Contrarian Bets
Patience is an important virtue for contrarians. Contrarian strategy is all about buying into out-of-favour stocks and hold them till the time they catch the fancy of the markets. In an attempt to search for such out-of-favour stocks - which are available quite cheap but have a reasonably strong financial position - we applied a number of filters. Firstly, they should have a price-earning multiple of not more than 12, which suggests that the markets are not very optimistic about them at the moment. Secondly, they should have a high current ratio (of 2 times or higher) and low debt-equity ratio, which point towards a potentially strong financial condition. Lastly, we pruned the list further to include only those stocks which have a decent dividend yield of 2.5 per cent or more. Our criteria led us to a list of 11 stocks, majority of which are banks. The list is sorted in the ascending order of price-earning ratio.
Institutional Picks
Rising institutional interest is generally a positive sign as it may indicate bright future prospects of a stock. After all, they are likely to have conducted thorough research before picking their stocks. In this screen, we have listed the constituents of BSE 500 in which non-promoter institutional ownership has increased by 6 per cent or more during the quarter ended December 2006.
The risk in following the smart guys is that you might end up buying a stock when it's too late. The stock may have already touched a level from where there is little upside left to exploit. But one interesting pick from this point of view is Varun Shipping. While most of the other stocks are near their 52 week high, this one is still trading close to its 52 week low. The list is sorted in the descending order of institutional holding at the end of December 2006.
Momentum Stocks
There is little fundamental justification for momentum investing. A momentum investor basically tries to ride upon an ongoing rally in a particular stock and exits it the moment winds change direction. If 'long-term' and 'risk-averse' are the terms that describe you as a stock investor, then obviously this strategy is not meant for you. But if you can afford to take huge risks in pursuit of quick returns, then our Momentum Stocks screen can throw up some interesting stock ideas.
The constituents of this list look unstoppable at the moment. These are the stocks which have appreciated at a breathtaking pace over the last three months to zoom more than three times the returns of the Sensex (11.80 per cent) over the same period. However, their PE multiples are still lower than that of the Sensex's (22.8 times).
If you do invest in them, don't forget to keep a close eye on them and sell them the moment you see signs of a reversal. The list is sorted in the descending order of three-month returns.
Fund Action
Tata Steel and Tata Motors head the list of most bought stocks for the month of December 2006. Among the smaller-sized companies, the recently-listed Sobha Developers found many takers. Presently, the stock is held by as many as 57 funds and is trading substantially higher than its offer price of Rs 640. The stock was listed on December 20 and it was trading at Rs 1057.70 by January 25, 2007.
Another noticeable stock in this list is India Cements. The company has posted good numbers in the last few quarters, and fund managers have built up positions in the stock ahead of the third quarter results.
Among the most sold stocks, many fund managers have offloaded Zee Entertainment (earlier known as Zee Telefilms) subsequent to its demerger. Taken together, mutual funds sold over 35 lakh shares in December 2006.
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