Inexpensive stocks: Are they worth it? - YouTube

Hi, everyone. Welcome to today's video on today's video.

I'm going to speak about three specific stocks that I have in my portfolio

that are trading or were at Rs50 when I purchase them.

So these are inexpensive stocks that we are going to talk talk about and we are

going to discuss whether or not it makes sense for you to enter into these stocks.

Now, what are the buying levels?

What are some risks and rewards associated with buying these specific stocks?

So you'll have a discussion around it.

It's a pure teaching video.

Please watch the video till the very end.

Otherwise, if you implement half

the understanding you will make loss in the stock market.

I will also talk about which is

my favorite stock out of the three that I'm discussing with.

That said, let's get the video started and very quick disclaimers number one,

this is not a buying or a selling recommendation.

Please act as per your understanding.

This specially applies for this video because we are talking about inexpensive

stock and these are heavily operator driven.

So please act as per your understanding.

This is the first critical point that I want to say out loud.

Second, please check the links in the description box.

These are the small cases that I have created so you can get a better

understanding of some of the other stocks that I recommended.

So download the app.

You can only view this small case through the app.

There are no viewing charges for these small cases.

You can definitely go and check it out.

Third, let me quickly explain you

the concept of inexpensive stocks many a times.

We as retail investors get super fascinated.

We say that you know what inexpensive stock?

Hardly Rs2, hardly RS3.

What's the harm of pouring in a little bit of money?

How low can it go?

Well, it can go to zero.

So that's an incorrect understanding

that inexpensive stocks are good or they are value bias.

Please understand this point,

especially if you are a beginner in the stock market.

Let me illustrate this point further by giving you a practical example.

Let's say on one hand you have RS2000 right.

On the other hand, you have four notes of RS500.

Which option is better?

Honestly, it doesn't matter because

it's one and the same thing because the value is similar.

Similarly, there can be a very expensive

stock like Mrf which trades close to one lakh rupees.

Now, is that a better stock with something

like JP Power, which is trading at RS3 RS4?

Honestly, the price of the stock does not matter.

What matters is to what extent that stock

can grow or to what extent that stock can come down.

So I hope this point is clear with that.

Let's start the video and the first stock that I'm going

to speak about that I have in my portfolio is Union Bank of India.

Now I've been very bullish about the PSU stocks.

I have been speaking about it on my channel for a while.

Now. This is my holding of Union Bank.

I also have PNB.

I also have Canara Bank,

and I also have a bunch of other PSU banks where I have diversified

a bunch of my portfolio where I've aggregated the stocks at lower levels.

And now they have already given me a lot of returns.

Now why have I purchased these stocks?

Okay, so let's first and foremost understand Mr.

rakesh jhunjhunwala's recent perspective on PSU bank.

So there were some very interesting points that Mr.

rakesh jhunjhunwala made on this particular video regarding PSU bank.

He also explained that he's a big investor in Canara Bank.

I had done a separate video on that.

So please go and watch that previous video of mine.

I had categorically spoken about this particular PSU buying in detail there.

But let me explain the key concepts here again.

So Mr. rakesh jhunjhunwala viewpoint is

that the PSU banks will grow because of two reasons.

The first reason is the value argument, right value argument.

Now, the value argument simply means

that these stocks are trading at market price, which is less than the book value.

The book value of these banks is higher than the market price.

So the share price of these banks should go up to the book value.

So that is the value buying approach here, that something is available

at such deep discounts that it is falling below its book value.

So therefore, PSU are good opportunity right now to buy.

Now, is this the only factor that you must consider in terms of buying stocks?

The answer is absolutely no, because

by this logic you can just take a look at current market price

of the stock and compare it to book value and start buying all the stocks,

assuming that all these stocks will reach up to the book value.

That is incorrect. But in PSU banks it's holding true.

And I will show you the charts and graphs and numbers also in a minute.

But let's understand the second argument. Also,

there has been a massive change that has been brought about due to the fundamental

shifts that have happened in the PSU space, especially banking.

So what is this change argument that Mr.

rakesh jhunjhunwala was speaking about change argument.

So essentially you would have seen that post 2018.

Right.

So this was the period 2016 to 2018 where there was a lot of NPA problems.

Right?

People like Vijay malya Nirav Modi took a lot of bank loans, ran away

and Punjab National Bank was somewhat of a party to it and bunch of other PSU banks.

So that was a bad stuff.

Then what happened?

There was NPA problems and there was something called as Basel norms.

Right.

So Basel norms for banking that were brought in during this period only.

And then there was something called as ARC asset reconstruction companies.

Now all these different things are interlink.

So what basically happened is this in simple language.

I'm cutting out the details to make the concept simpler for you to understand.

Basically, this is what happened in the banking industry that there were

a lot of people who are taking away loans running away.

It was creating NPA problems.

Similarly, there was a lot of default that was happening.

So these ARC's asset reconstruction companies, they take the bad loans

of banks, they buy it at lower prices and then they go and procure those loans.

