Saturday Equity Workshop~You Guys Rocked! Now Go Rock the Markets!

Saturday,February 17,2018  Fundamental Value Vs Price Equity Workshop in Mumbai

You Guys Rocked! Now Go Rock the Markets! ~ for what’s Academics & Theory without Action & Application

Full House with all pretty knowledgeable & many market veterans from Mumbai,Dubai,Sangli,Kolhapur,Hyderabad,Thrissur & Gokak~from small Investors to High Networth ~from Broking,Corporate,PSU,MNC Banks,MNC IT companies & FPI fraternity too…from a confident 25 year old to a 60 year old who has seen it all & wants to see some more !

Great Interaction literally from 9 am to 9 pm ! & the Bulls remained alive & kicking on & around the Conference Room table throughout !

We covered them all & more!~Valuing on Assets & Earnings & assessing against Market Price ! ~ Demergers  & Delistings  & Rights &  Non Linear Earnings & Holdings & Acquisitions & New Parentage & Turnarounds & Changing Dynamics in Sectors & Themes like in PSU Banks again! & the GST Impact…& of course hopelessly hanging on to Wealth Destroyers & even averaging in them over the years !

Where are the Sensex & Nifty headed in the coming years…should we be bothered about them & other Macros or simply continue focusing bottom up on specific selections for serious wealth creation…Passive or Active Investing…we discussed all

We covered  Investor Gurus Warren Buffett & Peter Lynch & Investor Mistakes of Confirmation Bias,Anchoring & Improper Framing among others…how Multi disciplinary thinking evolves ones into a better person & investor

Corporate Tambola too was fun with prizes for three full houses & instant chocolates to those who correctly guessed the companies…A Special Praise for Hemal,who had enquired if this workshop would be for Beginners,& turned out guessing many companies !

Some other prizes too for some fabulous answers…like the hilarious one from Daya that I should seek another session,this time one to one ,with the pretty girl who had emailed me a query to clear a concept which was not a financial one…she had asked my views on whether Marriage was necessary in modern times & should not ‘live in’ be good enough ! Daya’s response brought the house down!

Chowdhary from ONGC lucidly explained his views on ONGC going forward

Vijay Desai,a clear market veteran, won  for being the best participant with some great interaction right throughout

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Sat Feb 17 2018~Mumbai Funda Equity Workshop~Taking Stock at Sensex 36000

Hey ! Here’s the Announcement that’s been eagerly awaited for the next Mumbai Fundamental Equity Workshop after Full Houses in June & August 2017

Just Click on it to register

Fundamental MasterClass in Mumbai
Stock Selection ~ Value Vs Price – 2018 ~ Markets Major & Mature ~ Sensex 36000 ~ Taking Stock

Saturday, February 17, 2018

As usual it’s on a Full Saturday .This time on February 17,2018 at my Fort HO in Mumbai.The Investment,inclusive of GST etc, is Rs 18000 or Rs 16200 each for 3 or more registrations from a group

As Limited Seats,do sign up quick for debating & discussing wealth creation & destruction through direct Equity in Indian Listed Companies

We are at all time Highs on the Sensitive Indices with the Sensex at 36000+ & Nifty at 11000+

At my last August 2017 Workshop the Sensex & Nifty were at 32300 & 10000 levels.They’re up 10%+ since then in six months but the magic has been in Specific Scrips which have recorded life changing surges if you were only invested in them !

For illustration when guiding on Valuation with regards to Non Linear Earnings Potential  in the June & August Workshop I had the participants engage in a Valuation exercise for half an hour on Bombay Dyeing at Rs 70 to Rs 82 levels & draw conclusions with some convictions.It raced away to Rs 300 & it’s now at Rs 250 levels ~ yet over 200% inside six months…of course Markets have been kind too in this period

In the August Workshop we played out a 20% CAGR scenario over 5 years to explain the Magic of Compounding.We used Yuken at Rs 1877 as an illustration taking into account it’s financials,past,present & future potential.If at 5 years in 2022 it would reach Rs 4670 it would give this 20% CAGR.It’s up 150% absolute touching Rs 4700 today inside 6 months ! …Life Changing Wealth Creation in Equity is simply the Magic of Compounding in a right Selection based on the Valuation leg of the Equity Table

What Now? What Next?

