The stock will get a 1:1 bonus on June 1, 2007, so for every share you own, you will get one "free" share. I had said that just before the bonus there will be a temporary price hike to make for lower capital gains tax - and this is what seems to be happening. In my opinion, there's no need to exit this stock just yet - ride your profits and get the bonus shares.
I had targeted a price band 2700 to 2970 within a year, and 5720 in the long term. Looks like my one year target is here already - within two months!
Stick with the stock - I would typically wait for a 50% gain before booking partial profits - so let this stock go where it's going. Fundamentally the news has gotten better: It has announced a 3200 cr. capex plan to expand capacity to 15,000 MW (from 6,000 MW). Given the huge impetus for power projects, BHEL stands to gain immensely.
With fundamentals looking good and the price action responding, you might want to buy more. But wait - post bonus there is usually a small knee-jerk downward reaction where tax arbitrageurs sell and temporarily deflate the price. That would be a better time to buy. Remember though - long term for this stock, it's a good healthy stock and you shouldn't rush to sell it. Wait till you make 50% gains, sell 1/4th your holding and wait for the rest to gain.
Archives:
- Buy BHEL at 2,250 (Apr 03,2007)
- Update: BHEL at 2,465 (Apr 10, 2007)
- Confirmation of 1:1 bonus (May 2, 2007)
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>Hi Deepak,
I know about your post on BHEL. I read it and made a note of it. But the unfortunate even at that time was I was fully invested. Did not even have a cent to invest. Maybe thats the biggest mistake. I have made countless mistakes in just 3 months of investing directly in the stock markets.I am sad I missed the oppurtunity on BHEL. Now I am on cash. I will surely buy BHEL. But as you have written in the article what price range is good for me to enter post issue so that it will be a fair price. Can you please give me a rough estimate.I would like to hold this stock for atleast 5 years.
Not having bought BHEL when it was at 2250 was one of the biggest mistake. I hope I learn something.
Thanks & Regards
Hari
05.29.07 at 10:05 AM
>Hari: Don’t worry – there will be hajaar more opportunities. One miss doesn’t mean you lost it all – every month and every day there are opportunities in the market.
I’d say buy BHEL below 1,400 post bonus, for a 5 year target of Rs. 2,800 to 3000 (post bonus). Note: This is about 15% annualised gain if it takes five years but it is a rock solid company and has excellent prospects.
05.29.07 at 10:35 AM
>Deepak..I have been a silent reader of your blog and I was exactly like HARI- another one, who missed the boat as far as BHEL is concerned. I wish I had the horse sense to listen to you but these things are always in hindsight and I take my lessons and move on. I like the conservative advice you give (with out unreasonable and unrealistic expectations of returns) and that is a clear stand out. Keep up the good work.
On a side note, please do visit my blog, if you have interest in cricket http://cricket4ever.blogspot.com/
Lastly, I subscribed to your blog by email and I did not see the updates coming in thro the bulk mail. Is there a possibility that the bulk mail s/w of yours does not add the ids?
05.29.07 at 2:09 PM
>crick: Thanks for the comments. And don’t take me for face value – I might turn out to be very wrong! Do your own analysis too.
Interesting cricket blog – Keep writing, the work is good.
For email: it is possible that that the mail may have gotten placed as spam, since nowadays filters are quite strict. But perhaps you cna resubscribe? Can’t see your mail id, perhaps I can reconfirm if I know which id you used….
05.29.07 at 8:28 PM
>Hi Deepak,
With reference to your earlier post where you gave a exit call on IT, what triggers are you waiting to get back int IT?
The dollar seems to be stabilizing at 40, might even go up during the US election time, but i am sure there is more downwards after that. That apart, from the growth perspective, the IT biggies are still growing at a brisk pace, so I wanted to know what you consider a trigger to get back in IT sector?
Thank you.
Ps: Congratulations on being the most widely read blog. It doesn’t surprise me!
05.30.07 at 4:36 AM
>Sushant – I would say let’s wait for this quarter to ride over and see the results in July. I feel they will only be half subdued, the full effect of this fall will come only in the next quarter (Jul-Sep).
Do you still believe they’re growing briskly? They are currently valued at about 30 trailing P/E which I’m not sure they will live up to.
