Infosys

Infosys is undoubtedly a very healthy and well managed business in an industry where India excels. I did perform my independent IV calculation, but considering the strong business fundamentals, and the belief I have in the business, I consider this stock as a stalwart opportunity - stable business whose stock gets thrashed due to some one of earning expectations being not met. I purchased it around Rs 2200, and right now it is about 9% in my portfolio and my position stands at ~15% profit.

My IV calculation is here:

1. Infosys is a healthy business with very good ROE, so Graham's hidden bond based valuation will be too conservative a method. It gives a value of Rs 1400, but we'll ignore this method.

2. Since its a major index stock, historical P/E based method is more reasonable, though it is also most unreliable due to market re-rating being unpredictable. This value comes at Rs 2520

3. Modified Graham's number based method gives an IV of Rs 2922

4. DCF on FCFF gives a fair value of Rs 1517

5. Half PEG bargain is again a conservative method - Infosys will almost never trade at bargain P/E multiples due to being a popular, index stock. Hence we ignore this value of Rs 1463.

Accordingly, taking 25% margin of safety, the fair price comes at Rs 1739

Vishal performed this analysis for Infosys. It is a little old I guess, and based on this analysis, my purchase price of Rs 2222 is a good bargain. Hence I'm basing my purchase on Vishal's analysis, since my IV estimates are too conservative, and then I treat Infosys as a stalwart, which I'd sell for 25-40% profits when Mr. Market starts getting euphoric about every stock.

To be frank, i'm a little confused about sell decision here. Yes, if INFY crashes again on quarterly results in mid October, I'll buy more and increase stake to about 12% of my portfolio, but I'm not sure when to sell it. Probably when "dirty IPOs" start coming in market and people rush to buy them...I don't know. Maybe I'll just hold this very good business :-)

Here're my trades and investment actions. Yes, I did "trade" a bit in INFY stock in the past, but now I'm investing with thorough analysis.