Saturday 25 July 2015

Turnaround Stocks: U-Turn To High Returns
  Source: Investopedia

Weeding through beaten down companies to identify a turnaround stock can be a thorny situation. It's tedious and time consuming, and even if you feel you've done all your homework, the pick could still go bad. In this article we'll show you some harbingers of a turnaround situation that will help you isolate the flower from the weeds.

There are three root causes of corporate rejuvenation. They include: a sales jump, cost-cutting initiatives and new products. Let's take a closer look at them and some stocks that have turned around as a result of these changes.

1. A Sales Jump: While change at many public companies can proceed at a glacial pace, there are times when a company turns around on a dime to experience dramatic sequential or year-over-year improvements in sales.

A terrific example of just such a reversal of fortune can be found in an analysis of IBM (NYSE:IBM) in the mid 1990s. Prior to fomer chief executive Lou Gerstner's arrival on the scene, the computer giant was struggling. In fact, its product arsenal was downright paltry, and some investors questioned whether the company would be able to compete with the likes of Hewlett-Packard (NYSE:HPQ) and Apple Inc. (NYSE:APPL) over the long haul.

But Gerstner changed all that. Under his leadership, IBM introduced a slew of new products and focused increasingly on offering business services as well. In addition, he presided over a huge cost-cutting program that eliminated millions of redundant expenditures. This allowed the company to invest in future growth opportunities. 

The result of Gerstner's efforts showed through IBM's sequential and year-over-year improvement in net sales. In fact, on an annualized basis it grew revenue from $64 billion in 1994 to more than $87 billion by 1999, a major improvement for a company that was already among the nation's largest. Not surprisingly, the share price also increased during this time, from the $30 range to more than $100 per share by 1999.

 The lesson in this is to pay particular attention to companies that have shown marked improvements in sales, because it is a strong sign that better times - and higher stock prices - may lie ahead.
2. Major Cost-Cutting Initiatives: Even if a company isn't dramatically growing sales, it can still enhance shareholder value and drive its share price higher through aggressive cost cutting. Let's take a look at how Kimberly Clark (NYSE:KMB) managed to turn around its stock through this measure. 

In July 2005, the well-known maker of health and hygiene products announced plans to cut 6,000 jobs and sell or close up to 20 plants. Management said the cuts could save the company as much as $300 to $350 million annually by 2009. Perhaps even more importantly, it would free up resources so that the company could expand its business in China and focus on high-margin end products, such as diapers and paper towels.

Soon after this major cost cut, Kimberly Clark started to see some sizable savings. The stock reversed course and by March 2008 was trading almost $10/share higher than it did at the end of the 2005.

3. New Products in the Cards: Due to the after-effects of the tech bubble burst, a sluggish product pipeline and tough competition from companies like Microsoft (Nasdaq:MSFT), Apple's stock was struggling by late 2001.

Then along came a little product known as the iPod. While the iPod wasn't a sensation right off the bat, it was a solid product aimed at a very good consumer base, which helped it gain some valuable traction over its first few years. As new generations of the product hit the shelves - and everyone from celebrities to politicians were spotted with them - demand picked up quickly.

As of October 2007, the company had sold more than 120 million of the little gadgets, and it is a major reason why Apple is one of the top resurrection stories of the past decade. While not all new product releases will ultimately be a success, a new item often generates a lot of buzz in the investment community if it has the potential to drive the company's sales materially higher.

Bottom Line: Be on the lookout for one of the above catalysts at a struggling company, because they are often the first signs that a turnaround may be in the works. And, you don't have to get in at the beginning of a turnaround to profit, getting in on a rising company that looks to have long-term potential is still a solid investing technique.

Monday 20 July 2015


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Saturday 18 July 2015

HOW Rs. 10,000 BECAME Rs.500 CRORES+

Source: Quora

HOW Rs.10,000 BECAME Rs.500 CRORES

Mohammed Anwar Ahmed, 60, resides in the sleepy town of Amalner in district Jalgaon, Maharashtra. His father owned a large farmland in the 1970's. The father's untimely death in 1980 left the four sons to lead different paths in their lives. They sold the land and divided the proceeds of Rs.80,000 equally among themselves. Mohammed, the youngest of the four, then aged 27, was married for two years and had a year old son. On parting with his brothers, he was at crossroads and did not know the path he should choose for himself as all his working life he had worked on the fields. His one brother left Amalner while the two started their own shops.


In 1947, Chairman of WIPRO Ltd. and philanthropist Azim Premji's father Mohammad Hussain Hasham Premji set up the company's first plant here to manufacturer vegetable ghee, vanaspati and refined oils. It was then called Western India Vegetable Products Ltd. and had got listed on the stock exchange in 1946. Over the years many residents of Amalner worked at the plant and several residents were shareholders of the company. In 1966, Mr.Azim Premji became Chairman of the company.


