All these stocks-LG Bala,Garware wall and Hitech Plast have a few things in common-
1). All of them are quoting at very cheap price to sales ratio.
2). All of them have ethical and honest managemnts.
3). All are quoting at their 52 wk lows.
4). All of them have their margins under pressure, although all are profit making. All three had their margins under pressure in the last one year due to high crude prices and a depreciating ruppee. Now with the macro pressures easing the stocks may well rebound as their profitability start improving.
5). All of them are good pay masters as the dividend yeilds and dividend history are quite good.
We may collectively look at them for a nice one time profit.
In all the three cases, a margin improvement by 1% will improve the EPS by 20%. While a margin improvement by 2% will increase the EPS by 40%. This is an advantage while buying shares at low price to sales ratio.
This when coupled with increase in revenues going forward, might further boost the EPS
In all the three cases, a margin improvement by 1%( which is easily possible) will lead to an EPS improvement by 20 %. A 2% margin improvement will lead to an EPS spike of 40%. This is thebenefitof buying shares at low price to sales ratio.
If there is any revenue growth going forward, EPS would be further strengthened.
You can add kabra extrusion to that list.
fantastic management but company seems to have been affected by the downturn. Once things fall in place there is a cool multibagger to be made here. And at cmp of around 33-34, once things fall in place in say next 2-3 years they wills start receiving dividends which will amount to div yield of 8-10% based on purchase price.
what trigger you expecting coming qtrs from Kabra extrusion ? I just go thorugh latest annual report…their nothing special except management hope of business revival !!Yes price wise consolidation happening this level. Please share your thought
Another turnaround candidate would be linc pens and plastics. Some imp points to consider are-
1). Profitability in fy 12 came down due to increased financial costs( almost double of previous yr due high intrest rates) and higher advertisement spending(The co. hired katrina and shahrukh khan for its branding initiatives) .
2). Mitsubishi pencil co. of Japan has recently acquired 13.5% stake in Linc pens at Rs 100 per share.(Japnese co. kokuyo bought 50% stake in camlin in 2011)
3). Otherwise the management is ethical, AR is detailed and high dividend payout.
I think we can also add Hi tech gears to the list…
1). The stock is down due to poor q1 results attributable to the general slowdown in the auto industry.
2). Nothing wrong with the company otherwise…if it gets back to its FY12 profitability, which it shoud in due course of time, the stock price should easily shoe 50-100% appreciation from here on.
3). Again shareholder friendly management, good dividend yield.
Your mind seems to be a stock idea generating machine, mostly turnaround type of company.
What I feel is that it pays to wait for the actual turnaround to start and invest in such companies. In that way one can reduce the opportunity cost that one has to pay by waiting for the turnaround.
I think we first need to ascertain weather the turnaround would happen or not. If the chances are bright, like in some of the a/m cases, the rewards would be substantial. Even if the holding period is to the tune of an year, a 40-50% gain after the turnaround is a good enough reward for all the waiting that it takes.
Moreover there is nothing fundamentally wrong with these companies. It is just the on off glitch. But as Ken Fisher would put it- " It is the glitch that can make you rich"
Have you looked at Sintex?
One of the few names which have not recovered much.
I think the company ie sintex has a few corporate governance issues. They wasted a lot of money buying oil and gas blocks which is a totally unrelated business. The minority share holders were really unhappy after the event. Plus they have never distributed any profits in a meaningful way(look at their dividend record).
I think market is making too much of an issue out of the FCCB repayment.
The promoters have issued warrants worth 200 crores
Once the repayment is done one would see a rerating here
I was also quite bullish on sintex late last year. I had also calculated the effect of FCCBs on the financial postn of the company, and came to the conclusion that thenegative sentiment is overdone. I had also made up my mind to initiate a small postn. But, later I found that they have been wasting a lot of money buying oil and gas blocks, which is totally unrelated to their present line of business. Also if u surf the net enough, corporate governance issues wrt sintex would pop out. That’s why i decided not to buy and u should also be careful.
Agreed there might have been some capital missallocation but we are assuming here that most of this is already discounted and we are looking at it as a 6-9 months trade
I was looking at Garware Wall Rope as this co is common at several discussions for high yield stock. I would suggest to have a look at Sree Sakthi Paper - this has better growth, higher dividend and better ROEs.
Another candidate is HCL infosystems. Below is a conversation with famous analyst Ashish Chugh.
Some money can be made here…Anybody who is expert inanalyzingIT stocks can dig in and enlighten us all.
I ve also gone through their AR. Management says that they import a lot of hardware(upto 2000 cr). Due to rupee depreciation, it costed them 20% more. Had that issue not come up stock wouldn’t have fallen so much
Mitsubishi pencil company had bought 13% stake in Linc pens and plastics earlier this year at a much higher price than the CMP. Now Mitsubishi intends to hike its stake even further which is an indicator for the things to come in future. Moreover linc pens as a company, if studied carefully is nothing but an FMCG company. A little bit of patience can lead to some very good returns in this counter.
I was looking up Garware Wall Ropes and came across this thread. Amazing foresight to notice these in Oct 12. Makes me want to ask what companies are you looking at now
Promoters of LGB are buying from the open market.