Why Is Sesa Goa price falling? - 2 quick reasons

Sesa Goa

Sesa goa was supposed to be an outperformer by many analysts. However past 3 months have seen over 35% erosion of the stock price of Sesa Goa. Sesa Goa's main business consists of mining and exporting iron ore. However apart from iron ore the company is also into production of metallurgical coke.

First main rdason for Sesa Goa fall -Falling iron ore prices

Iron ore prices have fallen significantly from their peak prices in the last year. This is one of the main reason for the price drop in Sesa Goa. Read more about How Iron ore prices work.

Second main rdason for Sesa Goa Fall - China regulations

China is one of the largest importers of iron ore. Recently, the Chinese Government has banned import of low quality iron ore (one which contains less than 60% of iron). This has direct adverse consequences for Sesa Goa.

Will Sesa Goa stock see some action ?

There can be various speculations and theories regarding this. My personal opinion is that the stock will see some action ( by which I mean about 20%-25% rise once iron ore prices rise. However the following comment from livemint is worth noting about valuations on Sesa goa.

At first, Sesa’s projection of a 20-25% increase in deliveries in fiscal 2011 may seem weak compared with the previous year’s 36% growth. But this higher growth has been mainly achieved due to the contribution of iron ore from its Dempo acquisition. Adjusted for that, sales growth was 12% and 11% in the full year and March quarter, respectively. Dempo’s figures reflect in Sesa’s results from June 2009. The base effect will fade after the June quarter.

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Apollo Hospitals - Why should stock split result in price jump?

Announcements

Apollo Hosp - Board to consider Stock Split | 27/05/10 09:50
With reference to the earlier announcement regarding Board Meeting on May 28, 2010, Apollo Hospitals Enterprise Ltd has now informed BSE that in the agenda of the Board Meeting scheduled to be held on May 28, 2010, to consider and approve sub-division (Split) of equity shares of the Company and other matters connected therewith.

Apollo hospitals is up 10% today. The only relevant news I found was the above coroporate announcement on BSE.
The company as such does not undergo any change. Why should the price jump 10%? Or am I missing something?

- update - it turns out I was missing something. I checked the price on finance.google.com. THere is some bug there where it is showing a jump of 10% where as the price has jumped only 3.8%.

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How to invest in stock market? - Short Listing stocks

Stock Market movements and emotions

A typical week for an early investor -

You are new to stock market. The stock market index has recently gained over 10% in the past one month. Being excited about the movement you have a look at top gainers in the past week. You pick one or two stocks and then justify why these stocks are one of the best available, and also why the price is reasonable. You buy them, wait for a day or two. Unfortunately the stock market retreats and you lose over 10% of your invested value. You then start doubting your stock picks and mange to find a flaw. You decide to rearrange your portfolio and sell a portion of it and buy some of the other stocks which have been relatively stable during the recent market fall. But alas, in the coming week, the stock market rebounds and you realize that had you kept your earlier stocks, you could have done better... frustrated, you start searching the internet for investing strategies..

Does this sound familiar? This is what typically happens to new investors in stock market who do not have a fixed investment strategy.

Have a fixed criterion to short list stocks

It is important to have a fixed idea of what is the minimum you expect from a company whose stock you may consider for buying. As an example, I will give the following criterion which I try to follow.

1. The company must be fully functional and shown a positive net profit for at least 5 years.
2. The average topline growth of the company must be at least 15% in the past 5 years.
3. Minimum Operating Profit margin of 10% and ROCE (return on capital employed) of 12%.
4. The current stock price must not be more than 80% of the 52 week high price. (this is to avoid past experiences where I have invested right when the price was at its maximum, and had to pull out when the price plummeted).
   

It is also good to follow other rules of diversification (not putting most of your money in your top favorite stock), always keeping some cash ready to buy more if the price drops further etc. These other strategies will be discussed in later posts.

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Crisil - Best Stock to buy for Long Term Investment

Crisil - why is this one of the best stocks ?

Crisil - or Credit Rating and Information Services India Limited - assigns ratings to various financial instruments like bonds, debt and even mutual funds. Credit Rating Agencies like CRISIL are important for market efficiency because investors rely on their ratings for risk assessment. For e.g. if you want to buy bonds of a company or say even invest in a mutual fund, it would be very difficult for individual investors to conduct individual study. Crisil is a market leader in India with 60% market share in domestic bond market and 53% market share in bank loan market segment.

