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Thursday, November 6, 2008

Investing in good Book Value stocks - News - Results - IKF Technologies

According to Brokers reports, many investors are buying stocks of the Comapnies which have more cash than their market capitalization. According to Economic Times, only 32 companies in BSE 500 have more cash than market capitalization. Is it a right strategy? Is it enough? There are multiple factors that will determine a stock worth for investment.

After Ranbaxy, Sun Pharma is facing trouble from FDA. Investors should carefully watch the situation because Sun Pharma is a good company to buy for long term. If you think that markets are overreacting, accumulate gradually. Unlike Ranbaxy, Sun Pharma has strong fundamentals. We will get a clear picture in the next 2-3 days.

Two things that will change short term scenario: Dollar fall and loan rate cuts. Dollar fall will slow down FII outflow (only short term) and loan rate cuts will increase domestic consumption and improve bottom levels of companies.

Positive economic news:

1. Rupee recorded biggest one day gain since 1988.

2. SBI cuts lending rates by 50% in 2 days. Public sector banks are reducing both lending and deposit rates. Will they change consumption pattern?

3. Medical tourism: Global economic crisis is good news for Apollo and Fortis healthcare as foreigners are opting for low cost – best treatment model of Indian hospitals.

Negative news:

1. Reliance Industry shutdown 5 polyester units to improve margins.

2. Stocks are piling up at steel companies due to less demand. Ispat Industries closed down Bulgarian steel plant.

3. Oil prices bounced back as Saudi Arabia cut oil production.

4. Real estate firms are facing as sales are down by 30-40% and will continue to fall more unless they cut prices.

Statements on economy and global crisis:

1. Obama will not act against outsourcing – Nasscom.

Q2 results analysis:

1. IKF Technologies: Bumper results. Bio-diesel Company announced 125% increase in sales and 158% rise in net profit. Its future prospects will depend on its fund raising capabilities and execution skills. If it succeeds, it will change the lives of investors forever.

Caution: Invest any amount in this Company as "Lost money". It is very difficult to judge about the future prospects of emerging small caps. High risk takers with 5-6 year investment duration can invest some spare amount in companies like IKF Technologies.

CMP: 3.1 (BSE)

2. Arshiya International: Excellent results. Logistics Company reported 63% rise in sales and 140% increase in net profit. High valuations are a serious concern. Accumulate around 70.

CMP: 99 (BSE); P/E: 30; Book value: 78.

Poor results: Panacea Biotech, Saregama India, Raymond and Asian Electronics (worst performance).

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