Bank of America thinks Sensex will slide & close at 32000 end 2018 ….Of course in 2015 they had forecast it would be 54000 ! yes ! 54000 by end 2018 ! & Ambit thinks we are in the last stage of the Rally ~ but they’ve been remarkably bearish all of 2017 & am sure their clients must have missed the 2017 gravy train in Equities ~ While Many think we are in a huge Bull Rally for Years to come & one even has called 35000 as the new Sensex Bottom ~ Should we care about what they think ?

Or should we simply care about how to grow serious wealth through direct equity in Indian Markets & protect it while growing it ? That’s what this Workshop is about

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Equity ~Life Changers or Life Maimers ?

Equity ~Life Changers or Life Maimers ?

This Thought was inspired by a Whatsapp Forward received this morning titled Power of Equity .It listed many Life Changing Wealth Creators that grew many fold from just Rs 10000 invested in each  & carried a concluding Message in Capitals ” INVEST WISELY WITH LOTS OF PATIENCE “

This was the List & I’m assuming the Years & CAGR Maths is correct with Dividends not being considered :

  1. Eicher Motors-1992 => Rs 80 lakhs
  2. Asian Paints-1986 => Rs 90 lakhs
  3. HDFC -1990 => Rs One Crore
  4. Brittania – 1985 => Rs 1.06 crs
  5. MRF – 1985 => Rs 1.10 crs
  6. BOSCH -1985 => Rs 1.20 crs
  7. Amara Raja -1991 => Rs 1.25 crs
  8. Shree Cement -1990 => Rs 2.90 crs
  9. Infosys – 1993 => Rs 3 crs
  10. Dr Reddys -1986 => Rs 10 crs
  11. WIPRO -1981 => Rs 400 crs

Cannot Argue with this Message for I’ve seen three of my Scrips,in even relatively quick time inside five years of investment too becoming over 100 Baggers ~Matrix Labs( early Millenium & now delisted as sold to Mylan),Mercator(early Millenium) & WIPRO ( from 1997 to  early 2001)

It is rare for most investors to live the Conviction & Temperament to hold for long & ride the Huge Life Changing Gains.Imagine if more than Rs 10000 had been invested in each of the above,especially WIPRO!

However my Thought is what about Wrong Convictions on the High Fliers that became Wealth Destroyers &  Life Maimers !

Here are a few of them ,most yet listed & struggling to revive & how much worth would your Rs 10000 invested in each of them be now ….most are Horror Stories of the past decade or a little more…sure you can contribute more…My Horror Stories  have been the Damania Group’s Damania Capital Markets to mention one.Bad Judgement Call that Cost!It was compulsory delisted in July 2004.

~Suzlon -2005=>Rs 842  &  2008=>Rs 348 ! => 92% to 97% wiped out after considering 10:2 Split in January 2008 when it reached an all time high of Rs 2300 before split.Current Price Rs 16.Promoter Tulsi Tanti is yet on board though Dilip Shanghvi of Sun Pharma Group has acquired a major stake in it @ Rs 18 in February 2015.Mandatory Open Offer at Rs 18 to other Shareholders in January 2016 met with no success.The Share Price had raced to Rs 30 from where it has halved & is below the Open Offer & Stake Price of Rs 18.Shareholders hold out Hope of Revival back to Glory Days in the years ahead under Dilip Shanghavi.So far it’s been a muted share price trading range in recent months.

~Unitech-2006 => Rs 505 => 95% wiped out after adjusting for 12:1 Bonus & 10:2 Split in June 2006 & 1:1 Bonus in Aug 2007.Reached a high of Rs 14800 in 2006 before Bonus & split .Current Price under Rs 6

~Kingfisher Airlines-2006/7 => 0 ! => 100% wiped out & scrip suspended for trading from 2012/2013 & restricted trading from June 2015 ~ reached a High of Rs 335 in 2007

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State of State Bank of India @ Rs 225 ~ Shareholders Perspective

State of State Bank of India @ Rs 225 ~ Shareholders Perspective

Sensex is arguably reckoned to be the Barometer of our Economy & State Bank of India & Larsen & Toubro have been arguably reckoned to be the best India Proxy Plays in our growing Economy

Received a Forward from an Overseas NRI Friend enquiring if it was true that :

  • Rs 5 lakhs if invested in 2000 in a Fixed Deposit of State Bank of India would have been  currently worth Rs 26 lakhs while
  • Rs 5 lakhs if invested in 2000 in Shares of State Bank of India would be currently worth a whopping Rs 5.74 crs !

😈 Someone’s quite excitedly promoting  Investment in State Bank of India  & advocating Equity over Fixed Deposits over a long period….cannot blame the ‘someone’ for the excitement but deliberate exaggeration to prove the point !?

Anyway,gives me another opportunity to showcase the Magic & Power of Compounding with which I normally commence my Training Sessions

So FD ya Share?

Let’s take Investment in the Fixed Deposit first :

Here’s the Interest Rate Scenario in India form 2000 to date 2016

india-interest-rate

The average Interest Rate in the 16 years this Millennium is under 7% with Top High of 14.5% hitting in August 2000 & a low of 4.25% being recorded in April 2009

Assuming even that in July 2000 if one locked in the high rate of @ 14% in a 10 year deposit ,Rs 5 lakhs would have grown at a 14% CAGR to Rs 18.54 lakhs in 2010 & then at 8% CAGR grown to Rs 29.42 lakhs in the eight years till date July 2016….a straight CAGR would be 11.75% for 2000-2016 period….so the FD part of the Forward could be accepted when it states Rs  5 lakhs invested in a FD of SBI in 2000 would have grown to Rs 26 lakhs in 2016….this gives a CAGR of 11%

Now let’s Look at Equity Returns from State Bank of India :

The Forward excitedly proclaims that Rs 5 lakhs invested in the Shares of State Bank of India in 2000 would have grown to Rs 5.74 crs in 2016…..This would mean 11380% absolute returns and a CAGR of near 35%….Not Incredibly Unbelievable but certainly requires Verification

State Bank of India was at Rs 225 in July 2000 & is also Rs 225 today in July 13,2016,sixteen years hence….However the Face Value was Rs 10 in 2000  & now the Face Value is Rs 1

Thus Rs 5 lakhs invested in 2000 would have grown to Rs 50 lakhs now & not Rs 5.74 crs !….Original Investment of Rs 5 lakhs in 2000 would have been 2222 shares @ Rs 225(FV Rs 10)  which on 10:1 Split to FV Rs 1 in November 2014 would have been 22222 shares which at current price of Rs 225 would be worth Rs 50 lakhs.The Absolute Returns would have been 900% while CAGR would be @ 15.5% in this 2000 to 2016 period

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HOV Services buoyant @ Rs 163 ~ Economic Times quotes me

HOV Services buoyant @ Rs 163 ~ Economic Times quotes me in today’s edition on the clearly apparent undervaluation of the stake sale in Source HOV at just US $ 95 m to promoter entity…should be worth at least US $ 250 m

Hope better sense of fair play will prevail and the stake sale is passed at  a much higher consideration

Even at US $ 95 m, the gross consideration is Rs 580 crs while Market Cap of HOV is just @ Rs 200 crs…The Equity is Rs 12.50 crs (FV Rs 10) =>Rs 464/share deal value proposed…hopefully should be reconsidered to much higher….Company say the Board will decide what to do with the Monies but clearly they should be considering returning a large part to shareholders as special dividend…1000% Dividend  that’s Rs 100/share maybe ?

The Buoyancy in HOV should sustain and in fact the share price can gallop up even more smartly if better sense prevails all around and minority shareholders are protected with a better deal value than the US $ 95 m proposed to the promoters entity itself

Had blogged in detail on this recently and that’s how Economic Times probably saw merit in this line of thinking and covered it with my quote

HOV Services @ Rs 153~Up 62% In 4 Days And Worth More Despite Undervaluation Of Investment Sale To Promoters

…similar point well made by Economic Times too except it’s Bank Tec that is merging into Source HOV and not the other way round…though ratios are correctly stated where the smaller Bank Tec is valued marginally higher than the much bigger SourceHOV…not looking fair too though the latter carries deb

…Morgan Stanley is mentioned too but their important role has not been shared by the Company in full disclosure especially if they were involved in the Valuation &  deal negotiations and  how did they arrive to give a financial committment for a new line of Credit of US $ 1.1 Billion to SourceHOV

…also is Citigroup,the largest and majority shareholder  of 68%+ in SourceHOV selling too as the article mentions !? if so have they accepted this valuation of PKF Sridhar & Santhanam,the Chartered Accountants of BankTec or on which valuation are they going !?

