Follow the Leader – the boss is always right and so is the leader!

In 2008, Buffett bought a large stake in the stock of Conoco Phillips as a play on future energy prices. However, this turned out to be a bad investment, because Buffett bought in at too high of a price, resulting in a multibillion-dollar loss to Berkshire. The difference between a great company and a great investment is the price at which you buy stock, and this time around Buffett was "dead wrong." Since crude oil prices were well over $100 a barrel at the time, oil company stocks were way up.Buffett says: "When investing, pessimism is your friend, euphoria the enemy."

On our home turf too we have Rakesh Jhunjhunwala who suffered a severe set back in Praj Industries. Rakesh Jhunjhunwala‘s holding value in Praj Industries plumetted from Rs 357 crores to Rs 101 crores. The stock which was quoting a tad bit over Rs.100/share in first week of January 2010 has benn languishing in the Rs.70 to 80 price range for several months.

On the other hand, Rakeshji made huge losses on Titan Industries by reducing his stake from 4.13 million shares to 3.81 million shares when Titan’s share price continues to spike and kissed Rs.4244 on 11 November 2010 though it slid today by Rs.177.20 to close at Rs.3953.85/share.

A few months back I had written an article about Vikas WSP onwww.indianvalueinvestors.com wherein I had in good faith recommended a “Buy” based on the unique business model of the company. But no sooner I had posted the write up I started receiving mails from different sources asking me to justify the reason of recommending a “buy” of a stock which was delisted for a few years by SEBI.

Vikas WSP Limited is an India-based company. The Company is engaged in the manufacturing of guar gum powder (GGP) and its derivatives. The Company supplies to all sectors of the food industry with a range of products. The Company also offers guar gum for technical applications, such as pet food, oil drilling and fracturing, textile printing and paper making. As of March 31, 2010, the Company had manufacturing operations in Rajasthan and Haryana. The products manufactured by the Company are also used in the food production as thickening and binding agents. The company’s total revenues in fiscal 2009-10 stood at Rs. 458 crores and PAT was Rs. 123 crores, generating impressive margins of around 26 per cent.

Without blowing my own trumpet, I wish to tell you guys that the worlds largest Investment Giant Goldman Sachs Investments Mauritius very recently purchased 15,00,000 shares of Vikas WSP @ Rs.31.71/share. The stock rested at Rs.35.70/share today 12 November 2010.

Many savvy investors simply follow what FII’s and DII’s buy – because normally the stocks purchased by the biggies have a tendency to rise no sooner the bulk deals are through. That’s precisely what’s happened to Vikas notwithstanding the company’s bad reputation in the markets. The stock has started is bullish phase thanks to Goldman.

To err is human, to forgive divine. Let’s all forgive Mr.Agarwal and his team just as Goldman has by buying a stake in a company which was delisted from the bourses. As human beings, we all make mistakes – even the Warren’s and Rakeshji’s of the world and I am just a simpleton in an ocean full of good and dangerous creatures.

While Goldman is sitting on profits from the word go, what about you folks. Do you wish to bet on Vikas – do so if you think Goldman has the Midas touch to convert stocks into Gold though at times the touch may become tough at times. After all no one is perfect. We all make blunders, some times Himalayan Blunders. Now, don’t tell me that getting married was the greatest Himalayan Blunder that you’ve ever made!

Remember – the markets don’t guarantee anything to anyone. A person may be a King or Queen and have tons of money but the market cares not for what you have and what you don’t have. The markets don’t recognize a Buffet, a Rakeshji or a Goldman – the markets will do what they are born to do – go up, go down, go zig, go zag, go here, go there, go nowhere but you my friend have to go somewhere - that's to the Land of Wealth.. Therefore, think twice or rather thrice or better still think hard before you invest your hard earned money in the markets.

