Blue Chips Will Give No Returns. Look For Small Cos, Penny Stocks, Unproven Mgmt For Bumper Gains: Porinju Veliyath

State of the market – very bullish:

I am definitely very bullish on equities in 2015. We have a long way to go. It will be a very different market than it was in 2014. In 2014, we witnessed a major political turnaround and there is always a lag for the economic turnaround. 2015 is going to be a year of economic turnaround.

We have all the ingredients for growth, but a strong leader can really make it happen and that is what is going to happen. The government needs time. We had the political turnaround, now we are looking for the economic turnaround. It will take time. It is too early for people to expect so much.

Blue chip & fancied stocks will give no returns. Look for stocks like HPCL, DLF and Zicom (previously recommended) which have given very smart returns:

I am mostly looking at the midcaps and small caps. I feel there is very strong potential in the small and midcap segments still in 2015.

One theme I would like to present to the viewers is to look for management turnarounds. It is a known fact that around 75 per cent of promoters of domestic-listed companies are not very ethical and honest. They do not take care of the minority shareholders’ interest. Also, they do not really create wealth for all shareholders. So, this is the major block for people to look at small cap and midcap companies and some of them find it very easy to buy the blue chips — the blue chips of today’s or yesterday’s. The year 2015 will be very different. I will give you an example.

In the last two-three years, TTK Prestige was like the God of stocks — everybody wanted to buy the best stock — operators were there — big investors were there.

Look at the last one year. The stock has given you no return. This is going to repeat for many fancied stocks of today such as Kaveri Seeds, Kitex, La Opala, MRF, Ceat and V-Guard.

I am not saying negative things about these companies, but please see the fundamentals, the growth rate, and today’s price, earnings multiples as high as 70.

I am just saying that what happened to TTK Prestige last year will happen to most of these companies. See, I am talking from the stock point of view. These companies are great, well-managed with clean balance sheets, honest management.

Everything is perfect. But at what PE will you buy a perfect company?

People should look beyond those 40, 50 or 100 blue chip companies, whichever segment they are in. The real money can be made in 2015, if you look beyond these companies. I am telling you, we have hundreds of companies which will go 10 times and more in 2015.

These may be small companies. They may look like penny stocks. The managements may not be right. They may not be paying dividends, but that is the space to be in. Most importantly, some of these stocks may not be liquid and some of them may be listed only on BSE.

These are not the factors which should discourage individual investors from buying the stocks.