The market has fallen again and it's great opportunity to pick some good stocks at cheap rates.
Stocks to Buy in the fall of 4 June,2008
U.S. Markets, possibly one the biggest driver of the world market all over. What is happening in U.S. is important to everyone. Why? Simply because it is the largest economy of the world and even more importantly it is the biggest consumer of the all. If U.S. economy gets hurt, naturally everyone else gets hurt.So it is important to keep an eye on what's happening on the economic front at U.S. and how healthy are the markets there.
In early Jan this year, US markets were in bad-shape but still Indian bulls were running with full steam. Everyone was talking about de-coupling theory. But what happened eventually? A Crash! which caught everyone on the wrong foot.It was inevitable but small retail investors would have survived this tragedy, had they know to read the danger signals.
What's the way going ahead?
Indian stock market has started to rise again, people are slowly becoming more confident. Experts who were just weeks ago talking about the possible U.S. recession are now shrugging of the possibility. But my point is, is it really true that storm has passes? No! it's completely false. How come an ailing economy can suddenly turn into an healthy one in just a matter of few weeks? My advice be cautious and don't buy at this time and if possible try to sell off your earlier long positions.
Buy 'Sesa Goa' , great company, greater prospects. Have announced a bonus of 1:1 as well as a stock split of 1:10. This clearly shows the confidence of the promoters. Lots of money what else anyone wants? :-)
The future looks good for it as steel prices are on a roll and Sesa Goa with one the biggest iron-ore reserves has clear future earnings.
The top 5 stocks that one must have in one’s portfolio:
1) Reliance Capital around 1500
Rel Cap has become one of the biggest MF in India and growing rapidly. Apart from that it’s broking business is growing at fast pace as well.
P/E: 51; EPS: 38.71
2) Power Grid below 100
Power holds the biggest ground in 11th 5-year plan and every power company needs a transmission, PGCIL plays this role perfectly here. Also, diversification into other business areas is on the anvil starting with foray into entertainment industry. It is in talks with ZEE for a possible JV to expand fiber optic network.
3) Nagarjuna Fertilizer around 40
Slowly and steadily Fertilizer industry is coming into its own and Nagarjuna being the top player in the segment. Agriculture industry might be the next growth area of Indian economy with focus on Fertilizers. A lot of govt. help is expected here as well.
P/E: 92; EPS: 0.54
4) Dena Bank around 62
With expected consolidations and adoption of Basel-II by end of next year, PSU banks are expected to do well and Dena Bank remains the top pick among them.
P/E: 6.9; EPS: 10.20
5) Punj Lloyd around 340
India’s second biggest construction company is slated to deliver the goods as construction remains one of the biggest themes for developing India.
PE:96.11; EPS: 3.81
To understand this phenomenon, we must first look at how commodity cycles occur.
When commodity prices are high, there is an attraction to produce it, because the high prices offer high profits. When they are low, the opposite happens, because who wants to put all their money into producing a commodity if it is so cheap there is no profit to be had.
If we start at the bottom of the cycle, we’ll be able to understand this better.
Let’s create a commodity called ‘X’. X is a commodity that is used every day by people the world over. X is very cheap, at around $1 a parcel. Because it costs about $3 a parcel to grow, no one is producing it; however this doesn’t stop people consuming it. At this time there is a mound of X in Farmer Joe’s warehouse and so there’s no need to produce it either.
As months go by, the pile of X is stating to diminish, and so Farmer Joe who recognizes that the consumption of X is still constant starts to raise the price; which doesn’t seem to affect consumption all that much, because X is a necessity. After a few more months, Farmer Joe recognizes that he is able to sell X at $7 a parcel without any impact on consumption.
Farmer Joe sees this as an opportunity so he decides to plant some seeds and grow some more X. The only problem is it takes 12 months for X to mature, all the while the mound in his warehouse gets smaller and smaller, and the price at which he is able to sell keeps getting higher. In fact he is now able to fetch $12 a parcel.
Other Farmer’s around the area see what’s going on and decide they are going to grow some X too. Several months ago there was just a large mound of X and no X farms; now there is a small mound of X and plenty of X farms in production.
As Farmer Joe’s farm matures he is able to fetch a nice $12 a parcel for X, and so he is smiling, however not long afterwards, many of the other farms begin to mature also. All of a sudden there is a massive glut of X, which drives the price of X right down, back below $3 a parcel. The farmers who were last to grow X find that they will now have to face a loss.
In this situation, it was the farmers who created the cycle, and not the consumers; who just consume X, and pay what ever the price is on the day. However the price was dictated by the amount of X available, and this was due to the farmers. When there was plenty of X around, the price was low, and when there was very little around, the price was high; however it was the rush to produce more X that created the glut.
