Lecture: Investing in Stocks at 52-Week Lows

Introduction

• Focus on investing style of picking stocks at 52-week low prices.
• Purpose: Understand risks and reward potential of such stocks.
• Three practical examples will be discussed.

Resources

• NSE website provides a screener for new 52-week highs and lows.

Stock Analysis Examples

1. Equitas Small Finance Bank

• Current State: Trading at 52-week low around 75 INR
• Risks:
  • Stocks might fall further as the bottom is unclear.
  • Rising daily average cost of funds due to higher repo rate.
  • Decreasing net interest margin.
  • Increased credit cost due to RBI guidelines for universal banking.
• Fundamental Issues:
  • Loan disbursements down by 29% in last quarter.
  • High concentration risk in Tamil Nadu and Pondicherry.
• Potential Rewards:
  • Possible 40-50% gain if it rebounds to previous highs.
  • Management targets 25% loan book growth.
• Advice: Do not invest in lump sum. Spread out investment over time.

2. Apollo Pipes

• Current State: Down 21% in the last year, potential 21-41% gain.
• Industry: Top 7 PVC pipe manufacturer in India.
• Growth Projections:
  • PVC industry expected to grow at 15% CAGR in 3 years.
  • Management guides for 25-30% revenue growth.
• Challenges:
  • Pat margin low at 4.3%.
  • High PE ratio at 57.
• Positive Indicators:
  • FII and DII increasing stakes.
  • Significant capex for expansion.

3. CreditAccess Grameen Limited

• Current State: Down 15% last year, potential 40-50% gain.
• Ownership Change:
  • CreditAccess India BV selling stakes.
  • Uncertainty in company performance due to potential sale.
• Challenges:
  • Staff may feel uncertain, affecting company performance.
  • New ownership could change company direction.
• Considerations: Valuation and buyer interest are key.

General Advice

• When a stock hits 52-week low, assess reasons and make informed decisions.
• For stocks at 52-week highs, consider selling to book profits.

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