[VindyWheels]

SUN, it will depend on the swap ratio.

Strides Arcolab is a company I am interested in. Shasun has been acquired and will get merged. If you are investing 1 lac in Strides, ideally it should be equal to investing 1 lac in Shasun currently. With the swap ratio if you calculate, there would be minor difference only. Any arbitrage opportunity does not exist for too long.

Originally Posted by S_U_N

Hey Vindy,

What is your view about mergers/ acquisitions to the stock price of both the companies?

Say, for example, if Kotak acquires Yes bank. Would it benefit share holders of Yes Bank or would it be more beneficial to Kotak share holders?

The price per share of acquiring company is lower than that of the other company.

Faustus, I do not write in MC or anywhere else. Avanti's EPS of Rs 220 is an estimate based on management guidance which everyone has access to. I think that is a conservative estimate .

No, Avanti was not exporting shrimps, the major business is manufacturing feed for Shrimps. Shrimp is grown in farms in coastal area. The farmers buy the feed and grow shrimps just like agriculture. Feed is the highest cost item for the farmer and most critical. For 1 Kg of shrimp he will have to use more than a kg of feed. Avanti is now expanding its shrimp processing business and might start exporting shrimps at larger scale going forward. The next 2 years growth will be driven by feeds only.

India exports shrimp worth 20,000 Cr annually! But that's still small compared to the potential we have and the global demand. Apparently shrimp is considered a much healthier meat and is very popular in US.

Originally Posted by faustus77

Vindy
Hi
Thought of you when I saw Avanti at the upper circuit
Somebody else, name starting with the alphabet V, on moneycontrol posted about this years EPS of rs 220. Was it you?
Incidentally I have a vague recollection of a shrimp exporter in the doldrums because Japan had found their quality below par. This was years and years back. Was it Avanti?
Regards

[S_U_N]

Originally Posted by VindyWheels

SUN, it will depend on the swap ratio.

Strides Arcolab is a company I am interested in. Shasun has been acquired and will get merged. If you are investing 1 lac in Strides, ideally it should be equal to investing 1 lac in Shasun currently. With the swap ratio if you calculate, there would be minor difference only. Any arbitrage opportunity does not exist for too long.

Thanks Vindy. But what does this actually mean? Will swap ratio be announced only once the deal if finalized? If yes, by the time the advantage of getting prior information is lost.
Or, are you implying that until the deal is finalized, there may be no advantage of buying one over the other, since both will be the same eventually?
When Kotak merged with ING, around 1000 shares of ING were equal to 725 shares of Kotak.

[VindyWheels]

I thought your query was regarding cases where merger is already announced and the swap ratio is out.

If you expect a possible merger, then its always better to buy the cheaper company. For example if com A is trading at 5 PE and is expected to be acquired by com M which is a better com trading at 15 PE, then buying the 5 PE com A is better. As soon as the merger plans are announced the share price of A will go up. This is logical too as the assets of A are now expected to be put to better use by the management of M.

Having said all these, I have seen people trying to play such kind of deals based on rumours of mergers and end up losing money. I would never do this. When you can identify high quality companies with great growth potential, why get into all this?

Originally Posted by S_U_N

Thanks Vindy. But what does this actually mean? Will swap ratio be announced only once the deal if finalized? If yes, by the time the advantage of getting prior information is lost.
Or, are you implying that until the deal is finalized, there may be no advantage of buying one over the other, since both will be the same eventually?
When Kotak merged with ING, around 1000 shares of ING were equal to 725 shares of Kotak.

[Dry Ice]

Originally Posted by murillo

...

Originally Posted by VindyWheels

...

Quoting you guys to get some guidance. Reading up further on taxation part, I see that long term capital gains are non-taxable (for shares trading in Indian stock exchanges with STT paid for buy/sell transactions) and short term capital gains are taxed at 15% flat. Any dividends are non-taxable provided the 'dividend distribution tax' (15%?) has been paid by the company, something like TDS I believe.

Is the understanding correct? Also I assume that the same applies to equity mutual funds as well w.r.t long and short term capital gains.

[VindyWheels]

H, your understanding is correct with regards to stocks. I do not know about Mutual Funds..never invested in MFs and do not think I will ever do that.

Originally Posted by Dry Ice

Quoting you guys to get some guidance. Reading up further on taxation part, I see that long term capital gains are non-taxable (for shares trading in Indian stock exchanges with STT paid for buy/sell transactions) and short term capital gains are taxed at 15% flat. Any dividends are non-taxable provided the 'dividend distribution tax' (15%?) has been paid by the company, something like TDS I believe.

Is the understanding correct? Also I assume that the same applies to equity mutual funds as well w.r.t long and short term capital gains.

