Wednesday, June 17, 2009

Mid-cap Review: Alok, PFC, Kalindee & Videocon


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.

Bulls,
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.

Going Slow:

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.

Trading Perspective:

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.

Staggered Approach:

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.

Disclaimer: All data, content and/or reports posted by Viral Rajnikant Dholakia on this site are only for information and educational purpose of visitor/readers of this blog. It does not constitute to be a recommendation/offer/advice to buy or sell assets/securities in any form. Individuals/organizations are requested to take an informed call by consulting their Financial Advisor before acting on any matter/data published on this blog. This blog does not warrant of any kind of accuracy, adequacy and completeness of data, ideas or thoughts published in it. This site and Viral Rajnikant Dholakia assumes no responsibility or liability or loss or damage of any kind/nature for your trading and investment decisions and its consequent results.

9 comments:

DARK KNIGHT ABHAY said...

nice post..

but i think the current valuations are not for investing ,not even for long term...though it may take a long time for the market to go near the previous valuations but it will do,BELIEVE THE STOCK MARKET AND IT WILL NOT BREAK YOUR FAITH..

all it will take is patience..lots of lots patience..


thats wat i THINK

ONE QUERY..

i had l&t at 950..
i sold my 30 % of l&t at 1400
after 2 days it rose to 1650..wat i should have done,sell again or wat.?

sratergy for investment plan is gr8..but it do have so limits..


can u plz suggest the readers and me a better stratergy .if any ..

DARK KNIGHT ABHAY said...

dear viral

i have short-term perspective on l&t

Mohit said...

Thanks Bulls, As always great explanation.

Thanks.

Mohit.

Shabu's said...

Good work Viral... keep it up

Brad Zurich said...

Hi...Thanks for posting this resourceful post. It has something for everyone to learn and incorporate into their day trading routine.

Thanks also for sharing and spreading your knowledge something you would have learnt through many years.

Sunil N. Karande said...

Alok Ind cash flow is very good,but the debt ratio is above 3.50...bull what u say on this?

Viral Rajnikant Dholakia said...

Dear Sunil,

You have rightly pointed out that Alok Industries is a company with High Debt equity ratio.

This point was very well pointed out by me in my recommendation on Alok Industries dated May 14, 2009.

http://stock-mkts.blogspot.com/2009/05/value-picks-mid-caps-for-long-term.html

For you, I am re-producing the paragraph in the posting linked above:

Major Concern for Alok Industries: The major area of concern for Alok Industries is it's high Debt-Equity Ratio. Though, with the recent Right issue by the company, the high debt ratio is likely to moderate to some extent. However, most of the company's interest liabilities for its long-term debt is subsidized under textile promotion scheme.

Santy said...

Viral,

You made a mention of TIme technoplast , Gitanjali gems and IB real estate as picks in mid cap category. I always wanted to add TT and Gitanjali . Last weeks correction gave me hope.DO u think we can buy at the current price or wait for more correction.In case if we should wait then what would be a realistic entry point according to you.

Thanks,
Santhosh

Viral Rajnikant Dholakia said...

Dear Santy,

I have made a mention about I.bull.Realest and TT as an Investment bet from the mid-cap category.

The stocks look good even at current prices, but from long-term view.

It may be quite possible that, when markets correct substantially these stocks wont be able to resist on the down side and may witness some correction along with markets.

But, if you have really 2-3 years view, no problem in buying these 2 mid-caps at this point in time.


Accumulation Range:
I.B.Realest around Rs.140-180
Time Technoplast Rs.28-34
Buy in small lots.


Keep Tracking following Mid-caps if there is any substantial correction in the markets in the medium term period:

1) Thermax
2) Videocon
3) Alok
4) I.B.Realest
5) Time Techno
6) Everest Kanto