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From: 5minwrapup@equitymaster.com
Subject: Now That the Budget's Done, It's Time to Buy These stocks!
Date: March 01, 2016 at 08:11PM
5min Responsive Mailer Not able to view this mailer properly? See here: Desktop | Mobile Now That the Budget's Done, It's Time to Buy These stocks! Tue, 1 Mar 2016 In this issue: » Private investment capex cycle to revive? » Will FMCG companies utilize their cash pile ups well? » ...and more! Whew! The Union budget is finally behind us. The media, corporate heads, and Dalal Street are still trying to figure it all out. Was it disappointing or along expected lines? Was it average? Below average? Poor? The opinions are many. Ours is that the budget was a lost opportunity. But now what? The markets seem confused. They crashed to a new 52-week low yesterday during the speech. Then recovered most of the losses by the end of the day. Today, the mood is buoyant. Is it just a short covering rally? Will the down trend resume? Or has the market really found a bottom? Trust us when we say that no one has honest answers to these questions. So what is a retail investor to do? If you have reduced your activity in the market recently, you are not alone. But should you start buying stocks again? If yes, which ones? Or should you continue to sit on the side-lines? We are not good short-term market forecasters. Honestly, we don't care about day-to-day price movements. But we are good at finding out which stocks will do well in the long run. This is because we are good at identifying the best businesses. In the long run, the best stocks and the best businesses usually go hand in hand. Mind you, this is not an easy task. We have to figure out if a great business will remain great. We worry about the risks these businesses face. We need to find out how the growth story will play out. Most importantly, we have to calculate the right price to buy. Did you notice that I didn't mention the budget? That's not because budgets don't matter. Of course they do. But the best businesses aren't usually impacted negatively by what the government does. They are market leaders. They generate tons of cash. They act as pillars of stability for your wealth. They are called blue chips for good reason. If you buy blue chip stocks at the right prices, you could hold them for decades. Or you could sell them at a good profit a few years down the line. Our duty at Equitymaster, is to let the aam investor know two things: the names of such stocks and the right price to buy and sell them. And who better than Tanushree Banerjee (our co-head of research) to let you in on the action? The service she heads, StockSelect, has an enviable track record. Since 2002, she and her team have made it a habit to discover mega winners in the market. Her time-tested, and rigorous stock selection process has a 77.3% audited success rate! This means about eight out of every ten stocks recommended through StockSelect have hit their targets. So why worry about what the budget will do to stock prices in the short-term? StockSelect has a list of 25 scrips you can buy today! Seven of these stocks are right at the top of her recommended buy list. Tanushree believes these stocks can do well irrespective of the government's actions. My suggestion: Stop worrying about the government. Grab this chance to opt in. Just click here to get a 30-day free trial... Do you think this is the right time to buy blue chip stocks? Let us know your comments or share your views in the Equitymaster Club. Chart of the day A key aspect of yesterday's budget speech was that of better resource utilization of central public sector undertaking (PSUs). In a nutshell, these entities will be encouraged to divest their non-core assets and plough back money into their respective businesses (apart from paying out the excess capital) to boost the capex cycle. As reported by Business Standard, PSU expenditure is likely to rise by a fifth to Rs 3,981 billion in the current year. In addition to this, a lot of thrust was given to the infrastructure sector. The central plan outlay for power, new & renewable energy (NRE) and transport sector has been increased by a sharp jump of 50% (from the revised budget) to about Rs 3,380 billion. The largest allocation will go towards the transport sector (roads and railways) followed by power and NRE. Infra Spending Gets a Boost this Budget Will this 'revival in capex cycle' provide an incentive for the private players to up their capex as well? Well...that's a tough question to answer. As compared to the government's motive for boosting spending, returns play a very strong role for private players. For India Inc., the return ratios have been at their lowest in many years. A key reason for the same has been unutilized capacities, which has led to lower asset turnover ratios for India Inc. As we had written earlier, in FY14, the asset turnover for the companies stood at its lowest in over a decade. With financial performance in past two years not really showing signs of considerable improvement, it would be safe to assume that the scenario in this regard may not have improved much. So it all boils down to how one looks at the half full glass. Can things only get better from here...or can the situation still worsen? We take the side of the former... Moving on from the infrastructure sector to the FMCG space, it seems that the pro-Bharat budget is likely to provide the much needed push to FMCG companies. With a slew of announcements aimed at boosting the farm sector coupled with the tax relief for small tax payers, FMCG companies are bound to benefit from the higher rural demand. FY15 was one of the