Its a good idea to buy beaten down stocks instead of cribbing about the bears

In the world of business and finance, there will always be good and bad events happening once in a way, there will be corruption, insider trading and so many negatives that may drive a stock price to so low a level that it becomes an attractive buy for the smart investors. These guys eagerly wait for some bad news to break out so that people sell in panic and these smart investors then grab the shares which are falling by the wayside.

Today we will take a look at HDIL to find out whether it is worth buying it by embracing some risk which anyway you have to since no stock is riskless.

Market Cap of HDIL is Rs.8127 crores, Book Value of around Rs. 215 and a PE of 10.23. The 52 high / low of HDIL was Rs. 392.25 / 160.10.

Now see the following and see for your self whether the stock deserved battering:

• HDIL churns out annual revenues of around Rs.1600 crores and PAT of around Rs.602 crores. [ per FY10 results ]
• HDIL enjoys good margins – in FY10, NP margin was around 37 per cent.
• The company had cash in the kitty to the tune of Rs.787 crores – not a small amount by any stretch of imagination. The company had money blocked in various Investments to the tune of Rs.596 crores as on 31 March 2010.
• HDIL’s Debt Equity ratio is 0.58 and as such it can easily mobilize funds from the market when need arises – it has the blessings of several bankers.

Conclusion : Based on the above, HDIL is a decent buy to obtain decent returns in the short/medium term. The stock has been beaten down by around 29.35 per cent in one month. HDIL stock price which was Rs.253.95 on 1 November 2010 slid down to Rs.179.40 on 30 November 2010. Subsequently, the stock recovered by 19.70 per cent on 2 December 2010 to close at Rs.214.75. Again its gone down by 8.80 per cent today to rest at Rs.195.85 probably just for you.

If one takes a calibrated risk, getting hold of HDIL at around 185-195 per share can give investors 25 to 30 per cent return in 2 to 3 months’ time. And don't forget that Housing Development and Infrastructure Limited [ HDIL ] is a premier real estate development company with a proven track record of having completed several residential and commercial projects in Aaamchi Mumbai.