I have been wanting to restructure my portfolio for sometime and thought the new year could well be a good time to consider some new stocks which can be bought.Now, it is clear that i am still a novice without much Fundamental or Technical analysis capabilities.I follow the gut instinct and look at the management of the company.For me who manages a company and how they do it is a benchmark of the company’s success and future sustainability.
However, the ideology may hold good for real long term investments (5-6 years) given the company is a well established firm with a strong management on board, coupled with a strong balance sheet.However, given the recent market fluctuations i have grown detached from the real long term investing fundas.Not taking anything away from the 5-6 year horizon but given my relatively higher risk appetite, i figure i could get into momentum stocks and book some profits while i am at it.
If you have been around, I had posted another Stock Pick Question asking Is It The Right Time To Invest In Suzlon Energy? I had entered the stock at around 81 levels and exited within a month at 94.From the looks of it, the profit may not look phenomenal, but given the short time frame, i was rather happy with the profits i made.Again, the stock looks technically strong and i might consider entering again at 85 levels.
The Stock in question this time around Shree Renuka Sugars ( NSE: RENUKA) ,
The Group’s principal activity is to manufacture and market sugar. It also provides power generation and ethanol production. The Group operates through four segments: Sugar, Trading, Co-generation, Distillery and Other. It carries business of wholesale trading of sugar in the international market through its subsidiary Renuka Commodities DMCC.
A major player in the policy driven Sugar market.They company has been the market leader in its space and consistently delivered improving results.So much so , that the company’s profits have grown at a CAGR of 82% over the last four years.
Shree Renuka Sugars reported a net profit in Oct-Dec jump to 2.6 billion rupees from 0.11 billion a year ago on higher sales realisations and production, while net sales surged more than three-and-a-half times to 14.3 billion rupees.The quarterly results have been anything but phenomenal.Moreover, the company is looking to expand its foot print and has plans to double its refining capacity.
The company has been busy on the acquisition front too and is already eyeing a second acquisition in Brazil.The management of the team comprises of seasoned industry veterans and the company was started by an IIM grad turned Entrepreneur.
I had been wanting to get into the stock for sometime, but Sugar being a policy driven sector raises doubts in my mind on the right price.
- The stock is close to its 52 week high right now.
- It has a exorbitant P/E of ~52 against an Industry P/E of ~13 .
- With inflation looming large, any government policy could come in the way of price regulations being imposed on sugar.
What is your take on Shree Renuka Sugars ? Is it worth investing in the stock at its current prices or should one wait for some correction before getting into the stock?
I would also appreciate thoughts on why the stock does not make a BUYING sense?
Please contribute with your opinions and thoughts.