The Best Stock To Invest/Trade

Most of my friends call me every now and then & ask me which is the best stock to invest/trade (Dont mind guys I am using "invest" and "trade" as exchangeable words even though both are very different in nature). As I said many times, trading is purely individual's perspective for which that person needs to track the market, individual script & etc. And that too trader should be either very systematic or should be ready to hold for long term. Because systematic means you should be ready to accept loss & book the loss or hold it for a time period until it reaches your target. So suggesting trading for very short period of time (say one week or so) that too in this kind of market is very tough. And believe me its not an easy task to be very systematic because I know. And I learnt many lessons from past almost 2 years of trading/investing experiences. So I dont want you people to do the mistakes which I did. Anyway I will write about the "my principles" of trading some other time, today I will write about one script which I have researched from last 2-3 days. This following script is very good for traders as well as long term investors also.

TATA STEEL

(Click on the image for enlargement)

First Technical Analysis as it is my favorite; In May month rally (due to election results) stock reached high of 490. And from that high it is correcting itself with respect broader stock market indexes Sensex & Nifty are also correcting. Presently Tata Steel is trading at round of 76% correction level of its high; which is exactly first level of Fibonacci retracement.

And according to chart (which of course according to my interpretation), stock is at its minor support level of 355 to 360. But I doubt whether this support level is enough to hold because the way market is correcting it is very difficult.

So next Fibonacci retracement is 62% of its peak value which is around 280 levels and exactly at this it has major support. And chart also support this, because if you see the chart, from mid April to mid May stock was trading at that range. So according to Technical Analysis principals the previous resistance become support once stock crosses that resistance level comfortably.

So according to me investors/traders should start taking long position(start buying) from 300-280 levels. And even if this support breaks also there is MAJOR support at the levels of 250-260 which forms 50% retracement from peak. (Even though 50% retracement doesn't come under Fibonacci, chartists consider this as major one because of people sentiment).

Now analyzing the stock (or I can say company fundamentally); the Book value per stock is Rs. 370. Book value is nothing but even if company goes for bankruptcy also, per share holder gets 370 rupees for every share he is holding. That is price to book ratio is 0.96 which is very cheap in overall steel industry.

And if you take the PE ratio is trading at the multiple of 5 almost (exactly @ 4.96) where as steel index is trading at multiple of 8.6, which means for Tata Steel there is scope for price appreciation in near future.

And if you see the quarterly figures of gross sales & net profit it indicates that worst is behind us for this scrip.

And for people like my father who would like to invest for very long term here is comparison of steel industry peers with the Tata steel... Just check the Debt equity, current ratio, ROCE & RONW ratio which covers almost all angle from long term as well as short term perspective Tata Steel stands tall in comparison to its peers.

Bottom line:

And you people may ask steel industry; it is because recovery in any economy starts with Steel & Cement sector. So once recovery starts this is going to be rocking stock. So I recommend to start buying from the level of 300-280 levels & lets hope for the recovery in economy...