As we near the end of the first quarter earnings season of the new fiscal, this list will start witnessing changes from the next issue. Six stocks have made their exodus while six new stocks have been added to the list
As we near the first quarter earnings season of the new fiscal, this list will start witnessing changes from the next issue. This time, we saw an exodus of six stocks because they became expensive. Similarly, we saw six stocks make their way into our list.
Kajaria Ceramics, one of our favourites, has been rendered expensive and has dropped off. VST Industries, the so-called ‘vice stock’ which is a great defensive play, found its way back into our list. NCL Industries has reversed its trend from up to down. On the other hand, Zylog Systems, the Chennai-based IT solutions company, saw its trend completely reverse from down to up. Two banking stocks—Bank of Baroda and YES Bank have also witnessed change in trend—from flat to down, underlying weaknesses in the banking sector in general.
Here is the list of stocks which went in and out of our value pick list:
In: Sterling Tools Ltd, Omnitech Infosolutions, Ratnamani Metals & Tubes, Wyeth, VST Industries, Mahindra & Mahindra Financial Services.
Out: Asahi Songwon Colors, SRF, Kajaria Ceramics, Andhra Bank, Mindtree, Hindustan Zinc.
How To Use the Data: This list is designed to reduce your effort while making a shortlist of value picks. Stocks have been sorted and displayed according to a composite rank of high return on net worth and low valuation. You cannot buy these stocks mechanically. To actually select a stock to buy, you may want to glance at other parameters and apply your own understanding of a sector or a company. Remember, for value investors, there is something called a ‘value trap’. This refers to a situation when an attractive company is reasonably valued but its internals are deteriorating – which is probably why the stock was cheap to start with. One way to avoid this is to consider sales growth; so look at the ones with strong sales growth. Also, keep an eye on the tax payout, which is a measure of corporate governance. The best combination is great financials, low valuation and a rising stock price. One should buy in an uptrend, though a flat trend of a value stock is perfectly fine too. A ‘value’ stock in a strong downtrend is best-avoided. Remember, price could go down due to an adverse event relating to the company or a severe market decline; in either case you don’t want to catch a falling knife.