carriers or cruise ships, "they take a long time to change direction."
In many ways, this is a perfect analogy. In fact, it can take years for a larger company to bring a new product to market because of the committees that need to review its practicality (before its introduction), the legal vetting it must receive and the work that goes into its marketing and promotion. Also the impact of a new product on overall earnings of the company, may not be that substantial. Small companies, on the other hand, have less bureaucracy and a genuine need to push products to market just to survive.
Thus there are numerous factors, which make small cap compnies, a suitable investment option, if researched properly.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
In fact, according to Ibbotson Associates, a firm that tracks long term data (of companies listed in USA), small caps have increased in value by an average of more than 12% per year between 1927 and 2007. Meanwhile, large caps have increased just over 10% during that same time period. A differece of 2% per year compounded annually can make a huge difference to the end value of his portfolio.
Well, this performance advantage is no coincidence. In fact, small caps have several advantages that large caps simply can't match. They being :
Temporary Valuation Disconnect
Small caps may outperform larger companies over time, but the operative words here are "over time". That's because smaller companies, primarily because of their lack of visibility within the investment community, often experience a disconnect between their stock prices and their fundamentals. This discrepancy between price and fundamentals presents a tremendous opportunity that small cap investors can take advantage of.
Thin Market
Small caps tend to be thinly traded and, while this is a characteristic that can slice both ways, it often presents a huge opportunity for shrewd investors. As the company grows its revenues and earnings over time and the public becomes more aware of its existence and future growth prospects, demand for the stock inevitably perks up. And when a large number of investors start to clamor over a very limited amount of stock, this gives small cap stocks the potential to rise quite rapidly.
Lack of Analyst Coverage
We all have observed, that how various analysts keep track of earnings of large cap companies. They keep making estimate about future earnings of big companies(although they mostly fail), but no one cares about small cap companies and their earnings potential. The analysts start tracking such companies only when they have already grown by 40-50 times. Thus, if one jumps in early into a small cap company at its nascent stage, a lot of money can be made.
Institutional ownership
You must have often observed in our reports, that most of the stocks recommended by us, do not have any holding of major financial institutions or mutual funds. Well this scenario proves to be quite beneficial, as it can present a huge opportunity particularly for investors who get in early. Later on when major financial institutions start investing, then there happens P/E expansion for such companies, thereby giving good returns.
Adaptability
Eric Schmidt, who headed up Novell (Nadsaq:NOVL) and later moved on to Google (Nasdaq:GOOG), once said in a conference call that big companies were like aircraft carriers or cruise ships, "they take a long time to change direction."
In many ways, this is a perfect analogy. In fact, it can take years for a larger company to bring a new product to market because of the committees that need to review its practicality (before its introduction), the legal vetting it must receive and the work that goes into its marketing and promotion. Also the impact of a new product on overall earnings of the company, may not be that substantial. Small companies, on the other hand, have less bureaucracy and a genuine need to push products to market just to survive.
Thus there are numerous factors, which make small cap compnies, a suitable investment option, if researched properly.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Friday, August 28, 2009
Could you please provide your views on Tata Steel and Western Shipyard- Tripti Agarwal, Bangalore
Tata Steel
Tata group as a whole was one of the most aggressive groups in terms of acquisitions of companies. Be it Corus, Jaguar and land rover, all these acquisitions came at a very high cost. Corus saw many of its plants being shut down on account of slowdown, with Europe being very highly affected.
In the steel sector, I feel there are other companies, one of them being Bhushan steel which has performed exceptionally well, and i say this because in its results there is no effect of slowdow. The company has embarked on a huge expansion plan, and is definitely going to reap benefits. Even the valuations are cheap.
Personally speaking, I feel Bhushan is going to be a better bet than Tata steel in the years ahead, if one is looking at it from long term perspective. I have been suggesting this counter since the time it was quoting at Rs 450. The current market price stands at Rs 1075, so one should not put in much money at this level, or if you want to invest in it, then keep your investment period of atleast 2 years, with further buying at dips.
Western Shipyard
In the steel sector, I feel there are other companies, one of them being Bhushan steel which has performed exceptionally well, and i say this because in its results there is no effect of slowdow. The company has embarked on a huge expansion plan, and is definitely going to reap benefits. Even the valuations are cheap.
Personally speaking, I feel Bhushan is going to be a better bet than Tata steel in the years ahead, if one is looking at it from long term perspective. I have been suggesting this counter since the time it was quoting at Rs 450. The current market price stands at Rs 1075, so one should not put in much money at this level, or if you want to invest in it, then keep your investment period of atleast 2 years, with further buying at dips.
Western Shipyard
This company has been under woods since long. Its into ship and rig repairing. The company has gargantuan loans on its balance sheet. This year it registered an increase in revenue. It has entered into an agreement with ABG shipyard for restructuring of the company. This means it will get technical advice from it, also some financial help, as it is in dire need of it.
The company is not out of woods yet and it may take quite a while before it actually start registering good profits. For that, it will have to bring down the debt part, which would mean issue of equity shares. It is in a kind of vicious circle. The signs of recovery are still not very much evident. My suggestion is to plz wait for a while, as I still don't see a complete turnaround in this case.
The company is not out of woods yet and it may take quite a while before it actually start registering good profits. For that, it will have to bring down the debt part, which would mean issue of equity shares. It is in a kind of vicious circle. The signs of recovery are still not very much evident. My suggestion is to plz wait for a while, as I still don't see a complete turnaround in this case.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Thursday, August 27, 2009
Value Investing- A concept often ignored
Yesterday we released our first value pick under the "Penny stock package". Actually the stock suggested is more than a value recommendation, as it has many growth drivers attached to it as well. I thought the time is ripe for me to discuss on what actually the value investing means.
Value Investing
The strategy of selecting stocks that trade for less than their intrinsic values. Value investors actively seek stocks of companies that they believe the market has undervalued. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with the company's long-term fundamentals. The result is an opportunity for value investors to profit by buying when the price is deflated.
Typically, value investors select stocks with lower-than-average price-to-book or price-to-earnings ratios and/or high dividend yields.
The underlying premise is the belief that the market overreacts to rumors, news and events. It is believed that the resultant stock price movement is not in sync with the company's long-term fundamentals. So, value investors can pick these beaten and overlooked stocks and profit when its price reaches its true value.
Intrinsic value
The actual value of a security , as opposed to its market price or book value can be called its intrinsic value. The intrinsic value takes into account other factors like growth potential, brand image and so on. Some value investors rely on fundamental analysis that takes into account both qualitative and quantitative (ratios, financial statement analysis etc) aspects of the business.
Benjamin Graham and Warren Buffett's thoughts on value investing
High profile proponents of value investing, including Berkshire Hathaway chairman Warren Buffett, have argued that the essence of value investing is buying stocks at less than their intrinsic value. The discount of the market price to the intrinsic value is what Benjamin Graham called the "margin of safety". The intrinsic value is the discounted value of all future distributions.
However, the future distributions and the appropriate discount rate can only be assumptions. Warren Buffett has taken the value investing concept even further as his thinking has evolved to where for the last 25 years or so his focus has been on "finding an outstanding company at a sensible price" rather than generic companies at a bargain price.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Value Investing
The strategy of selecting stocks that trade for less than their intrinsic values. Value investors actively seek stocks of companies that they believe the market has undervalued. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with the company's long-term fundamentals. The result is an opportunity for value investors to profit by buying when the price is deflated.
Typically, value investors select stocks with lower-than-average price-to-book or price-to-earnings ratios and/or high dividend yields.
The underlying premise is the belief that the market overreacts to rumors, news and events. It is believed that the resultant stock price movement is not in sync with the company's long-term fundamentals. So, value investors can pick these beaten and overlooked stocks and profit when its price reaches its true value.
Intrinsic value
The actual value of a security , as opposed to its market price or book value can be called its intrinsic value. The intrinsic value takes into account other factors like growth potential, brand image and so on. Some value investors rely on fundamental analysis that takes into account both qualitative and quantitative (ratios, financial statement analysis etc) aspects of the business.
Benjamin Graham and Warren Buffett's thoughts on value investing
High profile proponents of value investing, including Berkshire Hathaway chairman Warren Buffett, have argued that the essence of value investing is buying stocks at less than their intrinsic value. The discount of the market price to the intrinsic value is what Benjamin Graham called the "margin of safety". The intrinsic value is the discounted value of all future distributions.
However, the future distributions and the appropriate discount rate can only be assumptions. Warren Buffett has taken the value investing concept even further as his thinking has evolved to where for the last 25 years or so his focus has been on "finding an outstanding company at a sensible price" rather than generic companies at a bargain price.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Tuesday, August 25, 2009
Compact Disc- Do your own due diligence before taking a decision on it
Compact disc is one stock, which keeps attracting naive investors towards it. The management adds all the ingredients in it to serve the investors with the best possible platter, but one should not fall for what's been served. Due diligence should be done to ensure that the information provided is correct to details.
On the first look, the performance and valuations of Compact disc seem to be providing the best investment option. But, that's what the company has been serving us. Now, let's try and look deep into it. The companies which are into animation business, or are into developing software contents, report a higher value of depreciation as there assets like computers or other instruments are some times depreciated at the rate of 60%. While, in the case of Compact disc, they don't provide depreciation at all. There's definitely cooking up of books being done, as they keep making announcements regarding setting up of such and such animation studio or gaming studio, but why is it that they don't charge depreciation.
Now, considering their announcements regarding the outsourcing work in the field of animation that they do. In 2008, they had been making claims that their films like Taj, hustle bustle, 3000 bc will be released by late 2008, but till now, I have not heard of any film that's been released from their own production house or even the work that was outsourced to them. They had made claims that they will be launching their animation film Soccer in Cannes film festival, but that also did not happen. Even now, they have been making all kind of false announcements to lure in people.
Balance sheet and cash flow statements are very important tools for overall analysis of the performance of the company, but most people ignore those, and concentrate on just income statement. Now, if I consider cash flow statement of the company, then an important point that comes to my observation is the fact that, although the company has been reporting large profits, but the cashflow from operations is almost nil.
In future Compact disc will continue making tall claims, but those will be devoid of substance as they have been till now.
On the first look, the performance and valuations of Compact disc seem to be providing the best investment option. But, that's what the company has been serving us. Now, let's try and look deep into it. The companies which are into animation business, or are into developing software contents, report a higher value of depreciation as there assets like computers or other instruments are some times depreciated at the rate of 60%. While, in the case of Compact disc, they don't provide depreciation at all. There's definitely cooking up of books being done, as they keep making announcements regarding setting up of such and such animation studio or gaming studio, but why is it that they don't charge depreciation.
Now, considering their announcements regarding the outsourcing work in the field of animation that they do. In 2008, they had been making claims that their films like Taj, hustle bustle, 3000 bc will be released by late 2008, but till now, I have not heard of any film that's been released from their own production house or even the work that was outsourced to them. They had made claims that they will be launching their animation film Soccer in Cannes film festival, but that also did not happen. Even now, they have been making all kind of false announcements to lure in people.
Balance sheet and cash flow statements are very important tools for overall analysis of the performance of the company, but most people ignore those, and concentrate on just income statement. Now, if I consider cash flow statement of the company, then an important point that comes to my observation is the fact that, although the company has been reporting large profits, but the cashflow from operations is almost nil.
