IS HINDALCO A CONTRARIAN BUY AT THESE LEVELS?

Discussion in 'Ask A Query About Your Stock Picks And Portfolio' started by Hakish, Oct 10, 2015.

  1. Hakish

    Hakish New Member

    Joined:
    Sep 2, 2015
    Messages:
    9
    Likes Received:
    2
    Am i the only one to think Hindalco is a contrarian buy at these levels?

    MARKET CAP - (Rs Cr) 17,273.61
    P/E - 24.53
    BOOK VALUE - (Rs) 182.36
    DIV (%) - 100.00%
    INDUSTRY P/E - 13.35
    EPS (TTM) - 3.41
    PRICE/BOOK - 0.46
    FACE VALUE (Rs) - 1.00
     
  2. Carl Icahn

    Carl Icahn Active Member

    Joined:
    Mar 25, 2015
    Messages:
    115
    Likes Received:
    92
    Madhusudan Kela of Reliance group was asked the question whether metal stocks are a contrarian buy. This is what he said:

    Very difficult to take a call. If I had personal money I would start to look at that sector because stocks are getting too compelling. But you have to have a time frame, the point is that it is possible for the next two years they don't move. There may not be downside but there may not be upside either.

    But whenever the sentiment will become positive then you're not talking about 20 per cent return, then you're talking about 200 per cent return.

    I am not averse to an idea of looking at it because today there is an extreme bearishness in the sector- but are we actively investing in the sector- no.


    So, what is your time frame? Do you have the patience to sweat it out? It could be a long wait.
     
    Fun_Da_Mentalist likes this.
  3. Hakish

    Hakish New Member

    Joined:
    Sep 2, 2015
    Messages:
    9
    Likes Received:
    2
    Thanks for the reply. Yeah I should be able to sweat it.
     
  4. Sachin pathak

    Sachin pathak Active Member

    Joined:
    Sep 30, 2015
    Messages:
    549
    Likes Received:
    128
    @carl

    I agree. Have been a quite strongly voicing an entry into metals and mining myself....hindalco, vedanta and tata steel.

    @ hakish, the names have moved up strongly this week but a 10-15% rally shouldnt deter one if he/she is willing to wait it out. Else one can adopt an oppotunistic approach and wait for a correction... Which in my view should be happening atleast once before the end of 2015
     
  5. dineshkapoor27

    dineshkapoor27 Active Member

    Joined:
    May 19, 2015
    Messages:
    309
    Likes Received:
    108
    I think you should also look at NALCO. Great dividend yield, cash rich and good margins. NMDC, MOIL are also good plays. Currently not many people are buying so you can reap dividends and accumulate in the next few years. These should give great returns.
     
  6. Srouta Mukherjee

    Srouta Mukherjee Well-Known Member

    Joined:
    Mar 28, 2015
    Messages:
    1,898
    Likes Received:
    769
    I was also going to suggest that. If you buy metal stock, buy NALCO with high dividend yield of 3.86 or NMDC with 8.84%. You get paid for waiting and there is no loss :) You get dividend + capital gains.
     
  7. Sachin pathak

    Sachin pathak Active Member

    Joined:
    Sep 30, 2015
    Messages:
    549
    Likes Received:
    128
    @srouta

    NMDC dividend yield is 8.84%.... even higher than tax free bonds recently issued by NTPC etc

    Ever wonder why there isnt a mad rush amongst investors to buy of NMDC shares like seen in the case of tax free bonds
     
    Srouta Mukherjee likes this.
  8. bholu

    bholu Active Member

    Joined:
    Apr 1, 2015
    Messages:
    395
    Likes Received:
    113
    valuations look compelling but I suggest if you are looking to hold long term then think about alternatives... invest in quality stocks where higher growth is possible. like HDFC Bank, Axis Bank, Ramco Cements,..I also thought NMDC looked cheap but not much capital appreciation looks in sight, why should I remain invested for long term ...also market does not assign very high PE multiples to the metal stocks but yes you can assign a small percentage say 5% of your portfolio to these stocks , not more ...also dividend yield is not guaranteed so in the face of lower profits the company may reduce dividend payout
     
    Biju and Srouta Mukherjee like this.
  9. Srouta Mukherjee

    Srouta Mukherjee Well-Known Member

    Joined:
    Mar 28, 2015
    Messages:
    1,898
    Likes Received:
    769
    Very good point. Because profits are not guaranteed!
     
  10. Sachin pathak

    Sachin pathak Active Member

    Joined:
    Sep 30, 2015
    Messages:
    549
    Likes Received:
    128
    Exactly .....i could have said this myself but wanted you to provide this important consideration. Stock markets and share prices capture future expectations. So high dividend yield in a stock which is in a sector facing huge headwinds may not be the best yardstick to decide
     
  11. Hakish

    Hakish New Member

    Joined:
    Sep 2, 2015
    Messages:
    9
    Likes Received:
    2
    very interesting discussion especially about the dividend yield. The only thing with NMDC (or any PSU) is that i am always a bit queasy with anything that is state owned, just my view.
     
  12. Fun_Da_Mentalist

    Fun_Da_Mentalist Active Member

    Joined:
    Sep 19, 2015
    Messages:
    240
    Likes Received:
    169
    When there are so many compelling opportunities in the market why would one look at a sector which is in a global downturn and whose main consumer ( China) is never likely to consume at that rate again?
     
Loading...