Planting a money plant in your house will not do the trick for the simple reason that if the money plant does not grow you’ll start wondering whether the God’s are angry with you and in frustration you may end up buying a dud stock instead of buying a star stock. I suggest that you plant a Money Plant in the core of your head and see the Money Plant grow and then you don’t require a Bufffet, a Rakeshji or a Goldman to tell you what to buy and what not to buy! If your wife is superstitious and insists you to buy the real Greeny Money Plant then do as she says but at the same time don’t forget to sow the seeds of the Money Plant in your head and keep visualizing bulky green leaves flowering by the day and by the night too!

Happy Investing!

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

ALOK INDUSTRIES LIMITED

Alok Industries Limited is into integrated textile business company. It operates in five divisions: Cotton Yarn, Apparel Fabric, Home Textiles, Garments and Polyester Yarn. The Company provides textile solutions through its five divisions. Its products include woven fabrics of cotton, man made filament yarn and pile fabric. Its pile fabric includes long pile fabrics, terry fabrics, and knitted or crocheted fabrics. The Company exports about 35% of its products to over 70 countries, such as United States, Europe, Latin America, Asia and Africa. The Company has manufacturing units in Navi Mumbai, Vapi and Silvassa. During the fiscal year ended March 31, 2010 (fiscal 2010), the Company manufactured 192.387 million meters of woven fabric; 6,852.32 million tons of knitted fabric; 10,989.08 million tons of cotton yarn, and 106,958.80 million tons of texturised yarn. Its subsidiaries include Alok Industries International Ltd, Alok International Inc., Alok Inc. and Alok H&A Limited.

Why buy Alok ?

Alok has a Market Cap: Rs.2627 crores and PE is 9.23. Face Value is Rs.10/= and Book Value is Rs.36. The company enjoys good top line and bottom line: In FY 2009-10 Total Revenues Rs.4314 crores and PAT Rs. 242 crores [ Previous fiscal Rs.2966 crs and Rs.187 crs ] Operating net profit for the six month ended September 30 this year stood at Rs 126.32 crore as against Rs 89.01 crore in the corresponding period last fiscal, a rise of 41.91 per cent. For the six month period ended September, the company''s net sales rose by 44.83 per cent to Rs 2,550.48 crore, as against Rs 1,761.07 crore for the same period last year.

           Proposed merger of Grabal Alok Impex union to add Rs 150cr to sales of Alok Industries Ltd.  The company seeks to double its revenue to around USD 3 billion over the next three years. Managing Director Dilip Jiwrajka asserts " we are driving on a highway, and on highway we can only drive in the fifth gear." The company's current gross debt is at Rs 8600 crore, which it seeks to pare through increased internal accruals and fund-raising by selling off its real estate properties.

Conclusion: Buy in the range of Rs.29 – 33/share with stop loss of Rs.26/ and hold for one to three months in order to obtain25 to 50 per cent returns.

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

Amongst the thousands of stocks quoted on our bourses, which 2 stocks do you think can give you 100 per cent returns in about a years time?

Probably you folks may be aware that there are total 4,951 + companies listed on Bombay Stock Exchange and 1,800+ companies listed on National Stock Exchange and its no child's play to pick up stocks that can give you 100 per cent returns in less than a year. But, I am going to gift you 2 free stocks which are pregnant with the potential of delivering 100 per cent returns in a years time. And I am going to give it to you for free - absolutely free. That's if you take the trouble to send me a mail requesting for the same.

Remember Bank and Post Office schemes may give anything between 8 to 10 per cent p.a. but we at IVI can make your money work harder for you by recommending stocks that are destined to give you 100 per cent plus returns and that too for free - consider it to be a nice way of welcoming the New Year. Check out if anyone is providing such recommendation for free and then and then only shoot out your mail to me.Needless to mention, since the 2 stocks that I am talking about will be gifted to you absolutely free, you will not be receiving any Research Report as such but only the name of the stock, suggested entry points, target price, stop loss, brief about the company and Investment Rationale.