[drsingh]

Originally Posted by Dry Ice

Is the understanding correct? Also I assume that the same applies to equity mutual funds as well w.r.t long and short term capital gains.

Simple rules for Mutual Funds :

1.Direct plan to cut out commissions
2.Growth option instead of dividend option. Mutual funds have to pay 12.5 % tax if they pay dividends. If you need money, its better to withdraw some units after a year to avoid any capital gains.

[sidhu_hs]

Originally Posted by arjunbagga7

Hi everyone,
Im a final year engineering student, considering investing in the stock markets. Since, I have always been provided helpful advice from the members of the forum, I would like to ask the experienced players of stock market, how should I make a beginning in this regard. Books, Online sources or any other practice that you would like to recommend for a newbie into the stock market.
Also, which would be the best newspaper for a beginner ?

First and foremost, I am not very experienced or successful investor but would like to share some of what I have been reading lately.

What prompted me to write this post: http://arvindt.blogspot.in/2005/09/p...ay-bakshi.html

Why Invest in stocks: https://indianwallstreet.wordpress.com/

A forum similar to ours on stock market: http://www.valuepickr.com/ (You'll get a lot of chaff, hard finding grains these days)

Some advice and picks in value investing: http://value-picks.blogspot.in/

I think the last blog has been pretty widely shared here as well, but before you take the plunge, read this post on the effect of social media and forums on stock markets: https://safirpicks.wordpress.com/201...some-thoughts/

Last but not the least, I will say that a seasoned investor is the one which has survived at least one market crash. Moderator tsk1979 started this thread when the markets were at their zenith the last time around but he hardly posts here these days. If you read the first few pages of this thread, you may see what a crash feels like. And we are seeing increased activity as markets are doing well this time around not only in this thread, but on various blogs and across social media.

Also, as you are final year student and interested in stock markets, I would advise you to re-read the very first link I shared in this post. Prof Bakshi's BFBV course can be accesed here: http://www.sanjaybakshi.net/bfbv/

"Allocate more to stocks if you want to earn - less if you want to learn and lesser if you want to have just fun!" - Basant Maheshwari

[PatienceWins]

Originally Posted by VindyWheels

But I have a big concern. Promoter stake is currently at 57%. They want to sell enough shares to raise 1000 Cr capital for their new business venture - food processing business. They say seeds are a great business to be in and food processing might take 10 years...but will still end up bringing down their stake in Kaveri to 37% if they do sell off their stake to raise the said amount! I don't understand why they are in a hurry to deploy such a large sum in this new venture. This is a double-edged sword. If a Bayer picks up this 20% stake the stock price might shoot up. We do not know. I have brought down my allocation to 5%...will seek answers from the management if possible.

I see that you are following Kaveri. Any idea why the stock is correcting so much - corporate governance or just a bad quarter? Thanks

[Latheesh]

^^

Fall in revenue
Not doing provisioning for royalty payment to Monsanto
Panic selling
Weak monsoon
Pricing pressure and Govt. Intervention

They already dropped the plan of getting in to food processing business

Decided to wait and watch!

[Saanil]

Hi Guys,

Just wanted to run a few thoughts and get to know opinion of people here. I have read a lot about value investing these days and one of the most common things that emerged was that you are more likely to find bargains in stocks when everybody is looking to sell them. Currently the Metals & Mining sector is absolutely under pressure with stocks hitting their 2-3 year lows. Of course people have genuine reasons to sell them - commodity prices have fallen a lot, global demand is very weak, China is slowing etc.

Buffet has mentioned many times that cycles always happen in economies. Companies take lots of debt; expand capacities way above demand and then the marginal players are forced out of the market. One of the key reasons for decline in commodity prices cited is excess supply. Iron Ore, steel, coffee, Aluminum – all have declined massively in the past 12 months. Like any other cycle, this will also turn but nobody knows when – not even the so called research analysts.

I was thinking of monitoring the Metals & Mining Sector. What got my attention were 2 companies – NMDC (current price: 94) and National Aluminum Co. (NACL, current price: 31.5). I know these are PSU’s which are generally said to be inefficient etc. But any investment can be a good one if bought at the right price i.e. no company/sector has the birthright of being a good/bad investment – it all depends upon the price one pays for them.

What I like about them:

-Debt free companies
-Available at PE ratio of 8x-9x
-Lots of free cash flow in the past.
-High EBITDA and profit margins in the past.

Now the outlook for these companies is not good and is being reflected in the fact they have declined a lot (NMDC: -34% ytd, NACL: -41% ytd) and I feel as these companies post their quarterly results, people will get more negative on them. My thinking is that the commodity cycle should reverse. I do not know when but it should happen in my opinion. How do you guys feel about monitoring these stocks? Do you have any advice on this? I am not recommending entering in these stocks now, but I think one can get good returns if the commodity cycle reverses (knowing that one cannot perfectly time the market). In my opinion these should be on our watch list – would love to know what people think here.

