Talking Stocks: Hold ICICI Sec, PFC, Suzlon; Sell Rain Ind, Shilpi Cable
By G. Chokkalingam
Founder & Managing Director, Equinomics Research & Advisory
I am holding 300 shares of ICICI securities which were from IPO allotment. Is it advisable to average at the current priceRs Has the share seen the bottom or still some pain is left? —ATUL ARORA
There could be little more pain as the brokerage income accounts for about 55 per cent of its total revenue, and the stock market is on corrective mode and also the competing online brokerage house with banking facility has slashed the brokerage commission. This could set off more competitive pressures for online brokerages. However, considering the steep correction in the stock price, strong balance sheet with net cash and other sources of revenues, you may hold it for long-term.
I have 7,000 shares of Suzlon bought at average Rs 18. Please advise what to do. —VINIT TRIPATHI
Crude oil price has risen over 170 per cent from 2016 bottom, which could start reviving the opportunities for the renewable sources of energy and the stock has fallen a lot. Therefore, you may hold Suzlon for the long-term. You may average the cost provided the company start reducing the debt and improving the operating margins.
I am holding 100 shares of Uflex industries at Rs 360. Shall I hold or book losses? —PURVANG GUPTA
Although current valuation looks cheap, over 170 per cent rise in crude oil price from 2016 bottom would impact quite adversely the profitability of this packaging company which uses derivatives of oil as core raw materials. So, I suggest not adding more to reduce your average cost, but hold on the stock is advised till you get your target price.
I hold 750 shares of BEL at Rs 153 by averaging at various levels starting Rs 174. But the stock is constantly on the downside. Should I average or exit?— MANJU S
After this steep fall, the stock trades at an attractive valuation of 16x FY2019 estimated earning which is close to historical bottoms. You may add slowly on declines in this weak market to reduce your average cost.
I am holding 30 shares of Transport Corporation at Rs 331 each and 50 shares of Power Finance Corporation at Rs 148 each. What should I do for next one to two quarters?—DEEPAK NARULA
You may even add on declines Transport Corporation to reduce your average costs as this logistic company has posted impressive growth in profits in FY2018 and is trading at quite attractive valuation of around 15x FY2020 estimated earnings. It has a fair chance of rewarding the investors within a year or so. Please hold PFC as it has been beaten down more than what it deserves for the next two quarters at least.
I hold 100 shares of Minda Industries limited at an average price of Rs 1,171.55. Is there a chance of Minda Industries crossing Rs 1,500? Suggest some good alternatives in the same space. — VIJAY V BANDARI
Minda Industries is trading at exorbitant valuation of over 40 PE on FY2018 expected earnings. You may consider Jay Bharat Maruti, a joint venture of Maruti Suzuki, which trades at substantially cheaper valuation and would be a major beneficiary of Marutis vision to increase the car sales to 5 million from the current 2 million annual targets.
I have purchased 30 shares of Rain industries Rs 447 per share and 100 shares of Welspun Enterprises Rs 174 per share. Kindly advise what to do. —YASH VIRA
You seem to have bought Rain Industries at the peak of the business cycle for its carbon product. Normally, such robust realization does not last for long in such businesses. Sell the stock if it recovers close to Rs 300. Sell Welspun Enterprises if it moves close to Rs 200 as its valuation is quite stretched at current price itself.
I bought 5,230 shares of Shilpi Cable Technologies at Rs 13.84/share. Now it is 41 per cent down and this stock has 60 per cent allocation of my portfolio. What should I do? — VIKAS
You have made two major mistakes in investing your hard-earned money. Based on your purchase price, you seem to have bought the stock in November-December 2017. You should have glanced through September 2017 quarterly results before buying the stock. It made a net loss of Rs 230 crore on a revenue base of Rs 292 crore in that quarter. Also inventories and receivables (as on September 30, 2017) together accounted for more than 200 per cent of its annualized sales. Secondly, retail investors with average risk profile should never invest more than 5 per cent to 10 per cent of total portfolio value per stock even if stock sounds good. You have allocated 60 per cent to a company which has shown clearly signs of severe crisis in its September 2017 result itself. Sell at current price as I fear, based on losses and balance sheet, you may lose your entire investment in this stock in future.
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