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CAPM Portfolio: Updates and Adding [Stock]

Deepak Shenoy8 min read
Quick Facts
What is "CAPM Portfolio: Updates and Adding [Stock]" about?
What category is this article in?
Premium
Who wrote this article?
Deepak Shenoy, Capitalmind's research team.
When was this article published?
Published 5 June 2014.
How long does this article take to read?
8 min read
What does the "Sintex Moves up 97% in a Month, Flies Past the FCCB Conversion Price" section say?
Sintex has gone up massively since early May, when we posted that we would add it as a “recovery stock”. The stock was at Rs. 52 then. Today, it’s at Rs. 100, a 97% gain, in one month!
What does the "Deepak Nitrite Continues Stellar Performance, Up 130% since March" section say?
This is our best performer. The stock is at Rs. 952, up 130% from our buy price of Rs. 415 in March. We bought it because it was a good stock, a leader in its space and making new highs. It continues to make new highs.
What does the "Finolex Industries Quietly Gives Us a 59% Return" section say?
Finolex announced a Rs. 7 dividend, and 25% increase in EPS to Rs. 13.71. The shares has quietly moved to Rs. 261 and we bought it in January for Rs. 166, for a 59% return in five months.
What does the "Strides Arcolab: Mylan Says Agila FDA Approval is Close" section say?
Strides is supposed to get $250 million from Mylan if the FDA checks for the Agila injectibles plant they sold to Mylan go through. Mylan’s result discussion shows them saying:
What does the "Astra Microwave: HDFC Mutual Fund Loves It" section say?
Astra continues an upmove since we bought it at 77. The stock is now at 112, (+46%) and HDFC Mutual Fund has been a bulk buyer. The stock has had no major news, except the sector is purported to get easier access to foreign capital (Defence FDI).
What does the "Phoenix Lamps Throws Up a Big Dividend, Potential Acquisition in Sight?" section say?
The auto-lamps company announced a fairly large dividend of Rs. 11 (on a share priced at Rs. 148) which buffers our downside. This is after it sold its non-profitable general lamps division and the money thus received (net Rs. 76 cr.).
What does the "BEML Just Modi’s Upward Expectations" section say?
BEML, since we bought it, has gone up 28%, with presence in both Defence and Railways. The Railways piece will benefit from the new government’s moves to modernize the rail pieces, and potentially fund metros in smaller towns. The defence piece is a positive for both the FDI measure, and from the fact that defence capex is a much required thing that has to come into focus soon.
What does the "Portfolio Summary" section say?
Here’s what the portfolio looks like:
What does the "Disclaimer" section say?
Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion.

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Capital Mind’s Deepak Shenoy was featured in ET Now today at 1:20 pm, talking about a few stocks.

He talked about a few CAPM Portfolio stocks such as:

  • BEML

  • Astra Microwave

  • Sintex

(Read a summary of the interview)

Sintex instantly jumped over 6% and while that makes us happy, it might the additional media attention that some of these stocks simply do not get otherwise that prompts buying when they are mentioned on TV.

In light of this we’d like to do a quick update on all the stocks we continue to own. And, in the same vein we will add one stock to our portfolio.

A Table of Contents:

  • Sintex up 97%

  • Deepak Nitrite up 130%, New Plant Commissioned

  • Finolex moves silently up 59%

  • Strides might get $250m from Mylan (Updates)

  • Astra loved by HDFC Mutual Fund

  • Phoenix Lamps throws Big Dividend

  • BEML Moves Up With Modi

  • Adding: Shipping Corporation

  • Portfolio Summary

Note: Since the elections are done, we will loosen our stops now. We’re taking them out to 15% or more, given we are in smallcaps.

Sintex Moves up 97% in a Month, Flies Past the FCCB Conversion Price

Sintex has gone up massively since early May, when we posted that we would add it as a “recovery stock”. The stock was at Rs. 52 then. Today, it’s at Rs. 100, a 97% gain, in one month!

What has changed? The stock breezed past its FCCB conversion price of Rs. 75 (now lowered to Rs. 65.74 due to terms in the agreement). This means more than Rs. 800 cr. worth debt is likely to be converted to equity (since the stock is so much higher than the conversion price).

The promoters had warrants for 10% of the company’s stock, at Rs. 69, which has now fully been converted to equity (delevers the balance sheet even more!). Remember, we bought at Rs. 52. (in May 2014)

Deepak Nitrite Continues Stellar Performance, Up 130% since March

This is our best performer. **The stock is at Rs. 952, up 130% **from our buy price of Rs. 415 in March. We bought it because it was a good stock, a leader in its space and making new highs. It continues to make new highs.

A new unit for whitening agents has come online. This will only impact results in the 2015-16 FY.

