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Best Fundamental picks and Thoughts on the Same

Discussion in 'Technical Analysis' started by sethuramcbe, Oct 27, 2016.

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  1. sethuramcbe

    sethuramcbe Responder

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    Hello All,

    I am initiating this topic to understand how to pick right stocks and rationale behind this

    So the idea is to have a diary of thoughts under one topic

    When we screen this topic after 5 years say we know why we bought a stock and why we sold it
     
    sethuramcbe, Oct 27, 2016
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  2. sethuramcbe

    sethuramcbe Responder

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    Currently i did a screen on some companies where
    Return on equity > 20 AND

    Price to Earning < 5 AND

    Earnings yield > 5 AND

    Dividend yield > 5


    Two name came up
    1 . Trinethra Infra
    2. Rural Elec.Corp. - To me REC looks a good buy where you get EPS of 28

    But the data from google and Screener is differing

    Can anybody help with some screening tools
     
    sethuramcbe, Oct 27, 2016
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  3. shabbir

    shabbir Administrator Staff Member

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    I differ such that I prefer to put the business first and then the numbers. So it has to be a unique business and my first bet as of today is Pidilite Industries is what I would like to bet on. They have managed to produce awesome products for last decade and I assume they will continue to do so. There is no alternative to FeviKwik and so is Dr Fixit. Fevicol has some local brands competition but nothing major. And it is just 3 products that we talk about.

    Still coming back to your point of PE < 5 and Div Yield > 5 is a very tight condition because such cheap stock may not have growth outlook. If I had to put condition it would be
    1. Return on capital employed > 22% AND
    2. Dividend yield > 1% AND
    3. Debt to equity < 1 AND
    4. Earnings yield > 12% AND
    5. Price to Earning < 15
    Each point is explained as
    1. I like return on cash more because if they take up loan as well, they should be able to arbitrage well on that borrowed money with a margin of 2. Assuming they borrow at 11%.
    2. Should not be very high paying dividend and I have explained it in my post - http://shabbir.in/dividends/
    3. Never prefer a high debt company.
    4. Good earnings
    5. PE high is fine as long as company is earnings good.
    Hope it helps.
     
    shabbir, Oct 27, 2016
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  4. sethuramcbe

    sethuramcbe Responder

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    Perfect Shabbir

    Some times even if some company has debt they are or currently might be in a process of reducing it aggresively

    In that case Debt might be high but future might be good too right

    Should one not take this into consideration

    Should we also check free cash flow too

    Running this logic on screener ended up with 18 companies
    Return on capital employed > 20% AND
    Dividend yield > 1% AND
    Debt to equity < 1 AND
    Earnings yield > 12% AND
    Price to Earning < 15 AND

    Price to Earning < EPS

    Those are

    1. Saurashtra Cem.
    2. Transpek Inds.
    3. Nitta Gelatin
    4. Oil India
    5. Trinethra Infra
    6. Sanghvi Movers
    7. Mazda
    8. Lak. Fin. & Indl
    9. Frontline Sec.
    10. Zenith Fibres
    11. Weizmann For.
    12. Eldeco Housing
    13. KPIT Tech.
    14. NIIT Tech
    15. Saksoft
    16. Sonata Software
    17.Thirumalai Chem.
    18 Kiran Vyapar Ltd

    Now I will look into this 18 and remove one by one with reason found.Till i end up with top 3.
    This is just an exercise i want to do.

    @shabbir - Hope i am going in right direction,might need our guidance here
     
    Last edited by a moderator: Oct 27, 2016
    sethuramcbe, Oct 27, 2016
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  5. shabbir

    shabbir Administrator Staff Member

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    I would not evaluate only these businesses because I like to evaluate the numbers last as you can see in this post - http://shabbir.in/investment-checklist/ And you are trying to evaluate numbers first and then the businesses.

    So yes this process can be a good learning curve. Actually, I have screened them but could not be convinced on many of those.
     
    shabbir, Oct 27, 2016
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  6. nirajshah

    nirajshah Champion

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    nirajshah, Oct 27, 2016
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  7. nirajshah

    nirajshah Champion

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    Would love to see views on them for sure.