In future Compact disc will continue making tall claims, but those will be devoid of substance as they have been till now.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Monday, August 24, 2009
Tata Elxsi- Reasonable Investment option
India is a growing economy and is fast replicating many of the ideas which are already in full-flow in many other developed countries. Animation, VFX and digital post production services is one such segment which is growing at a rapid pace, and is expected to continue doing that for a while. VFX has come of age and is an emerging trend in the Indian movie production houses today. Earlier VFX was used in Indian movies just for the ‘effect’ sake but now it is becoming an integral part of the story line.
Tata Elxsi is one such company in India, which has a strong presence in this space. The company's operations are broadly broken up into two business segments i.e. Software Development & Services and Systems Integration & Support. Software development and services is the main focus area of the company and contributes to a large extent to the revenues of the company. Now, within the software development business, the company has a division by the name Visual Computing Labs, which provides services in the area of animation and special effects content creation for the advertising, television and motion pictures markets in India and overseas.
While the Company has firmly established itself as one of the leading studioes for Indian customers for the domestic markets, it has not been able to cater to the needs of international market, especially the US, where often the remuneration for the services provided by this division is linked to the commercial success of the project. Now, for the companies to grow in this segment, the booming Indian market provides enough opportunities.
The animation industry is poised to touch more than USD 1.5 billion by 2010, according to an industry forecast by Anderson Consulting. The entertainment portion of the animation, gaming and VFX industry grew by 24 percent over the previous year and is estimated at Rs.13 billion ($260m) in 2007, up from Rs.10.5 billion in 2006, according to a report by the Federation of Indian Chambers of Commerce and Industry of India (Ficci) and PricewaterhouseCoopers (PWC).
So, taking into account both the international market from where the outsourcing for such kind of work has already begun and our very own Indian market, the opportunities for growth shall remain robust for another 5-6 years, with good opportunities for even very small companie to grow, as the competitors are limited on account of scarcity of talent.
Coming back to Tata Elxsi, it has been performing well over the years, although the performance for this year remained flat with a sub 5% increase in overall revenues and profit. But, that is understandable considering the fact that, Indian software industry went through one of the worst patches since its inception. Also, the company has been quite regular in its dividend payments.
Taking into account all the facts such as performance, opportunities, and the dividend at Rs 7.00 declared for 2008-09 (dividend yield 4.2%), it provides a reasonable investment option wherein a handsome growth can be expected.
Tata Elxsi is one such company in India, which has a strong presence in this space. The company's operations are broadly broken up into two business segments i.e. Software Development & Services and Systems Integration & Support. Software development and services is the main focus area of the company and contributes to a large extent to the revenues of the company. Now, within the software development business, the company has a division by the name Visual Computing Labs, which provides services in the area of animation and special effects content creation for the advertising, television and motion pictures markets in India and overseas.
While the Company has firmly established itself as one of the leading studioes for Indian customers for the domestic markets, it has not been able to cater to the needs of international market, especially the US, where often the remuneration for the services provided by this division is linked to the commercial success of the project. Now, for the companies to grow in this segment, the booming Indian market provides enough opportunities.
The animation industry is poised to touch more than USD 1.5 billion by 2010, according to an industry forecast by Anderson Consulting. The entertainment portion of the animation, gaming and VFX industry grew by 24 percent over the previous year and is estimated at Rs.13 billion ($260m) in 2007, up from Rs.10.5 billion in 2006, according to a report by the Federation of Indian Chambers of Commerce and Industry of India (Ficci) and PricewaterhouseCoopers (PWC).
So, taking into account both the international market from where the outsourcing for such kind of work has already begun and our very own Indian market, the opportunities for growth shall remain robust for another 5-6 years, with good opportunities for even very small companie to grow, as the competitors are limited on account of scarcity of talent.
Coming back to Tata Elxsi, it has been performing well over the years, although the performance for this year remained flat with a sub 5% increase in overall revenues and profit. But, that is understandable considering the fact that, Indian software industry went through one of the worst patches since its inception. Also, the company has been quite regular in its dividend payments.
Taking into account all the facts such as performance, opportunities, and the dividend at Rs 7.00 declared for 2008-09 (dividend yield 4.2%), it provides a reasonable investment option wherein a handsome growth can be expected.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Sunday, August 23, 2009
Steve Job’s June 2005 Address to Stanford Students
This post is very long and is all about Steve Job's June address to Stanford students. As I said, the post is long but one would never regret giving in 4-5 minutes to read the lifetime experience of a living legend. His address to Stanford students clearly tells us that it's very important to find what you love, and that is as true for work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work, and the only way to do great work is to love what you do. If you haven’t found it yet, keep looking, and don’t settle.
Here is the complete speech that he gave:
"Thank you. I’m honored to be with you today for your commencement from one of the finest universities in the world. Truth be told, I never graduated from college and this is the closest I’ve ever gotten to a college graduation.
Today I want to tell you three stories from my life. That’s it. No big deal. Just three stories. The first story is about connecting the dots.
Connecting the Dots
I dropped out of Reed College after the first six months but then stayed around as a drop-in for another eighteen months or so before I really quit. So why did I drop out? It started before I was born. My biological mother was a young, unwed graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife, except that when I popped out, they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking, “We’ve got an unexpected baby boy. Do you want him?” They said, “Of course.” My biological mother found out later that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would go to college.
This was the start in my life. And seventeen years later, I did go to college, but I naïvely chose a college that was almost as expensive as Stanford, and all of my working-class parents’ savings were being spent on my college tuition. After six months, I couldn’t see the value in it. I had no idea what I wanted to do with my life, and no idea of how college was going to help me figure it out, and here I was, spending all the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back, it was one of the best decisions I ever made. The minute I dropped out, I could stop taking the required classes that didn’t interest me and begin dropping in on the ones that looked far more interesting.
It wasn’t all romantic. I didn’t have a dorm room, so I slept on the floor in friends’ rooms. I returned Coke bottles for the five-cent deposits to buy food with, and I would walk the seven miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example.
Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer was beautifully hand-calligraphed. Because I had dropped out and didn’t have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and sans-serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can’t capture, and I found it fascinating.
None of this had even a hope of any practical application in my life. But ten years later when we were designing the first Macintosh computer, it all came back to me, and we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts, and since Windows just copied the Mac, it’s likely that no personal computer would have them.
If I had never dropped out, I would have never dropped in on that calligraphy class and personals computers might not have the wonderful typography that they do.
Of course it was impossible to connect the dots looking forward when I was in college, but it was very, very clear looking backwards 10 years later. Again, you can’t connect the dots looking forward. You can only connect them looking backwards, so you have to trust that the dots will somehow connect in your future. You have to trust in something–your gut, destiny, life, karma, whatever–because believing that the dots will connect down the road will give you the confidence to follow your heart, even when it leads you off the well-worn path, and that will make all the difference.
Love and Loss
My second story is about love and loss. I was lucky. I found what I loved to do early in life. Woz and I started Apple in my parents’ garage when I was twenty. We worked hard and in ten years, Apple had grown from just the two of us in a garage into a $2 billion company with over 4,000 employees. We’d just released our finest creation, the Macintosh, a year earlier, and I’d just turned thirty, and then I got fired. How can you get fired from a company you started? Well, as Apple grew, we hired someone who I thought was very talented to run the company with me, and for the first year or so, things went well. But then our visions of the future began to diverge, and eventually we had a falling out. When we did, our board of directors sided with him, and so at thirty, I was out, and very publicly out. What had been the focus of my entire adult life was gone, and it was devastating. I really didn’t know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down, that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure and I even thought about running away from the Valley. But something slowly began to dawn on me. I still loved what I did. The turn of events at Apple had not changed that one bit. I’d been rejected but I was still in love. And so I decided to start over.
I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods in my life. During the next five years I started a company named NeXT, another company named Pixar and fell in love with an amazing woman who would become my wife. Pixar went on to create the world’s first computer-animated feature film, “Toy Story,” and is now the most successful animation studio in the world.
In a remarkable turn of events, Apple bought NeXT and I returned to Apple and the technology we developed at NeXT is at the heart of Apple’s current renaissance, and Lorene and I have a wonderful family together.
I’m pretty sure none of this would have happened if I hadn’t been fired from Apple. It was awful-tasting medicine but I guess the patient needed it. Sometimes life’s going to hit you in the head with a brick. Don’t lose faith. I’m convinced that the only thing that kept me going was that I loved what I did. You’ve got to find what you love, and that is as true for work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work, and the only way to do great work is to love what you do. If you haven’t found it yet, keep looking, and don’t settle. As with all matters of the heart, you’ll know when you find it, and like any great relationship it just gets better and better as the years roll on. So keep looking. Don’t settle.
Death
My third story is about death. When I was 17 I read a quote that went something like “If you live each day as if it was your last, someday you’ll most certainly be right.” It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself, “If today were the last day of my life, would I want to do what I am about to do today?” And whenever the answer has been “no” for too many days in a row, I know I need to change something. Remembering that I’ll be dead soon is the most important thing I’ve ever encountered to help me make the big choices in life, because almost everything–all external expectations, all pride, all fear of embarrassment or failure–these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.
About a year ago, I was diagnosed with cancer. I had a scan at 7:30 in the morning and it clearly showed a tumor on my pancreas. I didn’t even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctors’ code for “prepare to die.” It means to try and tell your kids everything you thought you’d have the next ten years to tell them, in just a few months. It means to make sure that everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes.
I lived with that diagnosis all day. Later that evening I had a biopsy where they stuck an endoscope down my throat, through my stomach into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated but my wife, who was there, told me that when they viewed the cells under a microscope, the doctor started crying, because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and, thankfully, I am fine now.
This was the closest I’ve been to facing death, and I hope it’s the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept. No one wants to die, even people who want to go to Heaven don’t want to die to get there, and yet, death is the destination we all share. No one has ever escaped it. And that is as it should be, because death is very likely the single best invention of life. It’s life’s change agent; it clears out the old to make way for the new. right now, the new is you. But someday, not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it’s quite true. Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma, which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice, heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.
When I was young, there was an amazing publication called The Whole Earth Catalogue, which was one of the bibles of my generation. It was created by a fellow named Stuart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late Sixties, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and Polaroid cameras. It was sort of like Google in paperback form thirty-five years before Google came along. I was idealistic, overflowing with neat tools and great notions. Stuart and his team put out several issues of the The Whole Earth Catalogue, and then when it had run its course, they put out a final issue. It was the mid-Seventies and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath were the words, “Stay hungry, stay foolish.” It was their farewell message as they signed off. “Stay hungry, stay foolish.” And I have always wished that for myself, and now, as you graduate to begin anew, I wish that for you. Stay hungry, stay foolish.
Thank you all, very much.
Team MPS
Here is the complete speech that he gave:
"Thank you. I’m honored to be with you today for your commencement from one of the finest universities in the world. Truth be told, I never graduated from college and this is the closest I’ve ever gotten to a college graduation.
Today I want to tell you three stories from my life. That’s it. No big deal. Just three stories. The first story is about connecting the dots.
Connecting the Dots
I dropped out of Reed College after the first six months but then stayed around as a drop-in for another eighteen months or so before I really quit. So why did I drop out? It started before I was born. My biological mother was a young, unwed graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife, except that when I popped out, they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking, “We’ve got an unexpected baby boy. Do you want him?” They said, “Of course.” My biological mother found out later that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would go to college.
