Happy New Year

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Dear Readers

Accept my hearty wishes for a peaceful, healthy and prosperous new year 2012.

I wished to talk on something else as a gift post in this New Year, but changed mind after watching the following link. Keeping the entire adore to market, I wish to share, someway an incongruous observation by an intellectual Indian Guru.

        
http://www.youtube.com/watch?v=ogaeixO7kPY&feature=player_embedded

I would not like to comment on his words, but myself, watched several times, word to word, and  hope, it must  be  very special  to share with you  rather anything at this time....

Thank you Mahesh.....

Comment please....

Shabu Thachat

Stay cool ....

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Dear Readers,

There was a long gap in blog postings due to some personal issues and related change in schedules. I wished to complete this post even months back, but delayed to this point of time. Any way, will try on frequent interactions.

Lets talk on the ongoing phase of market. Most of our Portfolios are facing considerable loses at this juncture, especially those who started investment in last couple of years. Few of us burnt fingers by unloading entire holdings with serious loses. The second category exited well in advance at profit counters and sitting on good cash as well waiting to green the rest, the third, who are still accumulating in small batches as well averaging selected, but their trusted scrips at lower levels. All these groups are right with their own level of understandings and reasons.Transitory loses are a part of equity investment like always and its true that no one with out a history of mislay could survive the market.  But we required to adopt a positive attitude, need to prepare a confronting mood to loses for a credible recovery. Things are easy to say, but to implement a systematic but tough strategy mixed with extreme patience and dare is exasperating in practical, but not impossible.  There is no point of panic, if you have good faith on the stocks you are holding; even they crashed heavily in the current down turn. But ensure that, the crash is nothing related to stock/company specific issues. We must have to keep a higher level of  patience and sometimes it test us for long duration. Things will surely come bright with in few months and its inevitable in Indian scenario.

Markets always respond in an exaggerate manner to both moods, positive or negative. Some negative developments are there, but I feel, all these does not worth to create such an extreme panic stage especially in Indian scenario. There are no real frantic issues to feel upset on these entire crisscrosses. You can simply digest this point, if recall and analyze the history of our highly dynamic market for past couple of decades. Remember, it’s the same market which rocketed some 2000+ points in a single day after oath of the ongoing UPA Govt under Manmohan Singh. Market simply responded in a dazzling manner on a hollow but positive political news thread. And miserably, we know how things turned and how those so called optimistic rulers are ruling on us, harassing the public, testing our patience at their best.

Market’s positive responses to such spontaneous news were extreme and we need to consider the reverse too and is always hanging on indices. News on any kind of political instability, spurt of a war, unprecedented climate changes, serious terrorist activities or like ongoing global issues, or anything can create a deep sentiment and bring down the market to unexpected levels. But always the then sentiment, only sentiments reflects on indices. People, especially who falls under the trading fraternity practices drastic sells or buys in response to initial but overstated news threads by media with out absorbing/analyzing the reality.  And every time, people who responds in panic, burns their fingers. I strongly believe, nothing happened other than emotions, my point is, no matter of panic, except some temporary emotional concerns driven by media.

Substandard symptoms on global financial indicators especially related to Europe & US as well their serious debt issues are the visible aspects for the current down turn.  RBI’s certain maintenance activities adding fuels at times and like always, the factors works on indices rather than facts.  The unquestionable US economy and few Europeans are under big question marks and fading their charm. The so called muscular US economy is suffering serious internal injuries and struggling for survival. The European scenario is also not promising with countries like Spain, Italy and Greece.   The emotional impact is spreading gradually and reflecting on world wide key indices. DOW downed some 5.5% in a single day in a moaning Monday of August 8. Some European indices crashed more than 20% and keeping the downward trend, Indian market and our BRIC mates also lost around 15-20% at their key indices and moving directionless.  And recently the Occupy Wall Street movement is got fired and spreading its arms. 

