Author Archives: Craytheon

About Craytheon

We simplify Financial Analysis and Stock Valuation for investors.

Corona Virus – Once in a 100 year event.

At the start of 2020 if anyone would have told you that almost all major economies of the world would grind to a halt and a new bear market would begin in just two months all because of a microscopic virus from China, you would not have taken that news seriously but here we are.

We were in a 10 year Bull trend, everyone forgets the bad times since almost all stocks are rising, you become overconfident and complacent.


Nifty 50

If you were watching the Nifty PE ratio chart you would have seen that the Nifty PE ratio was above 27 for almost a year so it was over valued and due for correction but that is the problem no one knows when the market would correct and what would be the trigger.

Back in 2007, when interest rates started to rise in the US causing home loan defaults which triggered the bear market but this time interest rates were already low so there was no easy signal to spot. Enter Corona Virus, like a Hollywood disaster movie where a virus infects the world, no one takes it seriously until its too late which is what happened pretty much in real life.

Now most of the countries are in shutdown mode to prevent the spread of the virus but the downside is that this is going to affect people and their jobs, which has a cascading effect on almost everything. People talk about world wars and 2008 GFC but this is bigger than those events, this is a once in a 100 year event. If you have cash sitting in your account this is going to be a great opportunity to buy some of the best companies in India at discount prices. The problem is no one knows how long the markets are going to fall.

If this is the first time you have experienced a bear market and your portfolio is in red, and you are wondering what to do, it depends, if you have good companies and you haven’t sold yet then don’t sell instead keep on buying in small amounts. Ofcourse don’t listen to our advice blindly in the end you have to make your own decision.

We sold some shares two weeks back, did not sell some others because we thought it would not get so bad and the shares we did not sell are in good companies so we did not see a reason to sell, in hindsight we should have sold everything two weeks back. What are we doing now, we are just sitting on the sidelines and watching the FII DII Trading Activity  When foreign institutions start buying again that is usually a good sign to jump back in.


Just be sure that whatever you do does not cause you to lose sleep at night, most bear markets last around a year but because we are in uncharted territory, no one knows how long this will last, central banks have started pumping money into the system but if the virus keeps on killing and people are in lockdown that money is of no use.


P.S – Wash your hands regularly and avoid touching your face.

NSE, BSE series – EQ, BE, BL, Z. What do they mean?

You can trade lot of things on the NSE and BSE exchange like stocks, mutual funds, debt and much more, all those things are assigned a series code. The most popular series is the EQ series,  most of the popular companies like Reliance, Infosys etc trade under the EQ series on the NSE exchange.

Let looks at some of the other series which are used on NSE and BSE.

BE – Equity segment but intra day trading is not allowed and BTST trading is not allowed. Trades can be settled only after delivery. If you buy then the shares will come to your demat account.

BL – Block Trading, Order should have more than 500,000 shares. Its used by financial institutions during a separate trading window

BT – Trading shares which are in physical form aka the old share certificates. Trade for Trade Settlement.

BZ – Companies which fail to comply with Listing Obligations and Disclosure Requirements.

EQ – Equity segment used for normal trading and intra day trading is allowed and BTST is allowed.

Screen Shot 2019-06-23 at 5.16.29 pm

EQ series share price on NSE, this is the price which you see on various websites and on TV.

E1 –  Used for trading partly paid up shares which are issued during Rights Issue. Companies can have different price for shares trading in E1 series.

Screen Shot 2019-06-23 at 5.17.54 pm

E1 series share price on NSE

GB – Gold Bonds

GC – Government securities and Treasury Bills.

N* – Non convertible debt instrument, they are sub divided in to N2 to N8 and NA, ND etc.

Screen Shot 2019-06-23 at 5.44.55 pm
Various N series prices on NSE. You have to click on each and series to get the price of share in that unit.

MF – For Mutual funds listed on the exchanges

SM – Trading for companies which are in Small and Medium Enterprises. The paid up capital of such companies is less than Rs.25 crores.

Z – BSE Only, its used for companies which have failed to comply with its listing requirements.


A product cannot be under 2 series on the same trading day.

BTST – Buy Today, Sell Tomorrow.

There are some other series like XT, Y, IL and others, we might write about them in  second part of this post.

