Realty Sector stocks – worth a look? Nah!

The realty sector has been in the doldrums for quite some time now. Builders are hanging on to their unsold inventory in a bid to keep prices from crashing. Buyers are in no great hurry to relieve the builders of their pain.

Many builders are now being forced to liquidate some of their land banks and unsold projects to try and keep their heads above water. The charts of most realty sector stocks are in long-term bear markets.

As in any sector, a couple of companies are able to swim against the tide. Does that make their stock worth buying? Their fundamentals don’t justify it. If you are really keen about the sector, you may be better off buying land.

Hubtown (Ackruti City)

The stock closed at a 52 week high of 194.50 and forayed into bull territory for about 4 months. But the good times didn’t last. The stock is back in a long-term bear market.

Ashiana Housing

Since a 5:1 stock split back in Oct ‘13, the stock has been climbing relentlessly, gaining 4 times from its post-split low. Though it is one of the few charts in a bull market, valuations are astronomically high.

DLF Ltd

The stock closed at a 52 week high of 241.30 back in Jun ‘14, but lost more than 50% due to strictures from the Competition Commission. The Vadra Haryana land deal is turning out to be another thorn in its flesh. Despite a rally from its low, the stock is back in a long-term bear market.

DS Kulkarni

The stock price closed at a 52 week high of 103.25 in Nov ‘14, more than doubling within a year. After a brief correction from its top, the stock is trying to resume its up move, and is clearly in a bull market. However, valuation is stretched and fundamentals are weak.

Ganesh Housing

The stock price closed at a 52 week high of 211.40 back in Jul ‘14, gaining more than 3 times from its 52 week low. Its subsequent correction is still ongoing. The stock price has dropped below its three EMAs and may soon be back in a bear market.

HCC

The stock gained almost 4 times from its 52 week low by closing at 48.45 in Jul ‘14. It has been correcting since then, and is struggling to stay in a bull market. A fall below 27 will mean a continuation of the bearish pattern of lower tops and lower bottoms.

Omaxe

The stock briefly entered bull territory and touched a 52 week high of 151.05 in Jun ‘14, but soon dropped below all three EMAs into a long-term bear market.

Purvankara

The stock price more than doubled from its 52 week low by touching a high of 123.95 in Jul ‘14. It has been in a corrective mode since then, and has dropped into a bear market.

Unitech

The stock touched a 52 week high of 37.80 in Jun ‘14, gaining more than 3 times from its 52 week low. It has been all downhill since then, as the stock slides deeper into a bear market.

Vijay Shanti Builders

The stock chart pattern isn’t much different from most of the others from the sector. A gain of about 70% from its 52 week low, and a brief entry into bull territory was followed by a steady slide back into a long-term bear market.

Related Post

Chart Patterns of 10 Realty Sector stocks (an update)

Stocks in the news this week (Apr 17, ‘14)

As human beings and investors, we are prone to biases in our decision making. ‘Recency bias’ clouds our minds if a recent event had caused a lot of pain – like losing money by buying or selling near a market top.

Three days of profit booking by FIIs (they can’t go on buying all the time) sent shivers down the spines of many investors. Was this the beginning of the big crash? Should they be exiting the market?

Fear impedes rational decision making. Remember the famous Gabbar Singh quote from ‘Sholay’: If you are afraid, you are as good as dead. And the one from Warren Buffett: Be greedy when others are fearful.

This post is not about being greedy or fearful about the stocks in the charts below. Please do your own analysis if you wish to buy or sell.

Hathway Cable

The stock has been trading sideways for most of the past year. It slipped into a bear market in Feb ‘14. The sharp spike in price today was caused by a ‘buy’ call from a foreign brokerage. Technical indicators remain in bearish zones.

Hind. Construction

The stock had dropped deep in a bear market to ‘penny’ status in Jul ‘13. It has recovered since then and returned to a bull market in Mar ‘14. Some recent big orders have boosted the rally. Technical indicators have corrected overbought conditions and remain bullish.

Sadbhav Engg.

The stock had a long struggle with the bears, but has more than doubled from its Sep ‘13 low. Today’s sharp rise in price was on clarification about a frivolous allegation before the Company Law Board. Technical indicators are looking overbought and three of them are showing negative divergences by touching lower tops. Some correction or consolidation may follow.

Shasun Pharma.

Bears had a stranglehold on this stock. Though it has moved above its three EMAs on good volume support, the ‘golden cross’ of the 50 day EMA above the 200 day EMA is still awaited. A PE investor has bought a minority stake in a JV. Technical indicators are looking overbought. Expect some profit booking.

A look at Cap Goods and Infra sectors – a guest post

After rallying from their Dec ‘11 lows to their Jan ‘13 tops, both Sensex and Nifty indices have been undergoing corrective moves. While both indices are within 10% of their Jan ‘13 tops, some sectors have done much worse than the indices.

In this month’s guest post, Nishit takes a look at two such beaten down sectors – Capital Goods and Infrastructure, and builds a case for investing in stocks from these sectors with a long-term point of view.

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The Markets are going down every day and several sectors are being beaten out of shape. Capital Goods and Infrastructure are two such sectors. Fresh orders have dried up and stocks from these sectors are at multi-year lows. Let us try and examine these sectors.

Capital Goods and Infrastructure are the heart of any country’s economy. If infrastructure is not built well, no country can expect to do well. These sectors typically work in about 8 year cycles. They see a boom phase for a long time and then an equally long downturn as well.

The last cycle of investments stopped around 2008-2010 period. Hardly any new orders are being booked by most of the companies. The expansion of industry has also halted, and hence the Capital Goods sector is doing horribly.

Now, there will be two factors at play here. First, the existing infrastructure - specially the power plants and manufacturing industry - is getting old. This will lead to replacement demand. Second, as India grows there will be demand for additional power plants and machinery. More interior areas will get developed and become urbanised. This will lead to a lot of work for the Infrastructure companies.

There have been several companies both in the Capital Goods and the Infrastructure space which have been around for decades and have seen several business cycles and have returned stronger. Siemens, L&T, Bharat Bijlee, HCC to name a few.

We do not know how long the current downturn will last. It may well go on for a couple of years more. A smart way of playing this is by doing Systematic Investment in these companies. Most of them are at around 40-50 % from their peak valuations. Investments may be divided into 4 lot sizes. Add one lot now and then add another lot at about 15% higher or lower than the current valuation.

Metals is another sector where valuations have been beaten down. Remember no country can ever expect to grow without Steel being produced. Tata Steel and SAIL have been beaten badly out of shape and these companies have been around for several decades now. They certainly merit a look.

The downturn can go on for some time to come and all investments in such sectors need to be done with a time horizon of at least 3 – 5 years. It is a tough task for most of us but only by investing on such larger time frames can real money be made in the equity markets. The Benchmark Nifty may be down only around 10–12% from its peak in January ‘13 but Steel, Capital Goods and Infra stocks are down almost 40-50%. In every fresh leg of down move, different sectors get beaten down. Banks are currently facing the music. Information Technology Sector could be the next one.

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(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money Manthan.)

Chart Patterns of 10 Realty Sector stocks (an update)

If you have the money, buy realty, not realty sector company stocks. Why? Because most realty sector companies lack transparency, need lots of capital, have poor governance and a tendency to take buyers for a ride. Not to forget the nexus of local politicians and the underworld that usually leads to substandard quality of construction.

In the previous bull market, the sector was a favourite of big and small investors, and provided astounding returns to some. Those glory days are long gone, and unlikely to return. If you are stuck at higher levels, use the current rally to exit or switch.

In a previous post more than a year back, brief technicals of 10 realty sector stocks were presented. Not for suggesting investment, but to point out that even in a not-so-great sector, there are a few stocks that can swim against the tide. If you are enamoured by the real estate sector, pick those few exceptions.

Hubtown (Ackruti City)

A change of name and branding hasn’t changed the fortunes of Ackruti City – now known as Hubtown. The stock has provided no returns for the past year, and is technically still in a bear market. It is showing some signs of life, but the technical indicators are pointing to a correction from overbought condition.

Ashiana Housing

In complete contrast to the Ackruti City/Hubtown stock chart, the chart pattern of Ashian Housing is in an uptrend in a bull market, and touched a 52 week high last week. Note that the Dec ‘11 low, from which the current rally started, was actually a higher bottom than those touched in May ‘11 and Oct ‘11. Technical indicators are looking overbought, but looks like there is some steam left in the rally.

DLF Ltd

The big daddy of the real estate sector, DLF has provided almost zero returns over the past year and is trying to emerge from its 15 months long bear market. The stock dropped more than 50% from its Oct ‘10 peak, underperforming the Sensex, and is looking overbought.

DS Kulkarni

The stock traded within a rectangular band between 46 and 66 during the past year, before breaking out above the 66 level on a volume spurt last week. The stock price immediately pulled back to the 66 level, but the 50 day EMA crossed above the 200 day EMA indicating a possible return to a bull market.

Ganesh Housing

This was one of the better performing stocks in 2010, but suffered badly as the bears took their toll in 2011. The stock has given no returns during the past year and is technically still in a bear market, and the bearish pattern of lower tops and lower bottoms continues. The stock had shaved off 70% from its Oct ‘10 peak.

