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What Am I Buying? FDC

A commenter has asked a very valid question: Deepak, you tell us what NOT to do, but what should we be buying?

The answer is not: Gold, Bonds or staying in cash. Those are different asset classes. And while you should have money in them there’s no reason to shun equities completely.

And why shun equities, when most of the solid mid/small cap market is still available at ultra cheap prices?

Take FDC, a pharma company that has done exceedingly well:

image

It’s low volume so you gotta ignore the moves to 66 etc; the total turnover of the stock is less than a crore a day, so I have to be ultra careful when I get in.

It’s EPS has been moving up consistently, and the Trailing Twelve month EPS stands at Rs. 6.6 – meaning, at current value of Rs. 72, the P/E is about 11. To give you an idea of how good the last few months have been: The TTM Eps as of March 2009 was Rs. 4.37. EPS consistently seems to grow at 20% or more.

March quarters have typically been bad, going by financials. Would I care? No, for this is an example of a company I don’t mind keeping my money on; it seems to have enough going for it. Stops just below the 60 level.

Disclosure: Long the stock. 

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