Wednesday, December 12, 2012

Should you buy Kingfisher airlines? –remember today is 12.12.2012

I know many of my readers, who invest in stock markets are trying to figure out the answer to this question.

Kingfisher stock had a high of around Rs 30.9 in Feb 2011 and since then it has been a downward journey – it touched Rs 8.40 in August 2012 and since then has been languishing around Rs 15. Now we have this news that Etihad airlines may take stake in the airlines. Both KF and Etihad have not commented on this news.  We also have the news that 5 of its 42 KF planes have been taken back by lenders.

Yesterday, after the news of Etihad broke out, 85 lacs KF shares have been traded in BSE and NSE. To get a feel of this number, the most actively traded share in BSE and NSE yesterday was SBI and 23 lac shares changed hands on this counter. The KF stock has gone up by 5% (it cannot go up more due to controls by the regulator).The current price is Rs 15.7 (as of 12.12.2012)

The stock’s book value is -66.83 as per money control – what it means is that in a normal transaction, the share holder must give you Rs 66.83 for buying the stock instead of you paying him Rs 15.7.

Now here is my take.

We all should have a core portfolio and a satellite portfolio. The core portfolio is for long term investments and the satellite portfolio is for short term opportunities. The split between core and satellite depends on your life stage (age) and your risk tolerance level. For someone like me, I have 90% core and 10% satellite. For my students, I would recommend 80% core and 20% satellite. If you lose the satellite amount – you should not lose your sleep. But if you lose your core amount – you should surely stop investing (and come to me).

So here is the opportunity for investing in KF with your satellite portfolio – I believe that the stock will go up for a few days – the final value will be a derivative of the valuation that Etihad and KF managements agree – but greed in the market will create opportunities for short term gains. Do not wait for exit at peak – you will not be able to judge it. Exit once you get a pre determined appreciation (may be 15%) .

Am I investing – No. But that is my personal decision.

 Should you invest – well decide for yourself. Remember today is 12.12.2012