 
We can have a sincere look back on the previous slowdown era and can analyze the reasons with simple lay-man logic. Considering the US, Japan & Europian issues, the so called recovery symptoms were mostly fabricated. It was something like, a heavily damaged vehicle made ready to run forcibly with poor techniques. The interesting fact is, nothing less than an overhaul can run those vehicles again. This time it is irrecoverable for them, especially for US, Japan & few Europeans. The ongoing weakness in the labor market, low economic growth and untenable amount of debts are high degree concerns. It seems, all the above economies may possibly stay in poor health at least for next 3-4 years, even if they succeeded in managing curative measures. Simply, the recovery will take considerable time to reinstate things. That’s too, if everything, the counteractive measures worked out on a deliberated and disciplined manner. Recovering from such financial concerns are time consuming and there is no short cuts other than media hype, what they practiced last time.  The damage of the vehicle was not really solved, now it demands nothing less than a full fledge overhauling and it will take considerable time.

It seems, a credible set up is developing to rationalize the positions of those so called inflatable financial powers. Yes, countries have real inner strength will come forward, and we are there at a significant position.  Keep in mind that, all these market disorders are hardly related to any Indian standards or concerns on its growth measures, but purely external. Its true, we have unrivaled negatives, like heavily corrupted politicians, uncontrollable population, political instabilities at times, frequent terrorist outcomes, alarming inflation figures, disturbing interest rates and related qualms, but our economy is still intact and at an emerging phase.  In other words, India is not going to face a slowdown, but side effects rather than serious infection. Remember, the side effects must reflect on indices for the interim.

I would like to alert you all, who searching the bottom or confused on an entry point, the bottom level is unpredictable like always and investors who jump with big figures influenced on amid sucker rallies will surely burn their fingers. Its the history and tendency of every bear season. Be vigilant, searching the bottom of any bear market is a worthless effort. It always swallow as much traders/investors in its mouth with alluring short term recoveries making them feels a come up of  new  bull season…Bear market works like a defunct rat trap, which can shut we rats  in full or sometimes partially. Waiting the right opportunity to get out once the shutter relaxes, staying idle for a full opening or get out with cuts and bruises….

Comment please .... Happy investing & regards ....

Solidarity to Anna - The real Soldier

Dear Readers,

I would like to express solidarity to that great human being of our times,  Shri Anna Hazare, through this platform and his movement  against corruption as well for implementation of a genuine and powerful Lokpal Bill. 

It seems the movement may turn very much positive especially  for a country like India. Our highly corrupted politicians already lost their sleep, they are under nightmare and will!!

I am bit confused on the current abusing trend by congress Govt to Hazare in personal. These are the people who honored him  with Padmashri in 1990, Padmabhushan in 1992, SHIROMANI AWARD 1996, NATIONAL INTERGRATION AWARD in 1999 and much more in  last couple of decades. And, most of the times there was a congress lead coalition Govt. How such a highly favorable person can turn not only unfavorable but an enemy within such a short period? Is there any real logic… ? We know…..

I would like to request you all to express the solidarity to his movement in the real means ... and comment please

regards

Shabu Thachat

A must read content..

Dear Readers,

I wish everyone of you have a close read, an article by Prashant Jain(HDFC-AMC), forwarded by one my friend Mahesh Pidshetti from Bangalore..

http://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=1EwnJp7HcxkFptBzMkF-AiVU5JLlVkj0evNDO6n8ic3DNPyvP5YqKSip__6o-&hl=en_US


regards
Shabu Thachat

Multibagger Series - a cooling stock

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Dear Readers,

Markets are witnessing outrageous bleeding on collective sentiments related to various national and international issues. Some good stocks even fell more than 50% from their year high and offering a wonderful opportunity for patient investors. But considering the dense of ongoing negative pulses and associated sentiments, we should be very careful on any investment decisions related to equities. I hope market may provide better discounts in recent future, probably with in the first half of year. There are no visible serious fret factors for long term investors and whatever happening is a cycle of provisional actions, based on sentiments derived from series of negative cues.

It seems the level of crashes were not corresponding to the depth of sentiments or its at the lesser side. The overall impacts on the recent series of negative reports were strong enough to bring our indices down to some 25-30% but it was just below 20%. Even after a flood of negative issues and unparallel corruption revelations in the recent past, people are still buying our stocks and keeping faith on the market, FII's are still pouring money to our market even smaller in size. Remember, there is a buy for every sell. Just list out the chain of scary issues occurred in last couple of months; Alarming figures on inflation, negative IIP data, negative bank rates, increasing fuel price, spreading middle east anarchy, gigantic corruption revelations including Adarsh Flat, commonwealth games, 2G Spectrum, S-Band, harassing Radia tapes and now the obscurity raised by DMK on Govt’s existence..