So through this, some problems of the bank

is solved because banks still get some money out of their NPS.

That's 1 second the NPA itself got

controlled because now it's not easy, right?

I mean, it's not as if that's just can take crores and crores and crores

of rupees of loans from State Bank of India and run away.

No, that will not happen. It's very difficult to do now because

now the mechanisms have been tightened further.

This used to be easy to do it in the past.

Now it's getting harder and harder with the day and it's not easy anymore.

Right. So whatever fundamental problems

had to have happened in the PSU banking sector, they had already taken place.

Now we are on the path to recovery.

Now let me do a very quick comparison of Canara Bank with ICICI bank.

And this is one of the points that Mr.

rakesh jhunjhunwala was mentioning on his video.

So here you can see this. Right.

So here you can see that the current price of ICICI bank.

If you look at this, it's 780.

Book value is 227.

The stock is trading at a much higher level compared to its book value.

What about Canara Bank?

The current price is very less compared to its book value.

This is one.

Now you might say that you know what Canara Bank does not have growth prospect.

Probably the profit margins are not that great.

So therefore it is trading

at a significant discount compared to its book value.

And you might be right. But let's take a very quick look at it.

So if you take a look at the profit and loss, you will see.

And this is for Canara Bank.

You can take a look at revenues that from 2015 to 2019 period,

there was hardly any growth in terms of the revenues.

But this situation has changed quite a lot.

The revenues increased in 2021,

even the last twelve months, sales have been significantly higher.

Same goes for profit that 2015 to this period 2019, 2020 period.

Lot of losses. Negative.

Right.

But here positive revenues have started flowing in.

Right.

And this year Canara Bank has given the highest profit 6712 crores.

What about ICICI bank? Right.

Okay.

So if we take a look at the book size of ICICI bank for the last three years,

the numbers are somewhat comparable right now.

Icici bank is at 157-3812 and Canara Bank is at 1179540.

So it's not as if that there is a huge

difference in terms of the asset size or book value.

This is what Mr. rakesh jhunjhunwalawas speaking about.

But here is the difference.

If you take a look at the stock price

for Canara Bank or any major PSU bank except for SBI, you will find this trend

that back in 2010 the stock price was trading for Canara Bank at 767.

And here we are at 242.

Huge aggregation is happening in this space.

Right.

The same is the trend for Union Bank of India.

Same is the trend for Punjam National Bank.

So essentially there is a huge opportunity in terms of PSU buying.

On the flip side.

If you compare this to ICICI Banks stock price, it has been on an up price.

Right. So of course, ICICI is a great bank.

I have it as well.

But the value buying opportunity is with PSU bank.

That is the reason why I've been

aggregating so much of PSU stocks in the last four months.

Now you might say akshat selectively telling us stocks where you

have made profits and you are sitting on profit.

So you have hand picked those stocks.

Show us a stock where you have made a loss or your current is sitting on a loss.

Here is the stock which I purchased

where the current market price is around Rs21, and I'm sitting on a loss.

But I feel that this stock is still

reasonable and I will be able to exit with profit on this stock.

Subsequently, I'm talking about Hathaway Cables.

Now, this is a subsidiary that is owned by Reliance.

Now, Reliance has a major stake in this company.

And let me first and foremost, take you through financials of this company.

Right. So if you take a look at the sales,

the sales have been constantly going up majorly speaking, in 2015,

it peaked posed that it bumped down and since then it has been going up.

So it has been fairly doing consistently well, not a problem there.

Now, what has happened is if you take

a look at net profits, you will realize that this has always been

a loss making company except for the last three years.

Right. It has mostly been negative.

So you need to understand

why this company was generating so much of negative profits for the last so many

years and suddenly why it has become profitable.

Now the answer lies in cash flow statements.

If you take a look at cash flow statements

for 2021, you will see that cash flow from financing activity is extremely negative.

It's like 2000 crore negative. Why is that?

Because it was a high debt company and it has paid majority of its debt.

And if you take a look at the debt right now the debt to equity is zero.

It is a debt free company. As of now,

this is the mandate with which all the Reliance group companies are operating

right now that they want to just do away with debt.

They understand that

right now we are living in an environment where the interest rates are very low.

So borrow money in real terms literally

for free, pay off your debt and be done with it.

Right. So this is a great time for these type

of companies which are high debt which are owned by big conglomerates

to pay off their debt and take the next round of their growth.

Now let me just very quickly take you

through the promoter holding trend also of this company.

So in 2019 is when Reliance acquired stake in this company and then as per Sebi's

mandate, they had to bring down their promoter holding.

So there was massive sale of this stock that happened by the promoters.

Therefore you see the promoter holding coming down to 75%.

So there is nothing to worry about in terms of promoter holding for this stock.

Now if you take a look at FIIs DIIs, they have all been generally increasing

their holding in this stock, which is a good sign.

And this gets reflected where this gets

reflected in somewhat of this aggregation that is happening of this stock.

