Ashish Chugh of ‘Hidden Gems’ fame has a knack of identifying stocks that are unwanted and uncared for but which are on the cusp of greatness.
In January 2013, he singled out Selan Exploration as the stock that investors should entrust their money to.
Ashish’s recommendation surprised market watchers because Selan Exploration had been flat as a pole for nearly two years.
But once you listened to his logic, you knew you had a winner on your hands.
Ashish Chugh pointed out that though Selan Exploration has five oil blocks in the Cambay Basin and it was doing most of its production from a block called Bakrol, it was suffering mainly because the Director General of Hydrocarbons had not given approvals for drilling new wells.
In a brilliant strategic analysis, Chugh pointed out that even in the worst-case scenario that Selan was not able to scale up its operations and the production stagnated at two lakh barrels, investors would not lose money because it was generating huge amounts of cash and the valuations were very reasonable. Selan Exploration is debt free, has low operating cost and high operating margins between 80 to 85 percent, Chugh emphasized. It is also very shareholder friendly with 6 buybacks in the last ten years, he added. Of course, if Selan did get the necessary approvals, it would have a cash flow of about Rs 150 crore and the stock would fly, he said with a twinkle in his eyes.
Chugh also pointed out that with big-ticket players like Reliance and Cairn getting approvals from the DGH, it was only a matter of time before Selan was also awarded the coveted approvals.
With this kind of brilliant stock analysis, one cannot really go wrong. In just the last one month, Selan has rocketed and posted solid gains of 27%. If the rest of Ashish Chugh’s prediction comes true, Selan could be a true multibagger.
A lot of big-ticket stock pickers are now recommending Selan Exploration as a buy (such as Sharekhan who have it in their Model Portfolio).
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