There is some sure and different charm exists with our market/economy; otherwise the above reasons were more than enough to bring our indices to another historic lows. But there is some stubborn strength is underlying somewhere with our economy. The main pillars are still strong, which affirms my confidence or makes me more positive on our market. Market is really struggling to regain the charm, I would like to suggest you all, keep your faith on good companies headed by genuine management, which will surely bestow you good returns in the long run. Putting entire money in few stocks or having big numbers in certain stocks at a go, will not exactly the smart side in view of the ongoing scenario. This tact may prove hazardous considering the dynamic response of market to even trivial negative news threads. Accumulation in small batches at possible lower levels, the only strategy which will be beneficial or at the safer side in future. Because market is started responding quicker than ever and like anything corresponding to the tempo of our times.

I would like to place few inputs on an outstanding company as promised earlier. First of all, let me thank to Mr Mahesh, Bangalore, who grabbed my attention to this company in last year, reminded as well encouraged me to talk on the scrip. After a close scrutiny, I hope this company can provide superior returns in the long run for patient investors. Myself, already been analyzed and firm to consider it as a multibagger on the basis of differentiation and sensible monopoly in the segment. Moreover, I am confident on this company and the products/services they are configuring as an essential service to the vibrant Power/Energy/Oil sectors. Subsequent lines are plain personal conclusions, compilations or convictions to have this stock, I am satisfied with the horizon developing by this company considering the available data and feels the path ahead is promising. I have good faith on this company, their business model as well on its proficient management.

BSE Code - 530743

Scrip - GEI Industrial Systems Ltd

CMP – 170.55 (07/03/2011)

EPS – 15.34

PE – 11.12

BV – 52.57

FV - 10

52 Week L/H – 91.10/238.90

Promoter’s holdings – 41.41%

Chairman/MD – Mr. C E Fernandes

GEI Industrial Systems Ltd, an ISO 9001-2000 certified company with ASME’ "U" Stamp engaged in design, engineering, manufacturing, installation, commissioning and maintenance of extended surface heat transfer technology mainly for Power, Oil and Gas industries. The company is specialized in Heat Transfer Technology, an obligatory element for entire engineering processes irrespective of nature and size. It offers a wide range of equipments/installations including air cooled vacuum steam condensers, air cooled heat exchangers, process gas coolers, cooling water systems, transformer oil coolers etc. The company provides its products/services to a vast range of engineering installations such as power plants, crude oil/Petroleum refineries, CNG/LNG terminals, petrochemical/chemical plants, Oil and Gas fields, off shore gas processing platforms, fertilizer plants, metallurgical industry, electrical locomotives, cement plants, Sugar industry etc.

GEI have clear domination in the segment as well there is no Indian or listed Indian entities as competitors except a couple of foreign players. The company holding a market share of 45% in Air Cooled Heat Exchangers in the Oil & Gas Sector and about 70% in the Power segment. It has an admirable track record in the Oil, Gas and Power sector installations in both American continents, Europe, Africa, Asia and Australia. GEI has also entered into marketing agreement with X-Wire, an American company, to tap the US market and to meet up its outsourcing requirements in the heat exchange platform. GEI is also engaged as a major contractor to the massive Rural Electrification schemes of Govt. of India, targeting electrification of more than 1 lakh villages in different provinces of our nation, to be completed over the next 3-4 years.

GEI having the essential expertise and proved experience in the air cooling space is likely to be the key advantage to their rising demand. The conventional water cooling system depends on constant water availability and the paucity of water is the main obstacle for cooling processes at certain engineering sites. Water shortage has been detected as one of the prime reasons for many recent disorders/shutdowns in power plants all over India. GEI’s indigenously designed air-cooling concept work on freely available air, instead of diminishing water for cooling processes.

