Secular growth stocks with 5+ year horizon suitable for 10%+ of PF

Discussion in 'Ask A Query About Your Stock Picks And Portfolio' started by jarmoney, Apr 13, 2015.

  1. jarmoney

    jarmoney New Member

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    Hoping this will be a sticky topic. Please add your stocks backed by a strong secular story (value migration, niche or entry barrier) that you'd allocate 10% PF or more.
     
  2. west_canal

    west_canal New Member

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    Vmart retail - lowest cost operator in India's T2/T3 towns - very efficient and virtually no competition from organized retail. Adds 20% retail space every year plus 7-10% from same store sales growth allows it to grow 30% every year. Once IPO (done at 210) money is used roe will jump to 25%-30% after leveraging balance sheet over time.
    Its a 10 year story for me and will easily compound @ 25% CAGR.
    Their disclosures/corporate governance are pretty good. You can find company ppt/concall transcripts on their website. They have got smart independent BOD/got E&Y as auditor to improve accounting processes and got APL Logistics to help with logistics/warehousing to improve operational efficiencies. Promoter family is increasingly empowering professional mgmt and gradually shifting away from being a family run firm.
    They have got PE firm Westbrdge with strong track record in Indian markets as an investor ( right from IPO).
    Vmart today has about 108 stoes in 90 cities mostly in states UP/Bihar/Jharkhand/Uttrakhand etc. They are planning to enter Orissa/WB/Assam in near future. Organized retail is still nascent in T2/T3 cities in this part of the world and have got a huge runway of growth ahead of them. They have early mover advantage in their target geography and have a very efficient cost curve. I don't its possible to sell cheaper than them. ( 3 shirts for 350 bucks in AC well furnished store).
    Cash flows are enough to fund capex ( about 2.5cr per store - fixed assets+Inventory) internally wiht minimal debt.

    PS: I' invested from 195/share. My views may be biased.
     
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  3. Carl Icahn

    Carl Icahn Active Member

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    I think this is an excellent idea. Forcing people to think of such concepts will get them on the right path. I’ve put my thinking cap on. Here’s my list of top 10 secular growth stories:

    (i) Cera Sanitaryware: Market cap of Rs. 3600 cr. Brand leader. Top quality management;

    (ii) MCX India: Great business model with huge scalability. New management with proven track record;

    (iii) Repco Home Finance: Market cap of Rs. 4100 cr. Long runway ahead;

    (iv) Century Plywood: Market cap of Rs. 5400 cr. Consistent growth track record of 20% for past several years. Brand leader. Top quality management.

    (v) Capital First: Market cap of Rs. 4100 cr. Dynamic & professional management with skin in the game;

    (vi) Ashiana Housing: Market cap of Rs. 2669 cr. Housing will not go out of fashion ever, especially the middle class ones. Good track record of execution and delivery;

    (vii) AIA Engineering: Market cap of Rs. 11,000 cr. Duopoly manufacturer of a ‘must have’ item for the mining & cement industry. Dominant market leader in its segment;

    (viii) Ajanta Pharma: Market cap of Rs. 11000 cr. Excellent track record. Long runway ahead for growth.

    (ix) Kajaria Ceramics: Market cap of Rs. 6100 cr. Same reasons as are given for Cera;

    (x) Atul Auto: Market cap of Rs. 1200 cr. Strong management with ability to scale it up.

    Comments and criticism welcome. I reserve the right to change my opinion at any time ;)
     
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  4. Meenakshi Razdan

    Meenakshi Razdan Administrator Staff Member Moderator

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    Agreed. It is a good idea. Made sticky. Hope people contribute with their ideas. A brief note on the rationale as to why the stock is their favourite will help to clarify concepts.
     
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  5. saurabh.dwivedi

    saurabh.dwivedi Member

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    Dont you think cera and century plyboards are expensive at the moment.
     
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  6. Carl Icahn

    Carl Icahn Active Member

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    Undoubtedly, they are expensive. Cera is quoting at a P/E of 57x while Century Ply is quoting at a P/E of 41. There is definitely no valuation comfort. However, the question is whether they are likely to get cheaper in the future? These companies are growing consistently at a rapid pace. The future is bright. The size of opportunity is huge. So, what will be the market cap after five years or ten years? There is a lot of crystal-gazing involved here.
     
  7. Srouta Mukherjee

    Srouta Mukherjee Well-Known Member

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    Dewan Housing; Cheapest HF stock in market. Great future for gains. Management is ambitious. RJ has big stake.

    HSIL: Junior Cera at low valuations + powerful brand image (Hindustan Sanitaryware). Valuations are dragged because of loss in glass div. After turnaround will command same valuations are cera.

    JB Chem: Cheap pharma stock with huge cash on books. Safe and conservative management. Expansion plans will be driver for stock to scale new high.

    Nandan Denim (not researched fully); The next Arvind in making. Second largest denim manufacturer of country http://www.business-standard.com/article/companies/nandan-exim-likely-to-become-2nd-largest-denim-maker-in-india-112092700070_1.html

    Dolly khanna has bought big stake in Nandan Denim

    I have more stocks on screen. Will post later.
     
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  8. jarmoney

    jarmoney New Member

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    Srouta / Carl - Would be willing to put 10%+ of PF in each of the companies you mentioned? Which ones you wouldnt?
     