Monitoring Insider Trading – Rain Industries and Persistent

We email the Insider Trading and Bulk Deals report every end of day to our professional members, it contains the list of companies whose insiders or other institutional investors are buying or selling the shares. Monitoring such transactions is very important for investors.  As investors you can see if the promoters or other big investors are buying shares of a company. Once you see that activity you can do your due diligence about the company and buy the shares and ride the wave.

Back in April 2015, Monish Pabrai who is famous investor in the US (and now India) was buying shares of Rain Industries when its share price was between 30 Rs and 40 Rs.

Monish Pabrai Rain Industries

Monish Pabrai Rain Industries Email Alert


The share price pretty much languished for 1 year and then slowly started rising and then shot up like rocket and reached a peak of 460 Rs in Jan 2018. A massive 1000% profit, if at that time you decide to hold the shares and not sell till today you would have seen massive fall to 95 Rs. Monish Pabrai as per his letter to investors did not sell most of his shares. He regrets that decision.

So if you are an individual investor there is no guarantee that a company’s share price will keep on going up just because a famous investor has invested in it. If you are going to copy the trades of a famous investor sometimes it makes sense to get out with a tidy profit and not get greedy.

Rain Industries Insider Buying

Rain Industries Insider Buying



Let’s jump to Persistent where if you read the Insider Trading Email you would seen the founder and chairman of Persistent Anand Deshpande and other Persistent Insiders buying the shares. The share price had crashed to around 550 Rs. It was in that range for 2 months then rose to 630Rs for couple of months then fell again to 550 Rs in Jan. We bought a small position in Oct and Jan and were waiting for the price to fall further. Unfortunately the price did not fall further it kept on rising. Let see how Persistent plays out. We will keep you posted meanwhile keep checking the Insider Trading emails.

Persistent Insider Buying

Persistent Insider Buying


Disclosure – Long Persistent



IL&FS Transportation Networks loan defaults – How to avoid such bad companies?

If you were watching the financial news lately you would have heard about a company called IL&FS Transportation Networks which defaulted on its interest payments. It is an infrastructure company which builds roads and bridges.

You as an investor could have easily known back in 2016 that IL&FS Transport was a bad company and not to invest your money in it with just 5 mins of research.

Building infrastructure needs a lot of money upfront, so the infra companies need to borrow money from banks and other financial institutions and even the general public. The company lets say builds the road and gets the money from govt once its done or the company can collect revenue in form of tolls from public. So money goes out fast while revenue comes in slowly.  Managing such a business model is not easy.

Debt to Equity


Looking at the debt to equity ratio in 2016 it was very high at 3.8 in 2018 its much higher at 6.1. A debt to equity ratio above 1 is not a good sign. A ratio above 1 means the company is taking more loans compared to its equity. Big loans means big interest payments.

Intangible Assets and Goodwill

Another major red flag and a metric to measure the managements honesty is looking at Intangible assets and Goodwill.  Intangible assets and Goodwill are those assets which cannot be given a proper value. e.g If a company has a patent for a product or a good brand name (like Coca Cola), its definitely an asset but there is no formula to come up with an actual value for such assets.

If a company acquires another company for 100 million Rs but the value of its actual factory, machinery, land etc was 800 million Rs yet the company paid 100 million and it needs to balance the balance sheet so allocate 200 million as Goodwill. The goodwill is the premium you are paying for the brandname of the company being acquired which is why you ready to pay 200 million more.

Coming back to IL&FS, in 2016 its goodwill and intangible assets were 207,301 million Rs while its Total Assets were 378,443 million Rs which means around 50% of its assets were intangibles not some actual physical assets.

If you were a member of Craytheon you would seen this red flag in the company analysis section right away back in 2016.


You can save yourself lot of headaches and save your money by not investing in such bad companies by doing some basic research first.


P.S – Please do not call us for investment advice or stock tips.

Divis Lab – One year update after the share price crash.

Back in June 2017 we said that Pharma sector was undervalued  because lot Pharma companies had received complaints from US FDA about regulatory, compliance  issues about their manufacturing plants. Some companies like Divis Lab’s share price dropped like a rock.

Now just because the share price crashed does not mean you should buy it but if the company has good financials and if you can figure out if the problem due to which the price crashed is temporary then you should buy the shares.

With the above scenario if you notice insiders buying the shares as well then it confirms your analysis and its another confirmation signal when you buy.

Madhusudana Rao Divi who is a director bought 20,000 shares after the first price crash in late December.

Screen Shot 2018-09-01 at 4.05.39 pm

Raja Divi bought 10,000 more some later after the second price crash.

