ITC-A EVERGREEN BLUE CHIP

ITC is in the business of tobacco,Hotels,Paper,Biscuits and a host of other business.The company is using its free cash flow generated from its existing business to aggresively expand its Non-Tobacco business.The company is building new hotels,expanding its paper boards and printing business and also aggresively growing in its biscuits business.Imagine in a business dominated by Brittania for decades,ITC has already got over 8% market share in a short span of time.

But the most interesting aspect of ITC's dream is the e-choupal intiative whereby the company is bringing the rural India into its growth strategy.In what must be the most ambitious plans for any private sector co,ITC is planning to connect more than 1,00,000 villages in the country through this intiative.The e-choupal intiative will ultimately enable the company to source goods from the rural place to sell in the urban areas.The company also sells various things like Fertilisers,Fast moving consumer goods to the rural market.This I believe will eventually create the best retail model in the country.

For the year ended 2007 the company will end up recording a turnover of over Rs.20,000 crores and a net profit of over Rs.2500 crores.Virtually a debt free co with professional managment the co is in the right businesses to capture the India Story.At a price of Rs.185 the share is traded at a P/E of slightly over 23 times.Considering the growth plans the share may be accumulated to give excellent returns in the long run.Investors investing with a long term view will get atleast 20% tax free returns year on year for the next 5 years.A must share in everybody's portfolio.

THE QUARTERLY SYNDROME

Over the past few years with profileration of TV business channels and the compulsory announcement of quarterly results by companies everyone has been flooded with analysts talking about quarter on quarter growth of sales,profits etc.In fact the quarterly numbers of Infosys (which normally heralds the earnings season) is virtually a festival of sorts in some business channels and the market awaits with bated breath for the numbers to come out.With all these analysts ramblings (Forgive them,they have to fill in 24 hours content for their channels) it has become a huge confusion for long term investors.On top of it you have earnings estimates that are shown to the viewers before the results are announced.So there are comparisons between estimates,actuals,previous quarter earnings and then previous year corresponding quarter etc.At the end of it the market pronouces it verdict.In line,out line etc.Question is does this provide any guidance for the investor to make his decision.The answer is NO.

The 10-11% growth on Q-on-Q reported by the IT majors like Infosys,TCS etc somehow give the investors a very short term view of the company and make them exit if the near term results are disappointing.However the past several years have proved that a company like Infosys has consistently posted above industry average growth and a year end of 40%.So a long term investor is shaken off due to short term volatility in the results and near term market movements in what is essentially a solid long term investment.

So keep your eyes and ears open on all the news that is sorrounding the investment you have made but unless there is a huge downtrend in the performance of the company keep faith in a good management.It pays off eventually in the long run.

As somebody nicely said,long term investment in a good stock is like purchasing a piece of real estate.One does not look at real estate prices on a daily basis.Just because all the Television channels are rambling about the results 24 hours and come to conclusions it is not necessary for you take a decision to either enter or exit the stock.

Wealth Creator-NTPC

Investment Logic

NTPC is the largest producer of power in the country.As everybody is aware there is a continous shortage of power in this country.So the company would never be in a situation of finding it difficult to sell its finished products for a long time to come.If the country continues to grow at 8% plus then the requirement of power is expected to continue to grow.The problem lies in the fact that tariffs are controlled.So the company will continue to make decent profits but will most probably will never make any bumper profits in its lifetime.So it will be steady grower just like the tortoise in the famous Rabbit-Tortoise story.

Fundamentals:
For the quarter ended June 06 the company recorded a turnover of over Rs.7000 crores and a net profit of Rs.1500 crores giving it a quarterly EPS of Rs.1.9.The current discounting or P/E (current Price-Rs.130) of 17 times is slightly on the higher side investors should look to pick up the stock on all declines.Dividend yield is 2.1%.Considering the major expansion the company is undertaking growth will certainly happen.Also the company is looking at backward integration through accquistion of coal mines etc.Also the company is aggresively looking at nuclear power to enhance its production.

A strong play on the India growth story and the power sector.

wealth creator stock

GAS AUTHORITY OF INDIA:

One of the navratnas of Indian PSU's this company is involved in exploration,transportation and retailing of natural gas.For the year ended 06 the company clocked a turnover of Rs.16000 crores and a net profit of Over Rs.2000 crores.On a equity of Rs.845 crores the eps is over Rs.25.The company has created a huge infrastructure for gas transmission across the country for supplying natural gas to industries and retail consumer.The company is aggresively pursuing gas exploration and also has a slew of subsidaries to cater to the retail consumer through Indraprastha Gas in NCR (delhi),Mahanagar Gas Nigam(mumbai).It is also one of the companies in the Oil and Gas Sector which is least affected by the subsidy sharing scheme of the central government.

On the current price of Rs.250-Rs.260 the dividend yield works out to 3.85%.

Solid financial and a growth sector this stock should multiply in the next 3-5 years atleast 3-4 times.

common sense investing

Continuing with the process to choose/select a stock which can over a period of time create wealth for an individual there is another example i would like to give:Bharati Airtel.As the mobile telephony market picked up in India it was obvious to anybody walking down the street that mobile telephone users were growing in leaps and bounds.People started putting their mobile telephone numbers on their visiting cards and it was enough to get in touch with another person at any point of time.Bharati Airtel from quoting Rs.30 three years back is now trading at Rs.450.Astounding for a company that has not paid any dividend so far.A 10 bagger in three years.This is the sort of scrip that can create real tangible wealth for the individuals.

People would come to the conclusion that it is easy to say all this in hindsight.Believe me all this keeps happening right in front of our eyes on a daily basis.The most important is to keep the looking in our daily life-After all these companies are selling their wares to the larger population on a daily basis.The only caveat check out the quality of the promoters and their track record.

More fundamental value investment ideas will be posted soon.

investment quandry

At a time when the sensex has touched the highs in May 2006 and then the subsequent fall to a low of 9000 levels in June, investors in the indian market have been confused whether this is the time to invest in the stock markets.Though market timing is the most difficult thing to do (in any market) all analyst are giving various targets for the individual stocks and the index for the short term or they are all saying it is good for long term.The trick in the stock markets is to pick companies with a sustainable business model and which will have a resonable pricing power in forseeable future to ensure growth in topline and bottomline.Most of the investments made by wealth creators are commonsense investment.To give an example -investment in Hero Honda when the Indian two wheeler market were turning from a scooter market to a bike market.The advantage of the Hero honda was that it brought in products which were contemprary and which came in with the fuel economy tagline (the bajaj scooter used to give a mileage of only 35-40 kmpl as against the Hero Honda bike which came in with 60+ mileage.

Let me start today by giving my fundamental pick in the market:

Grindwell norton-MNC,Debt free company catering to the steel sector.With a huge expansion of the steel sector (Tata steel,SAIL,POSCO,Mittal Steel all annoucing huge plans for the sector) it is a given that the company will have huge growth in the next few years.Sustainable growth of over 20% seen in the next 5 years.Financial details of the company will be posted soon.