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16
May

What we can learn from Opto Circuits?

The investors of Opto Circuits are FRENZY!

The stock crashed from Rs. 180.00 to Rs. 50.00.  We receive emails on Futurecaps view about the company.

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About Company: Opto Circuits (India) is a multinational medical device company. It designs, develops, manufactures, markets and distributes a range of medical products that are used by healthcare establishments in more than 150 countries. The company specialises in vital signs monitoring, emergency cardiac care, vascular treatments and sensing technologies.

Web: http://www.optocircuits.com/

Futurecaps on the Stock

First of all, we did not recommended it, because it was Over-Priced at the time! But in the positive way.. In 2010 it was a very good company, very good growth records, good technology, great recognitions including Forbes Magazine.

You can see here the analyst who recommended it is facing questions:

http://www.safalniveshak.com/what-to-do-with-opto-circuits-2/?utm_source=The+Safal+Niveshak+Post&utm_campaign=e07267d0e6-RSS_EMAIL_CAMPAIGN&utm_medium=email

He is a very good analyst, I would say the investor is Amateur, He approached Stock Market in a wrong way!

See how people react with prices:

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Best Way to Approach Stock Market

Gone are the times where Business Owners have sleepless nights, today they have Hedging!

Gone are the times where Investors have bad surprises, today they have Diversifications!

Gone are the days where Investors blame the bear market, they are Opportunities!

From the day 1 of Futurecaps, we have been iterating the following

  1. Place only 25% of your savings in stock market
  2. Place at least 10 companies in the stock market investments
  3. Take an investment period of 10-20 years
  4. Stocks do not have fixed price, only situational price
  5. Bear market are the time where you get prices at the lowest

We should always ready to bear the Opposite Side of Investing >> When Stock Price reaches 0.

So how to apply these knowledge:

If you would have used 10 companies in your portfolio, then need not worry about Opto Circuits.  After all, worrying at this level is of no use as the price fall  almost 70% from 52 week high.

The good thing is that you are Cool with your Portfolio if you have 10 stocks in it:

  1. As you will have 1 or 2 troubled companies during market good times
  2. During market times you have all companies troubled, but it investing time as a whole

Based on our evaluations on the company, it is a Bargain Buy now, honestly 🙂

History of Consistently Increasing Sales, Earnings & Cash Flow image
Durable Competitive Advantage Company is a solid player in the technology enabled medical equipment market. image
Future Growth Drivers We expect the medical equipment business to progress in future too. image
Conservative Debt (long term debt < 3 Net Profit) Current Liabilities around 500 crores & Contingent Liabilities around 700 crores.  Both are less than 3 times of Net Profit (500 crores) image
Return on Equity must be Above Average ROE is 37% (which is exceptionally good) image
Low CAPEX required to maintain current operations Working Capital problem exists as per study. image
Management is holding / buying the stock Management wanted to buy the stock, instead they will prefer to use the money in paying of debts by US subsidiaries. image
Price is Under Valued (< intrinsic value) Very True, Intrinsic Value falls around Rs. 550 based on current EPS & Growth.  Plus the PE is just 2, with price quoting below book value. image
Stock Price is consolidating Not consolidating, more chance to go down.  image

Problems Summary

Following are the problems faced by company:

  1. Working Capital Issue
  2. Cash Flow is Negative
  3. Credit Rating in Trouble
  4. Debt due to Foreign Subsidiaries

Solution Measures

The company is taking solution measures like:

  1. Appointing new CFO Krishna Sudheendra who was CFO in Bangalore International Airport.
  2. Appointing Usha Ramnani (w/o CEO) as Managing Director of US Subsidiary Opto Cardiac.
  3. Allocating money through new debt instruments

These measures should ease the problems giving a long term view.

More Info: http://articles.economictimes.indiatimes.com/2013-01-22/news/36484418_1_opto-circuits-corporate-governance-outstanding-ratings

http://www.moneycontrol.com/news/business/opto-circuits-restructures-board-shrs-dipprofit-taking_833628.html

Summary

Based on the current evaluations, discarding the current problems,  we believe it is having Multibagger properties.  If the company resolves current problems, then in 5-10 year it could reach Rs. 500 through profits & growth.  In this view it provides a 10x MULTIBAGGER opportunity.