Screen Shot 2018-09-01 at 5.04.19 pm

Our Professional members get this information in an email which lists the insider buying and selling every day in the evening.

The share price chart gives a good picture when the insiders were buying.

Screen Shot 2018-09-01 at 5.07.48 pm

There were around 6 months when the share price was bouncing around 700 Rs to 545 Rs, we kept on buying during that time with an average share price of 600 Rs. The current market price is 1300 Rs. 100% + return in 15 months.

A good company with some temporary problems with insider buying, all you have to do is buy and wait. The market will reward you eventually.


Disclosure – Long Divis Lab

Avoid investing in companies whose shares have been pledged by their promoters.

When promoters pledge their shares, its a sign that the company cannot raise funds from other normal sources because banks are afraid that the company may not pay back the money, so the banks make the promoters pledge their shares to them. In simple words the promoters gives the rights to the bank to sell the shares if in case the company does not payback the loan. If during the loan tenure the share price of the company falls beyond a limit which is set by the lender, it triggers a margin call, the lender can demand that the loan be repaid or more shares to be pledged. If the promoter cannot repay or offer more shares, the bank can invoke the pledged shares aka sell those pledged shares which causes further fall in the stock price.

We always recommend that investors should avoid companies which have high debt, high debt companies not surprisingly are the ones whose promoters have to pledge their shares. Let us compare the stock price performance of some companies which have pledged their shares.

Suzlon has 20% of their shares pledged, that is a significant number.


Suzlon’s share price has not done so well over the years.



GMR Infra have 48% shares pledged, that is huge.


As expected, the stock performance has been very poor.



For the last example we will look at PARSVNATH Developers which has 59% shares pledged, that is just crazy.


Any guess how its share price performed over the years?


We can give many such example but hope you get the point.

As you can see from the above charts, there is no good reason to invest in companies which have pledged their shares, these companies have a tough time paying back their interest payments because overall the company is not doing so good which ultimately reflects on the stock price. Just by looking at the shareholding chart in the Insiders Page you can make the decision in less than a minute whether to invest or not. You can save your time, money and stress by ignoring such bad companies.

Vakrangee Share Price Crash

Vakrangee has been in the spotlight for all the wrong reasons. It’s share price crashed more than 50% in the last few days because there was a report in Mumbai Mirror that SEBI was investigating Vakrangee for share price manipulation. Such share price manipulation usually involves circular trading.


Vakrangee Share Price Chart

Now before we talk about Vakrangee, we will quickly explain what is circular trading. Circular trading is trading where the promoter or entities directly or indirectly related to the promoter buy and sell the shares for weeks or months. The shares are exchanged between these parties and the share price is slowly incremented. Normal retail investors or even institutional investors are not aware about this circular trading between insiders they just see that the share price is increasing and so even they are charmed by such share price rise and start buying shares. With all this buying by new investors the share price shoots up more. This goes on for a while and once the share price reaches the target set by the the promoter, the insiders start unloading their shares at high values and the insiders make a huge profit. The share price eventually drops and the retail investors are left holding the loss.

Now of course we don’t know if this actually happened with the Vakrangee but we searched the SEBI archives and found something interesting. Back in 2001 SEBI had conducted an investigation against Vakrangee because there were allegations of creation of artificial market and manipulation of the price in this scrip. The price of the scrip had moved from Rs.10/- to Rs.600/- during September 1999 to March 2000. Some brokers who were involved were banned from trading for 6 months.

In 2014 SEBI had imposed a penalty on one Vakrangee senior executive Prem Meiwal for delay in making disclosures to the stock exchanges with regard to change in his shareholding many times. Prem Meiwal was a VP of corporate affairs but he was also given the additional charge of assisting the company’s finance dept which is a bit fishy.

On Jan 25 2018, Vakrangee bought 20 lakh (2 million) shares of PC Jewellers. Vakrangee claims they had lot of money in the bank so instead of investing in debt or equity funds they decided to invest directly in PC Jewellers. This is not a good sign instead of using the extra funds to grow the company directly or returning the money to Vakrangee’s shareholders by issuing dividends, the company wants to be in the business of buying jewellery company.


Vakrangee has around 40,000 + kendra but what is a bit fishy is that all the kendra’s have the same phone numbers.


The current share price is down more than 50%, now it is your job as an investor to decide whether Vakrangee with such management is a good company to invest or not?



