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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 .















5 comments:

  1. Todday, HB portfolio on upper circuit of 20% , any news ? or just value is catching up ?

    ReplyDelete
  2. I got following deatild from Taurus Mutual Fund's website.

    Taurus Mutual Fund launched its first scheme – Taurus Starshare in early 1994 which is operational even today. Needless to say, it is because of its consistent performance through these past 15 years that this scheme exists even today. Taurus Mutual Fund was perhaps the first private sector fund house to receive permissions to launch fully repatriable investments by NRIs/FIIs. The scheme has since received investments from IFC, Washington, the European Economic Community, Brussels & EFM, UK.

    In 1999, a merger was announced between HB Mutual Fund & Taurus Mutual Fund. On amalgamation, the HB Asset Management Co. Ltd was renamed Creditcapital Asset Management Co. Ltd. which then was re-christened Taurus Asset Management Co. Ltd. w.e.f. April 21, 2006. Subsequently in March 2002, Taurus Mutual Fund also took over the schemes of BOI Mutual Fund. Currently, the shares of the Taurus Asset Management Co. Ltd are held by HB Portfolio Ltd along with other HB Group Companies.

    The HB Group is a well known player in the Indian capital market The major companies that constitute the group are namely:

    HB Portfolio Ltd
    HB Stock Holdings Ltd
    HB Estate Developers Ltd
    HB Leasing & Finance Ltd

    Taurus Mutual Fund has established its presence across all demographics. With branches in top 15 cities & representatives in smaller cities, Taurus Mutual Fund's distribution network is strongly supported by more than 4000 business associates.

    Taurus Mutual Fund offers investment solutions for all investor segments. With Equity oriented schemes, Debt based schemes and an Equity Linked Savings Scheme, in the open ended product basket, Taurus Mutual Fund continuously strives to strengthen its offerings with more & more innovative schemes designed on the basis of years of expertise, market knowledge & research.

    In order to provide the best levels of service & to ensure complete security in deployment & reporting of investments, Taurus Mutual Fund has allied with the Deutsche Bank, one of the largest fund accounting entities in India & globally. The custody of the assets of Taurus Mutual Fund is with the HDFC Bank Ltd.

    To support the business plans & to attract more investments, Taurus Mutual Fund has planned integrated marketing campaigns all round the year to increase awareness of its schemes.

    ReplyDelete
  3. Hi Vikas,
    Value investing is painful and need to be patience . I had never imagined that it would apperiate by 25% within a week .

    ReplyDelete
  4. What is your view post Marcj 2012 results?

    ReplyDelete

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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.

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