Growth prospects and financial info

Crisil is currently trading at a P/E of 25 as I write this post. To check the latest P/E go to moneycontrol.com or BSE PLUS. Crisil sales have been growing at an alarming rate of about 80% in the past five years. Although this amount of growth may not be sustainable in the long term, as more and more companies want to raise capital through bond market, I expect CRISIL to grow at 30% or more. Crisil is a debt free company with operating profit margin of about 50%.



disclosure: I own this stock.

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Apollo Hospitals - Good stock to buy for Long term

Apollos Hospitals - Company Overview

Apollo hospitals group, started in 1983 in Chennai, is an integrated healthcare organization which currently runs over 50 hospitals across India and overseas. Its operations include a chain of Apollo Pharmacies and neighbourhood diagnostic clinics. However, Apollo hospitals is planning to divest at least 50% of Apollo pharmacies, its retail pharmacy industry.

Apollo hospitals - Growth

Apollo hospitals limited has been growing at a rate of about 35 to 35% in the past 5 years. Although Operating Profit margins have decreased over the past 5 years, they are still at a comfortable 15%. It looks likely that Apollo Hospitals, the largest such company in south asia, and with its expanding overseas operations, can sustain about 25% to 30% growth in the coming few years. Apollo hospitals has also entered into a joint venture with Cisco to revolutionize healthcare (or telemedicine) using Communications technology.

I would enter the stock at its current valuation (690 @ 28P/E).
disclosure: I already own this stock. The investment time frame I have in mind is 3 years.

Recent Posts related to the theme "Best Stocks to Buy Now" (2010) Suzlon Energy - Best Wind Energy Stock for 3-5 yr investment. Crisil - Best Stock for Long term Investment Titan Industries - Best Consumer Durables Stock for long term Investment Apollo Hospitals - Good Stock to buy for Long term investment. Godrej Consumer Products - Best FMCG stock to Invest Now Stocks which were "Best Stocks to Invest" for year 2009, but now, the analysis may or may not apply, as prospects for the current year have changed. Best Stocks to buy in 2009. Glaxo - Best Pharma Stock Cipla - Good Pharma Stock Tata Tea- Best FMCG Stock Hero Honda - Best Auto Stock for 2009. Hindustan Unilever - Safe FMCG stock Posts on Investment Basics Understanding the P/E Ratio Return on Equity (ROE), ROCE and Shareholder's Equity Consolidated results vs. Standalone Results. Topline Growth vs Bottomline Growth

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Investment Opportunity lying ahead

European debt crisis

Although the european debt crisis could potentially get out of control and a logical possibility of a disaster exists, it is unlikely that any disaster will take place in the next couple of quarters. Thus, in my opinion, the next 3 or 4 quarters are likely to be of healthy growth with double digit IIP. Only economic indicator which will be slightly out of favor will be inflation. But the fear of debt crisis and slowing of activity in several European countries due to austerity measures are likely to keep fuel prices low, and thus help keeping inflation under control. In any case, to summarize, I do think the markets will make a new 52 week high in the coming 3 quarters.

Investment Opportunity lying ahead

The above logic doesn't mean that the markets won't fall. There are various reasons for market to fall in the short term. One of the principal reasons is pulling out of funds by FII's. I think it is possible we may see 4500 levels for Nifty in the coming month. If that happens, I believe it will be a wonderful opportunity for medium term investment. I am sitting on some cash, waiting to see if Nifty does fall to 4500 level. I am simply going to put all the cash in a Mutual Fund (currently the ones I have in mind are Reliance Growth Fund, Birla Sun Life Midcap Fund and Sundaram Paribas Select Midcap Fund). That would be a wonderful investment opportunity. If you are thinking along similar lines, don't forget to book your profits in 6 months, because the future ahead, who knows...

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Is the European Crisis good for India too?

An interesting article from Economists View - claiming that the European crisis will actually be profitable for US, at least in the short term (a couple of quarters).

Economist's View: "Is the European Crisis a Net Positive for the US?"

Yes, per usual, two economists, three opinions. In any event, one would have to consider the positive impact of the Greek crisis against any trade drag. And yes, there are positive implications. First, the weaker Euro has taken a bite out of oil prices, which fell back below $70 today. Make no mistake - keeping a lid on oil prices offers continued support for US consumers.

This logic applies to India too !

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