In a survey of India’s water situation, about 21 million wells drilled are lowering water levels in most of the country. In North Gujarat, the water level is falling by 6 meters (20 feet) per year. In Tamil Nadu, wells are drying almost everywhere and falling water tables have dried up 95% of the wells owned by small farmers. And the story is same or more worsen in other states. You can estimate the future business potential of this company by connecting the above stunning facts on water scarcity; moreover 70% of our planned power additions are setting up in water-scarce areas. The company will surely benefits from the rising demand for its air-based cooling systems from power/energy and petroleum industries, since accessibility of water is drastically retreats. In India, these two industries are highly reliant on water for their cooling requirements and are facing operational troubles at times when sufficient water is not available.

GEI is prepared to gain from the anticipated massive power projects by providing air-cooled solutions that offers remarkable benefits over conventional water-cooling systems. The company is undergoing a 100cr expansion plan, which will greatly enhance its capacity by end of this year. The expansion will allow GEI to double it’s order intake capacity to Rs. 1000cr from the current 500-600cr levels. It is estimated that, on the completion of proposed expansion plan, the company will emerge as one of the top three players in the segment globally.

Any threat of new entries in the segment is limited because the entries in such businesses are purely related to proved expertise/experience. Conglomerates who make considerable investments on large projects must verify the technical expertise, competence and capability on prompt deliveries from the partner. I don’t feel any fresh player’s entry as a threat in recent future, because the experience or past performance is appreciated largely in such service segments and that’s the lone eligibility condition to adopt such a partner. Normally, our power players will hardly try their luck with any newbie in the sector to play on their huge investments. .

There will be a huge investment in the power transmission and distribution area which is estimated to be around Rs. 4500 bn .Considering the vast prospective in this field, GEI has also stepped in to the power transmission business. A separate group, GEI- Power Transmission Business Group has been shaped in the company itself and experts in these fields have been recruited recently. The company also prepared to enter in to the area of Power Generator components, heavy fabrication and machining of generator components etc. GEI is planning to expand this potential business to the tune of around Rs. 2.5bn by next 3-4 years.

The dominant client base including established players and the probable demand on their products/services are indicating a clear horizon for the company in the future. I have listed few selected domestic and international players who are constantly getting cooled by GEI:-

ABB Ltd
Bharat Oman Refineries Ltd
Bharat Pumps and Compressors
BHEL
BPCL
Cairn India Ltd
Chennai Petroleum Corporation Ltd
Crompton Greaves Ltd
Davy Power Gas
Dresser Rand, USA
Engineers India Ltd
Essar Oil Ltd
G.S. Engineering, Dubai
General Electric, USA
Hanover Middle East, Oman
HPCL
IOC
IPCL
Kirloskar Pneumatics Co. Ltd
Larsen & Toubro Ltd
MRPL
ONGC
Oil India Ltd
Oman Refinery Co, Oman
Petronet LNG Ltd
Punj Lloyd Ltd
Reliance Industries Ltd
Samsung Engineering Co. Ltd
Sarda Energy
Shell LNG
Shree Cement Ltd
Shree Renuka Sugar
Solar Turbine, USA
Sri Ram EPC
Tata Electric Co. Ltd
Tharmax India Ltd
Thyssen Krupp
Toyo Engineering
Transturbo Engineering Sdn Bhd, Malaysia
Veco Engineering, Abudhabi
Walchandnagar Industries

The company also grown in a consistent manner, profits in the past 5 years grew at a CAGR of around 50%. I would not like to talk much on the technical side as it is easily available. With the outstanding track record in engineering expertise, manufacturing capacity, product innovation and global cost competitiveness, GEI remains solid to work out the best business with in the sphere.

Let me conclude, the majority is confident on the power sector and its a fact that power/energy is one of the most demanding business of the time. Ample funds have been committed by Govt as well private players in the Power/Energy sector as its the key to economic growth of any developing nation. A rough statistics, India is likely to commission 50000MW in the 11th 5 year plan and an anticipated 100000MW in the 12th Plan. Its sure that, increased investment in the Power & Oil sector by the Govt as well private players will provide enormous business opportunities to the company. I think, it will be a wise decision to accumulate GEI in small batches, who cools the head of power/energy/oil sectors, it will surely cool us too in the long run.

Comment please…..

Regards

Shabu Thachat – sthachat@gmail.com

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Sensex – The sensational story

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One of the most promising decades in terms of equities has been flagged-off. Its my first post in this new year and I would like to wish you all the very best in this year. In continuation with the previous post, lets talk on one our robust Indices, the BSE Sensitive Index (Sensex).