slowest for the sector in terms of value growth. The situation in FY16 has not improved much either (given the lower realisations). As such, looking for ways to maintain growth levels, FMCG companies are expected to take on the acquisition route given their rising cash balances. As reported by Business Standard, all of the major players have seen their cash balance double over a five-year period. While investments and acquisitions do make sense to keep the momentum going, it must be kept in mind that there have been times when companies have overpaid for select brands/ businesses; and results in the process have not been as envisaged - in other words, companies would have been better off paying out the amount rather than earning substandard returns on those investments. Nevertheless, business from abroad now forms a good chunk of revenues for select companies. To offset the slowdown witnessed in local markets, it would thus not be a bad time to scout for investment opportunities given the not so rosy economic scenario in other parts of the world. Indians markets were trading firm today. The BSE Sensex was trading higher by 3% or 700 points at the time of writing. Gains were seen across the board with FMCG and information technology stocks leading the pack of gainers. Mid cap and small cap stocks were in favour as well with their respective indices trading higher by about 2.5% each. Today's investing Mantra "The best investment against inflation is to improve your own earning power, your own talent. Very few people maximise their talent. If you increase your talent, they can't tax it or they can't take it away from you." - Warren Buffett Advertisement Modi 2016: An Agenda For Revival The landslide victory of 2014 handed Modi more than just a clear mandate...It handed him immense responsibility of a nation dreaming of great progress.From the euphoria of Achche Din the mood in India has swung to cautious disappointment and now we are in 2016...Who will answer the question how Modi can turn this ship around and get India back on track?Vivek Kaul has the answer and he has put it all down, along with his deepest thoughts on the challenges India faces, in our latest special report titled - Modi 2016 - An Agenda For Revival.And the best part is that he wants to give you this special report for free!So, don't delay...Click here to download this special report right away! Comments on this edition of The 5 Minute WrapUp: Post a comment | Read comments This edition of The 5 Minute WrapUp is authored by Devanshu Sampat (Research Analyst). The Premium edition is authored by Radhika Pandit (Research Analyst) Today's Premium Edition. Is the Union Budget Good for the Auto Industry? Various proposals announced in the budget will impact the auto industry directly and indirectly. Get Instant Access to this and all future editions of The 5 Minute Premium. Click here for details... Recent Articles Union Budget 2016- 2017: A Lost Opportunity February 29, 2016 Union Budget 2016-17: A hit or a miss? Would You Ever Try Walking on Clouds? February 27, 2016 Taking Stock Prices Too Seriously is a Recipe for Trouble. Now Is the Time to Differentiate Yourself from Other Retail Investors February 26, 2016 An investment advice to worried retail investors. How to Profit from Sensex' Steepest Pre-Budget Correction in 7 Years February 25, 2016 As Sensex faces budget blues and the sharpest pre Budget correction in seven years, it could be time to get greedy about blue chip stocks. DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014 INTRODUCTION: Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537. BUSINESS ACTIVITY: An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes. DISCIPLINARY HISTORY: There are no outstanding litigations against the Company, it subsidiaries and its Directors. GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT: For the terms and conditions for research reports click here. DETAILS OF ASSOCIATES: Details of Associates are available here. DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST: 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report. DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION: Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report. GENERAL DISCLOSURES: The Research Analyst has not served as an officer, director or employee of the subject company. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company. Definitions of Terms Used: Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service. Feedback: If you have any feedback or query or wish to report a matter, please do not hesitate to write to us. All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Use of the information herein is at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors. Before acting on any recommendation, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an "As Is" basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services. Please read our detailed Share Trading Guidelines here. You're receiving this email at RH@ignition.bz. If you have any questions about your subscription, or would like to change your email settings, please contact Equitymaster at +91 22 61434055, Mon-Fri 10.00 AM to 6.00 PM (IST) and Sat 10.00 AM to 3.00 PM (IST). If you wish to contact us, please click here. To unsubscribe from The 5 Minute WrapUp, click here. If you would like to report any mail delivery problems, click here. SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537. Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. | Telephone: +91-22-6143 4055. Fax: +91-22-2202 8550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
Subject: Now That the Budget's Done, It's Time to Buy These stocks!
