Good God, what should I buy ?

Last week was a virtual nightmare for stock market investors but it seems that the current week having begun on a good note may cheer up many investors. The sensex rested at 19405.10, up by 268.49 points or 1.40 per cent.

But the biggest problem in such times is that investors get totally confused in case they have cash and wish to take advantage by buying stocks which were beaten and battered for quite some time. This is particularly true in case of those investors who have limited cash on hand but several stocks in mind. An investor may wonder whether he should take a call on the most admired company RIL which has gone up by Rs.35.65 [ 3.5 per cent ] or whether he should buy Reliance Infrastructure which is down by Rs.401.40 from its 52 week high. An investor may also start wondering whether he should grab one or two of the so called “tainted” or ripe for “tainting” type of stocks like LIC Housing Finance Ltd, Unitech, Jaiprakash Associates, Reliance Communications. Or better still, should the investor take a well calibrated move by hugging BGR Energy- hold your breath, as this stock closed at 690.60, up by Rs.120.05/share which is pretty cool sum that day traders might have pocketed. The spike started happening after the company faxed its “clean image” letter to the bourses today. Yes, BGR may replicate a BHEL but that’s different subject altogether. And yes, I will not be surprised if BGR continues to move northwards for days/weeks at a stretch. But, the question is , do you have the guts to buy a scrip after it has risen by Rs.120.05 in a single day! If you have the guts, just go ahead and rest assured you would have embraced a 3 bagger!

Well, for the faint hearted, it is extremely difficult to pick the right scrip when you have limited cash at your disposal. Well, I’ll make things easier for you.

Considering the strong volatility of the markets, the safest bet, to my mind would be Jaiprakash Associates. It’s a Sensex and Nifty stock that rises with grace and stoops down with humility and again rises with glory – such is the nature of this stock. Well, I presume that most of you would be aware of this company, yet I am providing below a brief about the company.

Jaiprakash Associates Limited is a diversified infrastructural industrial conglomerate in India. It is engaged in the business of heavy civil engineering construction, power, cement, hospitality, real estate, and expressways. During the fiscal year ended March 31, 2010 (fiscal 2010), the Company had hydropower operational projects of 300 megawatts Baspa-II (Himachal Pradesh) and 400 megawatts (Uttarakhand). In hospitality sector it owns and operates four five star hotels, two in New Delhi and one each in Agra and Mussoorie with a total capacity of 644 rooms. In real estate sector it has 452 acres, which includes residences, commercial spaces, corporate park, entertainment and nature in abundance. It has 165 kilometers long six lane Yamuna Expressway project from Noida to Agra for commercial, industrial, institutional, residential and amusement purposes, and 1047 kilometers long eight lane Ganga Expressway from Greater Noida to Ballia (Eastern Uttar Pradesh).

In FY10, the total revenues and PAT was Rs.10,066 crores and Rs.1708 crores respectively. The company’s profits have been growing at a 5 year CARG of about 21 per cent and Institutional holding stands at 33.39 per cent as on 30 September 2010.

To cut a long story short just consider this: In this month the stock saw a high of Rs.138.90/share on 10 November and it closed today at Rs.107.30, that’s a loss of 22.75 per cent. The 52 week range was Rs.167 -99. Considering the above factors and the typical behavior of this stock, I expect this stock to rise by around 25 per cent in about 1 to 2 months time. And expect Jaiprakash Associates to give you 50 per cent from current levels if you have the patience to wait for a longer time frame.

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd