Stocks I bought in January 2005

I picked up two stocks in January 2005. In this note, I explain the value considerations behind these picks.

Kabra Extrusiontechnik Ltd

I bought this stock in the second week of January. The company manufactures machines that process plastic. The main reasons why I felt this was a good buy are :

• The company has been paying dividend consistently, and the dividend yield is good :
• Dividend data is available for the last four years, and the company has paid a 35% dividend during the last three years.The year before that, it paid a 30% dividend.
• The 35% dividend corresponds to a dividend yield of around 5.8% at the price I bought. Which is only slightly below par with current Fixed Deposit rates.
• The book value of per share is around one and a half times the price which I paid.
• At the price I bought, the P/E ratio is only slightly above 5.

TNPL

I bought this stock in the third week of January. The company is one of the largest paper manufacturers in the country. The main reasons why I felt this was a good buy are :

• The company has been paying dividend consistently, and the dividend yield is satisfactory :
• Dividend data is available for the last three years, and the company has paid a 28% dividend during this period.
• The 28% dividend corresponds to a dividend yield of around 4.7% at the price I bought. Which is not far below current Fixed Deposit rates.
• The book value is about 10% more than the price which I paid.
• At the price I bought, the P/E ratio is around 7.

I have higher hopes for Kabra Extrusiontechnik than for TNPL, both because of its better past performance, and because it has much more room to expand than TNPL. Also, the promoters of Kabra Extrusiontechnik have a much higher stake in it than the promoters of TNPL have in it.