Sell stocks of ABB - flat medium term future

Sell stocks of ABB from medium term perspectives. ABB Ltd. recently posted a 54 per cent fall in quarterly net profit on certain exit costs in some projects and increasing pricing pressure in the market.

ABB Ltd posted a net profit of Rs 38.3 crore compared to Rs 83.6 crore a year ago, on a marginal net sales drop of 4 per cent to Rs 1,446 crore in April-June quarter.

Although ABB management has given an open offer to accumulate the stock. But it seems that the ABB group is increasing its stake in ABB with only a long term view, considering India’s strong growth outlook. There are no near term drivers for increasing the stake. The company does not have any plan for significant capex in the near term. For the near term, the company seems concentrated in ramping up of production in its recently launched facilities.

Order intake in the first half CY10 looks weak but this is expected to improve in the second half. Order intake need to increase by two third in the second half in order to achieve the projected annual growth rate of 15% in CY10.

Profit margin is expected to improve in CY11 due to exit from rural projects, better supply chain management and other cost cutting initiatives. However, the margin pressure is likely to continue in the immediate term due to increased competition in the T&D (Transmission & Distribution) segment.


Stock looks like has entered in downward trend since the results were announced at the end of July.

Looking at the results, EPS expectations are at Rs.26.20 for FY11. Keeping this in mind, recommendation is to sell stocks of ABB. Support/comfortable buying opportunity could be around Rs. 630 levels.

Small Cap Stock To Buy : Medi-Caps

This is one small cap stock to buy which could fetch excellent returns for you in medium and long term.

Medi-Caps Limited is flagship company of Medi-Caps Group. It is one of the largest manufacturer of empty hard gelatin capsules in terms of manufacturing capacity as well as market capitalization in India. Company was incorporated in 1986.

Company's sales turnover for past 5 years (2006 - 2010) does not shows much growth but still it has managed to grow from 17.37 to 20.70 Crores. Don't forget the recession period in between. Being associated with medical and healthcare sector makes this business recession proof. Expense cuts in medicine supplies is the last thing anyone would do in life and this is the strength of all medicinal businesses.

But this is not the only reason to buy stocks of Medi-Caps. EPS for this company in year 2006 and 2007 were Rs. 20.32 and 25.92 respectively. Company's current EPS stands at Rs. 11.32 due to higher expenses.

Medi-Caps Limited has announced that the company has entered into a Joint venture with Mission Pharmaceuticals for setting up a plant at SEZ in Pithampur (District DHAR) for manufacturing softgel Capsules with the total proposed investment of Rs 20 crores. Further, the company has informed that out of the total proposed investment, it has already contributed Rs 55 lacs in the current financial year.

Company's total investments as per March 2009 data shows Rs. 44.67 crores. Total networth stands at Rs. 54.26 crores. Whereas company's market cap stands at only Rs. 26.33 crores. Book value is at Rs. 184.28

Medi-caps stock looks like a very cheap stock on valuations. The total valuations of company workout to be something like this. current market cap of company + cash investments + valuations of proposed investment (could be 30-40 crores in long term) = 26+44.67+30 = 100 crores

I would remove the Rs. 30 crores future valuation from this calculation. Current actual valuations stand at Rs. 70 crores against market cap of 26 crores. This gives good target stock price for medium term. Including valuations of proposed investments, stock could fetch excellent returns in longer term. Medi-caps is a definite stock to buy for mid and long term.

Stock to buy : Wockhardt

Here is a stock to buy as long term investment. This is a turnaround story which appears to be a value stock and this stock investment has a potential to give you good returns.

Wockhardt Limited (WL) is a subsidiary of Khorakwala Holdings and Investments Private Limited. The geographical segments of the Company are India, the United States/Western Europe and Rest of the World. The Company’s subsidiaries includes Wockhardt Biopharm Limited, Vinton Healthcare Limited, Wockhardt Infrastructure Development Limited, Wockhardt UK Holdings Limited, CP Pharmaceuticals Limited, Wallis Group Limited, The Wallis Laboratory Limited, Wallis Licensing Limited, Wockhardt UK Limited, Wockhardt France (Holdings) S.A.S., Girex S.A.S., Niverpharma S.A.S., Laboratoires Negma S.A.S., DMH S.A.S., Phytex S.A.S., Scomedia S.A.S. and Mazal Pharmaceutique S.A.R.L.

