SABERO ORGANICS GUJARAT LTD - BUY FOR LONG TERM

Sabero Organics Gujarat is an agrochemicals manufacturer promoted by Chuganee family.Company producing various fungicides, herbicides , insecticides and other speciality chemicals. Company having manufacturing facilities in Gujarat,Jammu Kashmir ,Tamilnadu and marketing offices in Europe, Brazil, Argentina, Phillipines and Australia other than various parts of India..Sabero's products includes Acephate, Mancozeb, Chlorpyriphos, Glyphosate, Dichlorovos, Methamidophos and Propineb.A major portion of its products are exported to various countries in their own brand names and also supplying products to other companies including well known MNC's.About 65% of its total sales is generated from exports and company's major asset is its product registration of more than 250 products in 50 countries.Company having many products registrations and strong presence in Brazil which is one of the biggest agrochemical markets in the world.Sabero came to limelight in recent past after the acquisition of the company by south based Murugappa group .'Murugappa group'is a well reputed business group from South India with deep knowldge in Agriculture related businesses along with others.Success of companies like Coromandel International and EID Parry is best example for their expertise in this field.Other listed companies from the same group includes Carborundum Universal,Cholamandalam Investment,Tube Investment,Coromandel Engineering..etc
Coromandel bought this company at a steep premium of 80 % to then prevailing market price and the deal concluded @ Rs.160/- per share.Also it paid Rs.38.47 extra per share as a non compete fee to the promoters of Sabero.Coromandel's strong marketing network is a big boost to Sabero where the largest customers are more or less the same.Management expertise and deep pockets of Murugappa group is added advantages.Due to lower capacity utilisation and higher overhead costs Sabero posted losses in first two quarters of this FY.In a recent interview Mr.Kapil Mehan MD of Coromandel indicated that they have took over the management of Sabero only in third week of December and their first priority is to enhance the capacity utilisation.He also mentioned that they are expecting the company will back to black in another two quarters. Earlier in FY 2011, Sabero posted a turnover of Rs.412 Cr and a net profit of Rs.10 Cr.I believe the massive capacity of its plants and the ability of Murugappa group will create  a multibagger from current price of Rs.55/-

ORCHID CHEMICALS & PHARMACEUTICALS LTD - UPDATES

Share price of Orchid Chemicals crashed from a level of Rs.300 to Rs.115 in this calendar year. Overall market crash and not so encouraging second quarter result was a  reason for this down trend .But the most important reason was the uncertainty  related with the redemption of FCCB ,which is due for redemption in February 2012.Now in a filing to stock exchanges , company informed that they  have already tied up funds for FCCB redemption . This is a good news and share price is expected to recover .Those with a long term view may enter @ CMP of Rs.136/-

BIOCON LTD - BUY

Biocon is  one of the  largest Biopharmaceutical company in India.Till recently company was mainly concentrating in statins which is a cholesterol lowering drug .But now company is seeking various growth opportunities in other segments and paying much attention for developing  other biotechnology based branded formulations and contract research activities through its subsidiary  Syngene and Clinical research through Clyngene.Branded formulation business is expected to grow about 30% in the coming year.Recently company launched 'INSUPEN' which is a reusable insulin pen.Company's agreement with foreign pharma companies for supply of products are also a positive step.Biocon's overseas operation in the countries like Malaysia ,Germany..etc are also moving in the right direction.Oral insulin is another important step which is going through clinical trials.Biocon's last quarter performance is a tad below expectations but the sharp cut in its share price makes it an attractive buy for long term investors .CMP is Rs.261/-

The Ups And Downs Of Investing In Cyclical Stocks

Courtesy :Investopedia



 Imagine being on a Ferris wheel: one minute you're on top of the world, the next you're at the bottom - and eager to head back up again. Investing in cyclical companies is much the same, except the the time it takes to go up and down, known as a business cycle, can last years.

