Tuesday, December 1, 2015

DALAL'S SURE TIPS

This column from Business World of 8 September 2003 passed on to my readers the tips I had received from a friend who had made his fortune speculating in shares.


Dalal speaks


Bhupa, otherwise known as B K Dalal, used to be a cricketer once; so he did not study too hard. Instead, he borrowed my notes and got better marks than I. Then he worked for a while in Godrej; that was the time when he started taking me to the races. I had come back from Cambridge, so he thought I must have brains. He wanted me to work out a system. I did. It worked for a session or two, then it failed, and he lost all the money he had put in. So I improved the system. It too worked for a while, and then wiped out his capital. So it went on for two years. Finally I had what I thought was a foolproof system. Just then, he stopped financing my losses: he said my system was too complicated.
Anyway, he continued to bet on the stock exchange. Today he is a gentleman of leisure; he loafs about in Colaba during the week. At weekends he goes to Lonavala and contemplates the flowers in his garden. He says he made his fortune on the stock exchange. All I can vouch for is that he lives well without doing any work, and has done so for decades. I have his word that his good fortune is due to the stock market. He is not a front-runner; he holds all the shares he recommends.
He has just sent me a number of tips which I would like to pass on to my readers. I do not guarantee that they will become millionaires in his footsteps. I would repeat the SEBI-enjoined injunction that share prices go up as well as down, and that it is possible for one to lose one’s shirt in the stock market.
FDC Rs 48: This pharmaceutical company is promising. It should double its profits. EPS last year was Rs 4.13; it should exceed Rs 6 this year. Price should go over Rs 60.
Foseco India Rs 180: Owned 60 per cent by Burmah Castrol; public shareholding only 12.5 per cent. Produces foundry chemicals; the auto boom is helping it. Impressive rise in labour productivity: it cut down staff costs by 20 per cent in the first six months of 2003. Last year’s EPS Rs 16.69; should go up to at least Rs 20 this year.
Burroughs Wellcome (India) Rs 460: EPS last year Rs 38.20; at the present rate of growth, it should go over Rs 55.
Krebs Biochemicals Rs 170: This small company, which produces active pharmaceutical ingredients, more than doubled its sales in the first quarter of this financial year. EPS of Rs 24.79 should rise to at least Rs 30 this year.
Madhav Marbles and Granites Rs 23 cum Rs 2 dividend: Granites were a sick industry; overindebted companies were being sold or turned over to BIFR. But a revival is taking place; exports rose from Rs 14bn in 2001-02 to Rs 20bn in 2002-02. the housing boom is also helping. Book value Rs 61.20, yield 10 per cent. EPS rose from Rs 4.50 to Rs 8.33 in the last two years.
OCL India Rs 110: Book value Rs 231. Produces cement, refractories and sponge iron – all booming. Last year’s EPS Rs 25.76; would rise over Rs 60 this year.
Super Spinning Rs 90: Same management as Elgi Equipment and Elgi Tread. Good record of steadily rising profits and dividends. PE is under 4.
Plastiblends India Rs 48.65: Makes masterbatches and compounds for the plastic industry in Daman. Continuously rising profits and dividends.
Rain Calcining Rs 21: This producer of petroleum coke and power was a loss-making company; last year it wiped out its accumulated losses. Its Eps was Rs 2.91; should go up to Rs 4.50 this year.
GIC Housing Finance Rs 23: is in the right business just now. Last year’s EPS of Rs 3.67 should exceed Rs 5 this year.
Hinduja TMT Rs 199: This scrip has been hit by the arrest of Samir Arora, and is underpriced. EPS of Rs 15.20 should exceed Rs 20 this year. Profit last year of Rs 820mn on sales of Rs 1.82bn – margin of 45 per cent.

Finally, my own footnote to BK’s counsel: when the shares go up, sell them off! And always spread your portfolio over 10 shares at least, so that if you lose on some, you can make up on others.