[avingodb]

Originally Posted by Octane_Power

I didn't know that the stock's price is reduced after a company issues bonus. I thought that happens only when the stock is split.

Does the price reduction happen after bonus issue too?

-Bhargav

If I know it right, after bonus, the face value does not change, whereas it changes after a split.

[VKumar]

Okay guys, during the days of demonetization, I gave a good amount to a friend who plays the stock market. I, personally, have near zero knowledge of the market and have withdrew around 50% of the amount, which has grown around 17% since October 2016.

Now I am planning to try my hand into the same and hence studied about various companies and sectors. Finally I have decided to put a part in the pharma sector, for around 2-3 years long term. As of now, I have zeroed down on Aurobindo Pharma and Natco.

Additionally I have zeroed down on some auto ones which include MSIL, TVS and Minda.

What you guys opine? And any suggestions to follow?

I have gone through the wonderful thread started by Smartcat too.

[SmartCat]

Originally Posted by VKumar

Now I am planning to try my hand into the same and hence studied about various companies and sectors. Finally I have decided to put a part in the pharma sector, for around 2-3 years long term. As of now, I have zeroed down on Aurobindo Pharma and Natco.

Natco is one stock that is going against the current pharma trend. But it also one of the most expensive pharma stocks around. Because of product pipeline, good stuff expected in FY19 - 20. Don't like Aurobindo much because of poor dividend payout ratio. However, it is a reasonably priced stock.

Because of certain headwinds (pricing pressure, FDA issues etc), funds are flowing out of the pharma sector in the short term. Since the trend is down, you might even see a further 20% drop in stock prices. But if you can hold on for atleast 3 years, then it might be a good buy.

Don't go all guns blazing into the pharma sector - instead, spread your investments over time.

Additionally I have zeroed down on some auto ones which include MSIL, TVS and Minda.

All are good, but all are expensive. Each of the above companies have great financials and are expected to post strong (20 to 30 percent per annum) profits over the next 3 years.

Invest small amounts every month, but be aggressive if there is a correction.

[Ferrari1976]

Originally Posted by smartcat

All are good, but all are expensive.

Smartcat, How do you determine if a stock is expensive or cheap (in other words, how do you arrive at the intrinsic value of a particular company?)? Is it just their PE ratio or something more?

Thanks.

[SmartCat]

Originally Posted by Ferrari1976

Smartcat, How do you determine if a stock is expensive or cheap (in other words, how do you arrive at the intrinsic value of a particular company?)? Is it just their PE ratio or something more? Thanks.

Depends. If a company has a very stable earnings growth history - that is, profit growth every single year like Maruti or Infosys or Asian paints or HDFC Bank - then you could just look at trailing PE, and compare it with its past growth rate and also estimated future earnings (based on brokerage reports).

For companies with uneven profit growth history, you need to take a different approach - along with trailing PE and estimated future earnings, one should also look at dividend yield at current market price. NIFTY has a dividend yield of 1.5%, so a stock you buy should ideally have a dividend yield of more than 1.5%. For small companies (not exactly blue chips), I also look at price to book value and growth in book value.

Over a long term (say 10 years), growth in stock price will be more or less equal to growth in networth (book value).

[Octane_Power]

Many good stocks are at/very close to their 52-week high. What do you guys think? Is it fine to start investing in these (chosen) stocks on a monthly basis even at the current levels?

Any opinions?

-Bhargav

[VKumar]

Originally Posted by smartcat

All are good, but all are expensive. Each of the above companies have great financials and are expected to post strong (20 to 30 percent per annum) profits over the next 3 years.

Hey Smartcat
Taken your word and put my money in diverse sectors. Now I have a question for you.

How people determine that any particular stock is undervalued? Recently I had someone (I don't know the name) talking everything keeping undervalued stocks as the center point.

[SmartCat]

Originally Posted by VKumar

How people determine that any particular stock is undervalued? Recently I had someone (I don't know the name) talking everything keeping undervalued stocks as the center point.

1) You get 4% pre-tax interest on your savings account. But if you get 4% dividend yield (tax free) when you invest in a stock, then I consider it undervalued.

