Stocks Corner: What to BUY, what to SELL!

We asked readers to mail their queries about stocks they want to buy, sell or hold. Here's the response to their queries.

Narendar Lokwani of StockFundoo advises about good, bad and ugly stocks.

You can mail your queries to stockfundoo@rediffmail.com.

Please advice on my portfolio given below, which is currently down by almost 11.25 per cent. Due to this I am under tremendous pressure and don't know what to do. How do I handle these scrips? Please advice/suggest:

• Balrampur Chini 1000 @Rs 67.02
• Central Bank 250 @Rs 94.55
• Dabur 225 @Rs 131.98
• Exide 225 @Rs 149.96
• GSFC 350 @Rs 72.70
• Geometric Ltd 275 @Rs 111.63
• Indoco Remedies 300 @Rs 68.2
• Jindal Saw 300 @Rs 130.98
• Punjab & Sind Bank 295 @Rs 80.6
• Rolta India 555 @Rs 65.94
• Zylog Systems 400 @Rs 67.8

Total portfolio amount (at purchase) was Rs 353,000. Currently it is at Rs 314,000 (Down by almost 11.25 per cent). Please give suggestions.

Typically, when one decides to invest in sin cash segment, you should brace yourself for stop-loss of at-least 20 per cent price movement against you. Stock markets are volatile by their very nature, because millions of investors get together every day on stock exchanges and buy and sell these instruments based on news, sentiments and results. Thus stocks prices will be volatile and one should not get unduly worried by 10 per cent movement against your purchase price.

However, it is a good idea to monitor your portfolio daily and keep track of overall market movement. Typically it's a good idea not to invest money that you will personally need in next 6 to 12 months in the stock markets. Hence long term investment in good stocks is only way for retail investor to profit from markets.

One way to analyse any portfolio is to divide all stocks into three segments – good, bad and ugly stocks. Good stocks are good picks in every market phase. Bad are otherwise decent stocks but in the short-term may show downtrend or short-term problems. Ugly are poor quality stocks you should stay away from.

Using this good-bad-ugly approach in your portfolio, one can segment your portfolio in this manner:

Good stocks: Balrampur Chini, Dabur, Indoco, Rolta, Jindal Saw, GSFC, Geometric, Punjab and Sind bank.

Bad stocks: Exide, Zylog.

Ugly stocks: Central Bank.

Now what to do with this categorisation! An investor can buy more of good stocks on dips. For bad stocks, investor can simply hold and hope for these firms to turnaround to better times and move them to good category. For Ugly stocks, investor needs to book loss or exit at purchase price.

As most of your stocks are good quality stocks and you need not worry endlessly on current 11 per cent underperformance of your portfolio. The markets are poised for a decent bull run, and hence you should be able to see good profits in your investments over a period of next 6 to 12 months.

Disclaimer: This article is for information purpose only. This article and information do not constitute a distribution, an endorsement, an investment advice, an offer to buy or sell or the solicitation of an offer to buy or sell any securities/schemes or any other financial products /investment products mentioned in this article or an attempt to influence the opinion or behavior of the investors /recipients.

Any use of the information /any investment and investment related decisions of the investors/recipients are at their sole discretion and risk. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Opinions expressed herein are subject to change without notice.

Please advice whether Mahindra Holidays is a good investment for 1-2 year horizon, My cousins enrolled in their packages last year and they are of opinion that the company is very good for investment since it has already got customers with 10-20 year horizon and has long way to go in terms of properties also. What do you suggest about investment in this stock? Please advice...

Mahindra Holidays and Resorts is a unique concept stock as not many listed firms exist in this segment, other than Sterling Resorts and Country Club to an extent. However, in comparison to Sterling, just to take an example, Mahindra Holidays is not trading cheaply. It is richly valued at Rs 2,750 crore with Rs 1,000 crore of debt. The revenues are growing sequentially with decent growth and annual topline is close to Rs 620 crore for March 2012.

The trick in this stock is to look at shareholding percentage and 82.69 per cent holding is with promoters themselves. Thus being a concept stock with little freehold, there are not many sellers available, even on a bad day.

Technically speaking, looking at charts, support is close at Rs 318 levels. Rs 260 is another support which is all time low and unlikely to break. So downside is low and on upside the stock can see levels such as Rs 360, then Rs 415 and Rs 460 as well in next one year or so.