The fundamentals around X was simply supply and demand, and this supply and demand was created by the market participants themselves; the farmers.
All financial markets are the same. Investors and traders may go to many lengths to work out the fundamentals behind a stock or market, but the real driving force is the supply and demand equation, which is created by the market participants themselves.
If everyone on the planet is bullish and long on a market because the ‘fundamentals’ suggest that this market is sound, they have affected the supply and demand equation of this market irrespective of the fundamentals behind it. They have in fact created an energy that will force the market the other way, simply because there is no one left to push prices higher.
The same is true the other way. If everyone is bearish a market, irrespective of the fundamentals, they will effect the supply and demand equation to the point where there are simply no sellers left. Price will then head up; which will seem to contradict the fundamentals or news at that time.
To jump on a stock or market at the top is to buy when everyone else has bought. If you base an investment decision on information made available to everyone, i.e. the front page of a newspaper, you are in effect the last farmer to plant X seeds. The front page syndrome is the symptom that tells you the supply and demand equation has now turned around, regardless of the fundamentals.
We are in a precarious moment with regards to the markets currently. Where we go from here will be determined by the supply and demand equation with respect to the market participants. Are they all bearish, bullish or are they undecided? If they are all bearish, we can only go up; if they are all bullish, we can only go down.
If they are undecided, we get volatility, however all turning points in markets are created by an extreme in supply and demand of the market participants. All trends are the transferring of one to the other. In other words, when there is extreme bearishness, the market will head up, and keep heading up until all the bears turn into bulls.
Are you going to be the last farmer who plants his X seeds?
Many people are attracted to the stock market, as they should be for investment purposes. The stock market has always been a valid option for people to build a retirement fund or a nest egg over time, provided they are savvy enough to pick the correct stock or fund. Many times, there is not enough time to devote to financial planning so a reputable financial planner is enlisted for guidance. This scenario is the usual way people approach the stock market, however, speculation is another way people use the stock market to make money.
Speculation comes in many forms with the stock market, usually by people that have enough disposable income to absorb a loss. Futures trading or commodity trading is one form of highly speculative investing or trading. Another is option trading. Stock options are derivatives that get their value from the underlying stock and can be highly speculative as they can expire worthless in a given period of time, unlike stocks. One good thing about stock options, the amount of money a person can lose is the amount spent on the options, unlike short selling, which can become extreme losses if a person is on the wrong side of the trade.
Another form of speculation is penny stock trading. Penny stocks, as tradition states, are any stock that trades below five dollars. However, for the purpose of this article, any stock trading below one dollar is a true penny stock. Many people are attracted to penny stocks because of their low price and the amount of shares that can be purchased for less money than larger stocks. One major drawback of penny stocks is that they are thinly traded and can go weeks or months without a single trade being executed by market makers. Usually the companies trading on penny stock exchanges are smaller companies with little or no cash, or shell companies with no viable business operating within the shell.
Penny stocks are wrought with fraud in some cases as unscrupulous characters tout these thinly trade stocks over the Internet or newsletters, selling their shares into penny investors as the share price increases. However, this is not always the case. There are viable start up companies trading on the penny stock exchanges that have a sound business plan with exciting futures, but little cash. When penny stock investors are fortunate enough to invest in one of these companies, gains in the stock price can be one thousand percent or better.
A speculation in penny stocks unfortunately is mostly done by people with little cash available for speculation and are unable to withstand the loss. Attracted to the inexpensive cost of these stocks, speculators more time than not, lose their investment and in some cases average down by purchasing more stock as the share price tumbles with the hope that the stock will return to previous highs. In some cases the penny stock investor does realize gains after averaging down, but this is not the norm.
Penny stock investing should be approached with caution and proper research should be done before buying equity in the company. Diamonds in the rough are out there trading on the penny stock exchanges, but honest research and a critical thinking should be applied before deciding to become a shareholder in a smallcap company. Due diligence is key to making informed decisions when considering a penny stock company.
This could be the most shocking article you've read for a very long time.
When you discover he biggest stock market secret of all, it could undermine everything you believe about trading in stocks. It could also completely turn your trading around by removing the "gambling" element almost entirely, and turning your losses into profits overnight.
Whether you're currently an active investor or not, you'll know the basics of how most people play the stock market. It can be summed up in two words.
Buy
Pray
You might laugh, but you know it's true!
They get a 'hot tip' from a newspaper, a tip sheet, a guy in a bar, wherever, and they go ahead and buy the stock. Then, they wait and hope and pray that it goes up, and IF it does, they sell and collect a profit.