    Sent from my 504Q+ using DIY Technical Analysis mobile app
     
    nirajshah, Oct 27, 2016
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  8. sethuramcbe

    sethuramcbe Responder

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    Shabbir bhai

    My ideal expectation was

    a) A collective involvement of all group members
    b) A learning curve for myself in picking right apple

    I do agree pick business first and numbers later.Being a different though i have That Numbers dont lie,i am trying 2 see the same from diff perspective

    I saw a video where basant maheswari where he told that his initial strategy during learning year was to buy stocks near 52 weeks low.Knowing that personally a stupid strategy but seeing that such ace investors came from their learning, my idea is to improve myself day by day .Brick by brick and create my own identity and style.

    @shabbir - I really like your clean thoughts and insights

    So my target is to bring TOP 5 fro above and we will discuss on this soon

    Would love to see your agreeable and disagreable points on this
     
    sethuramcbe, Oct 27, 2016
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  9. shabbir

    shabbir Administrator Staff Member

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    Yes I think this is a good thread and I am sure others when they will see will join and I am sure we will get inputs from lot of members.

    Let us take one stock at a time and discuss about why anybody would reject it and then learn from it.
     
    shabbir, Oct 27, 2016
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  10. sethuramcbe

    sethuramcbe Responder

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    Below are some of my favorites which i will add on declines
    They are

    a) CUPID
    b) Waterbase
    c) LA Opala
    d) Bajaj Corp
    e) Caplin point
    e) JHS Svendgaard - Little unknown as of now , so tracking this one
     
    sethuramcbe, Oct 28, 2016
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  11. shabbir

    shabbir Administrator Staff Member

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    Very nice list and I would like to add about Waterbase which is very risky business. A sudden flood or disease in the animals can impact badly on the company.
     
    shabbir, Oct 28, 2016
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  12. sethuramcbe

    sethuramcbe Responder

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    sethuramcbe, Oct 29, 2016
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  13. sethuramcbe

    sethuramcbe Responder

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    sethuramcbe, Oct 29, 2016
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  14. shabbir

    shabbir Administrator Staff Member

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    Multibase is a very small company and so you should be doing your research more thoroughly.
     
    shabbir, Oct 29, 2016
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  15. sethuramcbe

    sethuramcbe Responder

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    sethuramcbe, Oct 29, 2016
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  16. sethuramcbe

    sethuramcbe Responder

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    sethuramcbe, Oct 29, 2016
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  17. bhat64

    bhat64 Apprentice

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    Cupid for me is expensive right now...but definitely a solid company in a niche business with high OPM...I would pray for a market crash to add this...

    JHS is a micro cap, strong promoters, loss to profit company, attractive earnings visibility, strong own brands and strong clients for contract manufacturing...last 2 qtrs good numbers...management is coming back with lessons learnt. In this list JHS is my pick.

    rest I am not liking.. Personally

    I also concur to Shabbir.. I would stay away from a companies heavily dependent on nature not causing fury...!!! SKM egg is one example...avanti feeds too
     
    bhat64, Oct 31, 2016
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  18. shabbir

    shabbir Administrator Staff Member

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    I never prefer a loss making company and this company has made loss for 3 consecutive years. According to me loss making companies should not be public limited companies traded in exchanges because you had some idea formed a company and now you want others money to make more profit. The process should be as simple as that. I agree that in some decisions you could be wrong and so can have a bad earning year or can be investing to make less profit or a loss but not for an elongated period of time.

    Loss for 3 years and I never look at that company no matter what. I would prefer to see the turn around rather than assume a turn around.
     
    shabbir, Oct 31, 2016
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  19. bhat64

    bhat64 Apprentice

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    Awesome thoughts...I like the power of this forum! Learnings and more learnings...
     
    bhat64, Oct 31, 2016
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  20. sethuramcbe

    sethuramcbe Responder

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    Hello All

    Thanks for the picks ,LA Opala ,caplin point and cupid i like this companies (my personal choice)

    I also found Anuh pharma,bajaj corp as good solid ones
     
    sethuramcbe, Oct 31, 2016
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