Well first of all, I would begin with a small doubt that one of our follower had about how to trade. With times and technology changing, the necessity of having a broker and a separate trading account and other addendum are no longer there. All you got to do is open a demat account with a bank. I would suggest going for a reputed bank like HDFC or ICICI when you are entrusting your money with someone instead of a cheaper alternative. In he long term it won't have much difference.If you invest around one lakh, it will cost you around 300 bucks extra. That is not much for the ease and assurance that these banks provide.
Now coming to our Rule 5. When you look at the balance sheet of a stock. there are standalone numbers and there are consolidated numbers. Many large companies have some stake in their subsidiaries and depending on the percentage of claim they have in their subsidiaries, a part of profit or loss whatever that subsidiary is making as also its networth and liabilities are added to the standalone number. This gives us the value of consolidated balance sheet of the company. Now most of the trading advisory sites focus on the standalone numbers. But when you buy a stock, you are also buying a stake in their subsidiary and that should always be accounted for.Beware of a large company showing god profits in their standalone numbers and bleeding out through their subsidiaries.
The reverse case is also true. For example. go and check out Amtek Auto's last year standalone and consolidated numbers. Its consolidated EPS(earning per share) is three times its standalone number.
This brings the P/E from around 11 when we take the standalone numbers to 4 when we take consolidated values. Even the book value goes up one and a half times when we consider the consolidated value.
So,its a good practice to check the standalone numbers to see how the parent company is doing, but when there is a big discrepancy between the two, consider consolidated numbers. This is a very important factor for value investors like us, because it is generally ignored by short sighted traders looking for quick profits.
RULE 5: Between Standalone and Consolidated values, Consider Consolidated Values.
PICK OF THE WEEK: Amtek Auto. With a consolidated EPS of Rs 42 last year, It is a good buy at Rs 158.20. Also it is trading at a price significantly less than the book value. There is another important factor. It is an auto ancillary company with a significant presence in Europe and for the first time in last six years since the economic crisis, Europe has shown positive car sales growth. It is making public its December results on 12 Feb 2015. Watch out.
Amtek India also seems a good bet in this regard.It is trading at Rs 60.20 currently at BSE. Check it out yourself.
In case of any doubts on investment decisions in stock market, do write to us. we will get back to you in no time.
Now coming to our Rule 5. When you look at the balance sheet of a stock. there are standalone numbers and there are consolidated numbers. Many large companies have some stake in their subsidiaries and depending on the percentage of claim they have in their subsidiaries, a part of profit or loss whatever that subsidiary is making as also its networth and liabilities are added to the standalone number. This gives us the value of consolidated balance sheet of the company. Now most of the trading advisory sites focus on the standalone numbers. But when you buy a stock, you are also buying a stake in their subsidiary and that should always be accounted for.Beware of a large company showing god profits in their standalone numbers and bleeding out through their subsidiaries.
The reverse case is also true. For example. go and check out Amtek Auto's last year standalone and consolidated numbers. Its consolidated EPS(earning per share) is three times its standalone number.
This brings the P/E from around 11 when we take the standalone numbers to 4 when we take consolidated values. Even the book value goes up one and a half times when we consider the consolidated value.
So,its a good practice to check the standalone numbers to see how the parent company is doing, but when there is a big discrepancy between the two, consider consolidated numbers. This is a very important factor for value investors like us, because it is generally ignored by short sighted traders looking for quick profits.
RULE 5: Between Standalone and Consolidated values, Consider Consolidated Values.
PICK OF THE WEEK: Amtek Auto. With a consolidated EPS of Rs 42 last year, It is a good buy at Rs 158.20. Also it is trading at a price significantly less than the book value. There is another important factor. It is an auto ancillary company with a significant presence in Europe and for the first time in last six years since the economic crisis, Europe has shown positive car sales growth. It is making public its December results on 12 Feb 2015. Watch out.
Amtek India also seems a good bet in this regard.It is trading at Rs 60.20 currently at BSE. Check it out yourself.
In case of any doubts on investment decisions in stock market, do write to us. we will get back to you in no time.
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