And thanks for the compliments :) I think there are more widely read blogs than this – I’m just one of them, of which they are 10 or more…ther’s still a long way to go.
05.30.07 at 5:04 AM
>deepak,I read about your post on BHEL.Based on your analysis I bought at 2494(on that day, it was down more than Rs.50).I worried when it gone down to little over 2400. Now, it is OK.
Like this stock, we,lay investor expects the same from you. Identification of good stocks(for long term),its future growth & timing to buy.
05.30.07 at 10:33 AM
>Deepak,
Nicholas Piramal has closed 5% down today at 254. Shall I buy it.Or do you know any specific reason it has gone down. Also apart from DrReddys , Ranbaxy is there any good picks in the Pharma space? I think Nicholas Piramal is ok. They want to be among the top by 2012.As I was checking the price movements I saw that this scrip has lost 5%.If you think its a good pick I will buy it.
Also deepak I have a lots of doubts.Do not get the time to mail you.
regards
Hari
05.30.07 at 2:14 PM
>Dear deepak,
I had 10 shares.After bonus it should be 20. But, my broker online balance shows 30. how? Pls explain.
05.31.07 at 6:48 AM
>siva: This must be a mistake. THe bonus shares will get credited only after a few days.
05.31.07 at 7:05 AM
>Hi Deepak ,
Congratulations on being one among the most read bloggers. You certainly top my personal blog read list .
I wanted to know your views on Larsen & toubro. It is a stock which has done well & in the last one week , picked up nearly by 400 Rs & ended at 2000 per share. Is this a time to sell ( or to buy ?) .. is this overpriced now ?
Regards,
Ritesh Kamath
05.31.07 at 2:19 PM
>Thanks Ritesh. L&T is an awesome stock. I’ve tracked it from the demerger to Ultratech – prior to that it was trading at 600, and if you had 10 shares of L&T then for Rs. 6000, you would now have 4 Ultratech and 10 L&T shares giving a net value of 23,200 – in just a couple years.
Is this the right time to buy? It’s Trailing Twelve month EPS is 57 and P/E is 35. For this stock this is still a good deal because it has commanded much higher P/Es too. It’s growth is expected to be 40% or more for the next year. This has strength too – huge volumes, high relative strength, big moves on price. Buy in a series – like some amount this week, some amount next week and so on.
05.31.07 at 2:44 PM
>re your comment on L&T, additionally it will some value unlocking,
http://moneycontrol.com/india/news/ipo-upcoming-issues/lt-infotech-may-list2008-says-lt-cfo/284377
06.01.07 at 10:48 AM
>Hi Deepak,
BHEL story has unfolded true to your predictions. How far do you think the price will fall?
Thanks
06.05.07 at 10:26 AM
>Sujit: 1388 is where it is today. I think it’ll probably remain between 1300 and 1400 for a while and then break out, depending on news. I don’t foresee a fall below 1300, but then the markets have been known to humble all predictions.
Fundamentally, there is value even at today’s price.
06.05.07 at 11:03 AM
>Hi Deepak
I have a query for you related to FMCG. I have bought some shares of HLL more than a year back when it was riding in the 200+ levels and it has been on a loss for the past year . What is your opinion on HLL ?
06.13.07 at 9:44 AM
>anon: HLL isn’t all that happening. There’s no news, no action on the stock, nothing is moving too much. The only thing I’ve heard recently is the name conversion from Rin to Surf Excel bar which according to me is a waste of effort and a loss of brand value. FMCG wise you may be better off with ITC.
06.13.07 at 3:09 PM
>Thanks Deepak. So it would be better to cut loses in HLL and re align to some other stock. I am trying to see if it is a right time to sell ?
06.14.07 at 4:52 AM
>Deepak,
I found only 10 shares in DP a/c. WHen will they credit the bonus shares which were announced on 30th May. I asked the broker’s helpdesk and got the reply that I have to approach the share’s registry.
If u know this info, pls tell me.
06.18.07 at 4:43 PM
>siva: Yes, the bonus shares haven’t been credited. It’s taking an inordinately long amount of time and perhaps we should approach the company. Typically I have received bonus issues in two weeks.
06.18.07 at 5:05 PM