Turnaround companies- (dec 2015)

Turnaround companies that are fundamentally strong and potential businesses. share your valuable views.

 

NITCO ltd - i think it is a turnaround since debt is reduced . please share views on this

 

Action Construction Equipment - debt has stabilised and company requires no additional capex until sales double from current levels. Will be one of the first beneficiaries of the infra capex revival.

 

I would put my money on AIA Engineering. A well managed, debt-free company in an industry where there are only two players. The product is a must-have for the mining and cement industry. The stock is presently down owing to the woes of the economy in general and the mining sector in particular.

Edit: I have to correct myself. I think by "turnaround" you meant companies which are in fundamental difficulties presently. If so, AIA may not qualify.

 

Nitco seems to have around Rs.800 crores of debt and its networth is negative. Also it is loss making at operating level I.e. Before any interest expenses are paid out! So looks like apart from debt, company has operational/ commercial problems too.

 

Subex Ltd is my personal turnaround pick. Management intends to be USD 100 million revenue company with a 25% operating margin. Debt levels reducing to comfortable levels thanks to the FCCB conversion. Operationally too the company has shown good results in the last 3 quarters. I believe this company can be a good turnaround candidate to bet on.

 

Jubilant life, Sharon.Personal holdings ,hence biased view.

 

Pennar Industries: Company is now focussing on high profit margin sector...orders from Indian railways and low commodities prices can play a major role for this company....

 

Reliance Capital.

 

Dena Bank

 

Indian Hotels, suzlon and bajaj electricals

 

first source solutions... shaping up very well..

 

Kesoram Industries - a lot of restructuring. I'm buying. Biased.

 

Turnarounds are like drug addicts. After rehabilitation, for some time they behave well and stay off drugs. Then most of them relapse. Thus very few drug addicts actually recover. Similarly very few turnarounds really turn around. (Would I marry my sister to an rehabilitated drug addict ? --> NO. Would I invest in a turnaround ?--> NO)

When we have so many choices in stock market then why are we exploring turnarounds which have very high risk associated with them? Also in such highly volatile markets and weak global economy the risk associated with turnarounds increases manifold. As these companies have destroyed the investor trust due to their past behavior then their is a high possibility that investors may panic even at minor bad news and stock may tumble down.

Also whether we like to admit it or not but most of us do only a superficial study in the name of fundamental analysis. Most of the time we refer to advice written by experts (Although we criticize then in public but we follow them in private). Such experts may be biased and even compromised. Thus due to our lack of study and high dependence on experts, we may not really know whether a business has really turn around or not.

Thus due to weak global economy, high volatility, lack of investor trust, our own lack of study and availability of better choices (due to recent corrections in January 2016) I feel that it is best that we avoid turnarounds completely.

This will come in handy this year (2016) because in the last 2 years mid caps and small caps have become very expensive. Thus they may not give very good returns this year. Hence many broking houses will definitely try to sell turnaround stories and trap retailers. SO BEWARE OF TURNAROUNDS THIS YEAR (2016).

 

Can you please post the message in english?