Now that I have managed to irritate some of you, by rejecting stocks which you hold, let me push it still further J

Torrent cables: Erratic performance in the past. Loss in the current year and some years in the past.

TRF ltd: Negative cash flow. High accounts recievables being funded by supplier debt

Bharat bijlee: Poor cash flow. Rough estimate is 20% of net profit, hence the valuation is double the current PE. Fairly valued.

Allied digital services ltd: Raised new capital, majority of which has been used in accounts receivables

Ganesh housing: Fully valued or overvalued. Constantly raising capital for growth

Supreme industries: very low free cash flow and low margins.

UB engineering: Negative networth. Business turned around in the last 2-3 years.

Some quarterly results

Some of the companies, I hold currently have declared their quarterly results. A quick review and some thoughts

VST industries: The company reported a 40% increase in topline and 50% improvement in bottom line. Volume growth seems to be driving the top and bottom line in case of this company. I do not have access to the reasons behind it and hence it is difficult to evaluate the sustainability of the performance. I need to analyze if the growth is being driven by some new products as it is unlikely that the existing products would suddenly do so well.

Asian paints: The company is now firing on all cylinders. The company has reported a 100%+ growth in net profits. This has been a long term holding for me and as I have written in the past, I am also an ex-employee of the company. I am not surprised with the performance of the company. The company has a long history of good performance and has increased its market share and competitive advantage substantially in the last few years. The valuations of course reflect the strength of the company

NIIT tech: The company reported a 12% decline in topline and similar decline in the bottom line. The key reason behind it are the hedging losses. The company has been able to improve its operating margin during this period. There is nothing much to get excited in the current quarter results and with rupee appreciation, it is likely that the negative impact of the hedges will be reduced. I do not expect much in terms of the performance, which has clearly been a disappointment for me. I have marked down the intrinsic value of the company accordingly.

Maruti Suzuki: The company reported a 45% increase in topline and 90%+ improvement in net profits. The topline has been driven by domestic growth and major increase in exports. The bottom line has been driven by moderation of various commodity prices. The performance has been as expected in view the good monthly sales numbers and the stock price has already factored in this performance. As I have written earlier, I have started exiting this position.

I will be posting on the results of the other companies in the coming weeks as they are published and I am able to complete my review of the numbers.

The period from Oct 2008 – Mar 2008 was a no brainer period – as long you could suppress the sinking feeling of watching your holdings drop everyday. As I had gone through a similar phase (though longer, but equally mind numbing) in 2001-2003, I was better prepared emotionally to deal with it. I had promised myself in 2003, that I will ignore the doomsday predictions and invest a meaningful amount of money when and if the crash came.

As they say, be careful what you wish for. I got my wish in 2008 and more. So during this period it was a matter of picking a decent company and investing in it. The valuations did not matter much as almost everything was dirt cheap, as long as one could be sure that the company would survive the likely recession and prosper in the future. This period did not last too long and we have been on an upswing since April 2009.

The situation is now completely different. I have never seen a market where almost every company, especially mid-caps and microcaps are doing well too. During the previous bull market in 2007, there were pockets of undervaluation as the markets were focused on the hot sectors – realty and infrastructure at that time. So one could find undervalued IT or midcap companies easily.

Sudden corrections

That situation has now changed completely. The correction in undervaluation for several companies is startling. I have seen companies like Hawkins cooker, VST and countless more correctly suddenly by 40-50% or more in a matter of days. This is more pronounced in case of companies which have reported good results in the previous quarter.

The upside is that most of us are sitting on pretty decent gains for the year, far more than we expected at the beginning of the year. The downside is that the number of attractive opportunities are shrinking by the day.

Modified approach

I have been running filters and have done an initial analysis on some 200 odd companies and can hardly find anything which would send my pulse racing. There are a few decent opportunities out there and one could invest a moderate amount of capital in it, but nothing in which I could commit something meaningful and be confident about it. One option could be to do nothing and wait till something really attractive comes up. The other alternative, which I may end up following, is to buy the entire set of moderately attractive ideas in equal proportions. The end result would that each one of these ideas may not do well, but the group as a whole should give me above average returns.

I plan to publish a few of these ideas in the coming weeks, provided they do not run up in the meantime. However, as I promised in my previous post, the top 1-2 ideas are reserved for those who have already contributed or plan to do so in the near future.

An update on donations

I have received a commitment of around 15000 Rs (rupee equivalent) from around 13 readers. Needless to say, that I am very pleased with the results and would like to thank them (which I have already done personally).

A Happy Diwali

Finally a happy Diwali to all the Indian readers and may all of us have a prosperous year ahead.

I recently added an ad for CRY – Child rights and you, a non-profit organization which works as a channel or a link between donors like us and field workers, who work for child welfare. You can find more on their mission and activities on their website here.

I have added the link on the side bar under the title – Donate. I am also adding the link in this post in case you are interested in donating
http://www.cry.org/mainapp/shop/donation.aspx.

I will add a few more charities on my website in the future based on how convenient it is for the readers to donate and based on the effectiveness of these charities. My personal preference would be for charities which work for child welfare and are effective in doing it (do not waste the money on overheads).

I personally do not have any means of evaluating a charity and have picked CRY as I have worked with them in the past and have found them to be professional and focused on their mission.

Additional offer
I have not charged a dime from anyone for all the content (now over 400 posts) I have posted for the last five years. The ads you see on the website is the result of fiddling around and does not bring in any serious revenue.

The content on this website, good or bad, is original and not copied from anywhere. It typically takes me an hour or more to write some of the posts and the investment ideas are generally the result of the more than 20-30 hours of direct analysis and much more of background reading and study. It is my assumption that I have delivered some value (though you can disagree on it 🙂 ) to the readers over time, for which I have not charged and do not plan to charge in the future.

I plan to make an exception to the above plan in one specific case. In the future I plan to publish or provide a few investment ideas at regular intervals in exchange for donations to the charities listed on this blog. If you make a donation of a minimum of 1000 Rs or 30 dollars, and send me the receipt by email, I will in exchange email, a detailed analysis of a stock to you.

Whats in it for me?
That would be a very valid question from your end. For one, the offer is voluntary and as 97% of the content is free, you may not miss a lot. However you can look at it as a win-win offer too. If you donate, a child’s life would be changed and in exchange you may get a decent investment idea which may make some money for you . I cannot assure you that you will make money from my idea, but I can assure you that I will share an idea, only if I am investing in it.

I will be writing in detail on this in future posts with more options on this. Please leave me a comment or email if you can think of a good idea by which both the readers and the charity are benefitted.

Commerical advertising
You may be noticing some ads on my blog too. I have been experimenting with some ads lately to cover my hosting and other small expenses. I am personally not associated with any of the firms advertising on this blog and do not have a financial relationship with any of them, other than the click thru revenue or fixed fee for advertising on the blog.