Click to access ar0102a_p.pdf

Click to access part-2_p.pdf

Click to access 1292328722714.pdf

Three peaks of Nifty PE

If you look at the long term Nifty PE chart right from 1999 to 2018 you will notice three distinct peaks at Nifty PE level of 27. During the last two peaks in 2000 and 2008 Nifty PE went a bit above 27 and then there was a dramatic fall for a year or two. In Jan 2018 the Nifty PE went a bit above 27 and it looks like it has started to fall down in the last couple of days.

Nifty PE Chart

Nifty PE Chart

Ofcourse we cannot definitely say that the overall market will fall in the next coming days but the probability of that happening is higher if you look at the previous behaviour when PE was at 27.

If the market does indeed fall dramatically then yes your returns will go down but it will give a much needed opportunity to buy good companies at a fair value. Such downturns are always good news for long term investors. Valuation Screener will help you identify which stocks are undervalued.

Buy when there is blood on the streets.

In Feb 2016 we made a post about the stock market is going down, it’s a good time to buy and said that we were buying an auto ancillary stock. The stock we were talking about was Motherson Sumi.

In July 2015 the Volkswagen scandal broke out, the company was caught cheating emissions tests. The software in some of their diesel cars could figure out when the car was being used in emission test(aka laboratory conditions) and change the engine performance to emit low nitrogen oxide pollutants and overall lower the performance. So it passed all the emission tests. Once the car was on the road, the software disabled the cheating module and the engine would emit 40 times the permissible amount of nitrogen oxide. A couple of researchers who were testing Volkswagen cars found out the cheating mechanism and broke the story, Volkswagen shares went into a free fall.

So what does all of this have to do with Motherson Sumi. Motherson is a key supplier of wiring harness to the Volkswagen group, the group has different companies under its umbrella like Audi, Porsche, Volkswagen and others. 40% of the revenue came from Volkswagen group, so investors who panicked started selling their Motherson shares and it went into a free fall as well.

Intelligent investors on the other hand instead of panicking welcome such opportunities. Although 40% of revenues come from Volkswagen group, the scandal affected only the diesel cars of Volkswagen company (not the rest of car companies of the group). Motherson chairman said that around 15% of the revenue came from Volkswagen company, the stock price meanwhile fell from 357 Rs to a low of 158 a massive 55% loss. Was a 55% decline in the share price justified when the scandal affected 15% of the revenue and it’s not like there was a permanent loss of that 15% revenue, Volkswagen obviously would fix the issue and orders for wiring harness would continue for years to come.


Motherson Sumi Share Price

Motherson Sumi share price drop and rise.

So this was a low risk high reward opportunity, investors who bought Motherson shares then would have been rewarded with more than 100% share price growth now.

PS – There is a similar opportunity in one company in the Pharma Sector right now which will we post soon. You probably will know the name if you check the Valuation Screener or if you get our Valuation Report emails.

Disclosure – We hold long position in Motherson.

PS – Please do not call/email us for personal financial advice or stock tips.

Pharma companies are undervalued.

The stock market is near peak bubble territory. Check the long term NSE PE Ratio chart to see what happened when the PE ratio touched 25. Of course this does not mean there will be crash soon, nobody can predict that but if you look at history then it would make sense not to invest right now.

The share price of most companies is overvalued right now finding good investment opportunities has become difficult but there is hope. Look at the NSE Sectoral Performance for the last 3 months.


Most of the sectors have given good returns except IT and Pharma. The companies in the Pharma sector have been facing tough times. Such adverse conditions are good news for patient value investors because investing in companies who have taken a beating gives enormous returns down the line. The only condition is you have to analyse which stocks to invest in that sector.

Companies like Sun Pharma, Lupin, Divis Lab, Dr Reddy’s which were once the darlings of Pharma sector have taken a significant beating. Most of Pharma companies faced the wrath of US FDA due to tighter regulations.

Despite the short term bad news, Pharma companies are not going anywhere, they have promised to fix all the regulatory issues. We believe it’s a good time to invest in the Pharma sector. Of Course there is always a possibility that the share price of Pharma companies can fall even more, if that happens you will get to buy them cheaper. You can check our charts, valuation models of the individual pharma companies to see which ones are fundamentally good or bad. If you don’t have the tenacity to do the research you can invest in a Pharma mutual fund.

So even though the market is overvalued there are some hidden gems provided you know where to find them.