Wednesday, June 17, 2009
Mohit has posted a query in the 'Comments' section regarding Fundamentals, Trading and Investment perspective on some good fundamental Mid-cap stocks like PFC, Kalindee, Videocon and Alok Industries.
Can you write something or suggest some stocks which are good at current valuations or say if you can give some buying range for long term stocks. What are your views on Alok, PFC and Kalindee Rail on CMP from trading and long term view. Thanks.
Closing Prices as of June 17, 2009:
Videocon CMP: Rs.175/-
Kalindee Rail CMP: Rs.176/-
Alok Industries CMP: Rs.23/-
PFC CMP: Rs.196/-
Speaking about long-term Value proposition of Alok, Kalindee, PFC and Videocon - all of these 4 stocks (mid-caps) seem to be a good bet even at current valuations when contemplated from long-term perspective.
Determining Value in Optimistic & Pessimistic Phases:
For these 4 mid-cap counters, what we have seen till now is their stock price performance from Sensex 8000 to 15000 journey, the period of journey which can be co-related with the times of crisis and global slowdown. We're yet to see these stocks run on steriods like other mid-cap counters, which could be witnessed in the next leg of big rally.
But, gradually, as the economy comes out of the crisis and credit problems, the stock prices of these 4 mid-caps counters shall reflect more exuberance in the next leg of the bull rally from here. In times of optimism, the basis of determining valuations is different from that of pessimistic times. During pessimism. investors factor in the company's debt ratio, forex management, cash flows, promoter pledging of shares among many other factors.
During optimistic times, investors tend to be more occupied with fundamentals and earnings of the company and most of all Prospects of the company going forward rather than micro-factors which come under surveillance during bearish phases. So, the next leg of the rally, could be more return accruing in these four lagging but healthy mid-cap stocks.
However, I am of the view that markets are a bit over-heated in medium-term perspective. So, it will correct substantially- if not now than at some point post-budget period. So, one can buy these stocks in a staggered approach rather than going in for bulk quantity, if the perspective is for long-term investment.
I may be wrong on my view towards markets and it can keep on moving higher even after Budget, but i need to hold some specific view for markets rather than going view less- and hence i take a stand that markets are a bit over-heated in the short-term and Budget would be the decisive event for the markets next big movement direction.
From Trading perspective also, all the 4 can be bought (especially Kalindee & PFC) around current levels with strict Stop Losses for your trades. Stop Loss for Videocon could be around 145 levels, Kalindee could be around Rs.135 levels, PFC could be around Rs.160 levels and for Alok it could be around Rs.18 level. These Stop Losses are only for Traders and not Investors.
Coming to the point of Ranges for Accumulation of these stocks, i would like to Again repeat that.... You should not have in mind the 'ranges' to buy for these stocks. Because that would ideally mean you're looking to TIME the entry into these stocks. And, there is no certainty that you will get these stocks at your desired prices. May be, it would be a better idea to re-view or hold such ranges for stocks which are extremely over-heated and you could wait for these stocks to correct substantially to start accumulating. Selective large-caps shows the tendency of being over-heated.
So, best approach would be to divide every Rs.10 that you wish to invest in to 3-4 parts and invest them on larger dips as the correction kicks-in. From VALUE perspective all the 4 mid-caps are still lucrative in terms of their stock prices. All are good fundamentals stocks and will provide very handsome returns during the next big rally. You must have patience to wait out until another such rally happens.
(Note: My forward looking statements in this posting for these 4 mid-caps does not mean to convey that they're roaring Buys at current prices. Just that their stocks prices could still be value yielding from current prices in the long-term horizon. One should remember, that if markets correct substantially in future, these stocks wont be able to show any contrary trend to the markets and even they will correct. May be, their correction would be limited to some extent based on the value in these stocks.)
Investors can also add Gitanjali Gems, Indiabulls Real Estate and Time Technoplast to the list of 4 mid-caps mentioned above for the long-term Value Investment perspective.
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