Recommended prices of investing are around 50.

Next installment around 30.

Warning: Be cautious with news & alerts on company.  Do not invest more than 5% of your portfolio.  Minimize risks using Guard Bands!

15
May

Gujarat Automotive Gears Ltd. – A Fair Study

In this post, we can learn the Potential of Gujarat Automotive Gears Ltd. as  a Multibagger.  This is a small cap company & having peculiarities of growing sales & profits. 

About: Gujarat Automotive Gears Limited (GAGL) was established in 1973 at Baroda, India for the manufacture of Auto and Tractor components. Marketed under the brand names of KAG, these components serve the aftermarket and OEM’s in India. Two decades of experience, an established network and a synergistic approach to design and execution, ensures quality products and components from concept to completion.

Website: http://www.gagl.net/

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Warren Buffett 9 Criteria of Value Investing

Let us apply our usual tool for finding the multi-bagger properties.

Check list Template to Analyze Stocks

History of Consistently Increasing Sales, Earnings & Cash Flow image
Durable Competitive Advantage There are other large cap players with the same business. Our company may evolve to achieve Durable Competitive Advantage in future. image
Future Growth Drivers The auto & tractor industry is to witness more growth due to mechanization of human labors activities. image
Conservative Debt (long term debt < 3 Net Profit) Current Liabilities 6 Crores. Latest Net Profit is 6 Crores. So we are good. image
Return on Equity must be Above Average Return on Equity should be above 20%. Our company have 38% and on average 45%. image
Low CAPEX required to maintain current operations Company is required to invest in Plant & Machinery on a long term basis. image
Management is holding / buying the stock Promoter Holdings is 70%, it is a really strong holding from the management side. image
Price is Under Valued (< intrinsic value) Based on the Doubling EPS growth for last 3 years, the Intrinsic Value falls around  Rs. 2000.  Current Market Price is Rs. 884. image
Stock Price is consolidating
Luckily, it is consolidating in the range of Rs. 850
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Future Gain

Considering the Growth to be continuing for next 5-10 years, the stock should provide 10-20 times returns.  Certainly, there are risks associated, but we are Diversifying our Investments to cope with risk.

Declaration

Company is having Multibagger properties, as it is in Small Cap (< 100 crore capitalization) we recommend less than 50% weight age of the allocation.

14
May

Bajaj Finance Ltd. – Multibagger Analysis

Bajaj Finance Ltd. is a great stock which delivered more than 40 times returns in last 13 years.  We can check whether it has Ampere ahead based on our Intrinsic Valuations.

Website: http://www.bajajautofinance.com/

Brief: Bajaj Finance Limited is a financial services company that operates branches in India, which provide an assortment of financial services.

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History of Consistently Increasing Sales, Earnings & Cash Flow image
Durable Competitive Advantage image
Future Growth Drivers image
Conservative Debt (long term debt < 3*Net Profit) image
Return on Equity must be Above Average image
Low CAPEX required to maintain current operations image
Management is holding / buying the stock image
Price is Under Valued (< intrinsic value) image
Stock Price is consolidating image

Intrinsic Value

4800.00

Current Market Price

1378 (CMP < Intrinsic Value, Very Good)

EPS Growth Rate

40% (Very High, Very Good)

ROE

24% (Above Average, Good)

 

Current Liabilities

1694 Crore (Raises a concern as it is little above 3 times latest net profit)

Stock Price Consolidation

The stock price is in the up-move as it is a Declared Blue Chip Multibagger.  But, considering PE around 12, Book Value Ration just 0.5, I see it as a Good Price to buy & add on declines.

Expected Returns

Taking average EPS Growth as 30% per year, PE Ratio @ 20, we can expect 20 Times returns in 10 years.

 

13
May

Hindustan Zinc Ltd. – Multibagger Analysis

Website: http://www.hzlindia.com/

Vedanta Group of Companies

Let us analyze the multibagger properties of Hindustan Zinc Ltd.