Sometimes inviting suspense into our life makes living enchanting, after all life itself is a mystery so why shouldn't stocks be shrouded with some spicy mystery! Keep wondering which are these 2 stocks and let me know if what you are thinking is precisely what I am thinking about! Not easy, unless you are gifted with Extra Sensory perception (ESP) which means you have no option but to request for the two free recommendations by writing to me.

Maybe, you are wondering that these days travelling in the stock market train is akin to travelling in a Mumbai local train during rush hours when there is every possibility of a passenger being automatically pushed out of the train at a station which unfortunately is not the destination station! It's the force of the masses that pushes people out of the train and it is the same force that makes you board a train without much effort - you simply get pushed into and out of the train.

Notwithstanding the above, I have reserved these two stocks which will be disclosed only to you, I mean only to those you will take the trouble to tell me what they think of HBJ Caps and what is that you want us to do better in terms of inputs provided, recommendations given etc.

And also let me know how IVI can help you better other than by giving FREE stock recommendations!

Eagerly looking forward to receiving your mail.

Looking forward to hearing from you.

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

Important Notice: Offer Extension in view of the Banks being closed and you folks being busy pampering your sweet tooth !!!

It happens to all of us. We need time to think when we wish to part our hard earned money when we buy products and services from the market place – even if the stuff that you buy may help you make money..

And since virtually the whole country including the NRI’s were celebrating the Festival of Lights apart from the bankers, its quite fair enough to extend the Deep Discount Diwali Promotional Offer from IVI Unit much beyond Diwali. Guess, many folks out there were too busy enjoying delicious Diwali sweets and were off line for the past several days. Well, the Festival of Lights is over and yet we desire that you continue the celebration by inviting more Light [ read money ] to your Life -see how.

Friends, cheer up. The Bargain Stock Package [ BSP ]from IVI Unit will still be available for Rs.5000/= instead of the normal MRP of Rs. 10000/= until Wednesday 17 November. What’s more, once you subscribe for the BSP, you will be entitled to receive all of the following :

I] BARGAIN STOCK PICK- Long term wealth creating Stock with potential return of 200-300% in 1-3 years holding period.

II ] DEFINITE INCOME STOCK- Short term stocks with potential return of 25-50% in 1-3 months holding period.

PLUS, all of the following, Absolutely Free:

1.One Free Stock recommendation – a stock that represents one of the most ethical business houses in the world.

2.VI Bargain Stock Package Short term recommendation for September 2010 – Spice Jet is the name of the stock and brief details of our recommendation is attached as pdf.

3. IVI Bargain Stock Package Medium Term recommendation for September 2010 – Tulip Telecom is the name of the stock and brief details of our recommendation is attached as pdf.

4. IVI Bargain Stock Package Short Term recommendation for October 2010 – REI Agro is the name of the stock and brief details of our recommendation is attached as pdf.

5. IVI Bargain Stock Package Medium Term recommendation for October 2010 – Omnitech Infosolutions is the name of the stock and brief details of our recommendation is attached as pdf.

So, you have been provded more than ample time to think things over and take an informed decision. Guess, you don’t often get opportunities to save a cool sum of Rs.5000/= very often! Do you?

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

HBJ Capital's IVI Team wishes you all a Happy Diwali and a Prosperous and Wealth creating Samvat 2067

FRIDAY, NOVEMBER 5, 2010

HBJ Capital's IVI Team wishes you all a Happy Diwali and a Prosperous and Wealth creating Samvat 2067

Spike in volumes and spike in share prices may not necessarily spike your bank balance

As assured by me yesterday, I am providing a brief about two scrips whose volumes and prices have risen but unfortunately one is sure to make a nice big hole in your pocket while another may probably bring home lots of money over the years.