It's not exactly what you'd call a strategy, now is it?
Of course, there are traders who work far more sophisticated strategies than "Buy & Pray". They might use charts and technical analysis and work their trades on moving averages, Fibonacci lines, Bollinger bands and so on. They might go short occasionally to profit from an expected downward move, but the "gambling" element is still there – decide which direction the stock is likely to move in, and take a position on that basis.
If you're right, fantastic! If you're wrong, it's more of your trading capital down the tubes, and back to the drawing board for the next trade.
Why do people trade this way?
Well, I've done quite an in-depth study of this, and here's what I've found. Most people trade a direction because they think they're right (of course!) and because they don't know any other way of trading.
Even more fundamentally, though, there is an underlying belief that says,
"There are people in the world who can accurately and consistently predict the direction of any given stock or market. If I work at it hard enough, I'll eventually become one of them."
(And the nagging question here, of course, is whether "eventually" will come around before the trading capital runs out!)
So here's the biggest stock market secret…
NO ONE has the ability to accurately and consistently predict the direction of any given stock or market, and so it doesn't matter how long you trade for, you'll NEVER attain this ability!
I did warn you, didn't I? You might want to re-read that a couple of times, just to let it sink in.
And then you'll find a question emerging from the gloom – So, now what??
Well, if no one can predict the direction of the market, how to those 'in the know' trade? The answer is perhaps the second-biggest stock market secret.
The reality is, the "smart money" does NOT trade the direction of the market. The "smart money" trades only in situations where a big move is likely – and the "smart money" doesn't care which direction that move takes, because they're positioned to make a profit whether the stock falls or rises!
Again, may I suggest you re-read that paragraph a couple of times, too? Consistently successful traders trade to profit from big, fast moves, regardless of whether that move is up or down.
Can you learn how to follow in their footsteps? Absolutely!
Can you profit in the same way they do, without having to "gamble" on the direction of a market or stock? Absolutely!
Will it take you away from your job, your family, your leisure time? Absolutely not! This form of trading is unique as it's largely a set-and-forget strategy – and the 'setting' takes only a few hours a month!
Once you understand this profit-either-way strategy – and I suggest you learn direct from a professional trader who does this for a living – there are only a few steps to take, once a month.
You a) check which stocks are highlighted for you; b) check for the presence of one particular indicator; c) check to see if a highlighted stock with an indicator is a definite trade on a private website; and d) place the trade (with one phone call, or through your online trading platform).
And that's it!
You then profit if the stock moves up. And you profit if the stock moves down. And can usually bank your profits in a matter of days, as you'll be trading on volatility here, which means large moves in a short timeframe.
You'll only lose a little if the stock does nothing at all which, when you understand the strategy, you'll realize is quite a rare event.
Happy trading!
Biggies
RIL
JP associates
Prakash industries
REL
Tata Motors
Mid
PTC
Essar oil
Kirloskar oil
Nevyeli lignite
Petronet LNG
MRPL
Small
Exide industries
Ashai India
Appolo tyres
Vardhaman acrylic
Technically these stocks has been beaten enough so downside is limited.
Benefitting from the repeal of ULCA and possible IPO of the Godrej Properties, Godrej Industry is all set to fly. Godrej Industry has substantial holdings (around 82%) in Godrej Properties which will result in value unlocking when the IPO comes, and if rumors are to be believed existing GI shareholders might be getting some shares of Godrej Properties.So a buy is recommended.
CMP: 370
Target: 500 (near term)
Disclosure: I am not holding GI so far. (Darn I don't have money in my account. :-( )
Economics Times Link:
http://economictimes.indiatimes.com/articleshow/2112320.cms
The Company's objective is to manufacture aluminium extruded products. The stock is in news recently because of the right issue it’s offering.
The Right Equity Issue will be for 3,30,00,000 (three crores thirty lacs) equity shares of face value of Re.1/- each at a price of Rs.4/- per equity share (including a premium of Rs.3 per equity share) in the ratio of 33:47 (33 new shares for every 47 shares held) as on record date to be fixed in due course."
BUY: Century Extrusions
CMP: 13.55
website: http://www.centuryextrusions.com
This company has business ranging from oil and drilling to consumer electronics. It commands EPS of around 40% , promoters holdings is quite high around 70%. Also, a possible demerger of the business is on cards which could really unlock the value of this scrip.
Videocon seems good both from the perspective of short term and long term. Buy it for sharp upmoves.
CMP : 635
Target: 800 (in short term.)
52 week high: 868.65 (made it few weeks back)
Disclosure: I am holding videocon industries.
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