This company had faced big financial distress in year 2008-2009 due to it's big forex losses. The company is still not out of this problem yet. But it is going through the restructuring process under which company recently sold off it's land in Mumbai fir Rs. 200 crores. Company is also selling it's non strategic assets to meet financial needs.

Wockhardt is a pioneer in Insulin business. After restructuring of business, it is expected to carry a debt of Rs. 3500 crores. It's enterprise value is expected to be around Rs. 8500 crores. At current stock price of Rs. 238 market caps is approx. 2600 crores. This clearly shows the discount at which Wockhardt stock trades in stock market. Compared to other pharma stocks like Ranbaxy, this is a stock trading at 50 - 60 % discount.

If the restructuring goes as per company's plans, EPS for FY 11 would be around Rs. 11. Two - three years from today, company could be posting EPS at least Rs. 20. Wockhardt was a consistent dividend paying stock till it got in trouble in 2008 due to overseas acquisitions and forex losses.

The stock has recently run up a lot. If it corrects and goes below 200 levels, on can buy stocks at those levels.

The only worry is, restructuring could take some time. With valuations and all facts discussed, it is visible that stock is a turnaround story and carries potential to at least double in 2 - 3 years. It is definitely a stock to buy for long term.

US stocks plunge .. Whats next in stock markets?

U.S. home sales have fallen for the third consecutive month to the lowest rate since 1999 and this has pushed down stocks and fueled fears of a 'double dip' recession in the housing market. In addition to this, U.S. stocks have fell for a fourth straight day and they have closed at their lowest levels in past seven weeks.

The Dow Jones industrials ($INDU) briefly dropped below 10,000 but recovered a bit to end the day down 134 points, or 1.3%, to 10,040.

This is an effect of end of a popular government stimulus program which has drove home sales in July to their lowest levels in more than a decade and has fueled fresh concerns about the economic recovery. If this leads to double dip recession, you know where the stock markets could possibly go. The only direction could be southwards.

What would be direction of worldwide stock markets now? I recently came across an article which states why the U.S. stock markets could crash in September. And if US stock markets go crashing, you don't need any god to tell you what would happen in Indian stock markets!

Checkout: Is another market crash coming?

U.S. stock markets are running at earnings ratio of 20 whereas historical ratio has been around 16. Same is with Indian stock markets. Valuations seems to be on higher side. NIFTY P/E ratio is at 23.13 as on 24th August which I feel is on higher side. Better to have cautious approach in such times. Better to wait and watch.

Rakesh Jhunjhunwala Portfolio Updates 2010

Rakesh Jhunjhunwala has reduced stakes recently in some companies such as JB Chemicals, Mid-Day Multimedia, Praj Industries, Rishi Laser, Titan Industries and Vadilal Industries. These conclusions are based upon declared shareholding patterns of Rakesh Jhunjhunwala portfolio companies in 2010 till now.

Praj (nearly 16,000 shares sold) and Titan Industries (around 2 lakh shares sold) appears modest, in other four stocks Rakesh Jhunjhunwala has reduced his stakes to below 1 per cent.

In case of Mid-Day Multimedia, Jhunjhunwala sold his stocks (4.26 per cent for Rs 8 crore) a month before the company announcement of merger of its newspaper business with Jagran Prakashan.

Eight stocks in his portfolio underperformed the broader market (BSE 500) while the rest 18 generated positive returns with VIP Industries, Agro Tech Foods, Prime Focus and Rallis gaining above 30 per cent in the quarter.

In cases of JB Chemicals (where he held 1.48 per cent in the January-March quarter), Rishi Laser (held 4.45 per cent) and Vadilal Industries (held 2.78 per cent), there is absolutely no mention of Rakesh Jhunjhunwala or his associates in their latest shareholding patterns. These could also be stocks he exited. It is quite likely that he has completely exited some companies whereas in others, he reduced holdings below the 1 per cent mark, which is why his name doesn’t figure in their shareholding patterns.

Rakesh Jhunjhunwala is known to exit when stock valuations peak out, might have exited JB Chemicals (stock rose 25 per cent during April-June), Mid-Day Multimedia (15 per cent rise) and Vadilal (50 per cent rise) observing a rally in these shares.

