Is recession coming for the US?

Is recession coming for the US - and if so, when?

A new Bloomberg survey puts the probability of a downturn in the next year at 65%, up from 60% in February.

Whether it’s recession or not it’s better to buy GARP stocks. Investors always buy app based  stocks or the ones that  are discussed in the media. One such example is Vedanta. 

Vedanta has declared dividends on five occasions in FY23.  On 6th May 2022 the company declared ₹31.50 per share interim dividend. On 26th July 2022, it declared interim dividend of ₹19.50 per share. On 29th November 2022, Vedanta shares once again declared  an interim dividend of ₹17.50 per share. On 3rd February it declared yet another interim dividend of ₹12.50 per share to its shareholders. Last financial year it declared five interim dividend with net dividend of ₹101.50.   

Vedanta was trading above ₹400 in the entire month of April 2022.  it’s dividend yield worked out to around  25 per cent, which is much higher than PPF and FD return. Such kind of dividend yield stocks are very rare but Vedanta should be avoided owing to several reasons. Let’s check it out.

In the beginning of the financial year the stock was trading at 430+, but May 2022 it lost it sheen and was trading close to 300 and in July it was beaten down to ₹220. At a much higher levels we warned you not to buy out this stock despite huge social media hype. Today the stock is at ₹270. Even if you add the total dividend of ₹101.50 it’s not even close to ₹430, that was the price at which it was trading in the first week of April 2022. 

If you know to check the balance  sheet, you would easily discover that the company has a debt of ₹60000 crore. A good management would be interested to get ride off the debt to  improve the fundamentals and profitability.  Instead, the management is interested in stripping the cash from the company by way of dividends. Such kind of companies are dime a dozen in Indian market and we should always avoid them at higher price. Any investor who had  bought it at less than ₹80 during the Covid correction, would have been benefited by this, but those who bought it at higher valuations would be repenting for their decision. It’s better to watch out the valuations before getting into any stocks. 

Coming back to markets, currently some sectors like sugar, infrastructure, construction and capital goods are in expansion, some sectors like banking are in contraction, while others like PSU are more stagnating or not quite expanding nor contracting. Nothing appears to have peaked yet, and possibly some sectors like pharmaceutical may have seen their trough.  

This week is  yet another shortened week as market is closed on Friday owing to Dr. Baba Saheb Ambedkar Jayanti. Let’s enjoy the market now with the lesson of valuation.