Commodity and Cyclical Plays

(Lokesh Chandra Gorrepati) #164

Yes Jiten sir. Are you tracking Godawari Power and Ispat. Looking good to me even at CMP for good returns.

(csteja) #165

Is it advisable to buy any cyclical stocks (metals/mining and infra) now?

(sivaprakasamp) #166

On godavari power and ispat, the numbers are compelling and would be a great turnaround story if steel story plays as expected.

However I feel Jindal Steel is a better candidate.

Below link is from a recent investor meet:

Discl: invested on JSPL

(keda) #167

your post Mr. Jiten is great
My first question how do you decide when to exit from a cycle. Can you break up about each cycle exit point as you said that you have exited completely from paper. what factors help to decide when to exit . I am very new to this market .

(keda) #168

also which commodity shares can we enter at this point of time as all shares have already gone up

(Jiten Parmar) #169

Yes. Niteen and me have worked on this scrip together. He has done amazing work.

(keda) #170

how do you decide your exit

(Jiten Parmar) #171

Best exits are generally at peak earnings.

(khs) #172

Do you mean to say in comparison with previous historical high ?

(Jiten Parmar) #173

No. Current one’s. And for that u have to understand the dynamics of the commodity/cycle. Unfortunately, there is no set way. Lot of it is experience over the years.

(Sourabh Agarwal) #174

So would you sell something like heg now?

(Jiten Parmar) #175

Another way I look at these is sell these at 5-7 times peak earnings. If HEG peak earning is going to be 300, then it can be a sell between 1500 to 2100 based on this (this is just for illustration, I am not saying HEG will have peak earnings of 300).

(Ashok) #176

very good observation sir. however how to determine peak earning potential of commodity company? can you please elaborate with example. my calculation for MOIL is as under:

say MOIL achieved peak operating profit of 902.20 crore in year 2009. without taking into account if expansion in mining capacity if we assume that same operating profit will be achieved, as the depreciation and TAX is taken care by other income, applying PE of 7 give market cap of 6300 cr. if we add surplus cash in company the market cap becomes 8500. so upside of 20% left in MOIL.

(Jiten Parmar) #177

that’s very good work.

(keda) #178

thanks for giving your valuable advice .

(keda) #179

can you elaborate a little more on exit strategy with any example . thanks @maheshwari_a_its

(Devang) #180

But what if its running on its peak ?

(Yogesh Sane) #181

Hi @Jitenp, love your posts. You are an expert in cyclical stories. Thanks for all your inputs and insights.

How do you decide if current earnings are peak or there is further upside?

(Jiten Parmar) #182

As I said earlier, it does require one to understand the sector. This type of investing does require lots and lots of reading. Also, due to a good network, I do take help of sector experts to understand more. A collaborative effort helps a lot.

(Jose) #183

How abt buying into SAIL now??momentum seems intact