I have taken note of the performance of various Indian companies in that period when everyone was crying on the wall street. The figures reflected here show the most bearish period ever, these figures have been taken from Business Standard, a Financial Daily.
Companies with Positive Growth (in 2008-09)
There were only 5(five) companies which gave positive returns.
Market P/E was at 9.84 in the horrifying period (this is a comfort zone in which FII tend to invest), the EPS at that time is of no concern here but can be figured it out very easily.
Today’s Market P/E is at 17.10, Sensex is at 16167 which signifies an increase of 73.78% in P/E in last 2 yrs,
Today’s Sensex
If today, sensex were to return back to horrific period(P/E of 9.84) sensex has to look like this.
Other companies having single digit P/E and their comparisons
Stocks which have increased in value either in terms of price or the earnings have declined for that stock, for those stocks the P/E ratio has climbed up also the stock whose p/e ratio have increased highest in terms of percentages and the p/e ratio itself being 10 or more than 10 will be considered as a risky proposition.
Similarly, the stocks which are showing negative growth in P/E reflects that either the price have not increased that much or the earnings have been more than the price that has increased...
Safe Stocks
The top 5 companies are
Now, as we got list of “safe” companies, we will now test those companies which have given good growth in horrifying times of 2008/09.
Current Situation
Its clearly seen that the “safe” companies are now no longer safe as the Current P/E is more than 10 and in some cases they have increased more than 100%. So we need a new list of companies as per the current market statistics. "New Safe Companies" list.
Companies with Positive Growth (in 2008-09)
There were only 5(five) companies which gave positive returns.
| Company Name | Returns % | P/E Ratio |
| Glaxo | 11.34 | 24.13 |
| Hero Honda | 20.93 | 14.57 |
| HUL | 15.42 | 28.94 |
| Lupin | 0.66 | 9.91 |
| Sun Pharma | 2.85 | 11.28 |
Market P/E was at 9.84 in the horrifying period (this is a comfort zone in which FII tend to invest), the EPS at that time is of no concern here but can be figured it out very easily.
Today’s Market P/E is at 17.10, Sensex is at 16167 which signifies an increase of 73.78% in P/E in last 2 yrs,
Today’s Sensex
| Sensex Value | 16167 |
| P/E | 17.10 |
| Current EPS of Sensex | 945.43 |
If today, sensex were to return back to horrific period(P/E of 9.84) sensex has to look like this.
| Sensex Value if that horrifying period returns | 9303.03 |
| P/E | 9.84 |
| Current EPS of Sensex | 945.43 |
Other companies having single digit P/E and their comparisons
| Company Name | P/E in horrifying times | Current P/E |
| Aban | 9.64 | 4.05 |
| ACC | 6.39 | 20.61 |
| Allahabad Bank | 2.33 | 5.10 |
| Ambuja Cement | 9.41 | 18.16 |
| Andhra Bank | 4.67 | 4.48 |
| Ansal Infra | 2.24 | 4.59 |
| Ashok | 4.77 | 11.43 |
| Aurobindo Pharma | 8.26 | 23.90 |
| Bajaj Auto | 9.03 | 13.54 |
| Bajaj holding | 4.64 | 4.01 |
| BOB | 5.71 | 6.59 |
| BOI | 6.80 | 7.20 |
| Bharat Electronics | 7.44 | 13.64 |
| Bharat Forge | 9.57 | 21.43 |
| Bhushan Steel | 2.64 | 6.76 |
| Bombay Rayon | 5.64 | 17.85 |
| Canara Bank | 4.60 | 5.65 |
| Century Textiles | 8.02 | 40.23 |
| CESC | 7.49 | 11.78 |
| Chambal Fert | 6.83 | 15.36 |
| Chennai Petro | 1.48 | 5.56 |
| Core Proj & Tech | 3.98 | 11.72 |
| Deccan Chronicles | 3.02 | 51.19 |
| Dena Bank | 2.51 | 3.19 |
