quarterly levels posted on moorat day

originally this was posted on my paid position trading group on moorat day - just before moorat trading.

i am posting same on free group today. to read, you must be a registered member. registration is free on free group. link is given below.

http://finance.groups.yahoo.com/group/sumamura-free/

dubious valuations of power utilities ! ! !

how much the world pays for utility cos - may be in gas, may be in power or even in petroleum refining and exploration ...... in no market P/E of these cos is over 10 to 12 maximum 15 times trailing twelve months (TTM) earnings - EPS

we have been discounting our utlities at 40times / 50 times or even 60 times TTM eps. assuming that the utilities may have a growth in EPS at 15/ 20 % per year (anything more than that is not possible - since they are UTILITIES and their returns are controlled by govt - in most cases ), even at compounded rate they will take about 7 yrs to treble their EPS.

that means the price that we are paying today is for minimum 5 to 7 yrs forward earning. in this we have not assumed any contingencies / delays / bad years etc.

if you make concessions for hidden value unlocking - i dont see any hidden value in any govt utilities - in some private utilities, the value can not be much because the projects those cos are taking are also of long gestation nature and the revenues will kick-in only after 4/5/6 yrs down the line.

the bottomline is that the sector is rigged by some interested entities to get better valuation for their public offerings and to correspondingly reduce their own risk in these new projects / organisations.

as regards to cos that are related to nuclear power, we have to keep in mind that it takes 10 / 12 years for a nuclear power station to become operational. even with the best time frame - signing of 123 agreement with USA and award of contracts for a new nuclear power station - of 3 yrs for contract , we are looking at revenues that will kick-in 12 to 15 years away.

should we pay 20/30 40 % higher P/E now for cos like BHEL / NTPC / arewa / LT etc .

we have to do some hard thinking before putting our hard earned money. a fund manager can not think like that because 1... he is not putting his own money and 2... he has peer pressure. but that is not the case of an individual investor.

so please open any pink paper omorrow and look at fancy P/Es that you are paying and then decide whether you will like to be invested in them or take your money out when the going is good ................

US financial sector in doldrums .........

as mentioned earlier, US markets alongwith japan and UK markets are in good deal of trouble. charts are extremely extremely weak and immediate re-surrection looks pretty difficult.

in the face of such cues, we are still chugging along - but the moot point is - how long ?

cut your exposure in midcaps which have become extraordinarily rich - valuationwise - to the point of bubbleproportion. again i am saying this is the time to take your money and run ..............

you may lose a few percentage points on some stocks but i prefer to err on the side of caution than to feel sorry later ...........

just see if you can agree with me.

current global scenario

nasdaq composit has closed below 200 day ema yesterday. s&p 500 and dow is already below that crucial level. all is not well with the american equity markets.

japan is in a confirmed long term downtrend and FTSE is close to that alongwith american markets.

i think these are the most important markets and when they are showing signs of weakness we can only show sporadic show of strength - as our operators have shown yesterday on the back of FM's comments that no further means of capital control will be used in near future.

why i am saying operators is because again only the smaller F&O stocks have shown the glitter. largecaps did not participate except the likes of SBI / ICICI. but those will relent today as ADRs of ICICI had a dismal show.

i still feel that it is prudent to take profit even at this level- if u hv not done earlier - and wait for opportune moment to re-enter. some market analysts are calling every dip as a buying opportunity but these are turncoats and same people will tell u that market is headed for 5000 level so take short positions.

i wl say that there is a 90 % chance that the market will go down from here than move up so the odds are in favour of booking profit - even if you do not hv courage to go short. some puts like 5500 nifty shud be considered to protect your portfolio.

i will comment about commodities separately.

why this unique name ?

you may be knowing 'sanjay uvach' ? does the bell ring ?

sanjay was sarathi of dhrutarashtra - dhrutarashtra was blind so sanjay gave him 'running commentary' of what was happening at kurukshetra during the 18 day kaurav / pandav war. sanjay had divya-drushti so that he could see what was happening on any part of kurukshetra instantly.

i will try to bring you a review of what is happening in several different market segments around the globe and interpret same with a relevance to our markets. i have been doing that on my yahoo messenger account for sometime - yahoo id 'madhavranade1' but i want to document it here so that it can be referred to anytime by anyone.

i hope some of you will benefit from this effort.

my first post !

today, on the auspicious day of bali pratipada, i have started this blog.
pl look for some exhilarating inputs about stocks, commodities, indices - overall markets in general.
i will explain my philosophy behind the unique name for the blog tomorrow.
till then HAPPY DIWALI and enjoy the festive weekend ....................