Two stocks where Jhunjhunwala hiked his stakes in the April-June quarter were Geometric and VIP Industries. Geometric saw almost 95,000 shares added to his portfolio while in VIP Industries, he added 3.8 lakh shares to his portfolio within the three-month. The stock rose 25 per cent in the past fortnight.

Many investors in Indian stock markets follow stocks in Rakesh Jhunjhunwala portfolio. Karur Vysya Bank, Lupin, Crisil and Hindustan Oil Exploration are some of his discoveries.

Checkout: Rakesh Jhunjhunwala Portfolio

Rakesh Jhunjhunwala portfolio did not show any change in 22 other portfolio stocks such as Agro Tech Foods, Bilcare, Geojit BNP, ION Exchange, Kajaria Ceramics, McNally Bharat, Provogue, Rallis India, Strides Arcolab, Viceroy Hotels and Zen Technologies.

It is heard on streets that Rakesh Jhunjhunwala is buying stocks of Kingfisher Airlines. Not seen his name yet anywhere in shareholders. Also, Rare enterprises name appeared in bulk deals list of Visaka industries. I would post the exact numbers upon confirmation.

Should you buy IPO of Gujarat Pipavav Port ?

Gujarat Pipavav Port (GPPL), a developer and operator of APM Terminals Pipavav port, is coming out with its Rs 500 crore Initial public offering on August 23, 2010. Should you buy IPO of GPPL for investment? Let's checkout.

Issue Open: August 23, 2010
Issue close: August 26, 2010
Price Band: Rs. 42 - Rs. 48 Per Equity Share
Minimum Bid Size: 130 Equity Shares
Face Value: Rs. 10 Per Equity Share
Issue Type: 100% book building
Maximum Subscription Amount for Retail Investor: Rs. 100000

GUJARAT PIPAVAV PORT IPO:
Gujarat Pipavav Port (GPPL) is the developer and operator of APM Terminals Pipavav, India's first private sector port, which has multi-cargo and multi-user operations. GPPL have the exclusive right to develop and operate APM Terminals Pipavav and related facilities until September 2028 pursuant to the Concession Agreement with GMB and the GoG.

Mundra Port and SEZ Ltd (Mundra) is another company in similar business but they are not comparable as GPPL is smaller and provides limited services comparing to Mundra which has SEZ and other assets. GPPL has a lower margin as compared to Mundra as the company’s utilization rate was lower and it was incurring costs to expand capacity and relocate its LPG cargo ports. Going forward, with the operational efficiency, startup of LPG cargo services and lower debt burden, company could improve it's operating margin and profits substantially.

GPPL is backed by a strong promoter group - APM Terminals, which is one of the biggest terminal and port operators in the world and the IPO grade assigned to the company takes this into account. APM Terminals brings to the company technological expertise, best practices in port operations, and a strong and experienced management. APM Terminals Pipavav enjoys favourable oceanographic conditions, well-developed infrastructural facilities, and good rail and road connectivity to the hinterland, as per CRISIL notes.

IPO Grading / Rating:
CRISIL has assigned an IPO Grade 4 to Gujarat Pipavav Port Ltd (GPPL) IPO. This means as per CRISIL company has 'Above Average Fundamentals'.

GPPL has long term growth prospects and they have a scope to expand the margins. Investors may buy IPO of GPPL with long term horizon in mind. Looking at above average fundamentals, listing gains are also possible.

Draft red herring prospectus for Gujarat Pipavav Port IPO is here.

US Stock Markets plunge: Jobless claims and key manufacturing indicators worsen

It was the day of bears in US Stock markets. Jobless claims have increased. Key manufacturing indicators have worsen. Fear of double dip recession has hit the US stock markets.

For almost whole of the day, stocks in US Stock markets were sliding so badly that there was talk that the slump could turn into one of those big sell-offs that could leave investors just plain terrified.

Check this out on MSN: Dow falls 144 as fear slams stocks

A few headlines to worry about American stock markets are:

Jobless claims rose 12,000 to 500,000: It's further proof that the economy has been slowing for the last few months.

Manufacturing declined in the Philadelphia Federal Reserve Bank District: The bank's general monthly manufacturing index fell from 5.1 in July to minus-7.7 in August. This index is closely watched because it tracks the national manufacturing trends closely.

Last but not least: The S&P 500 has a technical breakdown - Last week, the index, which represents about 75% of the market capitalization of the entire U.S. stock market, fell below its 200-day and 50-day moving averages.

