One with aggressive management

JK tyre

Current price – 103

Target – 240

Timeframe – 1.5 years

Raw material of tyre is rubber and prices of rubber have gone up by 250% in last 1.5 years and that’s the main reason of bad health of tyre industry despite robust demand. Prices of rubber have been going up because of supply and demand mismatch which would improve sooner or later and prices of rubber are not at sustainable levels. In the near term prices can go up even further but this is the stock which can be averaged fearlessly if stock goes down. This stock might test your patience for some time so you would need to give it at least 1 year to see the true colors.

The Company is making efforts to make the facility in Chennai operational in the current year which was earlier scheduled for commissioning in middle of next year. The plant will have a capacity to produce 2.5 million passenger car tyres and 450,000 units of truck, bus radials every year. Apart from this, company plans to venture into power sector by setting up a 1,360 MW power plant near Jhansi in Madhya Pradesh. Which is bit of a diversification but I feel power is the safest business to diversify into, so I’m not worried on that front too. Some time back stock touched 70 levels and now has crossed 100 and if results of this quarter do not come out well which is very much probable then you may get it at sub hundred levels as well. So I would suggest putting only 35% of your intended money for this stock so rest you can average with if needed.

Thanks.

Treading on the path of recovery --

Well here it comes; I wish I can repeat the history of my first stock selection with my first recommendation except selling it too early.

Vishal Retail

Current price – 31

Target – 90

Timeframe – 2 years

Name must be scary to all who so ever had followed it till now. The main reason for me to recommend this as the management has gone into really safe hands now. It’s all time low being 25rs.its still very near to its bottom, it has already seen worst and all is factored in its price and things are only going to improve from here on.

Vishal retail is perfect example of what can over leveraging can do to a flourishing business and why the feet should be grounded even when you are on the real high. Recently Shriram group and TPG have bought the promoters stake and you can observe the improvements in the nearby Vishal retail stores and you will see that people are coming back to the store. There are no numbers as such to back my recommendation, still lots of debt which buyers already must have planned for. Both the buyers h ave deep pockets and I’m sure can take Vishal retail by places from here. And just to verify about management just go through the performance of Shriram transport finance.

I have to be bit conscious with my recommendations that’s why the target of 90 is also conservative.

Thanks.

Let's start........

Hi,

As I’m writing my first post and going to write my first stock recommendation suddenly something came to my mind and that is the first stock which I bought on 6th July 2006 if I remember correctly. The stock was “REI AGRO” which I bought at 122 and waited for 2 weeks, stock went no where neither up nor down. I thought what the heck I bought my first stock after so much of reading and so called data analysis and it’s not giving me any profit. I used to check almost 10 times in an hour and in two weeks I got bored and exited. 1.5 years later just before 8th Jan 2008 stock probably touched 1600 or even 1700 I don’t remember exactly, even after the big crash till April 2008 I don’t think stock went below 1200. Well I could not take any profit from my first stock but market tried to give me the most important lesson of the investment world – PATIENCE, and believe me if you can be patient then half job is done and rest half is done by the buying with margin of safety.

Let see if I can show some discipline with my blog and try to publish the update on the performance as well.

Thanks.