Bombay Stock Exchange is the oldest stock exchange in Asia and it is considered as the theoretical mercury of Indian economy/market on which majority of traders/investors designs their trading strategies or in other words, the pedestal of their investment decisions.

History highlights

The BSE (Bombay Stock Exchange) was established as `The Native Share & Stock Brokers Association' in 1875. Its all started when some 22 stockbrokers commenced trading under a tree opposite the Mumbai Town Hall in mid 1850s with an investment of just Re. 1 each, a substantial amount at that time. Premchand Roychand was the top broker of that time who assisted in creation of procedures for the trading system. Several stock broking firms in Mumbai were family run enterprises at the time such as Jamnadas Morarjee, D.S. Prabhudas & Company, Champaklal Devidas, and Brijmohan Laxminarayan. etc.. Few of them still managing their broking businesses. The Government of India recognized the Bombay Stock Exchange as the first stock exchange in the country under the Securities Contracts Regulation Act -1956.

The BSE Sensex was initially composed in April 1979 with some 30 stocks in various sectors. The BSE trading platform enhanced by adopting the computer based electronic-trading system in 1995 and currently it has more than 5000 active listed entities and its the largest in case of number of participants in a single stock exchange. India’s economy is comprehensively reflected on the rise of the Sensex and it is one of the dominant markets in Asia. In 1990, Sensex has crossed the 1000 point mark, was an Indian detonation aligned with the global markets reformation. Year 1990 was a historical year for the BSE Sensex.

Thrilling twenty years

On July 25 1990, the Sensex touched the exciting four-digit figure for the first time and closed at 1,001. It was one of the milestones for Indian equity market as well economy which never looked back from that point. Since, the upward trend of BSE Sensex is one of the steadiest compared to other overseas markets/indices and it will be interesting to observe the wonderful story of Sensex. I have placed few statistics on BSE Sensex since the year 1990 and the probable arithmetical conclusions left on you.

Sensex has shown an average yearly hike of 588 points in five years since 1991 (1991-1995).

Sensex has shown an average yearly hike of 441 points in five years since 1996 (1996-2000).

Sensex has shown an average yearly hike of 658 points in five years since 2001 (2001-2005).

Sensex has shown an average yearly hike of 2333 points in five years since 2006 (2006-2010).

2011 - 2015?

Sensex has shown an average yearly hike of 515 points in ten years since 1991 (1991-2000).

Sensex has shown an average yearly hike of 1496 points in ten years since 2001 (2001-2010).

2011 - 2020?

Sensex has made an average yearly hike of 1000 points in last 20 years since 1991 (1991-2010)

Sensex was never made a negative YoY difference on year high after 2002 except in 2009 which were totally based on the recession, truly an external factor.

Sensex took almost 16 flat years to touch the first 10000 levels (25 Jul 1990 to 07 Feb 2006, check the table). Interestingly it has grabbed the next 10000 points with in just 1 year and 8 months (07 Feb 2006 to 29 Oct 2007). The villain is same recession.

More precisely, reaching the first 5000 points since 1990, took some 9 years, next 5000 mark crossed in 7 years and the next both 5000s are in just 1 year intervals. Is that amazing? I strongly believe the recession played the foul, otherwise?

If we take last 20 years of history as a base, simply the Sensex have to reach some 30000 level by end of this decade. But remember, the ongoing trend as well other sustaining growth factors are much supportive than initial 10-15 years. Watch the figures of recent years.

What you think? How many more years to take for the 30000 levels considering the trends? Another 10, 4, 2, 1 or less?.

I have placed a couple of screenshots above in which you can read much more than what I have typed here. Anyway, raising questions and finding answers in contrast with the history is left on you. But I am sure India will stamp its authority in the global economic scenario by this decade. India being diverse in many sectors will see more upside due to the strong demand from its correlated sectors and it’s the most appealing destination for the investors worldwide.

A New Year gift post in the multibagger series is pending and I am working on that, will publish very soon.

A great quote is worthy here to mention; "If past history was all there was to the game, the richest people would be librarians - Warren Buffett

Comment please......

Happy investing & Regards

Shabu Thachat – sthachat@gmail.com