On 29th August 2012, Punjab National Bank (PNB) hit its 52 week low of Rs. 665. Nobody was willing to touch the stock with a barge pole.
But S. P. Tulsian, the master stock picker, knew that the best time to buy stocks is when they are down and out. And everybody knows that PNB is a stock with excellent fundamentals and management. Yet nobody was willing to stick his neck out.
S. P. Tulsian’s confidence came from the fact that though PNB had fared badly in that Quarter owing to the steep rise in NPAs, it has the highest net interest margin (NIM) for the June quarter amongst all the public sector banks (3.6%). Also, PNB is the second largest public sector bank, after State Bank of India, with 5,700 branches.
S. P. Tulsian’s analysis and calculation was also excellent. He pointed out that PNB’s book value then was Rs 815 and an EPS of Rs 110 EPS was expected in remaining three quarters. If one reduced the expected dividend payout of Rs 25, the book value would be Rs 900 as on March 31, 2013 as compared to the then book value of Rs 815.
The result: The PNB stock was then quoting at a mouth-watering price to book of 0.75. “We have not seen this kind of price to book for the larger PSU banks” S. P. Tulsian exclaimed. Other Banks like Bank of Baroda (BoB) and Canara Bank were quoting at a much higher PBV he said.
So, S. P. Tulsian sent out a strong Buy call and promised investors that they would see a price of Rs. 800 in four to five months.
Well, this is the kind of foresight and masterly analysis that makes fortunes. At today’s CMP of Rs. 912 (after the 10% spurt) investors who heeded S. P. Tulsian’s recommendation are looking at a gorgeous 37% return in just 5 months which means an annualized return of 89%.
And the good times may just be starting for PNB and the other PSU Banks. So, if you still haven’t invested in them, it’s time to wake up from your slumber and take a long and hard look.