This was the start in my life. And seventeen years later, I did go to college, but I naïvely chose a college that was almost as expensive as Stanford, and all of my working-class parents’ savings were being spent on my college tuition. After six months, I couldn’t see the value in it. I had no idea what I wanted to do with my life, and no idea of how college was going to help me figure it out, and here I was, spending all the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back, it was one of the best decisions I ever made. The minute I dropped out, I could stop taking the required classes that didn’t interest me and begin dropping in on the ones that looked far more interesting.
It wasn’t all romantic. I didn’t have a dorm room, so I slept on the floor in friends’ rooms. I returned Coke bottles for the five-cent deposits to buy food with, and I would walk the seven miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example.
Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer was beautifully hand-calligraphed. Because I had dropped out and didn’t have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and sans-serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can’t capture, and I found it fascinating.
None of this had even a hope of any practical application in my life. But ten years later when we were designing the first Macintosh computer, it all came back to me, and we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts, and since Windows just copied the Mac, it’s likely that no personal computer would have them.
If I had never dropped out, I would have never dropped in on that calligraphy class and personals computers might not have the wonderful typography that they do.
Of course it was impossible to connect the dots looking forward when I was in college, but it was very, very clear looking backwards 10 years later. Again, you can’t connect the dots looking forward. You can only connect them looking backwards, so you have to trust that the dots will somehow connect in your future. You have to trust in something–your gut, destiny, life, karma, whatever–because believing that the dots will connect down the road will give you the confidence to follow your heart, even when it leads you off the well-worn path, and that will make all the difference.
Love and Loss
My second story is about love and loss. I was lucky. I found what I loved to do early in life. Woz and I started Apple in my parents’ garage when I was twenty. We worked hard and in ten years, Apple had grown from just the two of us in a garage into a $2 billion company with over 4,000 employees. We’d just released our finest creation, the Macintosh, a year earlier, and I’d just turned thirty, and then I got fired. How can you get fired from a company you started? Well, as Apple grew, we hired someone who I thought was very talented to run the company with me, and for the first year or so, things went well. But then our visions of the future began to diverge, and eventually we had a falling out. When we did, our board of directors sided with him, and so at thirty, I was out, and very publicly out. What had been the focus of my entire adult life was gone, and it was devastating. I really didn’t know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down, that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure and I even thought about running away from the Valley. But something slowly began to dawn on me. I still loved what I did. The turn of events at Apple had not changed that one bit. I’d been rejected but I was still in love. And so I decided to start over.
I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods in my life. During the next five years I started a company named NeXT, another company named Pixar and fell in love with an amazing woman who would become my wife. Pixar went on to create the world’s first computer-animated feature film, “Toy Story,” and is now the most successful animation studio in the world.
In a remarkable turn of events, Apple bought NeXT and I returned to Apple and the technology we developed at NeXT is at the heart of Apple’s current renaissance, and Lorene and I have a wonderful family together.
I’m pretty sure none of this would have happened if I hadn’t been fired from Apple. It was awful-tasting medicine but I guess the patient needed it. Sometimes life’s going to hit you in the head with a brick. Don’t lose faith. I’m convinced that the only thing that kept me going was that I loved what I did. You’ve got to find what you love, and that is as true for work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work, and the only way to do great work is to love what you do. If you haven’t found it yet, keep looking, and don’t settle. As with all matters of the heart, you’ll know when you find it, and like any great relationship it just gets better and better as the years roll on. So keep looking. Don’t settle.
Death
My third story is about death. When I was 17 I read a quote that went something like “If you live each day as if it was your last, someday you’ll most certainly be right.” It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself, “If today were the last day of my life, would I want to do what I am about to do today?” And whenever the answer has been “no” for too many days in a row, I know I need to change something. Remembering that I’ll be dead soon is the most important thing I’ve ever encountered to help me make the big choices in life, because almost everything–all external expectations, all pride, all fear of embarrassment or failure–these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.
About a year ago, I was diagnosed with cancer. I had a scan at 7:30 in the morning and it clearly showed a tumor on my pancreas. I didn’t even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctors’ code for “prepare to die.” It means to try and tell your kids everything you thought you’d have the next ten years to tell them, in just a few months. It means to make sure that everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes.
I lived with that diagnosis all day. Later that evening I had a biopsy where they stuck an endoscope down my throat, through my stomach into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated but my wife, who was there, told me that when they viewed the cells under a microscope, the doctor started crying, because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and, thankfully, I am fine now.
This was the closest I’ve been to facing death, and I hope it’s the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept. No one wants to die, even people who want to go to Heaven don’t want to die to get there, and yet, death is the destination we all share. No one has ever escaped it. And that is as it should be, because death is very likely the single best invention of life. It’s life’s change agent; it clears out the old to make way for the new. right now, the new is you. But someday, not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it’s quite true. Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma, which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice, heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.
When I was young, there was an amazing publication called The Whole Earth Catalogue, which was one of the bibles of my generation. It was created by a fellow named Stuart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late Sixties, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and Polaroid cameras. It was sort of like Google in paperback form thirty-five years before Google came along. I was idealistic, overflowing with neat tools and great notions. Stuart and his team put out several issues of the The Whole Earth Catalogue, and then when it had run its course, they put out a final issue. It was the mid-Seventies and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath were the words, “Stay hungry, stay foolish.” It was their farewell message as they signed off. “Stay hungry, stay foolish.” And I have always wished that for myself, and now, as you graduate to begin anew, I wish that for you. Stay hungry, stay foolish.
Thank you all, very much.
Team MPS
Friday, August 21, 2009
Ankit Metal & Power- belongs to a well-known group
Ankit Metal and Power Limited is a Kolkatta based company that makes steel billets, re-rolled products and sponge iron. This is a 7 year old company endorsed by Mr. Suresh Patni. The Patni group is well-known in the field of steel products, and has a very large production capacity for ferro alloys. The other companies besides Ankit Metal & Power belonging to the same group are Impex Metal & Ferro Alloys Limited, Impex Ferro Tech Ltd. and Rohit Ferro-Tech Ltd. So, the basic raw material in which the group deals is Ferro alloys, but the product line-up of Ankit Metal is slightly different and includes Sponge iron, M.S. Billets, TMT Bars, Pig iron, Ferro silicon.
The business of such commodities is extremely cyclical in nature, and more or less move in tandem with the economy. These commodities are used in production of steel, a basic raw material for construction activities. For the period starting from 2004 and ending in early 2008, there was an upward trend with demand being very robust. But, by the mid of 2008, the prices had peaked, and with the slowdown across the globe, the demand plummeted, thereby bringing down the prices by more than 50%.
Due to all such factors, the companies operating in commodities business, either incurred loss or a heavy downfall in profits for the FY2008-09. As I keep saying that while investing in cyclical stocks, the most important factor that counts is timing. If you say invest at just the peak, by taking into account the results then it can prove harmful, if the prices start correcting. For me the best time to invest in commodities is when everyone else is ignoring it. Especially from the point of view of India, the demand for steel and other associated products is going to remain robust for another 20 years.
Now, coming back to Ankit metal, it performed well as others till 2008, but for FY2008-09 it could only record Rs 6.4 Cr as net profit on sales of Rs 506 Cr. While the net profit for FY2007-08 stood at Rs 22 Cr on sales of Rs 282 Cr. On a front look the numbers look very disappointing, but one should keep in mind the fact that this kind of performance was witnessed across the board, with many companies reporting huge inventory write-down, so for me the performance is satisfactory. Another positive from the results of FY2008-09 is the fact that company could record such a large growth on sales front.
In one of the announcements made by Mr. Ankit Patni, the Company is planning to expand its operations with a Rs.1,000 crore plus project, which will include pelletisation plant, mini blast furnaces, mild and alloy steel, structural steel and captive power plant, among others. The Company has already taken more than 100 acres of land at its existing plant site at Jorehira in West Bengal. Well, considering the previous expansion plans of the other group companies and the way another group company Rohit Ferro-Tech has expanded its capacity in the recent years, it definitely seems possible for Ankit metal to expand the similar way.
Also, considering the performance for quarter ending Jun'09, the signs of revival have started coming in. My view, for the company is that all those who have invested in it can continue holding it, as there's more to this stock than the current price of Rs 18.
The business of such commodities is extremely cyclical in nature, and more or less move in tandem with the economy. These commodities are used in production of steel, a basic raw material for construction activities. For the period starting from 2004 and ending in early 2008, there was an upward trend with demand being very robust. But, by the mid of 2008, the prices had peaked, and with the slowdown across the globe, the demand plummeted, thereby bringing down the prices by more than 50%.
Due to all such factors, the companies operating in commodities business, either incurred loss or a heavy downfall in profits for the FY2008-09. As I keep saying that while investing in cyclical stocks, the most important factor that counts is timing. If you say invest at just the peak, by taking into account the results then it can prove harmful, if the prices start correcting. For me the best time to invest in commodities is when everyone else is ignoring it. Especially from the point of view of India, the demand for steel and other associated products is going to remain robust for another 20 years.
Now, coming back to Ankit metal, it performed well as others till 2008, but for FY2008-09 it could only record Rs 6.4 Cr as net profit on sales of Rs 506 Cr. While the net profit for FY2007-08 stood at Rs 22 Cr on sales of Rs 282 Cr. On a front look the numbers look very disappointing, but one should keep in mind the fact that this kind of performance was witnessed across the board, with many companies reporting huge inventory write-down, so for me the performance is satisfactory. Another positive from the results of FY2008-09 is the fact that company could record such a large growth on sales front.
In one of the announcements made by Mr. Ankit Patni, the Company is planning to expand its operations with a Rs.1,000 crore plus project, which will include pelletisation plant, mini blast furnaces, mild and alloy steel, structural steel and captive power plant, among others. The Company has already taken more than 100 acres of land at its existing plant site at Jorehira in West Bengal. Well, considering the previous expansion plans of the other group companies and the way another group company Rohit Ferro-Tech has expanded its capacity in the recent years, it definitely seems possible for Ankit metal to expand the similar way.
Also, considering the performance for quarter ending Jun'09, the signs of revival have started coming in. My view, for the company is that all those who have invested in it can continue holding it, as there's more to this stock than the current price of Rs 18.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Thursday, August 20, 2009
A Multi-million dollar dispute
There's a lot of drama unfolding everyday over the multi-million dollar gas dispute that has now taken a completely different turn, with Mr. Anil Ambani going all guns blazing these days. He seems more than determined this time and has now taken the help of print media to bring into light the various anomalies attached with gas allocation and its pricing.
Now, from what the govt. has been posturing and from the media releases, it seems that govt. wants to intervene in the RIL-NTPC gas dispute to broker the settlement. But, if we consider the whole dispute then there are a few important things that come to light. NTPC has taken RIL, the operator of KG basin, to court for not honoring a gas supply contract. In a global competitive bid in 2004, RIL had offered to supply of 12 million standard cubic meter per day (MMSCMD) of gas from its KG-D6 to NTPC’s Kawas and Gandhar projects at $2.34 per million British thermal unit (mmBtu).
