Subdued performance of stocks recommended for 2018
First, we have to peruse the list of stocks recommended by Outlook Business for 2018 and see how they have performed.
It is not surprising that the performance is quite subdued on an overall basis given that the beginning of 2018 was the peak of the Bull market and there has been a significant correction since then.
Nischal Maheshwari‘s contrarian pick, ICICI Bank, emerged as the top performer with a spectacular return of 36%.
Saurabh Mukherjea‘s PVR came second with a return of 32%.
Ajay Jaiswal‘s Indian Hotels came third with a return of 13%.
On the losing side, Gaurav Parikh‘s HOV Services disappointed sorely with a loss of 46%.
Viraj Mehta‘s Thangamayil Jewellery and Harendra Kumar‘s Vedanta also lost big chunks in excess of 30%.
The average return of the 16 recommended stocks is (-) 10% which is not unreasonable given the state of the market.
|Stocks recommended for 2018|
|Ajay Relan||APL Apollo||(31)|
|Ajay Jaiswal||Indian Hotels||13|
|Ambareesh Baliga||Jyothy Labs||0|
|Bhavin Shah||PSP Projects||(9)|
|Ekansh Mittal||Manappuram Finance||(2)|
|Gaurav Parikh||HOV Services||(46)|
|Gautam Duggad||Shriram Transport||(23)|
|Jigar Shah||Coffee Day||(10)|
|Nischal Maheshwari||ICICI Bank||36|
|Samit Vartak||Balkrishna Industries||(23)|
|Tapas Sarkar||Power Grid||0|
|Vijay Kedia||Everest Industries||(13)|
|Viraj Mehta||Thangamayil Jewellery||(36)|
Stocks recommended for 2019
The recommendations for 2019 has come at an opportune time because the stock markets appear to have bottomed out and are poised for a surge.
The list is as follows:
|Stocks recommended for 2019|
|Expert||Stock||CMP (Rs)||YoY (%)|
|Aditya Narain||Dr Reddy’s||2764||31|
|Ajay Jaiswal||Engineers India||116||(28)|
|Ambareesh Baliga||Tata Motors||216||(40)|
|ArunaGiri||Grauer & Weil||51||(19)|
|Gaurav Parekh||Bombay Dyeing||136||(47)|
|Gautam Trivedi||Aavas Financiers||1163||50|
|Harendra Kumar||Reliance Industries||1329||45|
|Jigar Shah||Star Cement||99||(23)|
|Niraj Dalal||Coffee Day Enterprises||274||(10)|
|Saurabh Mukherjea||Dr Lal Pathlabs||1032||18|
|Vijay Kedia||Vaibhav Global||645||(7)|
|Vikas Khemani||ICICI Bank||394||36|
|Viraj Mehta||Alkyl Amines||829||31|
As one can see, several names in the list are of well known blue-chip large-cap and mid-cap stocks. These are fail-safe stocks which can be bought without much deliberation.
Grauer & Weil is not so well known.
According to ArunaGiri, Grauer & Weil is a “high-quality business with growing free-cash flow“.
He has emphasized that the current FCF yield is 6.5% and that it is a zero-debt company with a net surplus cash of about ~ 1.13 billion coupled with high double-digit operating margin and superior return ratios in the mid-20s.
Rarely would one get a quality business at a cheap valuation, but GWIL is an exception, he has opined.
He has also opined that on a FCF-based intrinsic valuation, that is, net present value of conservative future cash flow estimates, Grauer & Weil is available at 50% discount to its intrinsic worth which gives it substantial margin of safety and potential for significant re-rating.
Aavas Financiers is also a name which is not familiar.
The stock has to be in our radar because Gautam Trivedi has claimed that it is walking in the footsteps of the illustrious Gruh Finance and is likely to deliver similar multibagger gains in the foreseeable future.
The logic for recommending the stock is quite convincing:
“Of the 400 underwriters that they employ, 150 are chartered accountants and 89 are lawyers. Also 100% of customers must come to the branch to sign the papers, a system similar to what HDFC used to follow“.
It is also pointed out that Aavas has stayed away from builder loans or under-construction or investment property loans.
In addition, Aavas has no asset-liability mismatch (ALM) unlike its peers who are beset with these problems.
At the end of the analysis, Gautam Trivedi has reminded that good companies are not cheap and they remain expensive for a very long time. He has opined that that Aavas deserves a premium valuation given its strong management, under-leverage, and a high growth trajectory.