History of Consistently Increasing Sales, Earnings & Cash Flow image
Durable Competitive Advantage image
Future Growth Drivers image
Conservative Debt (long term debt < 3 Net Profit) image
Return on Equity must be Above Average image
Low CAPEX required to maintain current operations image
Management is holding / buying the stock image
Price is Under Valued (< intrinsic value) image
Stock Price is consolidating image

Company is Paying Dividend: Yes

EPS Growth Rate: 20%

Expected: 10X in 10Years

13
May

Muthoot Capital Services Ltd – Multibagger Analysis

Let us quickly analyze Muthoot Capital Services Ltd. against Warren Buffett’s 9 Criteria of Value Investing

History of Consistently Increasing Sales, Earnings & Cash Flow image
Durable Competitive Advantage image
Future Growth Drivers image
Conservative Debt (long term debt < 3 Net Profit) image
Return on Equity must be Above Average image
Low CAPEX required to maintain current operations image
Management is holding / buying the stock image
Price is Under Valued (< intrinsic value) image
Stock Price is consolidating image

Positive Factors

Sales increased 50% for last 3 years

Net Profit increased 50% for last 3 years

Promoters Holding is 75%

Neutral Factors

Company is in the Automobile Loan Sector

Negative Factors

Low Interest Coverage Ratio

Competitors are more in the loan market

Future crunch in GDP figures should increase bad loans

Overall

Overall the stock provides a multi-bagger properties, one can invest for a 5-10 year perspective for 30% compounded growth in EPS & there by Stock Price

By Futurecaps Chief Analyst

12
May

Why I should Invest in Stock Market?

The traditional Indian Mentality is to shy away from stock market.  There are multiple reasons for it:

  1. Stock Market is complicated
  2. Stock Market is considered as Gambling

At the same time, we would ask the person:

  1. How come the richest people in the world are through Stock Market?
  2. Why there are 5% Successful Investors in Stock Market?

The obvious answer would be: Learning!

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They are the people who:

  1. Spent time for learning the aspects of stock market
  2. Learned how to read a Financial Statement
  3. Researched hundreds of financial statements
  4. Have an Aptitude of Accuracy
  5. Placed their money when valuations were low for Market or Company
  6. Reaped profits & re-invested for further gains
  7. Attained Financial Freedom

What would be the Fool Proof Plan of Investing?

We would recommend the following allocation of your savings:

  1. 50% in Real Estate (Apartment, Plot, Villa including your Home Loan)
  2. 25% in Stocks (Growth Stocks, Value Stocks, Mutual Funds)
  3. 25% in Liquid Savings (Fixed Deposits, Recurring Deposits, Gold, Gold ETF)

We recommend the Layering should be properly followed as the Highest Liquid Layer protects the Immediate Top Layer.

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For example, if you do not keep Liquid Savings & only Stocks, then on an emergency you will liquidate your Stocks.  This will make you lose interest in investing stocks, thus loose a high speed investment vehicle.

11
May

How to start Investing?

For buying & selling stocks, you need a Trading Account with a Broker.

For having a trading account, you should have the PAN Card.

So let us take things step by step:

Apply for PAN Card

You can apply Online/Offline for the PAN Card.  Please find the details here:

https://tin.tin.nsdl.com/pan/

If you are applying offline, you can get the help of various agencies in your locality.  The total cost should be less than Rs. 1000/- & the total waiting time will be from 15 days to 30 days.

Start Trading Account

After getting PAN Card, you can start a Trading Account.  I prefer an Online Trading Account as you can buy & sell shares at your own.  Following are the leading providers of online trading accounts:

  1. ICICI Direct @ 0.75% interest
  2. Geojit BNP Paribas @ 0.3% interest
  3. T20 @ Rs. 20/-

Please note that the brokerage will be applied for both buy & sell, hence a low brokerage account is advised.  You can contact the branch office of each providers for starting the account.  ICICI Direct have better web interface than Geojit, T20 is cheaper but the application is complicated.

http://www.icicidirect.com/

http://www.geojitbnpparibas.com/