Thursday, May 19, 2016

[profit-tantra] Stock market Red Flags ! (Series-1)

Must read..
Dear All,
...
To create awareness among investors, I am starting series of mail, to bring awareness in investment community at large to be aware of red flags while investing in any company.
Hope investors will consider these points before investing. I have named this Educational Series as "Stock Market Red Flags"

Today we will be discussing two stocks which I feel is a risky bet in terms of investments based on there current business...

Stock 1 : Quick Heal (There will be no quick healing for investors :-) )


1. Opening day price action, IPO price was 321, closed at 273 on the day of listing down 14%
2. Again price has come back to same levels, any one who is stuck can still get out of the stock
3. Company's product - antivirus software is a low margin product, in a highly competitive industry
4. 49 crores was paid as dividend just before IPO,The purpose of bringing IPO is to do expansion with the money  received through IPO, than why such a huge dividend is paid to the promoters,

A clear case of filling the pocket at the cost of share holders, a big red flag !

Since IPO is brought to fund future growth and exit of the equity investor, but in either case if money is minted through dividends before IPO its a red flag

Stock 2 : InfiBeam - E-commerce player

1. Generally I prefer to invest in stocks related to those industries which are doing good.
2. As we know these E commerce players are incurring heavy losses due to competition, discounts and heavy advertisement expenditure
Hence we should stay away from a stock which is
- facing intense competition from new players,
- loss making margin's
- the business can be started with much ease, unlike a manufacturing plant which will take a long gestation period to start production,
need to take environmental clearance, acquire land and many more compliance to be followed.

- Hence entry of new players is very often, recently we have Shop clues, Koovs.com, Rocknshop.com etc, also Chinese Alibaba pro actively is buying stakes in e-commerce companies. Small players will not be able stand in front of there deep pockets.

Infibeam is exposed to all such risk and is loss making like it counterparts... Hence ask yourself due want to put your money in loss making company with the risk mentioned above...Though the price has gone up after the IPO, hence just get out and put your hard earned money in certain stocks... with good profitability or some turnaround story's with good management.
Please find attached charts of Quick Heal and Infibeam ! along with summary of losses e-commerce company's have incurred.

Conclusion : Stay away from both the stock based on the reason stated above and put your money in some good companies
.
Disclaimer : I don't have vested interest in any of the companies discussed, above is pure my personal opinion.

Use your own judgment for buying or holding the stock.








 

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