As Mohammed Anwar Ahmed sat near a tea shop in Amalner, a young stock broker from Bombay (now Mumbai) named SatishShah stopped to ask a question. This meeting would change the life of Mohammed Anwar Ahmed. Satish Shah had come toAmalner to buy as many shares as he could on behalf of some clients in Bombay. The question that Satish Shah asked was : “Do you know anyone here who owns shares in that factory?” pointing to the WIPRO plant. Mohammed replied that the owners of the factory stays in Bombay. In short 15 minutes, Satish explained to Mohammed, how owning a share could make one a part owner in the company. This made Mohammed inquisitive and the meeting lasted for 30 more minutes. Mohammed helped Satish Shah go door to door to collect shares from willing sellers (in very small towns nearly everyone knows each other) and for himself bought 100 shares of Rs.100 face value, thus investing Rs.10,000 from the total of Rs.20,000 that he had. The rest, he invested in starting a trading business.


From then on Mohammed started to think himself as part owner of WIPRO (and rightly so) and vowed never to sell a single share till Mr. Azim Premji is at the helm. Here is how his initial investment of Rs.10,000 grew to over Rs.500 crores.

He had invested in 100 shares at face value of Rs.100 in 1980.

The initial investment was Rs.10,000.
In 1981, the company declared a 1:1 bonus. He now had 200 shares.
In 1985, the company declared 1:1 bonus. He therefore had 400 shares.
In 1986, the company split the share to Rs.10. He thus had 4000 shares.
In 1987, the company declared 1:1 bonus. He hence had 8000 shares.
In 1989, the company announced a 1:1 bonus. Now he had 16,000 shares.
In 1992, the company declared a 1:1 bonus. By now he had 32,000 shares.
In 1995, the company declared a 1:1 bonus. He then had 64,000 shares.
In 1997, the company declared 2:1 bonus. He now held 1,92,000 shares.
In 1999, the company split the share to Rs.2. He now had 9,60,000 shares.
In 2004, the company declared 2:1 bonus. He thus had 28,80,000 shares.
In 2005, the company declared 1:1 bonus. He came to have 57,60,000 shares.
In 2010, the company declared 2:3 bonus. He now had 96,00,000 shares.

The current market price is Rs.500 (2014) per share. The shares are valued at Rs.480 crores.
Over the past 33 years, the company regularly paid out dividends and increased them almost every year. Cumulatively he received Rs.118 crores as dividend over the past 33 years. Thus by investing Rs.10,000, Mohammed gained Rs.598 crores.

He is now retired and donates freely to charity from the dividends he receives. His foreign educated children often advice him to sell the shares but he has kept his vow of not selling a single share till Mr.Azim Premji is the working Chairman.

This is a lesson - both in patience and conviction.

Monday 13 July 2015


Vidhi DyeStuffs Manufacturing Ltd posted on the blog at 15.90 on 9th December 2014.
The stock has rallied to almost 36 and was locked in the 20% upper circuit filter on BSE today.
Vidhi is up 126% in around 7 months.
Vidhi has recently announced to BSE that they have applied to list on National Stock Exchange.
Once listed on NSE, I think it will improve Vidhi's visibility to potential investors including FIIs and HNIs.
At current price of around 36, Vidhi is trading at a P/E of around 14. Vidhi is expected to do great in this FY too and therefore not keen to book profits at current levels.
Vidhi's rally should also lead to re-rating of another pick Dynemic Products which too i think will do well in this FY.  Dynemic is available cheaply valued at a  p/e of around 6.
For the food color sector at whole we have only two listed players in India, The leader being Vidhi and the similar sized Dynemic. I think both the stocks deserve better valuations as the proxy play to the processed food sector which attracts expensive valuations.

Monday 6 July 2015


NGL Fine-Chem Ltd. posted on the blog at 71 on 20th November 2014.
The stock has rallied to 200+ today and is locked in the upper circuit on BSE, up 182% in around 7 months.
In my blog post i had written about expecting the stock to hit Rs 200 in the mid/long-term and NGL has met my expectations really well by reaching 200 in just around 7 months.
At current p/e of only 15, I think NGL still has upside potential left but now i guess it's the right time to book partial profits/book invested capital in NGL and hold only the free shares for long-term!

Thursday 2 July 2015


The Ace Investor
Axiscades Engineering Technologies Ltd
  Listed on both NSE: AXISCADES and BSE:532395
Axiscades currently trading around 240 with a market cap of around 650 crores.
Promoters hold 59.12% stake, FIIs hold 2.01%, Alchemy Fund (Rakesh Jhunjhunwala, Hiren Ved, Lashit Sanghvi, Ashwin Kedia) holds 1.84%, Ashish Kacholia holds 1.38% and Edelweiss holds 1.02%.
Total Debt has reduced to 26.7 crores from 33 crores YoY.
Formerly known as AXIS IT&T, After merger with CADES the company is now named as AXISCADES. AXIS Inc was established in 1987 and in 2003 IT&T India acquired AXIS Inc. changing its name to Axis IT&T and in 2009 AXIS IT&T picked up stake in CADES resulting in the merger that concluded in 2014.
AXISCADES today is one of India's leading technology solutions provider, catering to the needs of Aerospace, Defense, Heavy Engineering, Automotive and Industrial Production sectors.
 AEROSPACE: AXISCADES offers complete solutions that range from concept generation phase to manufacturing in the aerospace sector. It has established long-term strategic relationship with Aerospace OEMs and Tier-1 suppliers to provide integrated solutions for systems and sub-systems including primary and secondary structures, electrical wing harness design, aircraft interiors, manufacturing engineering, technical publication and reports on non conformances and avionics.

