Painstaking research to discover ‘India’s Emerging Global Champions’
We have to compliment the wizards at Ambit Capital for their meticulous and painstaking research.
They started with a mammoth list of top 1,500 listed companies. From this, the first 100 companies were eliminated because they are behemoths.
It is common sense that behemoth stocks cannot generate multibagger gains with the same nimbleness that small companies can.
The remaining stocks were filtered on the basis of the companies’ demonstrated growth, focus on development of key products, success in globalisation, quality of distribution, ability for innovation, competitiveness, financing, corporate culture, leadership and other relevant factors.
This has resulted in eight mid-cap stocks which can confidently be described as “hidden gems” owing to their capabilities of generating multibagger returns and delighting investors.
Menaka Doshi, the veteran and charming Managing Editor of Bloomberg Quint, magnanimously revealed the hidden gems to the World.
Hidden mid-cap gemshttps://t.co/muTmT5qt3m
— menaka doshi (@menakadoshi) December 5, 2017
Rain Industries – Fav of Dolly Khanna and Mohnish Pabrai
Rain Industries needs no introduction to us because it is the high-conviction stock pick of Dolly Khanna and Mohnish Pabrai.
We have seen earlier how the duo walked into the stock and effortlessly pocketed mammoth gains of upto 1000% (10-bagger).
We have also seen that Motilal Oswal has recommended a buy on the assurance that in the “bull-case” scenario, the stock has a target price of Rs. 615, which is a massive upside of 100%.
Ambit has also given a clean chit to Rain Industries on the basis that the Company is in a favourable position compared to its peers owing to long-standing relations with customers and suppliers and also proximity to raw material sources and diversified product offerings.
It is also emphasized that the capacity shutdown by Koppers, the arch rival, will strengthen Rain Industries’ positioning in the tar distillation business.
Graphite India – 700% gain in 12 months
Graphite India was first discovered by David Nadel of Royce International Smaller-Companies Fund.
As far back as in April 2014, David Nadel loaded up on Graphite India on the basis that it is a leader in a global oligopoly market serving the electric arc furnace production of steel. He described it as a “high-quality, export-driven manufacturer”.
He was also one of the first identifiers of India as the best investment destination in the World. He wrote an elaborate piece titled “What Columbus Missed: Royce Rediscovers India (pdf)” in which he explained the entire merits of the Country.
Manish Bhandari of Vallum Capital also appears to be an early investor in Graphite India. He described the investment as a “market leader in the electrode business, a proxy to the recovery of steel manufacturing by Electric Arc Furnace (EAF) business, globally”.
Unfortunately, he did not name the stock. Otherwise, we could have also piled on to it and pocketed a few bucks.
Graphite India’s stratospheric surge of 700% gain in just 12 months has not deterred Ambit.
Instead, it has recommended a buy on the basis that the Company has several virtues such as cost-control, debt-light balance sheet, “prudent” approach to capacity expansion etc.
It is also emphasized that the Government’s anti-dumping measures on import of graphite electrodes from China will lead to immense prosperity for Graphite India.
Jefferies on Graphite India: Buy with a TGT of 342
German subsidiaries to turnaround with revival in Graphite demand
— Deepali Rana (@deepaliranaa) September 14, 2017
— BloombergQuint (@BloombergQuint) September 14, 2017
Greenlam Industries – Fav of Ashish Dhawan, Prashant Jain, Sudhir Valia and Jwalamukhi
When I spotted luminaries like Ashish Dhawan, Prashant Jain, Sudhir Valia and Jwalamukhi making their way towards Greenply/ Greenlam (pre demerger), I instinctively knew that multibagger gains were waiting to be harvested from the stock (See Why Are Savvy Investors Making A Bee-Line For GreenPly Industries?).
I was right and we can tell from the broad smiles of the shareholders that they are happy with the outcome.
Greenlam Industries is still a great buy, according to Ambit.
Its’ focus on improving margins, cash flows and balance sheet makes it irresistible for investors, Ambit asserts.
Another stock that we must keep an eye on is Century Plyboards. According to experts, the Company will be a big beneficiary of the ahift from unorganized to organized caused by the imposition of GST.
KRBL – beneficiary of surge in demand for packaged foods
We are very familiar with KRBL because Manish Bhandari of Vallum Capital recommended it with the assurance that it is a “compelling story of value migration towards branded business”.
The recommendation was brilliant because the stock has given a 125% gain over 12 months and 163% gain over 24 months.
Ekansh Mittal of Katalyst Wealth has recommended a buy of Chaman Lal Setia Exports, KRBL’s arch rival.
Dolly Khanna and Porinju Veliyath are sitting pretty in ADF Foods and LT Foods alias Daawat.
We saw a few days ago how leading experts have recommended a buy of LT Foods on the basis that it has “huge opportunities to scale up business” and will provide a “Royal Daawat for investors”.
Ambit have confirmed that there is a massive global demand for basmati rice and that all producers will prosper immensely.
KRBL has been chosen as being the best investment on the logic that it is better placed than its peers to tap opportunities arising from easing import restrictions in Iran and China.
Vinati Organics – earnings may triple over the next five years
Vinati Organics came into our radar when Ayaz Motiwala Of Nivalis Partners recommended it on the basis that it has a “unique competitive advantage, high quality & consistent, numbers, high ROC, reasonable valuations”.
Needless to say, the stock has given multibagger gains since then.
Ambit has now recommended a buy on the basis that Vinati’s earnings may “triple over the next five years” due to it being the sole manufacturer of vinyl polymer Acrylamido tertiary-butyl sulfonic acid in India and the expansion into paracetamol intermediate and IB derivatives.
It is also foreseen that Vinati’s multiples will increase to 27 times its earnings per share in 2019.
Other hidden gems with multibagger potential
Lakshmi Machine Works (global supplier of textile spinning machinery), Symphony (Air-cooler manufacturer) and Essel Propack (global manufacturer of aluminium and plastic laminated tubes) are the balance three stocks certified by Ambit to be ‘India’s Emerging Global Champions’.
The investment rationale given in respect of each stock is quite convincing.