I want to buy 200 shares of GTL ltd and GTL Infra each. What's your advice on this?  And any other share under Rs 30 that you would suggest?

Both GTL and GTL Infra are having severe debt related issues currently. With interest rates poised to come down in 2013, firms like these which had terrible time in last two years may prosper.

However, if you look at GTL Infra, even September 2012 results are not announced yet, whereas some of the good companies have already declared December 2012 results or are in process of doing so. So, how do investors make a decision if they have to wait for six months for quarterly results to be announced?

This points to deeper issues in the GTL group, and hence one can avoid these two companies for now. Both firms are also loss making in past five quarters and hence severe stock crash is justified in their case. So net, these firms are to be avoided for now.

I would suggest, please don't look at 'stock-price-under-30' kind of filters for your investment. Look for good quality stocks with transparent management and value price for your investments.

I am holding 2000 shares of LITL (Lanco Infra) @ Rs 13 and 1000 GMR Infra @ Rs 17.60/ share since one month. What should I do whether to hold it or sell it? I can hold it for a period of 2 to 3 years Please advice.

Lanco Infra (LITL) and GMR Infra are from the category of infrastructure stocks which got hammered in past two years with interest rate climbing, government indecision on infra sector and various project cancellations or holdup.

Out of these adverse issues, only interest rate will get resolved in year 2013. Interest rate decline may take place only in the later part of 2013. Current RBI governor is reluctant to reduce interest rates and one may have to wait for September 2013 when RBI regime will change for any aggressive measures.

So, good days are still afar for infra sector. For such investors with great patience, let's look at fundamental and technical for these stocks.

LITL's latest quarterly results indicated declining revenues and firm was barely profitable. Profitability will be a question in next few quarters as well. Promoter holding is high but slightly declining with FII holding declining as well. Firm is trading close to its book value.

On charts, LITL is stuck in a large triangle formation from past four months. Break of this triangle formation will decide its future direction. Support is at Rs 10.4 and final support at Rs 8.48.

Upward targets of Rs 19.7, Rs 25.1 and Rs 30.9 are doable in next 12 months. So you can hold for next 12 months.

Fundamentals of GMR Infra are in similar shape with sector specific issues plaguing both the firms. The charts for GMR indicate support at Rs 17.6, breaking which one should exit. You seem to have bought at the best price possible.

Rs 21.8, 27 and Rs 33.5 are doable in next 12 months, so you can hold GMR as well for 12 months.

I am holding 3000 shares of A2Z at Rs 62. What shall I do?

A2Z Maintenance was a popular stock in investment circles earlier as guru investor Rakesh Jhunjhunwala had a stake in the scrip. However, the stock plunged as he later pulled out and resigned from the directorship. Fundamentally as well, the scrip seems to be facing headwinds with September 2012 quarter revenues have declined and stock posting losses.

Charts are severely in downtrend, with stock at all times low currently and last candle is a huge red candle-breaking bottom convincingly. The fall is a sharp plunge and hence unlikely to continue in its present form. Scrip may decline slowly once some buyers emerge at lower prices. There is no support on charts currently.

You can hold the scrip as you are already in deep loss, but do not make any fresh investments. Once it trades above your cost price, you can exit. In next 6-12 months, once Rs 56 is crossed, one can see Rs 62 and Rs 73 levels as well.

I have bought 3000 shares of Unitech at Rs 36.70. Do you see the stock moving up with a six-month target? Do you want to hold or sell? Please advise...

Unitech seems to have risen from ashes. From a terrible low of Rs 18, stock has already more than doubled and is in good uptrend. Next possible targets are Rs 47, crossing which Rs 60 and Rs 68 are possible.

Fundamentally, things are still soft with the firm barely profitable in September 2012 quarter. All depends on how the topline revives and how the results shape up to be in next 1-2 quarters.

One can keep a stop-loss at Rs 32 and keep holding the stock for next 6-12 months.

Please advise me on what to do with Opto Circuits. I am stuck with huge losses in this stock.

Opto had support at Rs 100 but now that it has broken the next support is at Rs 80, which will definitely hold. Financials seems to be in good shape, however, low promoter holding is a worry.

Promoters are buying warrants at Rs 145, so nothing to worry till Rs 100 price level is sustained.