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.
