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Stock Tips for October 2017

Stock Tips for October 2017

Investors look forward to credible stock tips at the beginning of every month for investing. The stock news is full of junk tips from equally rubbish quacks. So what the investors are looking for is credible stock recommendations. So, as usual, I write this monthly article providing reliable stock tips based on sound logic.

This month, October 2017,  I have liberalised the rules for buying stocks a bit.

Why?

Because the market is burning. The reason is excess liquidity in the market. Of course there have been a few crashes in September but still, the stock market is at a high. The scorching markets have made stocks expensive across the board. And if we don’t make the belt loose we will not be able to buy any stocks and do justice to the good companies listed in the ‘Portfolio2K15‘.

As in the last month, I have tightened the dividend yield criterion this month too. But unlike last month, this month I set a hurdle rate of a minimum 4.00% dividend yield. Only those stocks that jump over this hurdle will get allocation under this category.

I have set a liberalised yet strict rules such that besides being a member of our ‘Portfolio 2K15’, the stocks shall satisfy the four criteria prescribed below:

  1. The Price to Book Value (P2BV) Ratio shall be less than 1.50. This means we will allocate money to a stock under this rule to only those stocks that are available at or at a discount to the price to book value ratio of 1.50. This is liberalization from a stringent 1.00 earlier.
  2. The Price to Earnings (PE) Ratio shall be below 15. This is again liberalization from the tough hurdle of 10 earlier.
  3. The product/ combination of PE*P2BV shall be less than 22.50 (1.5*15)
  4. The Dividend Yield shall be more than 4.00%. This is tightening from the last month’s 3.50%. Further, a mere good dividend yield is not sufficient. In addition, the stock must have passed at least one of the three previous tests. Meaning if the share proves expensive under the P2BV, PE and PE*P2BV criteria, it is ineligible for allocation merely on the grounds of an attractive dividend yield.

The total investable sum is taken as multiples of 20,000, that is Rs.20,000, 40,000 or 120,000 and so on, depending on the investible surplus available with the investor.

The basic unit of 20,000 is equally distributed among the four criteria at Rs.5,000 each or multiples thereof.

 

Summary of Stock Tips/ Recommendations

This October 2017 all the stocks constituting our Portfolio 2K15 qualified, however National Aluminium Company Ltd., whose price had appreciated throughout September, though managed to qualify could not earn enough allocation even to buy a single share! On the other hand MOIL Ltd., which could not earn enough allocation for many months in past made the mark this month.

Stock Tips October 2017

13 stocks qualify for investment in October 2017. An unlucky 13? Please don’t bother. I assure you that these 13 stocks will be the luckiest thing ever happened to you.

 

Stock Tips Based on Price to Book Value Ratio

Let us examine the stocks under the important price to book value ratio criterion.

Stock Tips October 2017 Based on P2BV Ratio

 

Stock Recommendation Based on Price to Earnings Ratio

Please see the table depicting the stock recommendation based on price to earnings ratio criterion.

Stock Tips Based on Price to Earnings Ratio for October 2017

 

Stock Tips Based on PE x P2BV Criterion

The product of the price to earnings and price to book value ratios is also an important criterion. As per value investing principles, this number shall not be more than 22.5 (1.5 * 15). Let us see what stocks pass this test.

Stock Tips for October 2017 based on PE x P2BV Ratio Criterion

 

Stock Recommendation Based on Dividend Yield Criterion

The dividend yield is an important aspect in stock selection. Let us see how our stocks fare under this key criterion.

Stock Tips for October 2017 Based on Dividend Yield Criterion

We see that five of the 14 stocks could not pass the hurdle.

 

Conclusion

To conclude my stock recommendation for this October 2017 is to buy the 13 stocks in the recommended numbers for each 20000 of your investment. Happy Deepavali and investing!

 


4 Comments

Senthil Annamalai – Oct 01, 2017

Hi Anand,

I am also a value investor and have almost the same kind of stocks in my portfolio also. So cheers for that.
I see that you are breaking down the 20,000 into 13 different stocks, then will you not incur higher brokerage charges?

admin – Oct 01, 2017

Dear Mr.Senthil Annamalai
Thanks for your comment.
This brokerage issue is bothering me too, but I could not pursue it because of my busy schedule. I have Kotak Securities as my stock brokers. Their price list says 0.5% of value trade as brokerage. If that is the case it really doesn’t matter if it is 13 trades or single trade is it not? But somehow I have a feeling that actual brokerage charged is on the higher side. This is a riddle I have to find the time to solve.
Brgds
Anand

Gourav – Oct 01, 2017

Hi Anand Sir,
I am a new investor in town. I just wanted to ask, how are you giving the particular number of shares for each company (basically asking the working behind it ) and why so specific number ?? Thanks for your blog.
Regards,
Gourav Manot

admin – Oct 01, 2017

Dear Mr.Gaurav Manot

Thank you very much for your comment.

I have already given the working.

I have allocated the sum of Rs.20000 under four criteria at the rate of Rs.5000 for each criterion. Within each criterion, the amount allocated depends on the discount available from the hurdle rate. For example, the hurdle rate under price to book value ratio (P2BV) and this 1.50 and stock a is available at 1.00 and the other stock is trading at a P2BV of 1.50, the latter does not get any allocation.
All allocations earned under all the four criteria is summed up.

The total allocation is devided by the current market price of the share to get the exact number of shares to be purcahsed.

This is the logic.

Invest and get rich.

Thank you,

With Best Regards

Anand

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