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November 3, 2010

My diwali special pick

Note : SOLD ALL Holding  with loss of 30% . No more interested in this type of companies .    
 Although value investors outperform speculative investors in the long-run, value investors do not expect to outperform the market.Value investors accept the reality that no one can predict market behavior; instead,
value investors work to control their own investment behavior.

         I prefer investment using safety of margin.I like Benjamin Graham's value investing style.I give 50% weightage for value stocks in my portfolio.



             For this Diwali my value pick is HB Portfolio Ltd. I am putting case how much cheap HB Portfollio is available at current price . 

             At current price of around Rs. 42 market cap of this company is around 50 crores. As per annual report 2010 company has Cash & Bank Balances more that 14 crores(Precisely Rs 140643338) on consolidated balance sheet . You can access annual report from company's website ( http://www.hbportfolio.com/Investor%20Information/Annual%20Reports/Report%20PDF/ar032010.pdf )   So effective market cap after reducing cash is 36 cr.  Company does not have any debt .Can you imaging how much stocks and mutual fund unit this company hold ? As on 31st march 2010 value of stock portfolio is 185 cr (Rs 185,13,13,967) and mutual fund units of 10 crores (Rs 9,98,89,044) . Company is also having unquoted investment worth 39.29 crores (Rs 392897303) in associates companies at book value .

           So company has total investment  Stock(185) + MF(10 ) + Unquoted(39) = 234 crores. and company is also having Net Current Asset around 47 crores (including 14cr cash) on consolidated balance sheet . So on market cap of 50, we are getting company ,which has investment 234 + Net Current Asset 47  = 271 crores and fixed asset extra.

            You can get complete list of stock,quantity and amount from annual report . I am providing just list of stocks.

Crompton Greaves Limited
CHI Investments Ltd
Federal Mugul(Gotze India) Ltd
Hindustan Sanitary Ware Ltd.
Jai corp Ltd
Jaiprakash Associates Ltd.
Jai Prakash Hydro Ltd
PBA Infrastructure Ltd.
RRB Securities Ltd.
JSW Steel Ltd
Tata Steel Ltd
Uflex Ltd
Unitech Ltd.
Ultramarine & Pigments Ltd.   


          I agree, generally holding companies trade on discount to their holding investment value. This range from 0 to 50% on market condition and nature of stock holdings . But HB Portfolio Ltd is not pure holding company , generally holding companies hold other companies of same group. So, if a group company's future is not bright, then also holding company has to hold that stock. As per my view this is one of reason why holding company trade on discount in the stock market. Other factor decides valuation is dividend yield. For movement of any stock it needs news flow ,but generally holding companies lack in this front.  HB Portfolio Ltd can buy and sell any stock just like mutual fund. I believe it should not trade more than 30 % discount to investment value. Right now market cap is 50 - cash 14 = 36 cr and investment  worth 234 corers. So effectively HB Portfolio Ltd is trading on steep discount of 85 % . and at current price dividend yield is around 4.8 and  company has consistence dividend paying record as well. Doesn't it compelling value buy ? if you know any better bargain value buy then please let me know.

        Detail of HB Portfolio Ltd
       This is HB group of company. This company hold stake in Taurus Asset Management Co. Ltd , which runs Taurus mutual fund . Taurus Tax Shield is well know ELSS Mutual fund scheme. Since company runs mutual fund we can trust management up to some extend.  Following are associated companies of HB portfolio Ltd. .

(i) Taurus Asset Management Co. Ltd.** India 50.00 %
(ii) Taurus Investment Trust Co. Ltd.* India 50.00 %
(iii) HB Insurance Advisors Ltd.** India 39.96 %
(iv) Merwanjee Securities Ltd.** India 48.00 %
(v) Pisces Portfolio Pvt. Ltd. ** India 38.00 %

          HB Portfolio Ltd had applied for NBFC license but there was a case of script manipulation(2001) was pending against subsidiary company HB securities . Last month after investigation, SEBI has given verdict(WTM/KMA/IVD/305/10/2010)  in favor of company So, it make way clear for getting NBFC license from RBI that is big positive for the company.


       Comparison
      Note :- following comprising is based on whatever data available with me. Please re-verify if you have annual reports of these companies.

1) Industrial & Prudential Investment Company Ltd :- I don't have exact data and annual report but as per whatever data I had it is trading on close to 50% discount . Company does not have any website. Dividend yield at current price is 0.9 % .

2) Stanrose Mafatlal Investment & Finance Ltd :- Market cap 43 cr , value of investment 74 cr . . Trading on discount of around 42 % . Dividend yield at current price is 4.5 % .

3) Aeonian Investments Company Ltd :- Market value of quoted investments is 81.5 cr + unquoted investment of  15.4 cr and no debt . So 97 cr is investment value and company's market cap is 93 cr .  So company is trading close to investment value.Dividend yield at current price is 2.2 % .

            In last few months stock analysts had given recommendation on stocks ,which were undervalued , after these recommendations those stock shoot up . e.g.  Bengal & Assam Company LtdJ.K. Agri Genetics Ltd, Sicagen India Ltd . I think, if any reputed analyst gives call on HB Portfolio Ltd on TV channels, then it will shoot up and will minimize discount to investment value .  Right now this is unknown script that is the only reason it is so undervalued. If you already know these detail and still not invested then please let us know the reason .

           At current price downside is limited and up side I can't predict . Tax free dividend yield of 4.8% is quite impressive and there is scope of increase in dividend , since dividend payout % of profit is just under 22% .


           I am right now analysis another value pick and going to publish soon . If you like to receive my value picks in your email inbox as soon as I publish ,then subscribe by email (right top corner) . It is absolutely free.

Your comments are welcomed .















Disclaimer

I am not an Investment advisor and do not provide this service via this Blog. The Blog is a personal diary and the stocks discussed on the blog represent my personal views and analysis. They are not recommendations to buy or sell stocks. I do not intend to recommend any stocks for financial or non-financial gains and may or may not be holding the stocks discussed on my blog.

In a nutshell - i am not responsible for the losses or gains made based on the information published on this Blog