Similarly if one looks closely at the dispute b/w RIL and RNRL, then the reason sought by RNRL for taking the issue to court is again that of non-compliance by RIL regarding the MOU. RNRL is in the Supreme Court to get RIL to keep its promise of supplying gas at the same terms as NTPC in line with the Reliance demerger MOU. But, with oil ministry's stand on ownership and pricing of gas in RIL-RNRL case, RIL has got a nod to change its stand in the NTPC case, to say that it will not be able to supply gas at the 2004 bid rate due to the ministry's stand.
Meanwhile Mr. Anil Ambani is strengthening his case against both Oil Ministry and RIL by using ad campaigns to portray NTPC as a victim of the stand taken by the oil ministry, which has been projected as favoring RIL. To me, Oil ministry is in a perfect fix now. Because of its stand on gas pricing, it has got involved in a contradicting situation. At one end, there is state-run NTPC, and at the other end there is RNRL. Since, both NTPC and RNRL have similar issues against RIL, and are asking for gas at the same rate, it remains to be seen as to how the ministry is going to intervene to settle the RIL-NTPC dispute.
It appears to me that RNRL is gaining an edge over RIL and oil ministry in this legal dispute, especially with the ad campaigns that it has been running, and no serious rebuttal from either govt. or RIL. Also, the possibility of oil ministry being able to settle the dispute b/w NTPC and RIL remains bleak. The law stands equally for all, and govt. can't really ask RIL to sell gas at $2.34 per mmBtu to NTPC, but at $4.2 to RNRL and others. It remains to be seen as to what stand Supreme Court takes on the battle b/w RIL-RNRL, and also what kind of justifications are put forward by Oil ministry on the issues raised by RNRL.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Now, from what the govt. has been posturing and from the media releases, it seems that govt. wants to intervene in the RIL-NTPC gas dispute to broker the settlement. But, if we consider the whole dispute then there are a few important things that come to light. NTPC has taken RIL, the operator of KG basin, to court for not honoring a gas supply contract. In a global competitive bid in 2004, RIL had offered to supply of 12 million standard cubic meter per day (MMSCMD) of gas from its KG-D6 to NTPC’s Kawas and Gandhar projects at $2.34 per million British thermal unit (mmBtu).
Similarly if one looks closely at the dispute b/w RIL and RNRL, then the reason sought by RNRL for taking the issue to court is again that of non-compliance by RIL regarding the MOU. RNRL is in the Supreme Court to get RIL to keep its promise of supplying gas at the same terms as NTPC in line with the Reliance demerger MOU. But, with oil ministry's stand on ownership and pricing of gas in RIL-RNRL case, RIL has got a nod to change its stand in the NTPC case, to say that it will not be able to supply gas at the 2004 bid rate due to the ministry's stand.
Meanwhile Mr. Anil Ambani is strengthening his case against both Oil Ministry and RIL by using ad campaigns to portray NTPC as a victim of the stand taken by the oil ministry, which has been projected as favoring RIL. To me, Oil ministry is in a perfect fix now. Because of its stand on gas pricing, it has got involved in a contradicting situation. At one end, there is state-run NTPC, and at the other end there is RNRL. Since, both NTPC and RNRL have similar issues against RIL, and are asking for gas at the same rate, it remains to be seen as to how the ministry is going to intervene to settle the RIL-NTPC dispute.
It appears to me that RNRL is gaining an edge over RIL and oil ministry in this legal dispute, especially with the ad campaigns that it has been running, and no serious rebuttal from either govt. or RIL. Also, the possibility of oil ministry being able to settle the dispute b/w NTPC and RIL remains bleak. The law stands equally for all, and govt. can't really ask RIL to sell gas at $2.34 per mmBtu to NTPC, but at $4.2 to RNRL and others. It remains to be seen as to what stand Supreme Court takes on the battle b/w RIL-RNRL, and also what kind of justifications are put forward by Oil ministry on the issues raised by RNRL.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Wednesday, August 19, 2009
Webel-SL Energy Ltd.- Can outperform others in the solar energy sector
In the last 40 years, global energy consumption increased two-fold when compared with the entire consumption history of civilization up to that period. The vision of moving to a low-carbon society, and together with them to consider and adopt the goal of achieving at least a 50% reduction in global emissions by 2050, has made many companies foray into alternative sources of energy. Some have opted for wind energ, some bio-fuels and some solar energy.
Webel-SL Energy Systems Ltd. ventured into solar energy. If I look at some of the other companies in the same business, then basic business of photovoltaic does not seem to be doing so well, with other companies globally facing a lot of problem with this business over the last 1 year. Even our very own Indian company XL Telecom performed badly during the last year.
Webel-SL is attracting the attention of big foreign investors these days on account of its business of providing alternate form of energy. The company basically provides solar photovoltaic cells and modules. Although there are other companies like Moser Baer, XL Telecom that are into the same business, but the difference b/w them and Webel has been in terms of performance. Webel has been able to maintain a steady growth over the last few years, while others have not done so well on this front.
The company recently raised about Rs 45 Cr through a QIP issue for augmenting the long-term working capital. Well, managing working capital poses a lot of problem for these companies, also investments involved in capacity expansion are very high. So, slowly and steadily the debt burden on these companies increase over a period of time. Interestingly in case of Webel- SL, the debt burden stands at Rs 130 Cr, and the company enjoys a reasonable interest coverage ratio in comparison to its peers.
In the case of companies, that are into manufacturing of solar photovoltaic cells and modules, performance and profitability are the two factors one should look at to sketch the overall prospects of the company. It's important to keep debt under control for such companies because going overboard with expansion plans can certainly dent the performance. In case of Webel, it reported revenues at Rs 146 Cr, i.e. approximately 46% higher than previous year, while the net profit stood at Rs 10.5 Cr.
The current market price of the company stands at Rs 315, while on 13 Mar'09 it was quoting at just Rs 44. The future prospects of the company certainly appear better than its peers, especially with the kind of performance it could record when others were faltering. But, at the current market price, I find it over heated and would suggest to rather keep a firm watch on it for its future growth potential, as it could prove to be one of those out-performers from this sector.
Webel-SL Energy Systems Ltd. ventured into solar energy. If I look at some of the other companies in the same business, then basic business of photovoltaic does not seem to be doing so well, with other companies globally facing a lot of problem with this business over the last 1 year. Even our very own Indian company XL Telecom performed badly during the last year.
Webel-SL is attracting the attention of big foreign investors these days on account of its business of providing alternate form of energy. The company basically provides solar photovoltaic cells and modules. Although there are other companies like Moser Baer, XL Telecom that are into the same business, but the difference b/w them and Webel has been in terms of performance. Webel has been able to maintain a steady growth over the last few years, while others have not done so well on this front.
The company recently raised about Rs 45 Cr through a QIP issue for augmenting the long-term working capital. Well, managing working capital poses a lot of problem for these companies, also investments involved in capacity expansion are very high. So, slowly and steadily the debt burden on these companies increase over a period of time. Interestingly in case of Webel- SL, the debt burden stands at Rs 130 Cr, and the company enjoys a reasonable interest coverage ratio in comparison to its peers.
In the case of companies, that are into manufacturing of solar photovoltaic cells and modules, performance and profitability are the two factors one should look at to sketch the overall prospects of the company. It's important to keep debt under control for such companies because going overboard with expansion plans can certainly dent the performance. In case of Webel, it reported revenues at Rs 146 Cr, i.e. approximately 46% higher than previous year, while the net profit stood at Rs 10.5 Cr.
The current market price of the company stands at Rs 315, while on 13 Mar'09 it was quoting at just Rs 44. The future prospects of the company certainly appear better than its peers, especially with the kind of performance it could record when others were faltering. But, at the current market price, I find it over heated and would suggest to rather keep a firm watch on it for its future growth potential, as it could prove to be one of those out-performers from this sector.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Tuesday, August 18, 2009
Ritesh Properties - Getting into niche fashion stores called Femella Fashion. Let's try and understand the company, and what it has been doing!!!
Lets get down to the numbers directly as they provide enough details in this case to take a call on stock.
My concerns regarding the operations of the company do not end here. On 6th May'09, the company had made an announcement, that it will come out with FY09 results by June 30, 2009. But, surprisingly it has not announced the results till now, and no further update has been provided regarding the delay. The management of the company seems quite bent upon keeping the minority shareholders in dark.
I maintain the view, that the companies which hide the facts should never be trusted no matter how promising the business of the company may appear.
- Its sales dipped from 27.9 Cr for Dec’07 to 4.1 Cr Dec’08. In the notes to accounts they did not mention a word on such drastic drop in sales. Even during the Sep’08 quarter they made sales of just 0.16 Cr with a net loss of 0.6 Cr and in the notes to accounts they mentioned that although they are engaged in real estate business but the sales are from other operations.
- This means that there real estate business is highly fluctuating and also there Fashion stores are currently running into loss, as the only other business that they have mentioned is this. Also if the company is mentioning that the sales are from other operations then it is their duty to keep the minority shareholders informed about the other operations of the company.
- I feel the company should come out with more details in their notes to accounts when they come up with losses or undergo such tremendous change in their results on QOQ and YOY basis. This benefits investors to take a call and since they have been non-vocal about it, so wont be prudent to go after their stock.
- Their Femella Fashion can scale new heights in the years to come but as of now I would want you to avoid this counter as the management can't be trusted.
My concerns regarding the operations of the company do not end here. On 6th May'09, the company had made an announcement, that it will come out with FY09 results by June 30, 2009. But, surprisingly it has not announced the results till now, and no further update has been provided regarding the delay. The management of the company seems quite bent upon keeping the minority shareholders in dark.
I maintain the view, that the companies which hide the facts should never be trusted no matter how promising the business of the company may appear.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Monday, August 17, 2009
Updates on Instant Profit Stock Reco for Aug'09 : Avance Technologies Ltd (BSE Code : 512149)
Dear Subscribers,
As was expected, Avance Technologies again hit an upper circuit with the CMP being Rs 2.34. We had asked you to keep your stoploss at Rs 2.32, instead of booking your profit at Rs 2.34.
Our strategy continues to remain same, as we want you to ride the momentum till it continues. If the stock hits an upper circuit tomorrow, then the stock price will reach Rs 2.45, and again we would not want you to book your profits, but rather update your stoploss to Rs 2.44 (provided it again hits an upper circuit) early on in the day, once the price reaches Rs 2.45
Team MPS
Our strategy continues to remain same, as we want you to ride the momentum till it continues. If the stock hits an upper circuit tomorrow, then the stock price will reach Rs 2.45, and again we would not want you to book your profits, but rather update your stoploss to Rs 2.44 (provided it again hits an upper circuit) early on in the day, once the price reaches Rs 2.45
Team MPS
Warren Buffet - Contd..
In my earlier post I had mentioned that there were many questions asked at the AGM of Berkshire Hathway, and Warren Buffet answered all of them like a true wizard. Here are a few more replies, and I found them really interesting.
How to think about Investing?
The first investment primer was written by Aesop in 600 B.C. He said, ‘A bird in the hand is worth two in the bush.’ Aesop forgot to say when you get the two in the bush and what interest rates are; investing is simply figuring out your cash outlay (the bird in the hand) and comparing it to how many birds are in the bush and when you get them.”
How do you feel after donating $ 40 Billion to the Bill and Melinda Gates foundation? You are a hero to us!
I feel nothing. I haven’t sacrificed anything in life. I have had a good life. I donated after I turned 75. I think I admire those people who sacrifice their time, share their food and home, as the people to be emulated not me. Besides, what is money before a man’s life?
What do you think are the pitfalls in donation?
