- Wealth PMS (50L+)
BHEL is now at Rs. 2,850, up Rs. 600 from April 3, 2007 when it first announced its results (and when I had said it was a good time to buy).
The stock will get a 1:1 bonus on June 1, 2007, so for every share you own, you will get one “free” share. I had said that just before the bonus there will be a temporary price hike to make for lower capital gains tax – and this is what seems to be happening. In my opinion, there’s no need to exit this stock just yet – ride your profits and get the bonus shares.
I had targeted a price band 2700 to 2970 within a year, and 5720 in the long term. Looks like my one year target is here already – within two months!
Stick with the stock – I would typically wait for a 50% gain before booking partial profits – so let this stock go where it’s going. Fundamentally the news has gotten better: It has announced a 3200 cr. capex plan to expand capacity to 15,000 MW (from 6,000 MW). Given the huge impetus for power projects, BHEL stands to gain immensely.
With fundamentals looking good and the price action responding, you might want to buy more. But wait – post bonus there is usually a small knee-jerk downward reaction where tax arbitrageurs sell and temporarily deflate the price. That would be a better time to buy. Remember though – long term for this stock, it’s a good healthy stock and you shouldn’t rush to sell it. Wait till you make 50% gains, sell 1/4th your holding and wait for the rest to gain.