| DLF | 4.10 | 23.08 |
| Federal Bank | 7.40 | 11.12 |
| Finan Tech | 2.52 | 0 |
| GE Shipping | 1.87 | 10.29 |
| Gail | 9.53 | 12.27 |
| Gitanjali Gems | 2.79 | 6.63 |
| Grasim | 4.25 | 8.83 |
| Great Offshore | 4.58 | 14.58 |
| HCL Techno | 7.50 | 16.34 |
| HDIL | 1.99 | 3.44 |
| Hind Zinc | 3.81 | 8.36 |
| Hindalco | 3.56 | 9.67 |
| Hotel Leela | 4.82 | 34.86 |
| HPCL | 6.98 | 5.74 |
| ICSA | 2.71 | 1.80 |
| IDBI | 5.82 | 5.95 |
| IDFC | 9.43 | 11.51 |
| IFCI | 1.55 | 2.37 |
| Ind Overseas Bank | 2.97 | 5.40 |
| India Cements | 4.64 | 34.15 |
| India Infoline | 5.91 | 10.87 |
| Ind Bulls Real | 7.26 | 13.83 |
| Indian Bank | 5.22 | 4.67 |
| Indian Hotel | 9.15 | 0 |
| Indian Oil | 6.60 | 8.33 |
| IVRCL | 4.51 | 18.65 |
| Jindal saw | 1.42 | 7.64 |
| JP Hydro | 6.73 | 23.16 |
| JSW Steel | 3.26 | 15.12 |
| Karnataka Bank | 3.88 | 6.94 |
| Lanco | 7.31 | 12.05 |
| Lic Hsg | 5.21 | 10.78 |
| Lupin | 9.91 | 22.59 |
| M&M | 5.34 | 14.23 |
| Maruti | 9.51 | 11.76 |
| Mercator | 2.13 | 0 |
| Mic Electr | 3.63 | 2.65 |
| Monnet Ispat | 4.70 | 8.11 |
| Mphasis | 8.72 | 7.20 |
| MRPL | 4.62 | 10.31 |
| MTNL | 8.93 | 0 |
| Nag Constru | 7.84 | 4.62 |
| National Alum | 6.91 | 12.74 |
| NDTV | 2.37 | 0 |
| NIIT | 8.94 | 7.84 |
| ONGC | 6.98 | 9.97 |
| Opto | 8.02 | 9.15 |
| Oracle | 7.77 | 15.72 |
| Orbit | 0.80 | 5.79 |
| Oriental Bank | 4.78 | 6.37 |
| Parsvanath | 2.30 | 13.63 |
| Petronet LNG | 6.01 | 13.69 |
| Polaris Soft | 3.27 | 6.08 |
| Praj Ind | 6.84 | 19.73 |
| Punj Lloyd | 7.38 | 0 |
| Punj National Bank | 6.51 | 6.38 |
| Rajesh Exp | 3.24 | 11.63 |
| Rel cap | 9.94 | 41.89 |
| Rel Comm | 6.28 | 14.14 |
| Rolta | 6.95 | 2.45 |
| Rural Electr | 7.82 | 7.36 |
| Skumar | 2.28 | 2.34 |
| SAIL | 4.31 | 7.16 |
| Satyam | 0.81 | 39.81 |
| SBI | 8.13 | 10.32 |
| SESA GOA | 2.68 | 4.66 |
| Shipping Corp | 3.50 | 0 |
| Sintex | 6.64 | 6.30 |
| Sobha Dev | 2.71 | 14.29 |
| Sterlite | 4.01 | 6.23 |
| Suzlon | 7.48 | 14.41 |
| Syndicate Bank | 3.81 | 5.56 |
| Tata Chem | 3.84 | 11.13 |
| Tata Motors | 3.64 | 6.43 |
| Tata Steel | 1.21 | 3.46 |
| Tata Tea | 7.11 | 13.09 |
| TCS | 9.52 | 21.96 |
| Tech Mahindra | 2.98 | 8.47 |
| Thermax | 7.26 | 13.14 |
| Tulip | 5.79 | 5.66 |
| UCO | 4.97 | 3.67 |
| UltraTech | 4.60 | 23.57 |
| Union Bank | 5.25 | 5.84 |
| Unitech | 2.93 | 15.61 |
| Vijaya Bank | 9.25 | 5.11 |
| Voltas | 7.54 | 8.73 |
| Walchand | 9.30 | 21.08 |
| Welspun guj | 5.10 | 0 |
| Wipro | 9.62 | 17.20 |
| Yes Bank | 9.32 | 11.65 |
| Zee Enter | 9.65 | 18.19 |
Stocks which have increased in value either in terms of price or the earnings have declined for that stock, for those stocks the P/E ratio has climbed up also the stock whose p/e ratio have increased highest in terms of percentages and the p/e ratio itself being 10 or more than 10 will be considered as a risky proposition.
Similarly, the stocks which are showing negative growth in P/E reflects that either the price have not increased that much or the earnings have been more than the price that has increased...
Safe Stocks
| Company Name |
P/E in horrifying times
|
Current P/E
|
Increase/Decrease %
|
| Rolta |
6.95
|
2.45
|
-64.75
|
| Aban |
9.64
|
4.05
|
-57.99
|
| Vijaya Bank |
9.25
|
5.11
|
-44.76
|
| Nag Constru |
7.84
|
4.62
|
-41.07
|
| ICSA |
2.71
|
1.80
|
-33.58
|
The top 5 companies are
- Rolta
- Aban
- Vijaya Bank
- Nagarjuna Constructions
- ICSA
- MIC Electronics
Now, as we got list of “safe” companies, we will now test those companies which have given good growth in horrifying times of 2008/09.