I have never donated a dime to churches or other such organizations; I need to believe in something before I end up doing that. I have been observing the Bill & Melinda Gates foundation for years now and I am confident they will do a fantastic job of making use of the money. I am a big believer in Outsourcing, others believed in me as an Investor and gave their hard earned money to invest. I believe in Bill Gates, he is a better donor than me.
Why do you work from Omaha and not Wall Street, New York?
Wall Street is the only place where people alight from Rolls Royce to get advised by people who use the Public transportation system.
You seem to be so well read, tell us how it all started?
My father was a stock broker, so we had all these financial books in our library. He introduced me to those classics and I got into them. I am lucky that my father was not a fan of Playboy! Reading is the best habit you can get. Well, you can learn from teachers too, and have mentors but there are so many constraints attached- they will talk fast, talk slow, they might talk like a pro or they might be terrible communicators. Books are a different animal altogether, I love reading! The beauty about reading and learning is that the more you learn the more you want to learn.
People who join Berkshire Hathaway seldom leave. How do you get along well with all your executives?
I try to get quality people. I always say - Hire someone in your organization who is better than you are. If you do that, you build a company of giants. If you get people worse than yourself, you build a company of dwarfs. And do not try to do everything yourself. Delegate the jobs and look out of the window. The results will come. That’s how you build institutions. It happens only when you empower others, believe in others. I am an investor, I am very secured at that, I have no clue how to make Coca-Cola or how to dole out credit cards (Mr. Buffett owns 8% of Coca-Cola and 13 % of American Express). I understand the wisdom of the aphorism that you cannot please all the people all the time. Of Course, you will always find qualities that you don’t like in people around you, but if you observe carefully the love of the work unites you both. There is no point in being obsessive about a bad quality in a person, whom you otherwise respect.
I am a small time businessman from Dallas, Texas, what do I need to do to hit big time?
Be patient, Achieving your financial goals and dreams will not happen overnight. As much as we would all really love to accomplish our goals in a few years, this is an ongoing process. Defining your financial goals is not a one-time task; you need to keep adding new plans at different stages in your life. We all admire the skills of Olympic ice skaters, pro golfers, and concert pianists. But do we remember that they didn’t acquire their skills overnight? They had to practice hours on end for years to achieve their dreams. The key to success is to continue learning throughout your life with a voracious appetite.
I think it is marvelous that you have had a golden run with investing, how did you do that?
My rule is to be fearful when others are greedy, and be greedy when others are fearful. Besides, I call investing the greatest job in the world because you never have to swing. You stand at the plate; the pitcher throws you General Motors at 47! U.S. Steel at 39! And nobody calls a strike on you. There’s no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it. Stay dispassionate and be patient. You’re dealing with a lot of silly people in the marketplace; it’s like a great big casino and everyone else is boozing. If you can stick with drinking Coke, you should be OK. First the crowd is boozy on optimism and buying every new issue in sight. The next moment it is boozy on pessimism, buying gold bars and predicting another Great Depression, most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
Mr. Buffet you have seen so many crashes and recessions, your take on facing recessions and stock market crashes?
If past history was all there was to the game, the richest people would be librarians. Every scenario is different. But always remember, Tough times do not last. Tough people do.
What is the One biggest advice you would impart to a young investor like me?
Think for a moment that you are given a car and told this is the only car you would get for the rest of your life. Then you would make sure that you car is taken care of well, it is oiled and detailed every now and then. You would make sure that it never gets rusted, and you would garage it. Think of yourself as that car. You just get one body, one mind and one soul. Take care of it well. Invest in yourself that would be my advice.
You personally know many of the Financial executives who are engineers of the current turmoil in the financial world, surprisingly even after record losses, those executives receive astronomical salaries and bonuses and arrogantly declare that they deserve it, why dint you advice them from making such decisions and what’s your view on their justification for their pay?
I like sharing my ideas but don’t like imposing my ideas on anybody. It doesn’t make sense and is a waste of time. If somebody has decided that they know everything that is there to know, nobody can help them. The best way to learn and succeed is to know that we know nothing. There is an entire universe out there and still some of us think we can know everything. In the world of investing a few people after making some money tend to imagine they are invincible and great. This is the worst thing that could happen to any investor, because it surely means that the investor will end up taking unnecessary risks and end up losing everything – arrogance, ego and overconfidence are very lethal. Personally I don’t feel too comfortable with too much extravagance, because I always think like an investor. My thought process doesn’t see a lot of value in a fancy car or a designer suit. Thinking like an investor always is very important to bring in a sense of discipline and focus. Before reading balance sheets and investing you need to make sure your outlook and mindset is that of an investor. Never let ego, arrogance and over-confidence control you - not just as an investor but also as a human being. You will never have internal peace if you are unable to look at everybody around you with love, compassion and understanding. Irrespective of who the person is, he or she can teach you something you don’t know. I have learnt so much from people all around me and I wouldn’t have been able to learn all these wonderful things if I had not spoken to them with a smile. To quote Sir Isaac Newton- If I have seen farther than others, it is because I have stood on the shoulders of giants.
How do you feel after donating $ 40 Billion to the Bill and Melinda Gates foundation? You are a hero to us!
I feel nothing. I haven’t sacrificed anything in life. I have had a good life. I donated after I turned 75. I think I admire those people who sacrifice their time, share their food and home, as the people to be emulated not me. Besides, what is money before a man’s life?
What do you think are the pitfalls in donation?
I have never donated a dime to churches or other such organizations; I need to believe in something before I end up doing that. I have been observing the Bill & Melinda Gates foundation for years now and I am confident they will do a fantastic job of making use of the money. I am a big believer in Outsourcing, others believed in me as an Investor and gave their hard earned money to invest. I believe in Bill Gates, he is a better donor than me.
Why do you work from Omaha and not Wall Street, New York?
Wall Street is the only place where people alight from Rolls Royce to get advised by people who use the Public transportation system.
You seem to be so well read, tell us how it all started?
My father was a stock broker, so we had all these financial books in our library. He introduced me to those classics and I got into them. I am lucky that my father was not a fan of Playboy! Reading is the best habit you can get. Well, you can learn from teachers too, and have mentors but there are so many constraints attached- they will talk fast, talk slow, they might talk like a pro or they might be terrible communicators. Books are a different animal altogether, I love reading! The beauty about reading and learning is that the more you learn the more you want to learn.
People who join Berkshire Hathaway seldom leave. How do you get along well with all your executives?
I try to get quality people. I always say - Hire someone in your organization who is better than you are. If you do that, you build a company of giants. If you get people worse than yourself, you build a company of dwarfs. And do not try to do everything yourself. Delegate the jobs and look out of the window. The results will come. That’s how you build institutions. It happens only when you empower others, believe in others. I am an investor, I am very secured at that, I have no clue how to make Coca-Cola or how to dole out credit cards (Mr. Buffett owns 8% of Coca-Cola and 13 % of American Express). I understand the wisdom of the aphorism that you cannot please all the people all the time. Of Course, you will always find qualities that you don’t like in people around you, but if you observe carefully the love of the work unites you both. There is no point in being obsessive about a bad quality in a person, whom you otherwise respect.
I am a small time businessman from Dallas, Texas, what do I need to do to hit big time?
Be patient, Achieving your financial goals and dreams will not happen overnight. As much as we would all really love to accomplish our goals in a few years, this is an ongoing process. Defining your financial goals is not a one-time task; you need to keep adding new plans at different stages in your life. We all admire the skills of Olympic ice skaters, pro golfers, and concert pianists. But do we remember that they didn’t acquire their skills overnight? They had to practice hours on end for years to achieve their dreams. The key to success is to continue learning throughout your life with a voracious appetite.
I think it is marvelous that you have had a golden run with investing, how did you do that?
My rule is to be fearful when others are greedy, and be greedy when others are fearful. Besides, I call investing the greatest job in the world because you never have to swing. You stand at the plate; the pitcher throws you General Motors at 47! U.S. Steel at 39! And nobody calls a strike on you. There’s no penalty except opportunity lost. All day you wait for the pitch you like; then when the fielders are asleep, you step up and hit it. Stay dispassionate and be patient. You’re dealing with a lot of silly people in the marketplace; it’s like a great big casino and everyone else is boozing. If you can stick with drinking Coke, you should be OK. First the crowd is boozy on optimism and buying every new issue in sight. The next moment it is boozy on pessimism, buying gold bars and predicting another Great Depression, most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.
Mr. Buffet you have seen so many crashes and recessions, your take on facing recessions and stock market crashes?
If past history was all there was to the game, the richest people would be librarians. Every scenario is different. But always remember, Tough times do not last. Tough people do.
What is the One biggest advice you would impart to a young investor like me?
Think for a moment that you are given a car and told this is the only car you would get for the rest of your life. Then you would make sure that you car is taken care of well, it is oiled and detailed every now and then. You would make sure that it never gets rusted, and you would garage it. Think of yourself as that car. You just get one body, one mind and one soul. Take care of it well. Invest in yourself that would be my advice.
You personally know many of the Financial executives who are engineers of the current turmoil in the financial world, surprisingly even after record losses, those executives receive astronomical salaries and bonuses and arrogantly declare that they deserve it, why dint you advice them from making such decisions and what’s your view on their justification for their pay?
I like sharing my ideas but don’t like imposing my ideas on anybody. It doesn’t make sense and is a waste of time. If somebody has decided that they know everything that is there to know, nobody can help them. The best way to learn and succeed is to know that we know nothing. There is an entire universe out there and still some of us think we can know everything. In the world of investing a few people after making some money tend to imagine they are invincible and great. This is the worst thing that could happen to any investor, because it surely means that the investor will end up taking unnecessary risks and end up losing everything – arrogance, ego and overconfidence are very lethal. Personally I don’t feel too comfortable with too much extravagance, because I always think like an investor. My thought process doesn’t see a lot of value in a fancy car or a designer suit. Thinking like an investor always is very important to bring in a sense of discipline and focus. Before reading balance sheets and investing you need to make sure your outlook and mindset is that of an investor. Never let ego, arrogance and over-confidence control you - not just as an investor but also as a human being. You will never have internal peace if you are unable to look at everybody around you with love, compassion and understanding. Irrespective of who the person is, he or she can teach you something you don’t know. I have learnt so much from people all around me and I wouldn’t have been able to learn all these wonderful things if I had not spoken to them with a smile. To quote Sir Isaac Newton- If I have seen farther than others, it is because I have stood on the shoulders of giants.
Team MPS
Sunday, August 16, 2009
Updates on Instant Profit Stock Reco for Aug'09 : Avance Technologies Ltd (BSE Code : 512149)
Dear Subscribers,Our latest "Instant Profit" recommendation for the month of August i.e. Avance Technologies Ltd (BSE Code : 512149) hit an Upper circuit on Friday as well, thereby closing the day at a market price of Rs 2.23. Earlier we had updated our stop loss at Rs 2, but now, since it has moved up, we would like you to keep your stoploss at Rs 2.21.
Also, we had suggested our first target as Rs 2.34. If the stock hits an upper circuit tomorrow, then it will reach our first target. But, instead of booking your profit at Rs 2.34 (provided it again hits an upper circuit), we would like you to ride the momentum, and again update your stoploss at Rs 2.32, once the stock price reaches Rs 2.34.