Finolex Industries Quietly Gives Us a 59% Return

Finolex announced a Rs. 7 dividend, and 25% increase in EPS to Rs. 13.71. The shares has quietly moved to Rs. 261 and we bought it in January for Rs. 166, for a 59% return in five months.

It owns 14.51% of Finolex Cables, which is equal to Rs. 30 per share of Finolex Industries. So in effect you get the business for Rs. 230, a P/E of 17.

Strides Arcolab: Mylan Says Agila FDA Approval is Close

Strides is supposed to get $250 million from Mylan if the FDA checks for the Agila injectibles plant they sold to Mylan go through. Mylan’s result discussion shows them saying:

On our injectables platform, I’m very pleased to report that since we last spoke, we have received3 more close-out reports from the FDA pertaining to our Agila India sites. This leaves us withonly one open FDA inspection at the Agila India site. And we continue to make good progress here.

This is great news and we can expect the close-out to happen this quarter, meaning that Rs. 1500 cr. will come to Strides. That’s Rs. 250 a share, and I expect they will distribute Rs. 200 as dividend.

The rest of the business is profitable (though a one time hit due to revaluation on deals has hit them big time in Q4). Net of that, they make Rs. 5-7 profit per share. **At Rs. 20 EPS for the next year, and a Rs. 200 dividend, the current price of Rs. 530 gives us 17 P/E **which isn’t too expensive.

Astra Microwave: HDFC Mutual Fund Loves It

Astra continues an upmove since we bought it at 77. The stock is now at 112, (+46%) and HDFC Mutual Fund has been a bulk buyer. The stock has had no major news, except the sector is purported to get easier access to foreign capital (Defence FDI).

The current proposal is that 49% FDI will not require transfer of technology. Which allows foreign non-defence firms - financial investors - to put in money into these firms. This changes the game for players like Astra, who currently have few plans of expansion but might able to do so with access to capital. Also note that they have increased their authorized capital - so a QIP or such might be in the offing.

Phoenix Lamps Throws Up a Big Dividend, Potential Acquisition in Sight?

The auto-lamps company announced a fairly large **dividend of Rs. 11 **(on a share priced at Rs. 148) which buffers our downside. This is after it sold its non-profitable general lamps division and the money thus received (net Rs. 76 cr.).

Now, the last quarter had an EPS of 4.6, which is only the profitable business (auto lamps) that grew 50% on revenues. If they continue, they can get an EPS of Rs. 15 for the year, which is still a P/E of just 10. If the auto sector improves, we’ll see the stock improve too.

Actis, the PE Fund that runs Phoenix Lamps has now held it for around 8 years after buying out the earlier promoters at a price of Rs. 190 per share. We would expect them to start preparing to exit, and we might see some smart action in the stock. But we’re on the 20% stop loss nevertheless.

BEML Just Modi’s Upward Expectations

BEML, since we bought it, has gone up 28%, with presence in both Defence and Railways. The Railways piece will benefit from the new government’s moves to modernize the rail pieces, and potentially fund metros in smaller towns. The defence piece is a positive for both the FDI measure, and from the fact that defence capex is a much required thing that has to come into focus soon.

New Addition: Shipping Corporation of India

In keeping with the idea that commerce will increase, we’d like to add Shipping Corporation of India (SCI) to the portfolio. We will take the current price of Rs. 64 for the entry (although we bought at a lower price).

The point here is that SCI is poised to make serious growth if the Transport Minister’s statements come out right. He said in a press release that he intends to increase commerce through inland waterways (rivers) and through coastal shipping.

He gave an example of shipping from Gujarat

to Chennai and back instead of Road transport. This does make sense - after all trucks will have to cross three other states (MH, KA, AP) to traverse the distance, which means multiple sales tax checkposts and harassment. If Shipping can be done right - less pain at the ports, faster tax clearances, and quick movement, with a regulatory system that manages the traffic well, we can really see massive gains. For this they’ll need vessels, operators and ports. Of all that we’ve seen, SCI is a good bet.

It’s a government company, and has been beaten up recently as in general, shipping costs have come down. But it has turned a profit in the last quarter and we believe it’s a good time to take a bet on the stock. The stop loss is really wide, at 20%. The stock just broke out of a long term resistance around the 60-62 levels. Let’s hope it sustains!

(Images from icharts.in and screener.in)

Portfolio Summary

Here’s what the portfolio looks like:

These are good times. Anyone with a dartboard could have made money. So let’s attribute this to good luck as much as it is good stockpicking. You must wait to see how we perform in a bad market.

(We are advised that this is a terrible thing to say in this business. That we should be taking full advantage. But what to do, we are like this only).

Please let us know what you think - our google group is available for you. (If you don’t have access, please mail [email protected] ) Note again that this is not advice. This is our own portfolio. We stand to lose money if any of these stocks fall, and therefore are biased. We also request that before you buy any securities please do your research, don’t rely on others.

Disclaimer

Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion.

Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.

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