What Are Cyclical Stocks?Identifying these companies is fairly straightforward. They often exist along industry lines. Automobile manufacturers, airlines, furniture, steel, paper, heavy machinery, hotels and expensive restaurants are the best examples. Profits and share prices of cyclical companies tend to follow the up and downs of the economy; that's why they are called cyclicals. When the economy booms, as it did in the go-go '90s, sales of things like cars, plane tickets and fine wines tend to thrive. On the other hand, cyclicals are prone to suffer in economic downturns. (For more on the business cycle, see Recession: What Does It Mean To Investors?)

Given the up-and-down nature of the economy and, consequently, that of cyclical stocks, successful cyclical investing requires careful timing. It is possible to make a lot of money if you time your way into these stocks at the bottom of a down cycle just ahead of an upturn. But investors can also lose substantial amounts if they buy at the wrong point in the cycle.

Comparing Cyclicals to Growth StocksAll companies do better when the economy is growing, but good growth companies, even in the worst trading conditions, still manage to turn in increased earnings per share year after year. In a downturn, growth for these companies may be slower than their long-term average, but it will still be an enduring feature.

Cyclicals, by contrast, respond more violently than growth stocks to economic changes. They can suffer mammoth losses during severe recessions and can have a hard time surviving until the next boom. But, when things do start to change for the better, dramatic swings from losses to profits can often far surpass expectations. Performance can even outpace growth stocks by a wide margin.

Investing in Cyclicals
So, when does it pay to buy them? Predicting an upswing can be awfully difficult, especially since many cyclical stocks start doing well many months before the economy comes out of a recession. Buying requires research and courage. On top of that, investors must get their timing perfect.

Investment guru Jim Slater offers investors some help. He studied how cyclical industries fared against key economic variables over a 15-year period. Data showed that falling interest rates are a key factor behind cyclicals' most successful years. Since falling rates normally stimulate the economy, cyclical stocks fare best when interest rates are falling. Conversely, in times of rising interest rates, cyclical stocks fare poorly. But Slater warns us to be careful: the first year of falling interest rates is also unlikely to be the right time to buy. He advises that it's best to buy in the last year of falling interest rates, just before they begin to rise again. This is when cyclicals tend to outperform growth stocks.

Before selecting a cyclical stock, it makes sense to pick an industry that is due for a bounce. In that industry, choose companies that look especially attractive. The biggest companies are often the safest. Smaller companies carry more risk, but they can also produce the most impressive returns.

Many investors look for companies with low P/E multiples, but for investing in cyclical stocks this strategy may not work well. Earnings of cyclical stocks fluctuate too much to make P/E a meaningful measure; moreover, cyclicals with low P/E multiples can frequently turn out to be a dangerous investment. A high P/E normally marks the bottom of the cycle, whereas a low multiple often signals the end of an upturn.

For investing in cyclicals, price-to-book multiples are better to use than the P/E. Prices at a discount to the book value offer an encouraging sign of future recovery. But when recovery is already well underway, these stocks typically fetch several times the book value. For instance, at the peak of a cycle, semiconductor manufacturers trade at three or four times book value.

Correct investment timing differs among cyclical sectors. Petrochemicals, cement, pulp and paper, and the like tend to move higher first. Once the recovery looks more certain, cyclical technology stocks, like semiconductors, normally follow. Tagging along near the end of the cycle are usually consumer companies, such as clothing stores, auto makers and airlines.

Insider buying, arguably, offers the strongest signal to buy. If a company is at the bottom of its cycle, directors and senior management will, by purchasing stock, demonstrate their confidence in the company fully recovering. (For more on how to research insider activity, see Keeping An Eye On The Activities Of Insiders And Institutions.)

Finally, keep a close eye on the company's balance sheet. A strong cash position can be very important, especially for investors who buy recovery stocks at the very bottom, where economic conditions are still poor. The company having plenty of cash gives these investors more time to confirm whether their strategy wisdom was a wise one.

