Hi Tigershark,
I can buy a closed factory company, if I get it at my price. Here at least some work is happening.
Its like this, when you get a company at discount to book value, it implies a few things:
1.There are certain assets whose realisable values may not be as good as the book value on the balance sheet
And/or
2.There may be certain liabilities which are understanded or contingent liabilities have a fair chances of materialising
And/or
3.There is a very good chance that future losses may be large enough to wipe off the positive difference that exists between book value and market value.
Now, just think about it......what if none of the things hold true, and the company may just amble across with normal profits. the gap will only widen, making it all the more attractive. So, by assuming all the negative things in my calculation, I try to get a decent margin of safety.
Just think about a SRF or a Cosmo films or a Voith Paper. The profits may have remained more or less the same, or there may be a slight drop, but still the profits are in the positive territory. So, with every quarter my game is becoming more and more attractive and I dont mind falling prices at all. SRF actually in buying back and cancelling the shares, and at a time, when most of the companies are diluting equity. Alongwith that, they are setting up capacities in their field when everyone is busy in deferring the plans of capital expenditure.
Cosmo films has announced an acquisition just on 29th of this month. The company is earning quite well. As and when crude prices stabilise, they will make a windfall.
Voith is another company which will also benefit immensely if rupee appreciates. The company is trading at nearly 60 p.c. discount to book, is debt free and is earning well enough for this price.
All i want my companies is to keep eaning profits , big or small and if they are making losses, attempt should be there to contain and stem the losses.And on top of it, I want them cheap. The thing is, you should be so convinced when you make an entry that your conviction only increases on price dips. But for that to happen, that conviction has to be totally your own.
Automobile Corporation would limp back to normalcy as and when the demand for buses come up. My big fear is that the dharwad plant of Tata Marcopolo has started operations. So, I dont know Tatas will be able to justify keeping 2 body building plants in such a scenario and should try to synergise productions. They have put so much money in the rights issue, so i dont think they will allow this company to bleed to death.
I am still to firm up my mind on this one, though. When telco is available at 150, why shall I think about Automobile corporation, is the question I am seeking an answer to.
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hence the display settings and I hate IE.
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