The stock market has offered a dream ride for investors during the last one year. While Sensex has clocked 9.61% returns during the last one year, Nifty rose 8.59% during the same period. Of late, stocks of some well known firms have not been able to deliver such handsome returns to their investors. In fact, they have moved south due to several factors affecting the company business and the subsequent worsening of financial position of their respective companies.
YES Bank: The private sector lender has fallen 73.84% during the last one year and lost 49% since the beginning of this year. The stock hit a fresh 52 week low of 85.70 level in trade today. The massive decline in the stock can be witnessed from the fact that the stock hit its 52-week high of 404 level on August 8, 2018.
Dewan Housing Finance: Dewan Housing Finance share price has fallen 86.88% during the last one year and fallen 67.48% since the beginning of this year. The stock hit a fresh 52 week low of 60 level on June 19, 2019. Interestingly, 10 months ago, the stock hit its 52-week high of 690 level on September 3, 2018. It was trading at 82.10 level in early trade today.
PC Jeweller: The stock of the jewellery firm has plunged 73.68% during the last one year and fallen 48.97% since the beginning of this year. It hit a fresh 52-week high of 167.60 on April 18 this year. Three months later, on July 8, the stock hits its 52-week low of 38 level on BSE. It was trading at 39.25 level on BSE today.
Jet Airways: Jet Airways share price has lost 82.69% during the last one year and fallen 78.50% since the beginning of this year. The stock hit its fresh 52-week low of 27 level on June 20, 2019. Nearly one year ago on July 10, the stock hit its 52-week high of 359.50 level on BSE. It was stuck in lower circuit of 5% at 59.70 level in trade today.
These beaten down stocks have seen rough weather and led to considerable erosion of investor wealth during the last one year.
This gives investors an opportunity to exploit the fall and reap gains in case these stocks rise in the future.
BusinessToday.In spoke to analysts to find out if investors want to put Rs 1 lakh into any of these stocks in the current market situation, which one of them can prove to be the best bet in the long term.
Romesh Tiwari, Head of Research at CapitalAim said, "If I must choose any one out of the given options to invest for long term, I would choose PC Jeweller. PC Jeweller is engaged in the business of manufacturing, sale and trading of gold jewellery, diamond studded jewellery and silver items. This year is expected to be a strong fiscal with a stable government at the centre that is likely to bring more buoyant economic policies to drive discretionary consumption. Jewellery business is expected to grow by 18-19% over the next two years.
At current price of Rs 47.50 and Book Value of 99.75, the stock is trading at 0.48 times its book value along with ROCE of 25.07% looks attractive for long-term prospect. We have seen decline in return on equity in last years that can see a turnaround in coming year as the upward trend is expected in jewellery business. Although we have seen decline in promoter holding and low interest coverage ratio in this stock but these factors are already discounted in the price."
Rahul Agarwal, Director at Wealth Discovery/EZ Wealth said, "Although, one can choose good value buys across the spectrum of stocks that are traded on the stock exchanges but if the only available choice is to choose from YES Bank, Jet Airways, DHFL and PC Jeweller then YES Bank and DHFL can be the two stocks that can make the cut. All these four stocks have been trading at a deep discounts to their 52 weeks highs, PC Jeweller has lost 73%, DHFL 89%, Jet Airways 81% and YES Bank has lost 73% in its stock price form the high within a year." Agarwal listed down these four stocks and analysed them to come to plausible options of his choice.
There are too many uncertainties surrounding the stock, and this point investment in the stock is pure gamble. Our advice to investors is to stay away from the stock, for those already invested in the stock, they should sell the stock and exit. We believe that NCLT resolution is far away in the future and any resolution that is reached would be highly dilutive for the existing shareholders. Jet Airways at present does not offer sufficient reasons for potential suitors to jump in with their offers in addition the debt-holders would have to agree to take severe haircuts on their loans which could be another sticking point. At current levels, Jet Airways appears to be an extremely volatile value trap that should be avoided at all costs.PC Jeweller
The decline of PC Jewellers was caused by a series of lapses over a period of few months last year. From promoters gifting a part of their holding to an "undisclosed relative", the botched up buyback plan, there had been a series of serious corporate governance issues with the stock. In addition the financial performance of the company has been less then flattering, as a consequence, PC Jeweller's market price has tanked more than 70 per cent in last one year.
PC Jeweller has posted a net loss of Rs 376.8 crore on a standalone basis during the fourth quarter of FY19 against a net profit of Rs 118.28 crore in the year-ago period, on account of loss in export business.
On a consolidated basis, the company posted a net loss of Rs 0.61 crore in the last fiscal year as against a profit of Rs 535.64 crore in the previous year. It is expected that the domestic business will continue to remain profitable, though with slightly reduced margins. But the overall business may take a longer time to turn around and as such the stock does not offer any incentive to invest in the stock at this point of time.
Dewan Housing FinanceThe company is currently undergoing an asset monetization programme and it's in the process of selling its loan assets, which include project loans. Although, the company has repeatedly reiterated that it intends to pay off all its creditors but markets have not shown confidence in the stock. For DHFL to turn around, it needs a strategic partner that can infuse fresh equity. The stock is currently available at around Rs 70 with a book value of approximately Rs 272. The woes of the company will take a long time to get over and the stock price recovery would not be a V shaped, but from a valuation perspective, the stock looks attractive and appears to be a good takeover target. Investors can look into the stock and take small positions at this time.
Under a new leadership and after the forced exit of its promoter-chief executive Rana Kapoor, YES Bank reported a whopping Rs 1,506 crore net loss for the March quarter as against a profit of Rs 1,179 crore in the year-ago period as provisions soared over nine-times. Higher provisions for possible reverses, including a massive Rs 2,100-crore contingency reserve were the prime reasons for the massive loss.
There was an operating profit for the quarter but because of the one-offs, it reported a loss. The management does not see this as a recurring phenomenon, and has reiterated its commitment to tread on a path of sustainable growth. Going forward, the stock would not be the stock of yesteryears where it had shown phenomenal growth. However, this growth led to a series of missteps, which had led the stock to this current situation. From a valuation perspective, the stock looks cheap and can be a good buy from a long-term perspective with a minimum three to five year horizon.
"In summary, if one has to invest Rs 1 lakh and had to choose between these four stocks, then the optimum portfolio mix can be to Invest Rs 80,000 in YES Bank and Rs 20,000 in DHFL with a minimum holding period of three years, " Agarwal added.
Edited by Aseem Thapliyal