Equity Markets

[nickspeedster]

This PEG is something new to me...will have to study it now!!!

As far as the P/E ratio is concerned, you have to comapre them with the rest of the industry.

Traditionally, IT industry has been the one with the high P/E. If you see the P/E of old economy stocks, they will be much lower. If a stock is fundamentally strong but for some reason has a low P/E compared to its peers in the same industry, then its a good buy. Those are the stocks you are looking for.

At the same time, there are cases where the whole industry has a re-evaluation. Banking is one such industry which is going to do well because of a lot of factors and you can see all the bank stocks touching sky high.

This is what is meant by research. Know your stocks before you buy them.

But to be really honest, Indian markets, ot for that matter world markets, also work hugely on sentiments. If its a bull run, even rubbish stocks tend to go up. And in bear phase, there is no stopping the downtrend. So sentiment is another thing you have to consider before investing.

[photon]

Originally Posted by nickspeedster

Okay lets see...

you buy one share from the market tomorrow...
say for a price of 5500...
after some time you get 3 more shares, so now you have four.

The price per share however will drop significantly.
Lets see it goes to as low as 2500.
But you still have 4 shares, so that Rs. 10000 for you.
Plus a dividend of Rs. 115(that will more than take care of your brokerage too!!!)

Not a bad deal afterall

I guess the calculation after record date works differently.

Market Cap = No. of Shares * Share Price

Market Cap today lets assume for Infy is 5000 Crores. So even after the bonus adjustment the Market Cap should be 5000 Crores. In this case the share price would be divided by 4. So the adjusted price would be 1500 and not 2500 assuming that Infy price is 6000 the day before.

So the summary would be ur net worth on Infy both pre and post the bonus will remain the same. Any upsides from 1500 levels will ofcourse be beneficial

[snan]

Originally Posted by nickspeedster

This PEG is something new to me...will have to study it now!!!

As far as the P/E ratio is concerned, you have to comapre them with the rest of the industry.

.

Hi...

It's easy to visualise why future growth prospects must be considered rather thn P/Es alone...P/E as such is generally calculated as price/EPS for shares...EPS is again based on earnings for the 4 trailing quarters (what has already happened and is history)...but markets reflect what holds for the firm in the future.....hence PEG sems to be a better indicator after all....but the caveat is tht its is Growth Estimates based..another highly subjective parameter....wht wud u say is the growth estimate for summin like reliance ??? what if thy find new gas reserves in KGB ? or wht if thier infocomm doesnt bring in the profits as expected ??? wht if PSUs stop buying out of their humongous refining capacities .....

so all thes are subjective..thts y no analyst restricts himself to specifi reatios...they are jus indicative...projections of future price are w function fo innumerable variables (inclduign as someone rightly pointed out...SENTIMENTS...now u see how everythign goes for a toss if something drastic happens in economy / a war...
so its not as simple as finding a few ratios and thn going ahead for some with low PE multiple or any other parameters..all these are at best Indicative...

MFs may not be giving u the same kick but well i have lost enuff to know tht the so called "kick" do gives u ulcers in stomach !!

suhas

[snan]

[quote="photon"]

Originally Posted by nickspeedster

Okay lets see...

So the summary would be ur net worth on Infy both pre and post the bonus will remain the same. Any upsides from 1500 levels will ofcourse be beneficial

Exactly for the same reaons bonus issues dont generate the same euphoria in matured markets liek US/LSE....we indians seem to think its some sorta gift!! ...For the same reason if u look into the buyers in infy after bonus declaration, the ratio of FIIs to others is proportionately smaller...but yea whn a company issue bonus share ( esp one with such a great management like tht of Infy) market feels tht the company is going to perform better in the future....

But theoretically its jus capitalisation fo reserves in the books of the firm....in case of bonus issue...

Eg: - Before bonus XTZ might have 10000 in paid yp capital and 30000 in reserves..after 1:1 bonus thy shall have 20000 paid up and 20000 resrves....jus an accountign thingie...thts the only diff...
also going ahead sincethe reserve has reduced, the future dividend yield wud be lesser thn before bonus issue....(again theoretiucally!!!).....

But i always maintain tht Maths and Market ont have much of a love love relation....things might look one way in an excel sheet and entirely diferent in reality !!!

[muks]

photon wrote:

Market Cap = No. of Shares * Share Price

bingo.nickspeedster plz clr ur concepts.
anyway thanx snan buddy fr giving good analysis of bonus.i was a little confused bout them as we indians always overreact to them.
we all can clr our doubts here as nobody has perfect knowledge. lets say, why don't we start by giving our criterion fr picking some stock. like future prospects, EPS,P/E,gut feel(ya, that is a big reason) etc. that can ensure some gr8 exchange of ideas. whatdyasay?
mux
btw, will post mine soon.

