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Sunday, January 23, 2011

Badly Beaten at Dalal Street

Lately, my focus towards identifying value shifted my focus to badly beaten stocks in the Indian Markets. I wouldn't suggest these are necessarily undervalued stocks. These are some of the worst beaten and well known stocks of recent times: Ackruti City, Koutons Retail, DB Realty, Ceat and many more.

The stocks near the 52 week lows can be seen at :
http://www.moneycontrol.com/stocks/marketinfo/off_lows/bse/homebody.php?indcode=0&sortcode=1

I say that for an average investor, getting into these stocks is not a good idea at all. Many of these stocks may never recover at all. Some of them may take ages to give even a decent return. However, I can't resist from investing in these. I filter out certain criteria and invest in a basket of about 5-7 of these kind of stocks. I estimate a holding period of a mimimum of 3 years and a maximum of 5 years. What ever happens, I plan to take my money out of these stocks after 5 years. About 2 of the stocks may get delisted or even go out of business. But I believe that the other stocks will more than compensate for the loss in these two delisted entities.

I wouldn't like to mention the filtering criteria I use since I haven't done rigorous testing if these criteria works. But basically I look the ratios which indicate the business efficiency. These ratios might be boring, but I kind of feel safe if these ratios are good.

My advice is to invest a small portion of your portfolio in a basket of heavily beaten stocks whose business look appealing to you and the efficiency looks good. All the best.

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