Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
12,076.00104.2
Stock Analysis, IPO, Mutual Funds, Bonds & More

Stocks that can be multi-baggers despite being at 52-week lows

The ideal situation is when the recent price fall is triggered by the supply-demand situation in the market, not by company fundamentals.

, ET Bureau|
Updated: Jan 21, 2013, 11.57 AM IST
0Comments
Look out for companies where the management is taking steps to solve the current problems.
Look out for companies where the management is taking steps to solve the current problems.
The Indian stock market is in an upbeat mood as the benchmark indices, Sensex and Nifty, recently touched two-year highs. Despite the spectacular performance, several stocks are languishing close to their 52-week lows. Should investors buy these? This is a tricky question and the answer depends on the fundamentals of the company. Most of the stocks are quoting at low levels because they are facing some problems.


However, ignoring these scrips or deciding to wait till the issues are resolved may not be a good strategy. This is because by the time the problems are solved, most of these stocks could have become multi-baggers. The investors who want to earn high returns may have to take a contrarian view and buy the stocks being ignored by other market participants.

However, this too can be a risky strategy, so they should park only a portion of their equity portfolio here. While choosing a stock in this space, be careful to avoid the ‘falling knives’, that is, the stocks that are still hitting lows on a daily basis. For example, the stock price of Arshiya International, which sets up trade warehousing zones and railway infrastructure, has fallen continuously in the past two weeks. Though the promoters have promised to raise Rs 130 crore by monetising their assets to revoke pledged shares (around two-thirds of their 44.6% stake is pledged), there is no stability in its market price yet.

Since there is no certainty about the price levels at which stocks like these will stabilise, it is best to avoid them, at least for the time being. Even among the stocks that are stabilising at low levels, investors should focus on those that still offer value for money. The ideal situation is when the recent price fall is triggered by the supply-demand situation in the market, not by company fundamentals. Also, look out for companies where the management is taking steps to solve the current problems. Here are three stocks that you could consider adding to your portfolio.


Cox & Kings

Cox & Kings
The valuation of Cox & Kings, specialist in holiday and education travel, has suffered after the company increased the debt levels for the acquisition of Holidaybreak, which is into education travel across Europe.

However, the acquisition should help Cox & Kings bolster its overall performance in the medium to long term because of the improved synergy.

“While the poor earnings visibility may continue for another two quarters, the synergy should start working in its favour in 2013-14,” says Rashesh Shah, analyst at ICICI Direct. Besides, the company is taking steps to reduce its debt burden and will be utilising the proceeds from the sale of its minority stake in Prometheon Holdings (another subsidiary company), in addition to cash from its operations.

Cox & Kings
 


Hexaware Tech

Hexaware Tech
Hexaware Technologies, the mid-cap IT company that was the darling of market participants, lost its status after the management cut the revenue guidance for the October-December quarter.

Though the firm indicated that the downward revision was due to a change in the scope of a project from one of its bigger clients and was a one-off event, the stock price fell by 30% in two months.

What should investors do?

“Since the impact of the cut is already factored in the price, investors may consider accumulating the stock,” says Ankita Somani, analyst at Angel Broking. However, they should start slow because the company will be giving the guidance for 2013 on 11 February.

Hexaware Tech



NMDC

NMDC
The recent fall in NMDC’s price was due to the government’s announcement of the offer for sale (OFS) divestment at a significant discount to the then prevailing market price.

With the OFS getting a better-than-expected response (it was subscribed 1.7 times and above the indicative floor price), the counter should do well in the future based on its strong fundamentals.

“NMDC should report good volume growth in 2013-14 due to the commissioning of new mines and ramping up of production in the existing ones,” says Sanjay Jain, steel & metals analyst at Motilal Oswal.

If the government decides to trim the current 30% export tax on iron ore, it could be a major trigger for the stock.


NMDC



PE: Price to earnings ratio; PB: Price to book value ratio. Bar graphs represent calls by analysts. Figures have been normalised to a base of 100. Source: Bloomberg

Also Read

Stock market update: 45 stocks hit 52-week lows on NSE

Stock market update: Cement stocks climb; Barak Valley leaps 5%

Stock market update: Sugar stocks surge; Vishwaraj Sugar zooms 10%

Stock market update: 67 stocks hit 52-week lows on NSE

Stock market update: Cement stocks advance; Orient Cement up 2%

Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.

Other useful Links


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service