Picking up FACT on shocking volumes and rising price can give investors a hard shock

FACT [ Fertilisers & Chemicals Travancore Ltd ]

Spurt in volumes in FACT happened on 3 November 2010 when days volume soared to 2748653 against 2 weeks average volume of 100988, an astounding spike in volume to the tune of 2621.76 per cent! The closing price on 2 November was Rs.49.40 and on 3 November it shot up to Rs.53.10, an increase of 7.49 per cent in just one day! To my mind neither a great monsoon nor any great decontrol buzz relating to agriculture inputs deserves such astounding spike in volumes in respect of a company whose fundamentals will infuriate a Warren or Graham for that matter. Forget about going into the history and geography of this scrip – just look at a few figures provided below and then perhaps you may be inclined to conclude that whoever is chasing FACT is doing so at the risk of losing money in the easiest way possible. The fact of the matter is that though FACT is India’s leading fertilizer and chemical manufacturer, it is in fact a white elephant whose volumes and share price seems to be increasing for no rhyme or reason.

BookValue Rs. 3.03 against CMP of Rs.52.25/share

Debt Equity Ratio 3.87

Interest Cover 0.13

Total Revenues in fiscal 2009-10, Rs. 2134.10

Total Loss in fiscal 2009-10, Rs.103.80 crores

Taking a call on GMDC based on high volumes and rising price can give investors a great profits

Spurt in volumes in GMDC happened on 4 November 2010 when days volume soared to 13447101 against 2 weeks average volume of 372818 an astounding spike in volume to the tune of 3506.88 per cent! You bet this is a good stock whose price has started increasing pretty rapidly as shown under :

Closing Price on 3 November Rs.139.50

Closing Price on 4 November Rs.164.40

Closing Price on 5 November Rs.169.50

Where in the world can you expect to make 21.5 % flat in 3 days flat!

Gujarat Mineral Development Corporation Limited (GMDC) is a mining and mineral processing company in India. GMDC operates in two segments: Mining and Power. The Company produces lignite, bauxite, calcined bauxite, fluorspar and manganese ore. GMDC is also engaged in the generation of power.

Book Value Rs. 48 against CMP of Rs.169.50 and PE of around 16

Debt Equity Ratio 0.30

Interest Cover 16.5

Total Revenues in fiscal 2009-10 Rs. 1065 crores

PAT in fiscal 2009-10 Rs.279 crores, post tax margin being around 26 per cent.

Conclusion : If volume increases are accompanied by rise in share price, the chances are that the share price may continue its north ward journey in which case one can take a calibrated risk and take a good position in the stock if the fundamentals are good. Else, better stay away or wait for the price to rise to its 52 week high and dump the scrip lock, stock and barrel!

So, friends without going into much details I trust you were enlightened on how to use volume shocking news to your advantage. And yes, be very careful when you see increasing volumes accompanied by rapidly decreasing price – it could be an opportunity to buy a good stock which is being beaten down due to some bad news [ like when Aban’s Pearl sank to kiss the ocean floor ] or it could be a another Satyam.

After all, stocks can at times don the role of a fairy giving you sweet dreams and more often than not, stocks can don the role of a monster giving you nightmares in the process. So, you need to pick stocks intelligently in order to be the Don of the Markets.

Happy Investing!

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

Volume Shockers can give investors a high Voltage Shock if they pick up the wrong stocks

One simple way to pick up good stocks is to observe which stocks are rising in volume with corresponding rise in prices and then blend this data with the underlying fundamentals of such stocks to verify if there is good value in the scrip. However one needs to exercise abundant caution whist deploying such stock picking strategy because more often than not the value of a scrip may continue rising for days or weeks when actually there is nothing much valuable in the scrip as such. As an analogy, folks may be thinking that Gold stocks may be the next big thing when neither the promoters or financers know much about how deep down the gold stuff is and whether the stuff is actually gold or coal and even if its gold in billion tones the Government babus will come out with such fascinating ordinances that will compel the gold diggers to start digging the grave of their corporate logo and what not! [ read - filing for bankruptcy ] A case in point is the ongoing Government intervention in the affairs of MFI’s. I was a bit amused to witness the “poking of nose” by State and Central Government in the affairs of MFI’s. Very recently when I was watching a TV serial in which a very prominent personality from GOI Finance Ministry said that MFI’s in India are doing a great job and they should be left alone because the BPL guys anyway borrow even at 100 per cent from money lenders but will never approach any bank because they want the money fast and that too without much pain. And did I say that MFI like SKS Microfinance, SE Investments, Arman Finance dole out loans in the range of 25-30 per cent and not 100 per cent! Well I didn’t but guess you folks got it anyway.