Team MPS
Team MPS
Saturday, August 15, 2009
Warren Buffet - There's so much everyone can learn from him
Warren Buffet is a living legend, and all those who are associated with Capital Market in some way or the other, most definitely know about him. Others like Jim Rogers, Peter Lynch, Benjamin Graham wrote books related to investment at different points of time, but Mr. Buffett has not written a book till now. So, how does one get to know the ideas of Oracle of Omaha. It's very simple because he really speaks his mind out on Annual General Meetings of Berkshire Hathway, and also through e-mails that he sends annually to all the stakeholders in Berkshire Hathway.
Warren Buffett yet again spoke out his Mind at the Berkshire Hathaway AGM on the Weekend of May 3 and May 4,2008 at Omaha
There were around 37,000+ shareholders who threw questions at him for seven continuous hours and he answered all of them like a wizard he his
Here are some answers to questions posed to him at the AGM
What does it take to become a successful investor? Brilliance or Smartness?
Neither, Success in investing doesn’t correlate with I.Q. Once you have ordinary intelligence, what you need is the temperament to control the urges that gets other people into trouble in investing.
When do you decide to invest in a firm?
The best thing that happens to us is when a great company gets into temporary trouble. We want to buy them when they’re on the operating table. (Mr. Buffett bought Coke when it had its biggest fiasco after launching New Coke; he bought American Express when it went through a loss making phase in the early 60’s)
What do you look for in people when they come to sell their firms to you?
I don’t look for the usual credentials such as an MBA, a pedigree (Harvard, Wharton), or cash reserves or market cap of their firm. What I look for is just a passion in their eyes; I think that’s the key. A person who is hungry will always do well. I prefer it when people even after selling stay on and work for the firm; they are people who can’t wait to get off their bed to get to work. Passion is everything; there is no replacement for innate interest.
Mr. Buffet, you told us that Berkshire Hathaway has $ 45 Billion in cash. Why aren’t you investing?
Up until a few years back I had more ideas than money. Now I have more money than ideas.
When do you plan to retire?
I love my job; I love it so much that I tap dance to work. Mrs. B, the founder of Nebraska Furniture Mark worked until she was 104, she died within 6 months of her retirement, that’s a lesson to all my managers, don’t retire! I personally am going to work 6-7 years after I die, probably that’s what they mean when they say- “Thinking out of the Box”!!
Why do stock market crashes happen?
Because of human nature for greed and insecurity. The 1970s were unbelievable. The world wasn’t going to end, but businesses were being given away. Human nature has not changed. People will always behave in a manic-depressive way over time. They will offer great values to you.”
What are the things that are taught wrong in Business school and the corporate world?
I like such open ended questions, I think Business schools should refrain from teaching their wards about profit making and profit making alone, it gives a sense of one dimensional outlook to the young students that loss is a curse. In reality, in the corporate world, failure and loss making are inevitable. The capital market without loss is like Christianity without hell. I think they should teach the student on how to buy a business, how to value a business? Not just on how to determine the price of a business. Because price is what you pay, value is what you get.
Do you still hate Technology stocks?
With Coke I can come up with a very rational figure for the cash it will generate in the future. But with the top 10 Internet companies, how much cash will they produce over the next 25 years? If you say you don’t know, then you don’t know what it is worth and you are speculating, not investing. All I know is that I don’t know, and if I don’t know, I don’t invest.”
There's more to this as there are still many questions that the shareholders asked him. The remaining answers shall be covered in the next post. Look for it, as the replies given by him, are as interesting as the ones above.
Team MPS
Warren Buffett yet again spoke out his Mind at the Berkshire Hathaway AGM on the Weekend of May 3 and May 4,2008 at Omaha
There were around 37,000+ shareholders who threw questions at him for seven continuous hours and he answered all of them like a wizard he his
Here are some answers to questions posed to him at the AGM
What does it take to become a successful investor? Brilliance or Smartness?
Neither, Success in investing doesn’t correlate with I.Q. Once you have ordinary intelligence, what you need is the temperament to control the urges that gets other people into trouble in investing.
When do you decide to invest in a firm?
The best thing that happens to us is when a great company gets into temporary trouble. We want to buy them when they’re on the operating table. (Mr. Buffett bought Coke when it had its biggest fiasco after launching New Coke; he bought American Express when it went through a loss making phase in the early 60’s)
What do you look for in people when they come to sell their firms to you?
I don’t look for the usual credentials such as an MBA, a pedigree (Harvard, Wharton), or cash reserves or market cap of their firm. What I look for is just a passion in their eyes; I think that’s the key. A person who is hungry will always do well. I prefer it when people even after selling stay on and work for the firm; they are people who can’t wait to get off their bed to get to work. Passion is everything; there is no replacement for innate interest.
Mr. Buffet, you told us that Berkshire Hathaway has $ 45 Billion in cash. Why aren’t you investing?
Up until a few years back I had more ideas than money. Now I have more money than ideas.
When do you plan to retire?
I love my job; I love it so much that I tap dance to work. Mrs. B, the founder of Nebraska Furniture Mark worked until she was 104, she died within 6 months of her retirement, that’s a lesson to all my managers, don’t retire! I personally am going to work 6-7 years after I die, probably that’s what they mean when they say- “Thinking out of the Box”!!
Why do stock market crashes happen?
Because of human nature for greed and insecurity. The 1970s were unbelievable. The world wasn’t going to end, but businesses were being given away. Human nature has not changed. People will always behave in a manic-depressive way over time. They will offer great values to you.”
What are the things that are taught wrong in Business school and the corporate world?
I like such open ended questions, I think Business schools should refrain from teaching their wards about profit making and profit making alone, it gives a sense of one dimensional outlook to the young students that loss is a curse. In reality, in the corporate world, failure and loss making are inevitable. The capital market without loss is like Christianity without hell. I think they should teach the student on how to buy a business, how to value a business? Not just on how to determine the price of a business. Because price is what you pay, value is what you get.
Do you still hate Technology stocks?
With Coke I can come up with a very rational figure for the cash it will generate in the future. But with the top 10 Internet companies, how much cash will they produce over the next 25 years? If you say you don’t know, then you don’t know what it is worth and you are speculating, not investing. All I know is that I don’t know, and if I don’t know, I don’t invest.”
There's more to this as there are still many questions that the shareholders asked him. The remaining answers shall be covered in the next post. Look for it, as the replies given by him, are as interesting as the ones above.
Team MPS
Friday, August 14, 2009
Suryachakra Power Corporation ltd - Feel free to avoid this company
India is a power deficit company, with power shortage during peak hours leading to power cuts of approximately 3-4 hrs per day across various cities. In the last few days, we have seen some big companies coming up with IPOs to fund their power projects running into thousands of watts. Back in June 2007 Surya Power came with its IPO with an offer price of 17-20 per share, and raised funds to the tune of Rs 68 Cr. The purpose for raising funds was to set-up four biomass power projects of about 10 MW each- two in Chhatisgarh and two in Maharashtra through its various subsidiaries.
A brief background about the promoters and the company
The promoters of SPCL were earlier in the aquaculture business and two of their listed companies — Suryachakra Sea Foods and Kalyan Sea Foods — fell into difficult times when the aquaculture projects were banned by the Supreme Court in 1996. These companies were subsequently delisted by the BSE, and the Securities and Exchange Board of India slapped penalties on them for non-compliance. Some cases are also pending in different courts against the promoters and some of the group companies for not repaying loans, including one filed by the Marine Products Export Development Authority (MPEDA).
Suryachakra before coming with an IPO had a 20 MW diesel power plant in Andaman, which was commissioned in 2003. The Plant Load Factor, or capacity utilization, of the plant, which is designated a base-load plant, had been sub-optimal and touched a high of 62 per cent in 2006-07, and the company was also involved in litigation's with Andaman and Nicobar administration over the delay in implementation of the power plant.
Performance
For the year ended March 2006, SPCL’s consolidated net profit was at Rs 17.2 million on an operating income of Rs 891 million, as compared to consolidated net profit of Rs 20.2 million on an operating income of Rs 656.3 million in 2004-05. Now, its been two years since the IPO was launched, but the company has moved nowhere in terms of profitability. For the FY2008-09 company earned a total income of Rs 1367 million, but recorded a consolidated net profit of just Rs 14.5 million.
Let's review the recent quarter ending Jun'09. In quarter ending June'09, the company recorded sales of Rs 42 Cr in comparison to Rs 27 Cr in Jun'08. At a first look that looks impressive, but if you dig deeper then one can clearly notice that income from power sales stood at Rs 29 Cr, only marginally higher than Rs 25 Cr last year, whereas rest of the income was from coal trading. Also the consolidated net profit came down on account of increased interest payment.
At current valuations, even if the management doubles its power generation capacity, the return would still stand very low, as both the equity base, and interest charges are very high.
Now, coming back to promoters once more. The board had approved an allotment of 65,00,000 convertible warrants to the promoters at a rate of Rs 15.5 for raising funds for expansion plans. But, to everyone's dismay, the promoters expressed their unwillingness to subscribe warrants and gave a reason that prevailing market conditions were not suitable. This clearly tells, that even the promoters found the subscription price of Rs 15 on a higher side. When warrants are issued, then only 25% amount is to be paid by the subscriber, and the balance 75% is paid, when they opt for conversion into equity shares. Also, there's a time period of 18 months given for conversion. If promoters are not finding enough value at Rs 15, then why should anyone else pay, especially when you are not going to run the company.
A brief background about the promoters and the company
The promoters of SPCL were earlier in the aquaculture business and two of their listed companies — Suryachakra Sea Foods and Kalyan Sea Foods — fell into difficult times when the aquaculture projects were banned by the Supreme Court in 1996. These companies were subsequently delisted by the BSE, and the Securities and Exchange Board of India slapped penalties on them for non-compliance. Some cases are also pending in different courts against the promoters and some of the group companies for not repaying loans, including one filed by the Marine Products Export Development Authority (MPEDA).
Suryachakra before coming with an IPO had a 20 MW diesel power plant in Andaman, which was commissioned in 2003. The Plant Load Factor, or capacity utilization, of the plant, which is designated a base-load plant, had been sub-optimal and touched a high of 62 per cent in 2006-07, and the company was also involved in litigation's with Andaman and Nicobar administration over the delay in implementation of the power plant.
Performance
For the year ended March 2006, SPCL’s consolidated net profit was at Rs 17.2 million on an operating income of Rs 891 million, as compared to consolidated net profit of Rs 20.2 million on an operating income of Rs 656.3 million in 2004-05. Now, its been two years since the IPO was launched, but the company has moved nowhere in terms of profitability. For the FY2008-09 company earned a total income of Rs 1367 million, but recorded a consolidated net profit of just Rs 14.5 million.
Let's review the recent quarter ending Jun'09. In quarter ending June'09, the company recorded sales of Rs 42 Cr in comparison to Rs 27 Cr in Jun'08. At a first look that looks impressive, but if you dig deeper then one can clearly notice that income from power sales stood at Rs 29 Cr, only marginally higher than Rs 25 Cr last year, whereas rest of the income was from coal trading. Also the consolidated net profit came down on account of increased interest payment.
At current valuations, even if the management doubles its power generation capacity, the return would still stand very low, as both the equity base, and interest charges are very high.
