I am going to make an investment in a portfolio of five beaten down stocks as a contra bet for 3 years. I feel that 3 years is a time in which these stocks can overcome their problems in sector and individual stock level. Here goes the portfolio -
SBI - PE 7.8; DY 1.8 (making new 52 year low each day) 10% of total portfolio value.
ICICI Bank PE- 11; DY 2.2 15%
Hindalco - PE-X; DY1.4 25%
Selan Exploration - PE - 15.7; DY 2.4 20%
L&T - PE -24; DY 1.4 30%
The problem is the starting point. The market is falling contentiously; no entry-point is looking safe now.
I have started investing with a test amount in SBI last Friday @ 183.
I have entered L&T and Axis Bank for the exact same rationale, but spreading my investment over days instead of lumpsum. Market will take a while to settle. Saudi market was down 7% today
In my opinion, in such volatile market conditions, you should buy in staggered manner.
Both Axis Bank and L&T look like value buys at current levels.
I would advise caution on L&T. Being an engineering stock with various businesses it is tough to decide PE some times. You can buy in staggered manner since it sometimes correct more than markets.
Selan vs Aban is a good debate point. Some investors must be put off by the huge debt of Aban, but the execution capabilities of Aban none the less are fantastic and is trading at attractive valuations and Iran’s sanctions lift will help!
Being a contrarian involves being a brave heart , but if you can maintain the Emotional balance , it will be fruitful!
Agri is beaten down sector too due to poor rains which might be on verge of a turn around this year/next year! The probability of 3 continuous years of low rain falls is a 1 in 67 years probability!! You can give it a chance. As you are focusing on large and mid caps , M&M Fin @210 can be a good bet supporting Rural finance