[photon]

Mux

Iam ready to chip in. But before that was just wondering whether ppl out here also do the Technical analysis things before investing? I went through a book

Technical Analysis of Stock Trends by Robert D. Edwards, John F. Magee

Was amazed at how People's psychology was getting repeated in the shape of chart patterns. Discussion could also centre arnd Supports n Resistances, RSI n ROC and Averages and what not. Truly addictive

[ace_bubble]

What do u say about this

Neyveli Lingnite
ROA = 13%
ROE = 19.3%
ROC = 15.9%
NPM = 42.7%
ICR = 435.3 wow!!!!
Debt/Equity = 0.2

on the other side
Inventory Turnover = 48 days
Receivables Turnover = 333 days (This is very bad)
But CR = 3.5

hmm can be bought
55 - 60 ideal price

SAIL
BV/share = 4.8
Inventory Turnover = 70 days
Receivables Turnover = 31 days
NPM = December quater 12.5% , Last Year = - 1.8 %

on the other side
Debt/Equity = 5.1 (very bad)
ICR 0.8
hmm
25 - 30 can be bought , who know govt. may come out with a offer for sail

Jindal Iron and Steel Co.
BV/share = 196.7
ROA = 5.6%
ROE = 14.3%
ROC = 14.0%
NPM = December quater 9.3% , Last Year = 7.8 %
ICR = 2.6 good for the steel sector
Debt/Equity = 0.9

Inventory Turnover = 34 days
Receivables Turnover = 32 days
hmmm
200 - 225 a very good price to pay


cheers
ace

[neil]

Hey again!

Mutual Funds may be boring for a day-trader or a Udayan Mukherjee fan, but for most Indians who look at safeguarding their capital while still investing in the equity market, MFs are a good option. Some people prefer Sachin, Ravi Shankar, MTV VJs at 9 AM...and if you prefer our man Udayan...nothing like it. I personally prefer adoring myself in the mirror (no, I'm not in love with myself ).

Yes Nick, one sure can make a lot more money by investing in direct equity as compared to the MF Equity, but then, one can lose a lot more money too. Goes both ways I supp.

Anyone here ever invested in Personalized Management Service (PMS)? You can get a Fund Manager to draw a completely personalized portfolio consisting of equities chosen by you. Returns are consistently 25% plus. Minimum Investment though is
in the range of Rs. 50 L. (do we have any young millionaires out here?)

Also, for novices, the Bullseye at www.moneycontrol.com is a real neat way to play with virtual money in the real market..and make some virtual moolah too.

Cheers
Neil

p.s. Buddy Nick, whatever gave you the idea I'm a 'big guy'?

[somudada]

a possible compromise between direct equity & MF would be sector specific mutual funds, at last count there were over 1200 mutual fund schemes of all the companies, (debt, equity,etc). the argument for direct equity fails to pass muster when u have som nay mutual funds to choose from, know their portfolios thru the net, & also know the minimum & maximum limit for any instrument( i.e company share in an equity scheme, G-secs in debt schemes,etc)
let the pros do what they are good at, to be a warren buffet u need great patience & an ability to trust your & other's judgement. most of all u need a some liquid money( like 50,000/-) that u can stash way in stocks for 5-6 years, if u are lucky u will hit the motherlode with rates of return like 800%-900%, if not it's a 50,000/- loss spread over 5 years. no not ponit in buying a stock & selling it after 3 months & +40%, thinking u were very smart, this stratergy will make u some money in the short term, but in the long term u will get clogged arteries & nothing else.


regardind ace_bubble,
jindal is in serious shit of being acquired or sold in the next 3 -5 years, it doesn't have the scale, nor the ficus, it'll probably keep it's power business . SAIL is an awesome copmany with a bright future, it's debt/equity is high cos govt rules don't allow it to to offload more equity.tisco & sail will be the one's to watch out for, though i seriously doubt any govt bailout of sail because of lack political fallout.

[Kanti]

I have been monitoring HLL for quite some time and i need advice from u guyz..i had bought HLL shares arnd 190 n sold it off at 205...now, the stock has come down to 150 owing to immense competition, low sales n results which did not meet market expectations.

Analysing the pros n cons for HLL...the positives are that its got great infrastructure, good top management, proven expertise n can really take on the competition(take the curent offer of "get one free with every purchase" on shampoos) but the negatives being its a slow mover, market has lost faith in this stock, facing stiff resistance from P&G etc.

The overall growth in revenues has been arnd 4% for this year end and the dividend yield was 550% on a face value of 1.

Wat would be the ideal time/price to enter this stock..personally i think now is the correct time to buy HLL n keep it locked in the cupboard for 2 years...wat do u junta???