  9. Carl Icahn

    Carl Icahn Active Member

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    Heh heh, you have a knack of asking pointed questions which forces people to think. Unfortunately I have a highly diversified portfolio with more than 35 stocks. I have each one of the above listed stocks but each forms a small part of it.

    Also I can't make up my mind about which stock to sell. Each one of them looks good from one perspective or the other.

    The other problem is that when I do sell something, the price shoots up thereafter, causing great distress. E.g Sun Pharma.

    So I have decided to maintain status quo for sometime and wait for things to settle down.
     
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  10. Srouta Mukherjee

    Srouta Mukherjee Well-Known Member

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    I am very confident about Dewan and JB because they are at cheap valuations. I am not worried about their prospects. I am feeling shaky about Nandan. It has huge debt. Also I read that there is glut in denim market.

    http://www.business-standard.com/article/companies/glut-squeezes-denim-margins-114051701152_1.html

    http://www.business-standard.com/article/companies/denim-makers-face-price-capacity-pressure-amidst-continued-glut-114051401279_1.html

    So if anyone have anything to say about Nandan denim pl say so. Why has dolly bought the stock?
     
  11. bholu

    bholu Active Member

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    with thousands of stocks...why are these qualifying for discussion on 10% portfolio allocation ? it seems small caps mid caps have caught the fancy of all....most of these stocks have rallied several times....can they maintain the run without rise in profits ? I advise caution
     
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  12. saurabh.dwivedi

    saurabh.dwivedi Member

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    1)At the surface most of them look very expensive , so any further action should be taken only after due diligence and research.
    2) I like MCX the most in the above list.
     
  13. Srouta Mukherjee

    Srouta Mukherjee Well-Known Member

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    Respected Sirs, you cannot simply sit on sidelines and say it is all 'expensive'. Then you have to sit at home and not come to market. Suppose you are fund manager and someone puts gun to your head and says HERE IS MONEY NOW DECIDE On 10 stocks for 10 years. What you will decide?

    Pl share that. Simply saying it is all 'expensive' is not going to help anyone. Pl share with stock ideas ... for 10 years with high ROE, debt free, non-PSU, good management, secular growth, strong brand image, good extent of opportunity in marketplace etc. Pl apply mind carefully and give proper explanation for stock picks.
     
  14. ruparelravib

    ruparelravib Finance professional with interest in equity marke

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    My list:
    MCX, DCB, Granules, Ajanta pharma, Dewan housing, Repco home. Selected defense related stocks to be added later.
     
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  15. bholu

    bholu Active Member

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    Thats the difference, between your money and others money...your philosophy might change when you have to invest your money viz a viz others money...I do not track all these stocks but of these 3 I like Atul Auto, niche player, possibility to scale up, valuations still reasonable..I have Kajaria, the best I think on fundamental basis, though I still believe this home building theme is a bit overrated, Capital First I studied and found to be good as somebody said management good, fundamentals strong ...rest no idea
     
  16. saurabh.dwivedi

    saurabh.dwivedi Member

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    In Investing its better to be on sidelines then to seek action.Patience is key.
    As it may happen then in the process of chasing money you can exhaust your investing capital and may not have the capital when a really good opportunity comes.

    For example take century plyboards its debt has doubled in last 5 years.Sales growth is around 10 %.
    Its valuation is more than 4 times sales and cash flow is not that great.
    That is why i call it expensive.So any time a stock's PE crosses 40-50 you should be cautious until you are sure about it.
    CERA and Kajaria are also expensive on many parameters like p/b, p/e.

    As far as my pick in current market is concerned i will go with:

    MCX: for following reasons:
    1) Exchanges are difficult to replicate
    2) it has more than 80 % market share in the market.
    3)Rakesh Jhunjhunwala is very bullish about it.Even this idea has some risks which you can discuss over here.
    4)Commodity market is in early stage in india.

    MOIL: for following reasons:
    1) Even though it is a PSU Commodity player, it is one of the few stocks available where i see value.
    2) owns 40%+ mangenese reserves
    3) It is a hugely profitable business, though how much it will reward its shareholders needs to be seen.
     
  17. abhay6605

    abhay6605 Member

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    eicher motors worth considering i think it will move towards 18000/- now both cv and two wheeler are on Fireeeee
    valuations who cares...... ;D..when one buys two wheeler royal is expensive so the stock it will never be on cheap value.......i am thinking to add.......
     
  18. heart

    heart New Member

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    @Ravi I am keen to add a few stocks from Defence Sector but they have run up alot due to all the hype. Can you suggest which can be put on radar and if possible why?

    Thanks
     
  19. Srouta Mukherjee

    Srouta Mukherjee Well-Known Member

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    Very few stocks are in defense: Bharat Electronics, Bharat Forge, Zen Tech, Axiscades, Dynamatic Tech, Pipavav Defense.

    Bharat Electronics will get guaranteed orders as it is PSU. The others will have to compete for orders.

    Bharat Forge has proven management track record. It also has non-defense activities such as auto ancillaries. So, if the defense hype evaporates, Bharat Forge will still be there on crease. All stocks are on fire at present.
     
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  20. heart

    heart New Member

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    @Srouta Quite right, the same was my understanding. In a recent interview when Vijay Kedia was pushed to a wall and asked to name just 3 stocks he would like to give as inheritance to his son, BEL was one of them and he said to have purchased it again the the region of 3k odd.
     
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