PSUs on a Fire-sale- Cos that might rise 170% to be at par BV

PSUs on a Fire-sale- Cos that might rise 170% to be at par BV

Mayank Mehra CFA FRM  | Sep 14, 2019 14:50

Many times as has happened in the past, panic and stress situations offer money making opportunities to the patient investors. We waited till we saw the economics turn around to call any stock or sector cheap, though we continue to wait while the economics continue to turn.

We had to absolutely call out that a truckload of PSUs were trading cheap. Scroll down to find a list of your favourite Monopoly PSU company offering a strong dividend yield along with an even stronger earnings yield. PSU companies have an often sticky dividend yield since their largest shareholder (THE GOVT) relies on them for budget decisions. Another opportunity that has made itself available recently is the bull run owing to government's strategic stake sale decisions like the one in BEML (NS:BEML) and BPCL recently.

Stocks that fit our firesale parameters:

We restrict ourselves from making any stock pick from the above list owing to restrictions in duty to our fiduciary clients.

The above list is aimed at compiling a list of stock in the PSU sector, which we expect have a high margin of safety (P/BV), have a sticky dividend/share over the years making the dividend yield reliable. Most companies have a solid moat and monopolistic businesses, namely-

  1. Coal India-Largest coal producing company in the world, accounting for over 82% of coal produced in INDIA.
  2. NMDC-Largest producer of IRON ORE in India and the operates the only mechanised Diamond mine in India.
  3. SAIL - The world's 20th largest Steel Producer trading at .37x of BV implies the stock has to go 170% up to trade at par BV (however that alone should not be the grounds of investment in the stock, nor am I directly recommending the stock to be bought)

to name a few

We strongly urge the audience to look at stocks where the govt/promoter holding is between 51% to 65% majorly because these stocks are less likely to have any Promoter holding offloading.

Me and my associates may have exposure to some or all of the scrips mentioned in the above list. The data presented should be used for educational grounds only and not be in any way treated as an investment recommendation.

Mayank Mehra CFA FRM

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Sunny Ken
Sunny Ken

Thanks, some of them are good for long term 3-5yrs.  ... (Read More)

Sep 15, 2019 06:14 GMT· Reply
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