Many companies that were written off not just by the retail investors but by institutional investors as well during the previous bear assault have emerged victorious after financial restructuring. These companies have given super normal profits to their shareholders.
This could be, therefore, the right time for bottom fishing.
This strategy, however, has its own rules. The first and most important being investing with a long-term commitment. Investors should have good withholding power as wonders cannot be expected in the short term (we at Megha Investments and Research team delivered 205% in one year), when the stock begins to come out of the downturn, the investment could multiple in a matter of days. But investors should not be greedy at that point of time. May be, they can liquidate whatever they have invested, but should not completely exit as the stock can give mind-blowing results.
Look at the government owned Steel Authority of India (Sail), the country’s largest steel manufacturer. This stock was trading at sub-Rs 10 level for months in 1999. It recorded a low of Rs 5.50 and a high of Rs 11 in calendar year 1999. The scenario remained more or less same for the next three years: 2000 (in the range of Rs 5.20 to Rs 11.50), 2001 (Rs 3.95 to Rs 8.25), and 2002 (Rs 4.70 to Rs 13.30). This was the period when the steel behemoth was stuck with huge debt of over Rs 21000 crore end fiscal ended March 1999 (FY 1999) — the highest during the last 10 years. Further, interest outgo was also the highest at over Rs 2000 crore.
Since FY 1999, the debt level has come down consistently to Rs 3045 crore end 2008. From the second half of FY 2003, the stock started recovering smartly, emerging in a new avatar after a massive restructuring. The rewards for keeping faith with the company during troubled times are absolutely amazing. The stock is currently trading at around Rs 234, which translates into a gain of 2240 % for those who had bought it at Rs 10 before less than 10 years!
Investors should, thus, be ready to bear the pain of financial restructuring for long duration as it generally means no dividend and may be capital reduction. The challenge for investors is to narrow down companies that have a good financial track record with years of existence, providing confidence about its corporate governance norms. Last, stay invested for years to capture the real upside.
If you don’t want to miss the next decade opportunity such as SAIL then join our newly researched PMS product 4 ACE PORTFOLIO and ride the next decade rally of stock market.
We have find out 4 stock which are able to become the next sail, reliance, ntpc, infosys in the next 5 to 7 years…
To beat the market one needs to think different like Indias warren buffet-Rakesh Junjunwal who bought engineering stock in 1994 when everyone was buying information technology stock and he becomes the real hero.
Retail and institutional investor focus only on ready-mix opportunity like current dis-investment theme and underperforms the market.
You can get more detail by clicking this link: http://www.meghainvestments.com/2010/01/4-ace-pms-portfolio-of-4-stocks-for.html
You can get more detail by clicking this link: http://www.meghainvestments.com/2010/01/4-ace-pms-portfolio-of-4-stocks-for.html
Contact:
Phone: 09377008708,
Email: Profit.Megha@Gmail.Com.
Email: Profit.Megha@Gmail.Com.
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