HCC

The Lavasa controversy nearly dropped the stock into single digits, as it fell 80% from its Jan ‘10 peak. The current sharp rally, backed by strong volumes, has caused a 100% jump from its Dec ‘11 low but the stock is technically still in a bear market. Technical indicators are signalling an overbought condition.

Omaxe

This is another stock that has been in a bull market, after forming three intra-day bottoms at 120. It has climbed above its previous intra-day high touched in Nov ‘10, and is trading above all three of its rising EMAs.

Purvankara

The stock is desperately trying to get out of a strong bear grip after providing negative returns over the past year. Technically, it is still in a bear market.

Unitech

This is one stock that tried to fly too high, like Icarus, and came crashing down to lose 80% from its Oct ‘10 peak. It provided negative returns over the past year and is still in a bear market technically.

Vijay Shanti Builders

A favourite stock of small investors, it lost more than 75% from its Jan ‘10 peak. The current rally has seen a spectacular parabolic rise, but the stock is looking extremely overbought.

Bottomline? The broader market rally from Dec ‘11 lows has propelled beaten down realty sector stocks above their 200 day EMAs, but that doesn’t mean their fundamentals have improved. Caveat emptor.

Chart Patterns of 10 Realty Sector stocks

Readers of this blog may be aware that the realty sector is not my favourite for a number of reasons. The single most important one is the lack of transparency in their financial statements. At the risk of generalising, annual reports of most realty sector stocks tend to hide more than they reveal.

Once again, realty sector companies are under scrutiny for all the wrong reasons. Their insatiable appetite for capital were being satisfied by obtaining loans using agents with questionable methods. Some of the money may have been diverted to the stock market. Environmental and government clearances were fudged to speed up projects or indulge in illegal constructions.

However, it would not be fair to paint all the companies in the realty sector with the same black brush. Here are the chart patterns of 10 realty sector stocks, some of which have done quite well despite the adverse publicity. Some are muddling along trying to keep their noses above water. The less said about the rest, the better.

I don’t really trust the fundamentals of these companies to recommend buying or selling. It is an effort to demonstrate that even in one of the worst sectors for investing, there are always a few stocks that stand out from the crowd.

Ackruti City

The stock has been in a year long bear market – failing to stay above its falling 200 day EMA for any length of time. It had started to fall rapidly even before the news about the circular trading hit the market.

Ashiana Housing

The contrast with the Ackruti City stock is startling. The stock has been in a strong bull market for the past 12 months, dropping briefly below the 200 day EMA during the recent correction. On the upward bounce, the stock is facing resistance from the entangled 20 day and 100 day EMAs. It may correct some more.

DLF Ltd

 

The stock of the biggest player in the sector hasn’t performed at all. The recent correction took it well below its 200 day EMA. The subsequent upward bounce halted at the falling 20 day EMA which is below the long-term moving average. Sign of a bear market.

DS Kulkarni

The stock drifted sideways for almost 8 months before rising to a new high in Aug ‘10 on good volumes. It has been in a down trend since then, and is facing resistance from the falling 20 day EMA. The 50 day EMA has slipped below the 200 day EMA and the 100 day EMA is likely to follow – confirming a bear market.

Ganesh Housing

Like the Ashiana Housing stock, Ganesh Housing has been one of the better performers in the sector. The recent correction took the stock below the 200 day EMA. The upward bounce faced resistance from the falling 50 day EMA. The stock has dropped below the entangled 20 day and 100 day EMAs. The correction may continue.

HCC

The controversy surrounding the Lavasa project could not have come at a worse time for the company. The high volume fall deep into bear country seems to have extinguished all bullish hopes.

Omaxe

After moving sideways just below the 200 day EMA till Jun ‘10, the stock had a sharp rally to touch a new high last month. The recent correction received support from the rising 100 day EMA, and the stock is poised above the 20 day and 50 day EMAs. Technically, the stock is in a bull market.

Purvankara

The chart pattern is similar to that of DS Kulkarni. It moved sideways till Aug ‘10. In Sep ‘10, the stock touched a new high and started a down trend immediately. The recent upward bounce found resistance from the falling 20 day EMA. The stock remains below the 200 day EMA, in a bear market.

Unitech

 

Another large realty sector stock with more hype than performance. The recent correction dropped the stock deep below its 200 day EMA. The upward bounce hasn’t provided much respite and the stock is back in a bear market.

Vijay Shanti Builders

This stock is a favourite of many small investors because it is ‘cheap’. But cheap can get cheaper. Vijay Shanti has been making lower tops and lower bottoms throughout the past year, and is in a bear market.

Bottomline? All 10 realty sector stocks are under bear attacks. But Ashiana, Ganesh and Omaxe have fared better than the others. If you have holdings in any of the other stocks, this may be a good time to switch. Small investors may be better off by avoiding this sector.