 "Four stocks investors can do without in 2012")
With just three-and-a-half weeks before the new year begins, it’s time to decide on new portfolio allocations. While you might get a lot of recommendations on what to invest in 2012, here’s a list of stocks you can avoid, according to UBS Investment Research.
The list, mentioned in its India Outlook 2012 report, names the following stocks:
First up is Bank of India with a price target of Rs 300 per share. The stock is currently quoting at Rs 346.5 per share. “We are cautious on Bank of India as its exposure to potentially stressed sectors is high compared to other banks under our coverage,” the report said. It believes the bank will not be able to manage the stress ahead due to its volatile loan recovery trends and provisioning coverage of around 59 percent. Loan loss provisioning is expected to increase by 95 basis points for the year ending March 2012.
[caption id=“attachment_148418” align=“alignleft” width=“380” caption=“AFP”]
[/caption]
Second is **HCL Technologies.**UBS expects the stock to be less defensive in a downturn due to lower resilience in margins and a relatively weaker balance sheet compared with peers. Operating margins are expected to remain low as senior management indicated that they may increase expenditure on sales and marketing over the next few quarters.
In addition, UBS expects a period of potential sluggishness in demand in early 2012, which could be a trigger for a potential downgrade in 2013. The brokerage remain bearish on the stock with a price target of Rs 380. The stock is currently trading at Rs 406.50.
**LIC Housing Finance (LICHF)**comes third with a price target of Rs 200 per share. The brokerage cites three reasons for its view. First, there is a slowdown in mortgage volumes due to the slowdown in the economy, high interest rates and high real estate prices. Second, continuing pressure from banks will keep the pressure on LICHF’s net interest margins (NIMs). Third, falling interest rates will not necessary benefit the company as asset yields are expected to be priced lower, and fourth, continued regulatory risks will weigh on the stock as capital requirements for housing finance companies remain more benign compared with other non-banking finance companies. The stock is trading at Rs 231.60.
The final stock to avoid is Tata Motors. The brokerage set a price target of Rs 170 for the stock. It is currently quoting at Rs 191.50.Continued investments in promotional and dealer support, as well expansion activities (mainly in its passenger vehicle business) are expected to affect domestic margins, which are likely to remain under pressure. The challenging global macro environment is also expected to limit volume growth in Jaguar Land Rover.