All these things are enough to at least worry about American economy and stock markets. And it is a well known fact that when American stock markets shake, world stock markets dance to it's tunes! Cash is King ... At least for time being!

Call-center jobs returning to US & IT Stocks

One more bad news for Indian call centers and to an extent for IT companies too. I had recently written an article "Should you buy stocks of IT companies for long term?" referring to Another Proposed Law To Stop Offshore Outsourcing which is called as "Stop Outsourcing and Create American Jobs Act of 2010". Here is another news that could be troublesome for Indian Call centers and maybe for IT companies too.

The recession in America had reached at it's peak last year. It lost roughly 8 Million jobs to recession. Yes, that's 8,000,000 jobs! And since loosing these jobs, American companies have been able to create only 500,000 jobs back in economy. Rest of the jobs are still not in economy and American unemployment rate is at staggering 9% and increasing month by month.

This depressed economy has reduced operating costs so much that Indian outsourcing industry has not remained as attractive as it was 10 years back. People in America are demanding all these jobs back in their country and they are ready to accept the jobs at lower wages. The most basic motto behind outsourcing jobs to Indian companies was to save on costs. Now that cost is coming down for Amercian companies in the form of lower wages. Plus they have lot of advantages such as no cultural difference, no language trainings, no accent trainings, no hassles and frustrations for American customers to understand non-American English. The list is quite long. Many of the rural American areas are almost matching the cost of Indian labor and operation costs.

Checkout the latest news from US about this here: Call-center jobs returning to US

Why am I writing this here? On Indian Stocks News? How is it gonna affect stocks? And which stocks?

Most of the giant IT companies today have call centers as their integral part of business. Wipro, Infosys, HCL ... they all have it. And that division is going to get affected in long term. if not affected, they would certainly not grow at the historic growth rates for sure. Same is applicable to an extent in software services domain. Although not immediately, in long run. The "Stop Outsourcing and Create American Jobs Act of 2010" is set to make entry this year and if it gets passed, it is going to hurt all the outsourcing from America.

All in all, I would like to repeat my opinion: I strongly feel that it is going to be extremely difficult in future for Indian IT companies to even keep up the growth rates they are accustomed to in last 10 years. This ultimately is going to take toll on their overall profitability and profit growth. The kind of explosive growth experienced by Indian IT companies in past few years could stall in future and so would slow down the growth of their stock price.

Finding a multibagger stock out of Indian IT companies stable is going to be extremely difficult in future. It is my gut feeling to not to keep my portfolio relied on IT stocks for growth. I would be glad to know your opinions, you may use comment form below to post your opinions.

Checkout: Should you buy stocks of IT companies for long term?

Rakesh Jhunjhunwala : India's growth rate most consistent

Rakesh Jhunjhunwala recently appeared in ET NOW Markets Summit 2010 on 6th August. He has opined that India's growth rate has been most consistent among all Asian economies and it is going to remain same in future.

Talking about Indian stock markets, he is of opinion that it will make a new high in this financial year itself. American dollar is going to be of paper value and gold will be glittering. Checkout the video.



Many investors in Indian stock markets track & follow Rakesh Jhunjhunwala portfolio religiously.

CHECKOUT: Rakesh Jhunjhunwala Portfolio

Stock investing tip : Buy stocks of Dabur India for short term

This is a stock investing tip to buy stocks of Dabur India for short term time frame. The target price could get achieved in one to two months. Dabur is one of the good FMCG stock as everyone knows. This tip is purely based on analytical indications.

Dabur India touched it's 52 week high recently at Rs 218.95. 52 week low was at Rs 121. Current EPS is Rs 4.87 and P/E stands at 41.37. Although P/E ratio looks high, FMCG stocks have always been considered as safe stocks in stocks markets and so command a higher P/E.

If you look at the 6 months chart, support line is around Rs. 195 which could be considered as stop loss. The target once again could be near to it's 52 week high i.e. 218. This levels provides moderate amount of returns in short term i.e. 1 - 2 months.





To remind you again, this is a stock investing tip for short term (1-2 months) only and not a swing trading or trading opportunity.

One thing to keep in mind is current stock market situation. US markets have tanked today (Wednesday) on the cues of big trade deficit. Indian markets too are looking week since past 2 trading sessions. Take a decision based on market conditions. Do not buy stocks in falling markets immediately today (Thursday). Wait to get a signal on stock market directions.