FUNDAMENTAL STOCK PICK:
NOVARTIS INDIA LTD.
cmp is Rs.525,
Target is Rs.735
Rational:
Novartis has a countrywide presence in the healthcare business with pharmaceuticals contributing 70% to total revenues, generics (8%), consumer healthcare i.e. OTC (14%) and animal health (8%) make up for the rest.
Novartis has identified therapeutic segments of Cardiovascular, oncology, Central Nervous System and gynecology as the key growth drivers for the future.
Novartis has some strong brands in its portfolio, which have been contributing to the topline growth over the years. In the pharmaceuticals division, the products ‘Voveran’ (pain & inflammation), ‘Methergin’ (gynaecology) and ‘Neoral’ (transplantation) continue to dominate the market in their respective therapeutic areas.
Novartis has a strong presence in the OTC (over the counter) segment owing to its very popular brand ‘Calcium Sandoz’.
The Company has no debt in its book which we always like.
The company has strong track of constant dividend payment.
The company enjoys higher profit margins and higher return on net worth and return on capital employed.
Apart from strong business let’s do some mathematical computation to value the company’s share price:
Book value 188 + cash per share 140+revenue per share 187=515 total value per share.
So you are paying just 10 rupee for the company having sales of Rs.640 crores and profits of Rs.100 crore.
So we believe this is a value buying opportunities at current price of Rs.525.
One thing keep in mind please don’t do this kind of calculation at your end because there are lots of companies available in market trading at much low price compare to book value, cash per share or revenue per share without having scalable business and proper management.
Invest in those companies who has proven financial and business execution track record with high corporate governance.
Remember bubble of Harsad Mehta was based on the same above valuation matrix and common people without approaching fulltime professional like us have lost their hard earn money.
Always buy on VALUATIONS an NOT ON THEMES...
Whether it is DOTCOM, POWER or recent DISINVESTMENT THEMES..
THEMES only make rich the brokers, stock market punters, Operators, Promoters, merchant bankers and fund managers NOT YOU...
Don't you have known what happened with hard earned money of people in Dotcom bubble, or say the Power craze in 2008...
MUTUAL FUND PICK:
Sundaram BNP Select Midcap Fund:
Recommendation: Buy.
Ration:
This fund has delivered return in bull and bear market but this fund takes high risk
So this fund is for those who are ready to take high risk in mid cap fund.
WEEKLY MARKET OUTLOOK:
SUPPORT AT 4750/4600/4500
RESISTANCE 5000/5100/5172
Trend reversal or correction a million dollar question
Nifty correct 10% in just 17 days.
Let’s paint the scenario to give answer of above question a trend reversal or correction by two way (1) technical analysis arguments (2) fundamental analysis arguments.
(1) TECHNICAL ANALYSIS ARGUMENTS
As per our last week’s argument as long as index trading above 200 DMA and above Dubai-debt crisis panick bottom which are placed at 15300 and 4500 for SENSEX and NIFTY respectively this 10% fall in 17 days is just a correction should not be counted into a complete trend reversal.
One question comes in everyones’ mind that which sector will lead the rally as 2009 rally was back by auto ,bank ,metals,pharma sector now we believe its time to buy oil and gas sector for 2010 rally on sectorial based analysis.
We have given our Elliott wave view on oil and gas index before 2-3 week ago (Click here to Read)
As per WAVE COUNT it will start 5th wave and will lead the next stock market rally.
Coming to broad based market traders keep stop loss of 15300 and 4500 for their long positions.
(2) FUNDAMENTAL ANALYSIS ARGUMENTS
Looking at the over all results announced so far we believe earning growth will be any where between 20 to 25% in the next 12 month.
Index are trading at 16 P/E multiple for estimated earning of fiscal 2010-2011 which is vary reasonable.
Current market situation could throw up some exciting opportunities in some high growth emerging sectors.
We believe the FII inflow will not be a big issue as world has more money and less opportunity.
While mid cap stocks have done well in the recent past, the valuations are still at discount to their larger peers.
Keeping above view in mind we recommend investor to be disciplined investing with principle of asset allocation.
We recommend MID CAP PMS 1 AND MID CAP PMS 2 for those who have investments horizon of 1 to 2 years.
This STANDAR PMS PORTFOLIOS are All About Making The Most of the Bull Market.
CONCLUSION
So over all both on technical and fundamental arguments we believe this is not trend reversal and just a correction and trader and investor should find out value buying in market.
TECHNICAL STOCK PICKS:
Reliance Ind:
stops loss 1025 targets 1066/1082
Reliance capital:
stop loss 777 targets 831/850
GMDC:
stop loss 137 targets 153/161
Hexaware:
stop loss 75 targets 87/92
IOB:
stop loss 85 targets 97/102
KEY NEWS TO WATCH OUT
3rd February to 5th February: Follow-on public offer of NTPC.
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