When to hold on to shares and when to sell

By G Chokkalingam CEO, Equinomics Research & Advisory

I have purchased 1,500 shares of Transport Corporation of India at Rs 385. What is your short term and long term view ? – Pinak Biswas

You had paid over 36 PE for a company whose operating profits were growing at an average of around 6% for the 5 year period ending FY2015. Even for the first 9 months, its net profit grew at 12% only. Never pay such a huge premium for any stock if the growth story is not evident.

Please hold the stock till its express cargo division is demerged and that new share is listed for getting some tactical upside.

I want to buy stock in cement sector mainly Ramco Cements, seeing government push on infrastructure. Let me know which one of this will be the best bet 3 year ? – Ramkrishna
Yes, Ramco Cements is a part of good management and also a very efficient firm and hence, you may consider it. Based on valuation and diversification, you may also consider KCP which is available around 10 PE as compared to over 20 PE for Ramco Cements on FY2016 estimated earnings.

KCP also has the most profitable sugar business in Vietnam and has five sources (hydel, thermal, solar, wind & heat recovery) of power generation which enabled it triple its cement segment profits during the first half of current fiscal.



Is it good to buy shares of On Mobile? – Manish

In my view, No for 3 reasons:

Stock has already nearly doubled from the bottom, despite company posting de-growth in revenues on consolidated level during the first 9 months of current fiscal; Posted net loss in both FY2015 and during the first 9 months of current fiscal; and most intriguing point is that it has paid a tax of Rs 26.69 crore when it made a net loss Rs 5.62 crore before tax on consolidated level.

Again, during the first 9 months of current fiscal, while profit before tax was Rs 17.12 crore, it paid a tax of Rs 23.65 crore!

I had bought Prakash Industries and Godawari Power last year. However, currently both of them are down 50%. Would it be worth holding or averaging at the current level for a 3 year investment horizon? – Bunty Sanwa

In the next one year steel industry is likely to improve its prospects and Prakash Industries, unlike other steel companies, not highly leveraged. Hence, please hold it. You may consider converting loss-making Godawari Power into NMDC, which has got solid cash and also likely to make an EPS nearly Rs 4 from its interest income alone. NMDC is unlikely to slip into loss at operating level, being the lowest cost producer of iron ore.

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