Now, coming back to promoters once more. The board had approved an allotment of 65,00,000 convertible warrants to the promoters at a rate of Rs 15.5 for raising funds for expansion plans. But, to everyone's dismay, the promoters expressed their unwillingness to subscribe warrants and gave a reason that prevailing market conditions were not suitable. This clearly tells, that even the promoters found the subscription price of Rs 15 on a higher side. When warrants are issued, then only 25% amount is to be paid by the subscriber, and the balance 75% is paid, when they opt for conversion into equity shares. Also, there's a time period of 18 months given for conversion. If promoters are not finding enough value at Rs 15, then why should anyone else pay, especially when you are not going to run the company.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Thursday, August 13, 2009
Updates on Instant Profit Stock Reco for Aug'09 : Avance Technologies Ltd (BSE Code : 512149)
Dear Subscribers,
Our new "Instant Profit" recommendation Avance Technologies Ltd (BSE Code : 512149) hit an upper circuit today with CMP being Rs 2.13. There was a good volume today with approximately 7.7 lakh shares being traded. Earlier we had suggested a stoploss at Rs 1.94, but now since it has moved up, we would like you to keep your stoploss at Rs 2.
Team MPS
Team MPS
Sintex Industries- May benefit from the Govt.'s proposed Rs 2 lakh crore plan
For all those who are an avid reader of The Economic Times, it is definitely not a News that govt. has come up with a mega plan of slum-free India. Well, if we really wish to see our cities being reckoned in the same category as New York or London, then getting rid of slums is definitely a right step forward for achieving the same.
A top view of even our so called Financial Capital Mumbai, will make you think that does it really deserve to be called so, and how we still lag behind the major economies of the world. But, since we lag behind, that's why we have so many opportunities for growth and are able to grow at a healthy rate of 7-8%. Even the new govt. is doing its bit by announcing ambitious plans, with greater stress on housing for all, and proper dwelling units for slum-dwellers. The govt. is rolling out a massive plan to build 50 lakh dwelling units in five years across 400 towns and cities and has proposed an outlay of approximately Rs 2 lakh crore for the same. The most obvious thing that would come up in someone's mind is that the plan can generate crores worth of business for the real estate developers.
It is true that real estate developers will be benefited, but it is still not clear as to what kind of housing the govt. is envisaging. The first company that came to my mind while reading the article was Sintex Industries. Everybody is well aware of the black colored Sintex Water tanks, and many have been using those for many years. The company is a leading supplier of such tanks, and will definitely benefit from the proposed scheme, as it may turn out to be a preferred supplier.
But, the rather more interesting offering from the company's portfolio of products is its concept of Prefabricated buildings and Monolithic constructions. The company already has strong order book for Prefabricated building systems and monolithic constructions on account of govt.'s initiative towards slum rehabilitation and urban decongestion in states like Tamil Nadu and Maharashtra.
Monolithic construction is a concept which is suitable for low-cost housing in urban and rural areas, and is also a speedier, superior method in comparison to conventional structure.It is suitable for mass housing of any kind wherein large number of units of similar configuration are needed. Now, the govt. has proposed to set up 50 lakh dwelling units at a cost of Rs 2 lakh crore. The avg. cost per dwelling unit comes out to be Rs 4,00,000, and considering all this, I feel govt. will definitely consider the idea of monolithic construction.
On the performance front, company has been doing extremely well with more than 30% year-on-year growth. It has diversified its product portfolio so well over the years, that no other company had been able to match it. Also, Sintex as brand name is well-trusted by everyone. If the govt. plans as per what I envisage, then the company will definitely get a major chunk of order. Considering the current Mcap of Rs 2,800 Cr, there definitely lies a plethora of opportunities for this Mid-cap company to grow into a large-cap.
A top view of even our so called Financial Capital Mumbai, will make you think that does it really deserve to be called so, and how we still lag behind the major economies of the world. But, since we lag behind, that's why we have so many opportunities for growth and are able to grow at a healthy rate of 7-8%. Even the new govt. is doing its bit by announcing ambitious plans, with greater stress on housing for all, and proper dwelling units for slum-dwellers. The govt. is rolling out a massive plan to build 50 lakh dwelling units in five years across 400 towns and cities and has proposed an outlay of approximately Rs 2 lakh crore for the same. The most obvious thing that would come up in someone's mind is that the plan can generate crores worth of business for the real estate developers.
It is true that real estate developers will be benefited, but it is still not clear as to what kind of housing the govt. is envisaging. The first company that came to my mind while reading the article was Sintex Industries. Everybody is well aware of the black colored Sintex Water tanks, and many have been using those for many years. The company is a leading supplier of such tanks, and will definitely benefit from the proposed scheme, as it may turn out to be a preferred supplier.
But, the rather more interesting offering from the company's portfolio of products is its concept of Prefabricated buildings and Monolithic constructions. The company already has strong order book for Prefabricated building systems and monolithic constructions on account of govt.'s initiative towards slum rehabilitation and urban decongestion in states like Tamil Nadu and Maharashtra.
Monolithic construction is a concept which is suitable for low-cost housing in urban and rural areas, and is also a speedier, superior method in comparison to conventional structure.It is suitable for mass housing of any kind wherein large number of units of similar configuration are needed. Now, the govt. has proposed to set up 50 lakh dwelling units at a cost of Rs 2 lakh crore. The avg. cost per dwelling unit comes out to be Rs 4,00,000, and considering all this, I feel govt. will definitely consider the idea of monolithic construction.
On the performance front, company has been doing extremely well with more than 30% year-on-year growth. It has diversified its product portfolio so well over the years, that no other company had been able to match it. Also, Sintex as brand name is well-trusted by everyone. If the govt. plans as per what I envisage, then the company will definitely get a major chunk of order. Considering the current Mcap of Rs 2,800 Cr, there definitely lies a plethora of opportunities for this Mid-cap company to grow into a large-cap.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Instant Profit Stock Reco for Aug'09 : Avance Technologies Ltd (BSE Code : 512149)
Buy Avance Technologies Ltd (BSE Code : 512149) around Rs 2.03 - 2.13; SL @1.94; TGT#1 Rs 2.34, TGT#2 Rs2.50.Previous day data:- [Live Quote]
CMP = 2.03 (+0.09) +4.64% on 12 Aug 2009
Volume = 4,295,830
Prev Close = 1.94
Day's H/L (Rs) = 2.03 - 2.03
52wk H/L (Rs) = 1.94 - 0.07
Mkt Cap (Rs Cr) = 9.76
Volume = 4,295,830
Prev Close = 1.94
Day's H/L (Rs) = 2.03 - 2.03
52wk H/L (Rs) = 1.94 - 0.07
Mkt Cap (Rs Cr) = 9.76
About the company:- http://www.avancetechnology.com/
Avance Technology Ltd. is building the next generation trading software that is scalable for performance and tolerant against system crashes. Currently we are focused on connecting to Hong Kong Stock Exchange's AMS/3 system. Our state-of-the-art clustering technology enables us to sustain high availability and scalability while our proprietary multi-thread user interface technology enables us to build the most responsive user interface ever provided by a trading platform.
Latest News:-
July 29th - Avance Technologies Ltd has informed BSE that August 08, 2009 has been fixed as the Record date for the following purpose:-
- To issue bonus shares to the shareholders in the ratio of 4:1 (FOUR Shares for every One Share Held by the member).
- To sub-divide the face value of its shares from Rs 10/- to Rs 1/- each.
Aug 11th - Avance Technologies Ltd has informed BSE that the Board of Directors of the Company at its meeting held on August 10, 2009, has allotted Bonus Equity Shares in the ratio of four fully paid up Equity Shares for every one Equity Shares held by the members (4:1) as on the Record date.
- Team MPS
Wednesday, August 12, 2009
Neo Corp International Ltd.-Innovative Textile Company
About two months back, I had discussed about the company Neo Corp International, and had told that how cheap the valuations are, and how it may benefit from govt's stress on development of agriculture and infrastructure. At that point of time its Mcap was just Rs 20 Cr, and now it stands at Rs 40 Cr. So, within a matter of 60 days, it has given a return of 100%.
A small briefing on the company
Neo Corp International started as a small woven sack factory in 1988 but since then till now it has expanded it’s product range to include a slew of products such as FIBC's, container liner, leno bag, geo textile, ground cover, shade nets, hale nets, wind breakers and constructive cover. These products come under the category of Technical Textiles.
In the initial days, the management of the company decided to export its product in the foreign market sensing the lack of demand and understanding of such products in the Indian market.
The exposure to international market at an early stage tuned the company to a continuous need for improvement in its products to meet the international competition and also enhanced its understanding of the product and demands.
Neo offers three kinds of products, they are: PACKTECH, AGROTECH & GEOTECH.
PACKTECH products provide cost effective solutions for storage carriage and protection requirements of industrial, agricultural and their goods. In India a lot of agricultural produce is wasted during transportation and handling because of the use of low quality jute bags on large scale. Neo Corp’s products offer a viable solution, as these will protect the produce from being environmentally affected and from being wasted.
GEOTECH products have wide range of end-uses in pavements/roads/railroad beds/airfields, retaining wall earth embankment, concrete revetment, drain construction waterways, coastal engineering/defense, landfill, industrial and contaminated land reclamation but again as is the case in India, they are still not being used at large scale and we know the conditions of roads of India.
There should be a demand in India, for such niche products in the years to come with the Govt. being more conscious of quality control and with it laying more stress on the development of all sectors directly or indirectly related to agriculture.
The benefits of it should trickle down to companies like Neo Corp.
A small briefing on the company
Neo Corp International started as a small woven sack factory in 1988 but since then till now it has expanded it’s product range to include a slew of products such as FIBC's, container liner, leno bag, geo textile, ground cover, shade nets, hale nets, wind breakers and constructive cover. These products come under the category of Technical Textiles.
In the initial days, the management of the company decided to export its product in the foreign market sensing the lack of demand and understanding of such products in the Indian market.
The exposure to international market at an early stage tuned the company to a continuous need for improvement in its products to meet the international competition and also enhanced its understanding of the product and demands.
Neo offers three kinds of products, they are: PACKTECH, AGROTECH & GEOTECH.
PACKTECH products provide cost effective solutions for storage carriage and protection requirements of industrial, agricultural and their goods. In India a lot of agricultural produce is wasted during transportation and handling because of the use of low quality jute bags on large scale. Neo Corp’s products offer a viable solution, as these will protect the produce from being environmentally affected and from being wasted.
GEOTECH products have wide range of end-uses in pavements/roads/railroad beds/airfields, retaining wall earth embankment, concrete revetment, drain construction waterways, coastal engineering/defense, landfill, industrial and contaminated land reclamation but again as is the case in India, they are still not being used at large scale and we know the conditions of roads of India.
There should be a demand in India, for such niche products in the years to come with the Govt. being more conscious of quality control and with it laying more stress on the development of all sectors directly or indirectly related to agriculture.
The benefits of it should trickle down to companies like Neo Corp.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
Tuesday, August 11, 2009
Risky companies- Don't seek investment opportunities in these companies
While it is important to know the stocks one should invest in, it is equally important to know the stocks one should avoid, as one wrong investment (investment different from trading) can destroy your capital. Here are a few of those, you should not fall into :
Pennar Aluminium
No income for the last two years. Promoter stake at just 3% out of an equity base of 58 cr. There is nothing in the company that can make me think twice before suggesting you to invest in it.