Conclusion
Don't rely on cyclicals for long-term gains. If the economic outlook seems bleak, investors should be ready to unload cyclicals before these stocks tumble and end up back where they started. Investors stuck with cyclicals during a recession might have to wait five, 10 or even 15 years before these stocks return to the value they once had. Cyclicals make lousy buy-and-hold investments.

TATA CHEMICALS - REPEAT

Tata Chemicals is a familiar company for Indian Investors.Considering the potential of Agriculture related sectors worldwide , this company deserves a position in the portfolio of any investor. Company is a leading manufacturer of  Fertilisers and Soda Ash even in a global level.Through several acquisitions company has grown many fold in  recent years. Company is also selling Iodised salt in different brand names like "TATA SALT','I-shakti''TOPP SALT'..etc.In the Fertiliser sector TCL manufacturing and selling Urea,Single super phosphates,Di-ammonium phosphate,Nitrogen phosphorous potassium complexes..etc The sharp rise in fertiliser prices in recent times is expected to help the company to post improved realisation in this sector.Company also having a joint venture with Ireland based Total Produce . Total Produce is the third largest fruit and vegetable distribution company in the world and Europe’s largest fresh produce provider.Through this joint venture company - named 'Khet Se '- Company offering fresh fruits and vegetables.As a brand extention , Tata Chemicals recently started selling pulses like chana, toor, urad and moong under the brand name I- Shakti.Along with its subsidiary Rallis India , Company is initiating a campaign called 'Grow More Pulses' as a knowledge sharing platform for farmers.Company's another initiative is  'The Tata Kisan Sansar'which is a network of about  nearly 700 farmer resource centers that caters to more than 3.5 million farmers in 22000 villages in the northern and eastern part of India.Since it is not a micro cap and  lot of reports are easily available about this company, I am not explaining much on this,but I feels this is the company from TATA group having maximum potential to grow in the next 10 year period.For the latest quarter ended September , on a consolidated basis  company posted a jump of 116 % in its net profit. One should include it in your portfolio at CMP of Rs.350/-

HI-TECH GEARS - BUY

Hi-Tech Gears is one of the largest manufacturers of  auto components in India .Its product list includes Precision forging components,Engine Components and two wheeler parts.Company is a major supplier to Hero Motocorp,Honda Motors,Tata Motors,Caterpillar, Cummins..etc.It is also in export market and recorded a jump of 80% in exports in last financial year.Now company is developing some new products and also adding new markets like Brazil and U K. Company's management is share holder friendly and paying good dividend and issuing liberal bonus in regular interval.For the financial year ended March 2011 , Company posted a turnover of Rs.427 Cr and a net profit of Rs.35 cr .In the latest September quarter Sales were Rs.118 Cr and net profit were Rs.10 Cr .At current market price of Rs.121, Hi-Tech Gear is one of the safest bet from auto component sector.

STOCKS TO BUILD A PORTFOLIO

We have discussed many small and micro cap stocks in the past few years.As you are aware, these type stocks are generally  not suitable for investors with low risk taking capacity.In recent times I am receiving lot of requests from our friends to suggest few stocks with reasonably good growth prospects and relatively low risk - to build a portfolio . Find below few such stocks ( some of them are  already discussed). Considering the current volatile situation, it is better to avoid buying the stocks in one go .


COMPANY NAME             SECTOR                         CMP

1) YES BANK                     BANKING                        290            

2) CAIRN INDIA                 OIL/GAS                          316            

3) TATA CHEMICALS        COMMODITY/CHEM        352             

4) WABCO INDIA                 AUTO PARTS               1277              

5) ADITYA BIRLA NUVO     DIVERSIFIED                910            

6) KAVERI SEED COMPANY  SEEDS                         460           

7) MADRAS CEMENTS           CEMENT                      115              


8) GSK CONS.HEALTHCARE  FOOD                          2480               
       
9) M& M                  AUTO                                       748              

10) FORTIS HEALTHCARE      HEALTH CARE              114              

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