Current Situation
| Company Name |
P/E Ratio
|
Current P/E Ratio
|
Increase / Decrease %
|
Dividend Yield (in %)
|
| Glaxo |
24.13
|
29.59
| 22.62% |
2.04
|
| Hero Honda |
14.57
|
19.42
| 33.28% |
5.16
|
| HUL |
28.94
|
36.89
| 27.47% |
1.70
|
| Lupin |
9.91
|
22.59
| 127% |
0.6
|
| Sun Pharma |
11.28
|
28.09
| 149% |
0.6
|
Its clearly seen that the “safe” companies are now no longer safe as the Current P/E is more than 10 and in some cases they have increased more than 100%. So we need a new list of companies as per the current market statistics. "New Safe Companies" list.
New Safe companies along with their dividend yields.
So, according to this table, and a combination of both the safety moat by declining in prices and dividend appreciation, i would recommend them.
My ratings based on Dividend Yields and safety, would be as follows
If only stocks based on Dividend Yield are only to be selected and ignoring the safety factor, then my ratings would be
There are 4 banks in the list, if you don’t believe in bank stocks then you can remove them and you can find only 5 stocks
| Company Name |
P/E Ratio in 2008-09
|
Current P/E Ratio
|
Increase / Decrease %
|
Dividend Yield In %
|
Score
|
| Rolta |
6.95
|
2.45
|
-64.75
|
5.92
|
383.32
|
| Vijaya Bank |
9.25
|
5.11
|
-44.76
|
4.80
|
214.85
|
| ICSA |
2.71
|
1.80
|
-33.58
|
4.38
|
147.08
|
| UCO Bank |
4.97
|
3.67
|
-26.16
|
4.88
|
127.66
|
| Nag Constru |
7.84
|
4.62
|
-41.07
|
2.50
|
102.68
|
| HPCL |
6.98
|
5.74
|
-17.77
|
4.85
|
86.18
|
| Bajaj Holdings |
4.64
|
4.01
|
-13.58
|
4.79
|
65.05
|
| Aban |
9.64
|
4.05
|
-57.99
|
1.01
|
58.57
|
| NIIT |
8.94
|
7.84
|
-12.30
|
3.53
|
43.42
|
| Indian Bank |
5.22
|
4.67
|
-10.54
|
3.95
|
41.63
|
| Rural Electr |
7.82
|
7.36
|
-5.88
|
3.89
|
22.87
|
| Mphasis |
8.72
|
7.20
|
-17.43
|
1.27
|
22.13
|
| Andhra bank |
4.67
|
4.48
|
-4.07
|
5.42
|
22.05
|
| Punj National Bank |
6.51
|
6.38
|
-2
|
2.39
|
4.78
|
| Sintex |
6.64
|
6.30
|
-5.12
|
0.68
|
3.48
|
| Tulip |
5.79
|
5.66
|
-2.25
|
1.25
|
2.81
|
| MIC Electronics |
3.63
|
2.65
|
-27
|
0
|
0
|
The last column is a score column in which i have given scores to the stock which has better P/E ratio and also which gives better Dividend Yield. Company having both is given better score. A decrease in the P/E ratio is termed as better score. Score is derived by multiplying the Decrease with the Dividend Yield by which we are targeting to get best of both worlds.
Score = Decrease * Dividend Yield (an increase in P/E will give a negative score but if the P/E is still below 10, the investor can consider that stock.)
So, according to this table, and a combination of both the safety moat by declining in prices and dividend appreciation, i would recommend them.
My ratings based on Dividend Yields and safety, would be as follows
- Rolta
- Vijaya Bank
- ICSA
- UCO Bank
- Nagarjuna Construction
- HPCL
- Bajaj Holdings
All these five stocks(not including banks) will give you safety as well as good dividend yield(there are two bank stocks, you can remove them if you don’t trust bank stocks). The reason sometimes banks are excluded from analysis is because they don’t tend to do well in case of economic downturns, and they are the last to recover, also they are more complex to understand than other stocks.
If only stocks based on Dividend Yield are only to be selected and ignoring the safety factor, then my ratings would be
- Rolta
- Andhra Bank
- UCO Bank
- HPCL
- Vijaya Bank
- Bajaj Holdings
- ICSA
- Indian Bank
- Rural Electrical
There are 4 banks in the list, if you don’t believe in bank stocks then you can remove them and you can find only 5 stocks
Still in both these list the following stocks are common...
- Rolta
- UCO Bank
- Vijaya Bank
- Rolta
- ICSA
- HPCL
Regards,
Mahernoz
28th November 2011
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