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Stock Ideas: Stocks Near 52-Week Low

A stock screen is a filtered list of stocks which is arrived at according to some criteria that are likely to remove less investment-worthy companies from the list. They throw up investment ideas which can then be evaluated closely. Membership of BSE 500 index is basic qualification for our screen.

Equity markets are going through a nervous phase. At the time this article is being written, the markets have ended in red for four consecutive days to shed 5.35 per cent over the week. Their unpredictability can unnerve even the most accomplished of stock investors. They however present excellent opportunities to buy stocks at attractive prices. These opportunities are all the more relevant in the Indian context, simply because they have been hard to come by in the last few years.

Stocks Near 52-Week Low
Markets tend to over-react to even the slightest bit of negative news. Some stocks correct much more than they should have, but may also recover speedily once the bulls return. Therefore, it may not be a bad idea to invest in stocks that have been hammered. Here you can look out for the stocks, which are trading near 52-week lows. We have restricted the list to only those stocks which are trading within a range of one per cent from their 52-week lows. The list is sorted in the descending order of market capitalisation. But bear in mind that this list is based solely on stock price performance and not fundamental variables.

Deep Value
The premise of value buying is to look for stocks which are trading at a discount to their intrinsic value. Attributes like low price-to-earning (PE) ratio, low price-to-book (PB) ratio, and a high dividend yield make a sound basis to pick value stocks. While low PE and PB ratios are suggestive of the depressed stock price, dividend payments send strong positive signals about the company's stable financial health. After all, it must be earning profits and generating sufficient cash flows to be able to maintain a steady stream of dividends.

These are the kind of stocks that this screen tries to capture. Here, we have identified stocks which are trading at a PE ratio of less than 10, PB ratio of less than 1.5 and a dividend yield of greater than 3 per cent. The list is sorted in the ascending order of PE ratio.

Fund Action
While the fund managers continued to be high on engineering and infrastructure companies in January, other sectors which generated interested were power, steel and pharma.

In engineering and infrastructure space L&T, BHEL and IVRCL continued to attract fund managers. The latter had witnessed heavy buying in October 2006 also. In January, funds bought stocks worth Rs 103 crore in IVRCL. And the fund managers who took a call on this company earlier weren't disappointed. The stock's three-month return (till January 31) stood at 42.12 per cent.

In the power sector, Jyoti Structures and RPG Transmission were among the most bought stocks. Interestingly this time frontline cement and IT companies were on the other side of the table, i.e., they were the most sold stocks by the fund houses. Top cement companies like ACC, JP Associates and India Cements were offloaded in large chunks. Technology pack didn't do better either. Among the large caps, there was heavy selling in I-Flex, HCL Technologies and Mastek. In I-Flex, the funds sold 29.42 lakh shares worth Rs 573 crore. Number of funds holding this stock came down from 53 in December 2006 to 13 in January this year. Another noticeable trend was in the sugar pack. The funds diluted holdings in Triveni Engineering and EID Parry. Though both are diversified players -the former having interests in engineering and the latter in bio products and sanitaryware - they were offloaded in large chunks.