Pentasoft Technologies
The company has been a defaulter for long. It has been defaulting on loans provided by various financial institutions. I had heard about companies delisting their shares from various regional exchanges, but had never heard of they de-listing it from NSE. It simply tells about the poor state of the company, and may be it does not have enough to even pay for annual listing fees. Earlier its equity capital was brought down from Rs 250 Cr to Rs 25 Cr on account of accumulated losses.
I think, I don't need to say more on this.
Parekh Platinum
The Company has not made any provision for interest on Secured Loans & unsecured loans relating to Banks & Financial Institutions for the period from April 01, 2008 to March 31, 2009 as in the opinion of the management sufficient provision is already made in the books to meet the eventual liabilities of the lenders. Again never heard of this kind of accounting policy. Again this company has been posting losses year on year, and the losses would have been a lot higher, had it accounted for interest amount.
Even this year profit is also a notional one, as it is on account of restatement of foreign currency dues.
Asian Films
There is no one as a promoter of the company. Sales have been coming down every counter, with either negligible profits or even losses. The highest stock price in the last 3 years has been Rs 0.7. The company has nothing to talk about its business.
Pennar Aluminium
No income for the last two years. Promoter stake at just 3% out of an equity base of 58 cr. There is nothing in the company that can make me think twice before suggesting you to invest in it.
Pentasoft Technologies
The company has been a defaulter for long. It has been defaulting on loans provided by various financial institutions. I had heard about companies delisting their shares from various regional exchanges, but had never heard of they de-listing it from NSE. It simply tells about the poor state of the company, and may be it does not have enough to even pay for annual listing fees. Earlier its equity capital was brought down from Rs 250 Cr to Rs 25 Cr on account of accumulated losses.
I think, I don't need to say more on this.
Parekh Platinum
The Company has not made any provision for interest on Secured Loans & unsecured loans relating to Banks & Financial Institutions for the period from April 01, 2008 to March 31, 2009 as in the opinion of the management sufficient provision is already made in the books to meet the eventual liabilities of the lenders. Again never heard of this kind of accounting policy. Again this company has been posting losses year on year, and the losses would have been a lot higher, had it accounted for interest amount.
Even this year profit is also a notional one, as it is on account of restatement of foreign currency dues.
Asian Films
There is no one as a promoter of the company. Sales have been coming down every counter, with either negligible profits or even losses. The highest stock price in the last 3 years has been Rs 0.7. The company has nothing to talk about its business.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Monday, August 10, 2009
The two very important technical terms - Support & Resistance
These days you people must be hearing a lot about Support and resistance. Even I look for the two when I give Instant Profit recommendations, although in case of penny stocks there are not many cases where you can actually look for support and resistances, because the volume is not sufficient most of the times.
Most of the penny stocks which are not backed by fundamentals, provide good opportunities for taking a positional trade, as sometimes they keep running upwards on momentum and even run as high as 100-200%, but when they reverse their direction then it becomes important to book your profit or loss, whatever the case may be, as one cannot determine the extent to which they may fall.
I am actually writing this post to make people aware of what Support and Resistances are and how are they established, as many are still oblivion to these two terms.
Like everything else in life, stock prices are driven by supply and demand. Supply is synonymous with bears and selling. Demand is synonymous with bulls and buying. As demand increases, prices advance and when supply increases, prices decline. When supply and demand are equal, bulls and bears slug it out for control.
How is support established?
As the price declines, buyers become more inclined to buy and sellers less inclined to sell. A point where demand overcomes supply and prevents the price from falling becomes a support. Human behaviour is responsible for the existence of supports and resistance.
Many investors who have zeroed in on a particular stock may not commit their resources as prices are falling. Once the price starts rising, they rue the fact that they did not buy it when it was low and vow to buy it if prices come back to those levels. If buying demand overcomes supply at those levels, prices will rise from that level again, reinforcing the psychology. The significance of the support level increases the more times the price bounces back from that level.
Support does not always hold and a break below support signals that the supply from bears has won over the demand form bulls. A decline below support indicates a new willingness to sell and a lack of willingness to buy. That's why while trading it is important to keep a stoploss at a certain level, and that's basically the support level.
Once support is broken, another support level will have to be established at a lower level. Sometimes price movements can be volatile and an intra-day dip below support is not considered a breach of support, which we call a 'whipsaw.' There are many instances during intraday when the stock price may dip below support level, but as said earlier that a breach of support is considered only when the closing price is below the support level, and I feel that one should keep his stoploss atleast 1-1.5% below stoploss level, in order to avoid its execution and save yourself from closing your position at a loss.
How is resistance established?
As the price advances, sellers become more inclined to sell and buyers are wary of committing resources at high levels. At a point where supply exceeds demand and prices stop rising, further movement is resisted. Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further.
As the price falls from such a resistance point, investors who were hoping for a further rise now realise they have missed on selling the stock. And when prices rise to this resistance level, they remember to sell this time, which creates pressure from all such investors who were left holding their shares earlier.
The significance of the resistance level increases with the number of times the price reverses from that level. Just like support, resistance does not always hold and a break above resistance signals that the bulls have won out over the bears. A break above resistance shows a new willingness to buy and/or a lack of incentive to sell.
In case of intraday trading the margins are already very less, but if one is holding a positional trade where he is seeking a 15-20% gain, then I feel exit level should be kept atleast 1-1.5% below the resistance level. This ensures that you actually book your profits, rather than stock rebounding before even actually reaching the resistance level.
Support turning into Resistance and vice-versa
Once the price breaks the support and travels lower, it turns into resistance. Similarly, if the price pierces the resistance and goes further up, the resistance level then becomes the support. A mere intraday violation of the support and resistance levels is not enough. It should close above the resistance or close below the support to qualify as a successful breach.
So as our life is not static, similarly supply and demand situations do not remain static. It's an ever changing and a dynamic phenomenon, and hence support and resistances keep changing. Therefore one needs to assess the situation which includes numerous other factors and thereby change his position accordingly.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Most of the penny stocks which are not backed by fundamentals, provide good opportunities for taking a positional trade, as sometimes they keep running upwards on momentum and even run as high as 100-200%, but when they reverse their direction then it becomes important to book your profit or loss, whatever the case may be, as one cannot determine the extent to which they may fall.
I am actually writing this post to make people aware of what Support and Resistances are and how are they established, as many are still oblivion to these two terms.
Like everything else in life, stock prices are driven by supply and demand. Supply is synonymous with bears and selling. Demand is synonymous with bulls and buying. As demand increases, prices advance and when supply increases, prices decline. When supply and demand are equal, bulls and bears slug it out for control.
How is support established?
As the price declines, buyers become more inclined to buy and sellers less inclined to sell. A point where demand overcomes supply and prevents the price from falling becomes a support. Human behaviour is responsible for the existence of supports and resistance.
Many investors who have zeroed in on a particular stock may not commit their resources as prices are falling. Once the price starts rising, they rue the fact that they did not buy it when it was low and vow to buy it if prices come back to those levels. If buying demand overcomes supply at those levels, prices will rise from that level again, reinforcing the psychology. The significance of the support level increases the more times the price bounces back from that level.
Support does not always hold and a break below support signals that the supply from bears has won over the demand form bulls. A decline below support indicates a new willingness to sell and a lack of willingness to buy. That's why while trading it is important to keep a stoploss at a certain level, and that's basically the support level.
Once support is broken, another support level will have to be established at a lower level. Sometimes price movements can be volatile and an intra-day dip below support is not considered a breach of support, which we call a 'whipsaw.' There are many instances during intraday when the stock price may dip below support level, but as said earlier that a breach of support is considered only when the closing price is below the support level, and I feel that one should keep his stoploss atleast 1-1.5% below stoploss level, in order to avoid its execution and save yourself from closing your position at a loss.
How is resistance established?
As the price advances, sellers become more inclined to sell and buyers are wary of committing resources at high levels. At a point where supply exceeds demand and prices stop rising, further movement is resisted. Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further.
As the price falls from such a resistance point, investors who were hoping for a further rise now realise they have missed on selling the stock. And when prices rise to this resistance level, they remember to sell this time, which creates pressure from all such investors who were left holding their shares earlier.
The significance of the resistance level increases with the number of times the price reverses from that level. Just like support, resistance does not always hold and a break above resistance signals that the bulls have won out over the bears. A break above resistance shows a new willingness to buy and/or a lack of incentive to sell.
In case of intraday trading the margins are already very less, but if one is holding a positional trade where he is seeking a 15-20% gain, then I feel exit level should be kept atleast 1-1.5% below the resistance level. This ensures that you actually book your profits, rather than stock rebounding before even actually reaching the resistance level.
Support turning into Resistance and vice-versa
Once the price breaks the support and travels lower, it turns into resistance. Similarly, if the price pierces the resistance and goes further up, the resistance level then becomes the support. A mere intraday violation of the support and resistance levels is not enough. It should close above the resistance or close below the support to qualify as a successful breach.
So as our life is not static, similarly supply and demand situations do not remain static. It's an ever changing and a dynamic phenomenon, and hence support and resistances keep changing. Therefore one needs to assess the situation which includes numerous other factors and thereby change his position accordingly.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
Friday, August 7, 2009
Let's see if these two industry heavyweights qualify as an investment option for another 1-2 years
Suzlon Energy Ltd.
The global wind markets have continued to feel the impact of the credit crisis and overall macro-economic conditions. While the company registered growth in revenues at a consolidated level, its profits have lagged due to lower quantity of sales at the Suzlon Wind level. This has been caused by multiple factors such as the delayed budget impacting orders in India, and customers in international markets postponing deliveries to the second half of the financial year. This year its bottom line also got affected on blade restoration and retrofit programme, that was carried out by the company. For Jun'09, company has reported a large loss, and what was disappointing was that it could not perform well on the operational front. Besides that, it has to make huge interest payments every quarter, which further dent its profitability.
The revival process may take longer time, then anyone's investment horizon of 1-1.5 years. Also, with crude hovering below 80$/bbl, there may not be a greater push to renewable sources. I feel, there are other better opportunities than Suzlon at present.
Kingfisher Airlines
Airlines and media industry are almost similar in certain respects. Both of these industries are essential, but both of them requires the company to have very deep pockets. They kind of get entangled in a vicious circle, where they keep borrowing money, and therefore pay huge interest amount on those borrowings. Also, they keep bringing in new strategic investors, to keep the company afloat. You must have understood, what I mean to say, but to state it more clearly, I would suggest everyone to keep away from Airlines industry at present. Recently the company announced plans of raising funds to the tune of Rs 5 billion. No matter, what the route company takes, earnings will be diluted.
I would not suggest anyone to invest in it
The revival process may take longer time, then anyone's investment horizon of 1-1.5 years. Also, with crude hovering below 80$/bbl, there may not be a greater push to renewable sources. I feel, there are other better opportunities than Suzlon at present.
Kingfisher Airlines
Airlines and media industry are almost similar in certain respects. Both of these industries are essential, but both of them requires the company to have very deep pockets. They kind of get entangled in a vicious circle, where they keep borrowing money, and therefore pay huge interest amount on those borrowings. Also, they keep bringing in new strategic investors, to keep the company afloat. You must have understood, what I mean to say, but to state it more clearly, I would suggest everyone to keep away from Airlines industry at present. Recently the company announced plans of raising funds to the tune of Rs 5 billion. No matter, what the route company takes, earnings will be diluted.
I would not suggest anyone to invest in it
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the equity analyst on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
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