Friends, remember the trend is your friend but catch the trend fast before it bends – this is something akin to a bus moving forward and northwards if all goes well but at times the bus in which you are travelling may without warning start moving in the backward and southward direction making it impossible for you to reach your desired destination – yeah you can as well hop off mid way sustaining injuries and board another bus which you believe is moving northwords! But that’s different question.

While there will always be many stocks which are up consistently on a 3, 5, 7 days time frame, not all would be great buys. Indeed, ascertaining which stocks will continue the uptrend based on fundamentals is a herculean task because you will need to check the fundamentals of each of these stocks to conclude which are the best amongst the several stocks which have commenced their north word journey. Hence, I have attempted to cover just 2 stocks only : one which I believe will continue the north word journey and another one which will come crashing down sooner than later like a house of cards.

Friends, I’ll throw some light on these two stocks tomorrow since my friends have given me about more than a dozen missed calls and I need to join them for commencing celebrating the Festival of Lights.

As I sign off, I wish you and your family a Very Very Happy and Prosperous Diwali and a Great New Year.

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

Dont expect KCP to spice up your portfolio

A premier producer of cement and industrial machinery, KCP is one among the leading industrial groups in India. Innovation being the premise, dedication and detail are the other assets that have lead to strong proceeds of KCP. Technology formulates the chic of our service with cutting edge, state of the art facilities and latest process trends that are applied in areas such as critical industrial equipment for mineral processing and chemical industries, steel plants, space research applications and Nuclear / Hydel power installations. KCP has set up over 38 sugar plants and 12 cement factories.

KCP has an Equity base of Rs.12.89 crores and its Market Cap of Rs. 410 crores. While the Net Profit Margins ranging between 16 to 18 per cent plus. However, the company’s top line and bottom line is erratic as can be seen in the table provided below:

	2009-10	2008-09	2007-08	2006-07
Total Revenue	382	353	406	294
PAT	60	65	66	48
PAT Margin	15.6	18.6	16.3	16.4

Q2FY11 numbers too are not encouraging – total revenues for the quarter stood at Rs.86 crores as compared to Rs. 109 crores in Q2FY10, down by around 21 per cent.. PAT in Q2FY11 stood at Rs.4.96 crores as compared to Rs.21.64 crores in Q2FY10,- a staggering reduction of 77.07 per cent.

The company derives around 50 per cent revenues from its cement division,, around 42 per cent from its Engineering segment and balance from its power division.

Promotor’s stake in the company stands at 46.26 per cent and DII’s stake is 6.91 per cent. Though the company has a low Debt Equity ratio, the company will need to make strenuous effort to ramp up its top line and bottom line with greater thrust in its Engineering and power division.

Conclusion: Though KCP may appear to be cheap at a PE of around 11, its dismal Q2FY11 performance and looking at the low delta in 52 week high low of Rs.37.46 – 25.40, the stock may hardly do any wonders for your portfolio.

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

Punters continue betting on 2 stocks having potential to become 2 baggers in less than 2 years

[ Which horse do you think represents Yes Bank and which represents Indus Ind

Bank and which horse do you think will eventually win the race or will it be a tie ]

IIn order to tame inflation, D Subbarao, Governor of the RBI on Tuesday 2 November 2010, announced a hike of 25 basis points in the repo and reverse repo rates, respectively, in the mid-year review of its credit policy. The cash reserve ratio (CRR), as expected, has been left untouched at 6%. Accordingly, the new repo rate, at which it lends to banks, stands at 6.25% and the reverse repo rate, at which it absorbs extra cash, at 5.25 per cent.