Date: March 01, 2016 at 08:11PM
5min Responsive Mailer Not able to view this mailer properly? See here: Desktop | Mobile Now That the Budget's Done, It's Time to Buy These stocks! Tue, 1 Mar 2016 In this issue: » Private investment capex cycle to revive? » Will FMCG companies utilize their cash pile ups well? » ...and more! Whew! The Union budget is finally behind us. The media, corporate heads, and Dalal Street are still trying to figure it all out. Was it disappointing or along expected lines? Was it average? Below average? Poor? The opinions are many. Ours is that the budget was a lost opportunity. But now what? The markets seem confused. They crashed to a new 52-week low yesterday during the speech. Then recovered most of the losses by the end of the day. Today, the mood is buoyant. Is it just a short covering rally? Will the down trend resume? Or has the market really found a bottom? Trust us when we say that no one has honest answers to these questions. So what is a retail investor to do? If you have reduced your activity in the market recently, you are not alone. But should you start buying stocks again? If yes, which ones? Or should you continue to sit on the side-lines? We are not good short-term market forecasters. Honestly, we don't care about day-to-day price movements. But we are good at finding out which stocks will do well in the long run. This is because we are good at identifying the best businesses. In the long run, the best stocks and the best businesses usually go hand in hand. Mind you, this is not an easy task. We have to figure out if a great business will remain great. We worry about the risks these businesses face. We need to find out how the growth story will play out. Most importantly, we have to calculate the right price to buy. Did you notice that I didn't mention the budget? That's not because budgets don't matter. Of course they do. But the best businesses aren't usually impacted negatively by what the government does. They are market leaders. They generate tons of cash. They act as pillars of stability for your wealth. They are called blue chips for good reason. If you buy blue chip stocks at the right prices, you could hold them for decades. Or you could sell them at a good profit a few years down the line. Our duty at Equitymaster, is to let the aam investor know two things: the names of such stocks and the right price to buy and sell them. And who better than Tanushree Banerjee (our co-head of research) to let you in on the action? The service she heads, StockSelect, has an enviable track record. Since 2002, she and her team have made it a habit to discover mega winners in the market. Her time-tested, and rigorous stock selection process has a 77.3% audited success rate! This means about eight out of every ten stocks recommended through StockSelect have hit their targets. So why worry about what the budget will do to stock prices in the short-term? StockSelect has a list of 25 scrips you can buy today! Seven of these stocks are right at the top of her recommended buy list. Tanushree believes these stocks can do well irrespective of the government's actions. My suggestion: Stop worrying about the government. Grab this chance to opt in. Just click here to get a 30-day free trial... Do you think this is the right time to buy blue chip stocks? Let us know your comments or share your views in the Equitymaster Club. Chart of the day A key aspect of yesterday's budget speech was that of better resource utilization of central public sector undertaking (PSUs). In a nutshell, these entities will be encouraged to divest their non-core assets and plough back money into their respective businesses (apart from paying out the excess capital) to boost the capex cycle. As reported by Business Standard, PSU expenditure is likely to rise by a fifth to Rs 3,981 billion in the current year. In addition to this, a lot of thrust was given to the infrastructure sector. The central plan outlay for power, new & renewable energy (NRE) and transport sector has been increased by a sharp jump of 50% (from the revised budget) to about Rs 3,380 billion. The largest allocation will go towards the transport sector (roads and railways) followed by power and NRE. Infra Spending Gets a Boost this Budget Will this 'revival in capex cycle' provide an incentive for the private players to up their capex as well? Well...that's a tough question to answer. As compared to the government's motive for boosting spending, returns play a very strong role for private players. For India Inc., the return ratios have been at their lowest in many years. A key reason for the same has been unutilized capacities, which has led to lower asset turnover ratios for India Inc. As we had written earlier, in FY14, the asset turnover for the companies stood at its lowest in over a decade. With financial performance in past two years not really showing signs of considerable improvement, it would be safe to assume that the scenario in this regard may not have improved much. So it all boils down to how one looks at the half full glass. Can things only get better from here...or can the situation still worsen? We take the side of the former... Moving on from the infrastructure sector to the FMCG space, it seems that the pro-Bharat budget is likely to provide the much needed push to FMCG companies. With a slew of announcements aimed at boosting the farm sector coupled with the tax relief for small tax payers, FMCG companies are bound to benefit from the higher rural demand. FY15 was one of the slowest for the sector in terms of value growth. The situation in FY16 has not improved much either (given the lower realisations). As such, looking for ways to maintain growth levels, FMCG companies are expected to take on the acquisition route given their rising cash balances. As reported by Business Standard, all of the major players have seen their cash balance double over a five-year period. While investments and acquisitions do make sense to keep the momentum going, it must be kept in mind that there have been times when companies have overpaid for select brands/ businesses; and results in the process have not been as envisaged - in other words, companies would have been better off paying out the amount rather than earning substandard returns on those investments. Nevertheless, business from abroad now forms a good chunk of revenues for select companies. To offset the slowdown witnessed in local markets, it would thus not be a bad time to scout for investment opportunities given the not so rosy economic scenario in other parts of the world. Indians markets were trading firm today. The BSE Sensex was trading higher by 3% or 700 points at the time of writing. Gains were seen across the board with FMCG and information technology stocks leading the pack of gainers. Mid cap and small cap stocks were in favour as well with their respective indices trading higher by about 2.5% each. Today's investing Mantra "The best investment against inflation is to improve your own earning power, your own talent. Very few people maximise their talent. If you increase your talent, they can't tax it or they can't take it away from you." - Warren Buffett Advertisement Modi 2016: An Agenda For Revival The landslide victory of 2014 handed Modi more than just a clear mandate...It handed him immense responsibility of a nation dreaming of great progress.From the euphoria of Achche Din the mood in India has swung to cautious disappointment and now we are in 2016...Who will answer the question how Modi can turn this ship around and get India back on track?Vivek Kaul has the answer and he has put it all down, along with his deepest thoughts on the challenges India faces, in our latest special report titled - Modi 2016 - An Agenda For Revival.And the best part is that he wants to give you this special report for free!So, don't delay...Click here to download this special report right away! Comments on this edition of The 5 Minute WrapUp: Post a comment | Read comments This edition of The 5 Minute WrapUp is authored by Devanshu Sampat (Research Analyst). The Premium edition is authored by Radhika Pandit (Research Analyst) Today's Premium Edition. Is the Union Budget Good for the Auto Industry? Various proposals announced in the budget will impact the auto industry directly and indirectly. Get Instant Access to this and all future editions of The 5 Minute Premium. Click here for details... Recent Articles Union Budget 2016- 2017: A Lost Opportunity February 29, 2016 Union Budget 2016-17: A hit or a miss? Would You Ever Try Walking on Clouds? February 27, 2016 Taking Stock Prices Too Seriously is a Recipe for Trouble. Now Is the Time to Differentiate Yourself from Other Retail Investors February 26, 2016 An investment advice to worried retail investors. How to Profit from Sensex' Steepest Pre-Budget Correction in 7 Years February 25, 2016 As Sensex faces budget blues and the sharpest pre Budget correction in seven years, it could be time to get greedy about blue chip stocks. DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014 INTRODUCTION: Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537. BUSINESS ACTIVITY: An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes. DISCIPLINARY HISTORY: There are no outstanding litigations against the Company, it subsidiaries and its Directors. GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT: For the terms and conditions for research reports click here. DETAILS OF ASSOCIATES: Details of Associates are available here. DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST: 'subject company' is a company on which a buy/sell/hold view or target price is given/changed in this Research Report Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report. DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION: Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report. GENERAL DISCLOSURES: The Research Analyst has not served as an officer, director or employee of the subject company. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company. Definitions of Terms Used: Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service. Feedback: If you have any feedback or query or wish to report a matter, please do not hesitate to write to us. All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Use of the information herein is at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors. Before acting on any recommendation, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an "As Is" basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services. Please read our detailed Share Trading Guidelines here. You're receiving this email at RH@ignition.bz. If you have any questions about your subscription, or would like to change your email settings, please contact Equitymaster at +91 22 61434055, Mon-Fri 10.00 AM to 6.00 PM (IST) and Sat 10.00 AM to 3.00 PM (IST). If you wish to contact us, please click here. To unsubscribe from The 5 Minute WrapUp, click here. If you would like to report any mail delivery problems, click here. SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537. Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. | Telephone: +91-22-6143 4055. Fax: +91-22-2202 8550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