2) Any stock that trades at or below Price to Book value (P/BV) of 1. This means theoretically, if the company shuts down tomorrow, you will still not lose any money because (assets minus liabilities) = marketcap.

3) If a company has historically grown at 20% per annum and is expected to grow at 20% per annum in the future, but it trades at 10 or 15 PE, then it is undervalued.

There are other ways to find out if a company is undervalued, but these are difficult to detect.

1) Cash in hand greater than 50% of market cap.
2) Loss making companies raking in big profits because of structural shift in the industry (Eg: sugar stocks going up 10 times in 2 years, because of supply demand scenario)
3) Holding company discount. Company A (market cap 10,000 cr) owns 75% of Company B (market cap 10000 cr)

[shetty_rohan]

Originally Posted by VKumar

Hey Smartcat
How people determine that any particular stock is undervalued? Recently I had someone (I don't know the name) talking everything keeping undervalued stocks as the center point.

Originally Posted by smartcat

1) You get 4% pre-tax interest on your savings account. But if you get 4% dividend yield (tax free) when you invest in a stock, then I consider it undervalued.....

Hi Smartcat,
Can you please suggest couple of good undervalued(preferable not PSU) stocks?

[tanny]

The way stock market operates will always remain a mystery to unravel and learn every day.



But in general its more about the future expectations than past. All ratio’s PE/PEG/Div Yield/ROE/ROI etc are past performance of company which may hold true in future is always subjective. A sector or company which appears cheap today on these parameters may fall further as well depending on how it does in future. A overvalued stock my rise further as well if it does better than expectations.



A PE of say 50 which looks good today, could drop to 30 in a year if company has good year. A PE of say 10, could rise to 15, if company has a bad year



Something which is available at lower value would generally have reasons for the same. If its cheap its cheap for a reason.



Stock Market will throw bargains of under valuations (“value” may mean different things to different people) from time to time, so one has to hunt for them. Volatility is only permanent thing, if you can learn to profit from it, then you can sail in markets. But one must not be fishing for rotten stocks, it could lead to eventual loss only.



Only thing from my perspective, which I can say, is over leveraged companies (high debt) are not good, companies which can sustain/increase their sales/profit in future are the company to go for . but one has to judiciously spread our buys over time when PEG is not too high , buy the stock on dips and hold for long term.



And yes, Trading and Investing for long term are two different ball games. Must not be mixed.



Last, there is no holy grail. What methodology works for one may not work for others.


Thanks,
Rahul.

[SmartCat]

Originally Posted by shetty_rohan

Hi Smartcat,
Can you please suggest couple of good undervalued(preferable not PSU) stocks?

I'd prefer giving opinion on a stock or company on your radar, rather than recommend a stock I own. Because I might exit a stock I own for various reasons, and forget to update this thread.

[shetty_rohan]

Originally Posted by smartcat

I'd prefer giving opinion on a stock or company on your radar, rather than recommend a stock I own. Because I might exit a stock I own for various reasons, and forget to update this thread.

I would consider myself as long term contrarian investor. Since most of stocks are already overpriced(close to all time highs), I am looking for the value buys which will not drastically reduce in case of a crash.

Long time back(around in 2013), I had bought Sonata Software at Rs 20(because of low p/e, low p/b, good dividend), and sold it at Rs 24. Now it is Rs 154.

Currently, I am accumulating Sun Pharma and BSE. Do let me know your opinion on this. You could also suggest other value buys.

Thanks in advance.

[inder]

Applied for CDSL IPO. Did not go for ERIS lifsciences. Looking at the subscription figures of CDSL its going to be a lucky few who would get allotment.

[Stratosphere]

Originally Posted by inder

Applied for CDSL IPO. Did not go for ERIS lifsciences. Looking at the subscription figures of CDSL its going to be a lucky few who would get allotment.

I applied for the IPO yesterday too. By what time should we know the allotments? I applied for 3 lots. I'm think its going to be like The D-Mart IPO all over again in terms of subscription and valuations.

[inder]

Allotment would be out on 29th I guess.