Tuesday, October 6, 2009

Contrarian Picks - For Risk Takers

Contrarian investing can at times pay handsome dividends, provided it is weighed properly against various considered inputs. The general consensus of the market is not to be discounted but at times you stand to gain immensely by taking just the opposite stance to that of majority of market participants. When financial institutions were falling like nine pins and every shade of investor treated them like lepers, Warren Buffett took a contrarian view. He went ahead and bought $ 5 bn preferred stocks of Goldman Sachs. One year down the line he grew richer by $ 3 bn.

There have been many instances of taking calculated and considered risk by contrarian investors and succeeding with a bang. Laxmi Mittal of Arcelor Mittal fame bought distressed steel plants around the globe when steel as a commodity was in slump and prospects looked bleak. Result of that brave contrarian investment decision is for all to see.

Coming to Indian markets as of now, to my mind there are some distressed stocks one can consider for contrarian investment. It should be done with a view that one is ready to average the same scrips at lower levels and hold for long term if short term view does not work out. Under no circumstances should one discard the stocks at loss if the trade goes unfavourable. Lets see some of these scrip in succeeding paragraphs.

Unitech
Buy the scrip at current market price ( closing price on 06 Oct was 98.75) for initial target of 160 to 180. If trade goes awry then keep accumulating from 83 to level of 60 in small packets and hold till its long term target of 320/330.

Suzlon
Buy the scrip at current market price (closing price on 06 Oct was 87.15) for initial target of 140. In case trade goes in opposite direction then start accumulating from 77 to the level of 70 in small packets and then hold for for its long term target of 320.

Rcom
Buy the scrip at 250 ( closing price on 06 Oct was 268.3) for initial target of 350. In case trade goes in opposite direction then start accumulating from 220 to the level of 180 in small packets and then hold for its long term target of 600.