So you can clearly see right

that pick up period where so much volume has come in this stock.

Right.

This is the period where the majority of the volume has come in.

So I'm quite hopeful that this stock will bounce back again.

It is already a deep value buy. For me.

I will aggregate some more position in this stock again,

not a stock buying recommendation because this is dangerous gain.

So please trade at your own risk.

I'm just here to educate you.

Please don't buy at my base humble request, right.

Because these Penny like stocks can be

manipulated a lot by the operators that say, second, this is a Reliance owned

entity and I'm not a big fan of Reliance how they treat their shareholders.

I invest because I see deep value buying opportunities, but it's not as if that I'm

a big fan of their management as a shareholder.

Right.

So because of these reasons, this is not a buying recommendation.

Please buy at your own risk.

I just explained you all the fundamentals how I am looking at the stock.

You need to do your own analysis.

The third stock that I have is called as

TV 18 again owned by Lines and the current stock price is Rs46 Rs46.

I am already on good profits on this stock.

I have done a lot of swing trading on this stock, made a lot of money reinvested it.

And I'm very happy with the results of this talk that it has given me so far.

So essentially it's a bonus for me.

Now, if I hold it and even if my entire

capital becomes zero, I'm still okay with it.

I've already made a lot of money on this stock.

But what is the good quality or good things about this talk?

Let me quickly comment one is that sales have been continuously going up massively.

Right?

So the sales have gone up quite a lot from 2018.

The company is growing profitably, which is good news.

And the third thing that I want to do

a comparison of is with the Zee entertainment network.

So if you consider the stock P/E

of Zee Entertainment Network with TV 18, you will see that there is a huge

difference in terms of P/E for a growing company.

The P/E expansion usually happens.

I'm betting on that.

Second point is that if you take a look at the Roc, if you compare it with Zee,

you will see that Roc for both the companies are similar.

So it's not as if the TV network 18 is falling somewhere.

Then why is it speed not growing?

It's just that there is not enough interest in this talk as of now.

Therefore, probably the P/E is not growing

at a scale at which zee entertainment limited P/E grew.

I'm quite bullish about the fact that with tv 18 all the stock P/E will expand.

Why? Because of this P/E,

if earnings have gone up, the price will have to go up.

That is the simple point for the P/E to remain same.

Now, for a company like TV 18, the earnings have been going up consistently.

So therefore the price of the stock will

also have to go up even to maintain the same P/E.

So this is like a P/E buying analysis that I've done.

Of course I will not be able to cover all

the points regarding P/E, but hopefully this helps you understand

how I'm thinking about these less expensive stocks.

And accordingly, you can also take your bet.

So I said that I'm going to talk about my favorite stock out of all these three.

So I would say that if you have to pick one out of these three,

it should be. Comment your answer below.

Try to guess what I'm going to say next.

It would be fun for me to watch that.

So comment your answer below. And here is my answer.

So my answer is I would buy PSU banking stocks.

Super simple, because honestly,

at this stage, if you think about it, what is happening from the macro

perspective is that the first major growth in terms of the banking sector is done.

What do. I mean by that, it simply means that,

for example, HDFC bank became so big because it was able to incorporate

something called as core banking solutions.

It was able to open the branches really quick.

It was able to serve the customer really well.

But now, if you think about it, honestly,

the cost of capital for any bank is almost similar now at least the big ones.

Hardly any major difference there.

Number two, the customers do not interact with bank much.

Right. This is happening, right?

This does not mean that HDFC bank and ICICI bank will do poorly.

They will continue to do really well.

They will continue to gain market share.

These are not the stocks that will go like

five X ten X that will give you stable, consistent growth.

So these are good stocks to buy, no doubt.

But because of the deep value buying opportunity in PSU Bank,

I still feel that there is a lot of ground to be covered here.

These PSU banks have taken so much.

We think so much meeting for the last

almost five, six years that it's their time.

Now they are going to grow faster.

And honestly, we have moved to a banking

world where customers do not really engage with the bank that much.

They sit at home and do like net banking

transactions and whatnot and it's super easy to do.

Not kidding.

Sbi has come out with really interesting stuff.

So honestly, what I'm getting at is that it's not as if that there's going

to be a huge difference in terms of the services

that will be offered by HDFC versus SBI versus some other bank.

The reason is very simple that customers do not want to be served.

Now they can just sit at home and get service themselves by using the app.

And that is what they are doing now.

A lot depends on HDFC ICICI how they are incorporating new digital

systems and defining that new next leg of growth.

Right. So it would come to that.

So that is a growth play when it comes to HDFC ICICI, bank, etcetera.

That's a growth play they have to keep on innovating.

But the PSU banks right now, it's a value buying opportunity.

Still. Right.

So if you have to pick one, I would go with PSU stocks to aggregate

it, buy different PSU banks and diversify, so that would be the way to go.

So I hope you enjoyed the video.

Please press the like button and also check.

Check out my small cases

in the description box and I will see you the next time.