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Sunday, October 19, 2008

Stock Market News - Midcaps and Small caps Results Analysis


Quarterly results analysis: Contrary to popular perception, midcaps and small caps are announcing superb results in this highly unfavourable atmosphere. These are the stocks that were corrected by 60-80% in the last 2 months despite posting good results in the last 2 quarters. Long term investors should accumulate these scrips for better returns.


1. Tata Coffee reported 228% increase in net profit in September quarter but sales rose only by 26%. Tata Tea will also announce good results in the last week of October.

2. Compact Disc India: This animation Company once again posted bumper results. It announced 119% increase in sales while profits rose by 114%. Its shares are trading at a forward P/E of 0.5. Unbelievable valuations. That is bear market!

CMP: 34.8 (BSE); P/E: 1.4

EPS: 25; Book Value: 40.

3. Like all brokerage firms, India Infoline also reported very poor results.


4. Goa Carbon: Bumper results. Company posted a net profit of Rs 2.8 crore Vs net loss of Rs o.45 crore in Q2 of previous year. 1289% increase in 6-month net profit! Can it able to continue its high growth?

CMP: 65 (BSE); P/E: 2.3

5. Poor results: Elecon Engineering, Madras Aluminium, Finolex Cables, Kavveri Telecom, Sasken Communication, Novartis India, Ratnamani Metals and SBI Home Finance.

6. Mphasis and Satyam posted wonderful results. But will they keep momentum? I am negative on this sector because of "Obama factor". But they will participate actively in short term rallies.

7. FAG Bearings: Company posted outstanding results despite operating in unfavourable conditions. It reported 34% increase in sales while profits rose by 42%.

8. Sanwaria Agro Oils: Company announced 58.9% growth in net profit. Rs 23 crore Vs Rs 14.5 crore.

Investment ideas.....

Investment is all about common sense, keen observing and finding value. Keenly observe surroundings and find the emerging trends. Whether people are depositing more money in PSU banks out of panic? Whether you are seeing any rise in hospital visits? Whether people are consuming more alcohol to forget their problems? Whether there is any decrease in visits to multiplexes or Restaurants or shopping malls? Whether people are cancelling their expensive travel plans?

Defensive stocks Vs Growth stocks:

People generally tend to buy defensive stocks like HUL etc during panic situation. But long term investors should not do this mistake. Why? Do you want to satisfy with dividends? What is the difference in HUL price in 1983 and 2008?

EX. You buy HUL with 1 lakh and some growth stock with another 1 lakh. Your HUL money may become 1.1 lakh and growth stock money may become Rs 60,000 over short term. But after 2 years, HUL money is still at below 1.2 lakh levels while growth stock money will cross Rs 2 lakh. Another advantage is growth stocks are available at cheap valuations in bear markets while defensive stocks trade at premium valuations in falling markets. Just see how Google shares are rising after the announcement of good results.

Note: Don't give too much importance to indexes, short term moments and market capitalisation. Just see the stock and its value and buy for long term. Results season is the ideal time to find great Companies and build good portfolio.
Article from Stock Market Guide (Dr. Krishna) 
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