Do you follow those “Blue Channels”?
To be more specific, by “Blue Channels” I am referring to the “Business Channels” and the so called experts who blabber on the television for the sake of it.
If we go by the standards of Credit Suisse, becoming a stock market expert is left hands play and all of you reading this can try you hand at it. All you have to do is predict a higher SENSEX level when the market is going up and predict a very low SENSEX level when the market is heading south.
Moreover, the same applies not just for SENSEX but for commodities, currencies, etc.
Jul’11 market review by Credit Suisse expert: SENSEX to touch 22,000 in 12 months
Dec’11 market review by Credit Suisse expert: SENSEX to touch 13,500 by Jun’12
By now you may have realized that how much importance should be assigned to the blabbering on the Business channels.
We would like to bring to your notice an interesting Demerger arbitrage opportunity from Alpha Plus Portfolio, with a good scope for land bank value unlocking.
By now, you may already be aware that arbitrage opportunities are to a large extend immune from market risks (refer our previously recommended arbitrage opportunities on Atul Auto, Piramal Life Sciences, UTV Software etc), however every now and then we come across an opportunity which provides scope for value unlocking of land bank.
Earlier we had worked on the demerger opportunity of TCI Ltd and TCI Developers, which resulted in a gain of more than 50% in just 6 months, while with this one we expect higher return as the stock is already quoting at very low valuations with complete disregard for ~ 200 acres of land bank with the company.
More importantly the company has already started with the process of monetization of land bank with the development of housing projects and with the view to unlock value for shareholders, is demerging the land bank along with the housing projects into a separate company.
Normally we do not like real estate companies as an investment option, however in this demerger case we are getting the above mentioned land bank of approx. 200 acres almost free of cost at current valuations and it is this land bank value which the company wishes to unlock by demerging Residential township unit into another listed company while the original company will continue with its existing operations.
We expect decent returns over the next 3-4 months in this opportunity, as the value of land bank is almost equal to the current market cap of the company, while the existing operations of the company command a premium.
In case of demerger opportunities, it’s important to keep a track of proceedings and reduce market risk by timing the purchase of shares so that there’s less time gap between the purchase and the record date (not more than 2-3 months). The company has already received the approvals from the following:
- Board of Directors,
- Secured lenders, creditors, etc.
Now, only the high court approval is pending and once this approval is received the stock should start witnessing buying interest from the informed and the smart investors. As per our talks with the Company Secretary of the company, the approval from the High Court is expected by the mid/late Jan’12 and we would therefore suggest you to go ahead with the investment strategy suggested in the report at the following link:
Ph: 0120-4109766, Mob: +91-9818866676
Countless studies have been done on investor psychology, yet mystery remains. A field known as ‘behavioral finance’ has evolved over the time to offer better understanding of how emotions and cognitive errors influence investors and decision making. The most intriguing behavior that still eludes behavioral finance experts is the one that comes in plenty at times of market tops and bottoms. In big bull markets, investors remain blind to risks, while they remain double-blind to opportunities in market declines. It is fascinating to observe that investors who were willing to bid any price at peaks are now willing to even give a second glance at prices that one-fourth of their peaks.
What explains this rather irrational behavior? It goes back to two basic human emotions – greed and fear. It is not so much about lack of awareness of either risk (in bull markets) or opportunities (in bear markets) that is driving this behavior. It is rather our misguided confidence (coupled with greed and fear) that is behind this dynamics. We, humans, overestimate our ability to out-smart the crowd at exit and entry. At the peak of a bull market, it manifests in the form of false confidence that when the music stops, you can not only stop dancing, but also can rush to the exit comfortably. But peoples miss the hangover and gate-crashing effect. Not to forget the stampede and the fatal consequences that follow. This is what happens when everyone in the crowd thinks that he/she can outsmart the other (bigger fool theory!). Precisely the same illusion blinds us, but in reverse, at the bottom of the market.
The problem gets further compounded because of the presence of false and misleading sharp corrections in the bull markets and strong rallies in the bear markets. Trying to time the market is the most common mistake and is also one of the most expensive, especially at market bottoms in terms of missed opportunities.
In this back-drop, it is important to be aware of the common follies to which the investors are vulnerable, especially in a sharply declining market like the current one. Some of them are as below:
- It is a terrible mistake to wait for the comfort of the economy to turn around. History tells us that markets hit the bottom much before the real economy hits the bottom. The opposite is true as well. Taking cue from the 1930 depression, the US markets were already up 30% when the real economy hit the bottom in March 1933. Same is the case in successive slowdowns in the US in 1942 and in the late 1980s.
- ‘Cash is King’ is another mistaken notion which most investors have, especially when markets are down. Holding cash (or cash equivalents like deposits etc.) can only give an emotional comfort of not waking up to sharp erosion in portfolios every morning. It is a poor asset to choose as it is likely to under perform even inflation, leave alone equities over the long-run. So trading long-term gains for short-term emotional relief with cash/FDs does seem insane.
- Disproportional focus on macro is another folly. Macro being the function of so many inter-related constantly evolving variables, trying to get a grip on this by mindless dancing to every tune of macro data smacks of irrationality. Ironically, the world of analysts and scholars can’t get enough of this. While it may be intellectually stimulating to track and grasp the complex macro; to base investment decisions completely on macro outlook is a poor substitute to simple time-proven bottom-up stock picking.
- Investors need to be aware that they pay a heavy price for blindly following both the optimists and the pessimists. Opinions and views are no substitutes for hard-data and ground-up research. One needs to be extremely careful about acting on the basis of breathless headlines and views that are flashed 24X7. Most of them have very little utility value for genuine long-term investors.
To sum up, it is time to be judiciously greedy and not to get carried away by the panic-packed noise. As someone wise said, time to invest is when drums are beating, not when trumpets are blaring.
(Source: Economic Times)
Katalyst Wealth (email@example.com)
On behalf of the entire team of Katalyst Wealth, wish you a very Happy and Prosperous New Year.
Walt Disney Software Communications will launch an offer for delisting shares of UTV Software Communications from Indian bourses on 16th January 2012 (an arbitrage opportunity shared on 5th Oct’11 at Rs 945, click HERE)
The offer will open on 16th Jan’12 and will close on 20th Jan’12.
Important Note: We will book complete profit in case the stock reaches Rs 1050 in the regular trade by 16th Jan’12, while if it does not, then we would suggest you to bid your shares in the delisting offer at Rs 1100/- per share.
The currency has depreciated by approx. 18-20% since the announcement of de-listing plan and the indicative price of Rs 1000, so we expect the company to accept shares up to Rs 1100/- per share.
All the shareholders will get the bidding form by around 5-10th Jan’12. We will keep all the Alpha Plus Portfolio members updated, however please mail us in case of any queries.
For details on arbitrage and other Alpha recommendations, refer the below link:
Katalyst Wealth – firstname.lastname@example.org