>> Saturday, July 18, 2009
The Vulture Play
These stocks have fallen like there’s no bottom. But the levels at which they are trading offer huge opportunities.
Strategy: Buy on rumours and sell on news.
Suzlon: Debt is high and so are the receivables. But Tulsi Tanti is willing to dilute his stake and meet commitments. If US President Barack Obama backs energy generation from green sources, Suzlon’s 5 MW wind turbines will be hot. The stock has gained nearly 300 percent since the time it fell to Rs. 35.
Ranbaxy: The last 12 months have been bad. Sales are down, research hasn’t paid off and US FDA is after it for manufacturing lapses. But the new Japanese owner Daiichi Sankyo has had great successes in research and working with the FDA. Expect them to put Ranbaxy back on an even keel.
NIIT: As IT crashed so did the IT trainer. Its stock fell 85 percent to Rs. 14. But it is moving beyond IT and is training professionals for banking jobs. The amount spent on education doubled in the last five years and NIIT grew twice as fast, quadrupling its top line. The stock has recovered to half its 52-week high.
Wockhardt: Its core business is in fine fettle. Its problems are foreign loan repayments and derivative losses. Banks are taking over the company operations and Habil Khorakiwala has put some businesses on the block to pay off debtors. Wockhardt’s strong cash flow should return it to good health in two years.
Hindalco: The acquisition of Novelis tripled Hindalco’s sales but caused an 11 percent decline in net profits. But aluminum prices are rising and credit is beginning to flow. Hindalco’s nine-month profits look nice. It now has the space to fix Novelis. Tricky but not impossible.
Risk: This one’s clearly a high risk strategy. There could be serious heart ache before the gains come.
Source : Forbes India.