Besides, RBI made other announcements like reduction in Export credit refinance, discontinuing the bank funding support to Mutual Funds, Non Banking Finance Companies and Housing Finance Companies.

Consequent to the above announcements, the Sensex rested at 20345.69, down by 0.05 per cent and 9.96 points lower

The markets seemed to have simply shrugged off the RBI announcement with the Nifty moving sideways and Advance:Decline ratio being 25:25.

Amongst the 6 Nifty bank stocks, most registered an increase in their share prices in the range of 0.05 to 1.35 per cent increase. Kotak Mahindra Bank ended at Rs.474.45, up by 1.35 per cent over previous close.

Amongst all the banking stocks, I find as if there is a race going on between 2 banking stocks with different group of punters striving hard to drive up the stock prices of Yes Bank and Indus Ind Bank. In this calendar year of 2010, Yes Bank has given investors 33 per cent return and Indus Ind Bank has given 100 per cent returns as shown below:

	Yes Bank	Indus Ind Bank
4 Jan 2010	268	142
2 Nov 2010	368	285
Returns %	37.31	100.71

I was always wondering when the above two stocks will stop rising and start sliding downwards but to my surprise the stock use to rise no sooner it use to fall and slowly but gradually it reached levels that give the owners a very good return, especially Indus Ind Bank. So, now you must be wondering why on earth am I penning my thoughts on stocks that have already risen. Well, hold your breath my dear friends. Instinct stronger than reason tells me that both the above stocks can become two baggers in 2 years. Figures speak louder than words and presented below is a snapshot of the some numbers related to these two banks which are in great shape and seem fully geared to keep rewarding its shareholders steadily but handsomely in the years to come.

While the Equity base of Indus Ind Bank is higher than that of Yes Bank by Rs.116 crores, both banks Market Capitalization is more or less same- Yes has a Market Cap of Rs.12753 crores whereas Indus has a Market Cap of Rs.12759. PE of Yes is 21.31 and that of Indus is 29.16. The LTP on 2 November 2010 of Yes Bank was Rs.369.4 and that Indus Ind Bank was Es.276.65.

Further, annual and latest quarter results are provided below for quick reference which will give one a fair idea about how the company is performing on an annual as well as on quarterly basis:

Figures in crores

		YES BANK	INDUS IND BANK
Total Income	FY2009-10	2945	3260
Total Income	FY2008-09	2438	2765
Increase	%	20.79	17.9
PAT	FY2009-10	477	350
PAT	FY2008-09	303	148
Increase	%	57.42	136.48
Total Income	Q2 FY2010-11	1084	505
Total Income	Q2 FY2009-10	678	341
Increase	%	59.88	48.09
PAT	Q2 FY2010-11	176	133
PAT	Q2 FY2009-10	111	77
Increase	%	58.55	72.72

Further, one can get a better perspective about how effective the bank is in conducting its affairs and the potential it has for growing further by looking at the following data:

			YES BANK		INDUS IND BANK
NIM			3		3.41
Capital Adequacy			19.43		16.22
Net NPA's			0.06		0.36
Total Branches			171		238

And as far as CASA is concerned Indus Ind Bank has a CASA of 25.4 per cent and Yes Bank’s CASA is growing at a whopping 118 per cent on a y-o-y basis.

Based on the above data, can you guess which is the better scrip having the potential to double your money in about two years time. If you put on your thinking cap and look at the numbers closely, you know which scrip will double your money. Going forward, I will not be shocked if investor sentiments and punters drive the stock prices to levels that would be tantamount to irrational exuberance!

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