[drsingh]

Originally Posted by Saanil

Hi Guys,


My thinking is that the commodity cycle should reverse. I do not know when but it should happen in my opinion. How do you guys feel about monitoring these stocks? Do you have any advice on this? I am not recommending entering in these stocks now, but I think one can get good returns if the commodity cycle reverses (knowing that one cannot perfectly time the market). In my opinion these should be on our watch list – would love to know what people think here.

Peter Lynch s strategy for playing cyclicals is to buy when stocks/sentiment is cheap and sell when consensus becomes positive on the particular cyclicals. Basically to get out with 50-60% gains.

Your thinking is good. I like MOIL from this space. It has more than 70% of market capitalisation as cash reserves right now.

And will continue to throw up cash and is sitting on large ore reserves.

[Saanil]

Originally Posted by drsingh

Your thinking is good. I like MOIL from this space. It has more than 70% of market capitalisation as cash reserves right now.

Wow! Thanks for the suggestion. The cash reserves are indeed huge. So just because sentiments are bad, the stock has come down so much. Will need to further study this.

[nowwhat?]

Originally Posted by Saanil

Wow! Thanks for the suggestion. The cash reserves are indeed huge. So just because sentiments are bad, the stock has come down so much. Will need to further study this.

Few things to note about MOIL. Firstly commodity prices the world over are on a downward trajectory and the bottom is continually being tested. A lot depends on China (or whether infrastructure spending eventually picks up in India), but there seem to be no signs of a pickup in the short term.

Secondly, MOIL mines manganese which is largely used to harden steel for the construction/infrastructure sector. For demand of manganese to increase, there must be an increase in the installed capacity of steel. Therefore MOIL is one stock that would pickup only when behemoths like SAIL or Tata Steel start expanding. AFAIK, SAIL's utilization is low these days.

Thirdly, while MOIL may have huge cash reserves (I haven't checked), this may or may not reflect that well on MOIL. For starters, it is a PSU and governments in the past have asset-stripped PSUs to finance the CAD. MOIL perhaps escaped because it is quite small. Also a huge cash pile may mean one is as successful as Apple and/or one is unable to use the capital to expand the business, i.e. return on capital (ROC) is low.

Disclaimer: I do not own any stock nor am I a stock analyst.

[drsingh]

Originally Posted by nowwhat?

Few things to note about MOIL. Firstly commodity prices the world over are on a downward trajectory and the bottom is continually being tested. A lot depends on China (or whether infrastructure spending eventually picks up in India), but there seem to be no signs of a pickup in the short term.

Secondly, MOIL mines manganese which is largely used to harden steel for the construction/infrastructure sector. For demand of manganese to increase, there must be an increase in the installed capacity of steel. Therefore MOIL is one stock that would pickup only when behemoths like SAIL or Tata Steel start expanding. AFAIK, SAIL's utilization is low these days.

Thirdly, while MOIL may have huge cash reserves (I haven't checked), this may or may not reflect that well on MOIL. For starters, it is a PSU and governments in the past have asset-stripped PSUs to finance the CAD. MOIL perhaps escaped because it is quite small. Also a huge cash pile may mean one is as successful as Apple and/or one is unable to use the capital to expand the business, i.e. return on capital (ROC) is low.

Disclaimer: I do not own any stock nor am I a stock analyst.

All said and done there is 'value' indeed. . Market cannot ignore cash reserves forever. The goal is to play the turnaround news/consensus and get out. It came down to 232 from 400. If cash continues to rise, market cannot ignore it forever .



When the prices stabilise, the value of ore reserves will rise too.

That's my line of thinking.

Another interesting turnaround play is REC. It is one of the largest NBFC in India lending to the power sector. Now there is also renewed focus on lending to Renewable sector where there are no fuel supply issues. When the sector turns around, this should do very well. OFS placement was at 320 a couple of months back and institutions were falling over themselves to get allotments.

Now nobody seems to care at 260
.Any thoughts /critique on my opinions welcome. Knowledgeable members, please feel free to poke holes in my thought process.

[nowwhat?]

Originally Posted by drsingh

The goal is to play the turnaround news and get out. It came down to 232 from 400. If cash continues to rise, market cannot ignore it forever.

I agree with you with a caveat. To give you one example, I invested in Satyam after it crashed because I believed the company had intrinsic value that did not erode despite the scandal. Only thing is it took me a long time (3-5 years) to make any money out of it. In the meantime, I tore my hair in frustration.

MOIL too has value, but when would the market recognize it is open to conjecture. Anyway my 2 cents, since I have been generally unlucky in timing the market.

I wrote the previous mail to Saanil primarily to explain where manganese stands in the supply chain.