 DEFENCE: AXISCADES offers wide range of solutions and services related to Avionics, C412, Testing, System Integration, Software and Simulation.The defence sector team of Axiscades comprises of industry veterans who have served in the armed forces.

In layman terms, AXISCADES is a part of commercial aircraft and defense aircraft manufacturing process beside other services and solutions offered.

AXISCADES has recently announced an tie-up with ASSYTEM to deliver solutions to AIRBUS.
The collaboration will provide Airbus with a complete near and off-shore engineering services.

Airbus is already operating two separate civil aviation and defense aviation engineering centers along with one research and technology center in India. Airbus as of date has a total strength of more than 400 highly skilled engineers and staff in India. After having openly expressed the interest to "Make In India" Airbus Defense CEO Mr Bernhard Gerwert met PM Narendra Modi on 30th June 2015 and once again expressed his interest even as they discussed various aerospace, defense and civil aviation projects.

When PM Modi had visited France, he visited the Airbus manufacturing facility and Airbus had announced that it would increase its Indian outsourcing to $2 billion. Airbus Group has recently consolidated all its operations in India under one entity named Airbus Group India Pvt Ltd as per the group's one roof policy. India is the first international market where local operations are being brought under a single company.

Lets take a look at the financials of Axiscades :-

The financials show that AXISCADES has been growing well. However, FY16 is going to be a very good year for them as per the guidance recently provided by the management. With sales set to be around 350 crores and taking the margins as similar to last year the EPS is expected at 8.65.

2016 is also going to be the first full year in operation after the merger. The earnings estimate is not clear as in the interview management first say's that the revenue is going to be 500 crores and later backtracks and says we can't tell you as we are listed entity and there will be growth.

At current price of 240 w.r.t. FY16 earnings estimates the P/E comes at under 28. However, please note that AXISCADES is not the typical undervalued idea but something which deserves expensive p/e as well as a space in the portfolio because of the sector it is in. Drones, Aircrafts, Fighter jets and a lot of more such stuff is going to be manufactured in India and around the world and AXISCADES is in a position to make healthy gains out of it.

 Interesting thing to note is that renowned investor Ashish Kacholia had picked up 1.38% stake at the price of around 240 and Alchemy Capital which is founded by Rakesh Jhunjhunwala, Hiren Ved, Lasit Sanghvi, Ashwin Kedia too picked up the stake around the same level earlier this year. From 240 in late March 2015 the stock went to almost 400 in early April 2015 dealing constantly in upper circuits.

Suddenly, A bunch of rumor mongers noticed the heavy up move and stepped in by spreading all sorts of rubbish about the company on Social Media websites as well as messengers. Stupid allegations were doing rounds on Whatsapp, Telegram, Facebook, MMB and the stock price crashed to 180s. Forcing the company to give a disclosure statement to the exchanges denying the rumors.

Basically, A good stock was available at a huge discount to the price where big guys purchased mainly due to social media misuse which is a growing menace. One of the rumors in the market have been that Alchemy and Ashish Kacholia have completely exited Axiscades as they found some fallacy in the financials reported.

We have now entered the month of July and the share-holding pattern is going to be out some days and as per me there might be a increase in the stake owned by these big investors who don't usually play short-term.

Dynamatic Technologies is another defense stock where Alchemy and Ashish Kacholia had invested.
The same stock has moved from 585 in Jan 2014 to hit a high of 4225 in Apr 2015.
Up 622% in a year and four months. Kacholia had officially invested in Jun 2014 at around 1500.
Even today after crashing from 4225 to 3000, Dynamatic is still trading at a p/e of around 200.
Axiscades however is avilable around the level these big guys invested at.

     Technically too Axiscades is really looking good now, the stock has really bounced back well in last few days after a long consolidation. The stock has now broken out of a range and looks set to surpass its earlier highs of around 400.

 All in all, AXISCADES looks like a must-have in the portfolio and it seems the up-trend has already started. This is another probable multibagger candidate as "DEFENSE" is a buzz word in the markets along with "AVIATION" and "MAKE IN INDIA".
Note: The above is not a research report but information as available on public domain and it should not be treated as a research report.

Registration status with SEBI: I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”

Disclosure: It is safe to assume that i might have Axiscades Engineering Technologies Ltd in my portfolio and hence my point of view can be biased. Readers should consult their financial advisory before any investments.