The market correction has given the much needed opportunity for many people who either want to enter now or re-align the portfolio with better stocks. I was looking at the prices of some of the stocks and found how irrational investors are we and how the investor behavior forms the market sentiment. I will discuss this with one real time example.
Bajaj Holdings & Investments-:
|
|
Whether it is grocery or stock we all want to buy at a price lesser than its real value. For example, if someone sells an article worth Rs. 2100 for price of just Rs. 750, will people buy? I would think so. But it does not happen at least in stock market. With my personal research I found out, Bajaj Holdings & Investments has 31.49% and 38.55% stake in Bajaj Auto Ltd. & Bajaj financial services ltd and also 24% in Maharashtra Scooter ltd. Apart from these, they have 100% subsidiary called Bajaj Auto holdings ltd and 1% stake in ICICI bank ltd plus other equity investments.
Let’s calculate per share worth of this company-
Value of Bajaj Auto & Bajaj Finserv stake= Rs. 16500 cr.
Other equity investments including ICICI Bank = 3100 cr.
Value of fixed income securities = Rs 2576 cr.
So total value of these investments is Rs. 22176 cr. Bajaj holdings have total O/S shares of about 11.12 crores. So if you divide the total investment value of Rs 22176/11.13 crores o/s shares, you get per share value of Rs 2000.But the current market price is just Rs 820 which 60% lesser than the actual investment value. Also the businesses they have invested in {Bajaj Auto & Bajaj Finserv} are doing extremely well and future is also bright. Even if we assume 25% holding company discount, the stock still has about 40% upside. I know many market analysts know this fact but I am not able to accept why stock price is hovering around Rs. 800. One more interesting thing, this stock did trade at RS3100 in December 2007-January 2008 during previous market peak. So can we say it as a big investment opportunity or irrational behavior of investors? Only time can answer.
Regards
Garvit Dave