…because the Indian Listed Company’s notifications to the BSE & NSE on September 30,2014 only states that the deal will be contracted and consummated at the same valuation provided to the majority shareholder !…that’s Citigroup

…the notification also states that SourceHOV will use the new US $ 1.1 Billion refinancing facility…. committed by Morgan Stanley….. for three purposes as below

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“Should City Union Bank be retained for 3 Months ex Rights ?” asks Rahul ~ Just became ex rights yesterday and is @ Rs 50 now

Hi Rahul ~ Your Question is quite interesting and I’m sure over 80000 shareholders of City Union Bank would like to know too !

On November 12,2012 I had blogged on a surging L & T Finance and it’s stake in CUB

Yo! L & T Finance Holdings Zooms 12.7 % To Close At Rs 72.40 Today ~ It Holds 4.68% Of City Union Bank (CUB) Which Is Cum Rights Rs 59.75

“Should you retain CUB ex rights for 3 months?”  is what you ask

The Answer depends on the Shareholder’s Risk Profile and whether the shareholder is comfortable with a Long Term Outlook on CUB

Of Course your Question is specific on the time Period ~ 3 Months

There are  Two Approaches to Consider here and assess their weightage in your decision making to immediately sell or hold CUB ex rights

  1. Immediate to two to three  months ex rights Impact on  Share Price  and  Traded Volumes because of the Rights Issue  ~ There will be some price pressure ex rights
  2. Assets and Earnings Valuation of  CUB and Interesting Shareholding Developments  going into 2013 ~ I will give more weightage to this  

Rational Thinking  and Maintaining Same Scrip Weightage Exposure in the Portfolio would guide you to adopt a strategy of  replacing existing original CUB holdings with  Cheaper Rights at Rs 20 ~ However the Rights Ratio is only  1: 4 and the Rights Pricing is attractive at Rs 20 and therefore it will not be possible to replace entire original holding as you may not get more shares than entitled even if you do apply for them ~ so you could adopt the strategy of selling 25% of your original holding now ex rights @ Rs 50 knowing you will be getting the same quantity in the Rights at Rs 20 ~ this will serve two objectives ~ Reduce your Holding Cost while maintaining  CUB weightage in your Portfolio 

The Risk you take here is that the Share Price of CUB actually will move up in 2013 from ex rights Rs 50 levels ~ This brings us to the Assets and Earnings Valuation  Assessment of CUB ~ Ex Right the Book Value drops to Rs 30 +and the FY 13 Projected EPS to Rs 5+ giving us relatives of P/BV of 1.6 and P/E of 10 ~Despite the Pressures on Margins and rising NPAs with such a huge FII Shareholding of over 21% of the Equity as well as L & T Finance  being the largest shareholder holding just under 5% in CUB,my sense is that 2013 will be a very interesting year

I would take a longer term view and give more weightage to continuing and sustainable valuations and the  interesting  shareholding developments that may take place in 2013 and beyond in CUB and would not sell CUB ex rights ~ Of course this would mean I’m increasing my shareholding in CUB through subscribing for the Rights and therefore also increasing the CUB weightage in my Portfolio

I suspect what most will do is to sell 1/4 th original holding right away ex rights at Rs 50 and replace these with the Rights Shares at Rs 20 ~ I also noticed heavy buying cum Rights at Rs 60 by those who are playing the Rights Game with  a  Financing and Fixed Return and Stag Mindset !  Their holding cost  will be Rs 52 /share => 4* 60 + 1*20 => 260/5=> Rs 52 ~ Therefore they may sell  when CUB moves to just Rs 55 and beyond to capture their  5 % absolute Interest Returns in the next  two to three months ~ Therefore in the Short Term there will be some Pressure on the CUB  Share Price ~ but will it drop towards Rs 40 ! ? I think one should take the risk it will not given the Valuations and Shareholding Situations that I’ve specified above

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