Why are stock markets rallying and will the Bull run continue in 2018?
The wizards at Nirmal Bang have first dealt with the seminal issue that is troubling all investors i.e. whether the magnificent Bull run will continue unabated in 2018 and whether the multibagger gains will continue to gush out with full force.
All the factors that have contributed to the magnificent Bull run and the arguments in favour of and against the continuation of the Bull run have been considered in an objective and professional manner.
The bottom line of the dissertation, as far as I can make out, is that the Bull market is here to stay and that we can continue to tuck into high-quality stocks, albeit during corrections.
Stocks recommended during Diwali give up to 48% gain
This is an opportune moment to check the performance of the stocks recommended by Nirmal Bang during Diwali 2017.
The performance is as follows:
|Rane (Madras) Ltd.||504||750||48.8%|
|Tata Global Beverages Ltd.||210||300||42.9%|
|Minda Corporation Ltd.||144||191||32.8%|
|Control Print Ltd.||382||483||26.3%|
|S. Chand And Co. Ltd.||464||521||12.3%|
|Shemaroo Entertainment Ltd.||400||440||10.0%|
As one can see, the performance is quite spectacular with three out of six stocks having given a return in excess of 30% within the short period.
The average return of the six stocks is about 29% which heavily outperforms the paltry return of 2% given by the Nifty in the same period.
“People laugh at me when I recommend Tata Global but investors will make a fortune,” Rajen Shah said with a wry grin in words that sound prophetic now.
TGBL is also a favourite of Porinju Veliyath. He has been repeatedly imploring us to buy the stock on the basis that it is fail-safe.
No doubt, if we had listened attentively to Porinju Veliyath and Rajan Shah and obediently bought Tata Global Beverages, we would have prospered immensely.
— Porinju Veliyath (@porinju) February 20, 2016
Rane (Madras) and Minda Corp have also clocked in magnificent gains.
Best four stocks to buy for 2018
For 2018, Nirmal Bang has recommended the following four stocks:
|Stock||CMP (Rs)||YoY (%)|
Dilip Buildcon – wannabe L&T
Dilip Buildcon is familiar to us because it was recommended by Mudar Patherya.
“Baby, there is something happening here,” Mudar had exclaimed in uncontrollable excitement at Dilip Buildcon’s spectacular results.
He did complicated number crunching to drive home the point that we cannot keep Dilip Buildcon out of our portfolios.
Mudar’s logic is supported by a buy recommendation from Axis Direct.
Thereafter, Dilip Buildon has come on record to state that their ambition is to become “the next L&T” by following prudent bidding strategy and excellent execution.
“We have built our first dam. Typically dams in India take six-seven years to be built, we have completed it in three years. The second dam that we are doing will be done in about two and a half to three years as well,” Rohan Suryavanshi, one of the honchos of the Company said with supreme confidence in his voice.
It is obvious that if Dilip Buildcon is able to achieve even a fraction of what L&T achieved, we are talking of a super-duper multibagger even from here.
Nirmal Bang has foreseen that Dilip Buildcon has a target price of Rs. 1324. The investment rationale is as follows:
– Sales of BOT/HAM projects will free capital for growth
– Consistent track record of early completion of projects
– Industry leading margin and ROE
– Improvement in working capital cycle
– Capitalizing on market opportunities in Road sector
DCB Bank – potential 100-Bagger
DCB Bank also needs no introduction to us.
We saw how the stock soared to the skies on the back of Motilal Oswal’s certificate that it is a potential 100-bagger.
Thereafter, a couple of disastrous business decisions and expansion plans brought the stock tumbling down into the ground (see “100-Bagger” Stock Falls From Grace & Is Condemned To Sell Due To “Very Dangerous, Unexpected & Disappointing Shift” In Strategy“).
The management displayed exemplary grit and mettle by starting afresh and building from scratch.
After a couple of tough quarters, the business was back on track and the stock reclaimed its title as a multibagger.
Nirmal Bang has rightly identified the latent strengths of DCB Bank and recommended a buy on the following investment rationale:
– With completion branch expansion plan cost to income ratio to improve and will yield good returns in the future
– Healthy Growth in Net Interest Income
– Stable asset quality
– Well capitalised and healthy Balance Sheet
Shemaroo Entertainment – Isko hilaega kaun?
Shemaroo Entertainment first came to our attention when Donald Francis, the illustrious co-founder of the valuepickr forum, wrote a detailed note on why the stock is a great buy.
He and the other experts of the elite forum described Shemaroo as a “no brainer” at “inflection point” with “compelling valuations“.
“Isko hilaega kaun“, the question was asked to underline that the stock has an impenetrable moat.
Donald Francis also revealed that Shemaroo is a high conviction stock pick for him and that he has invested 10% of his net worth in the stock.
Nirmal Bang has echoed similar investment rationale whilst recommending a buy of Shemaroo:
– From past few years, the company is constantly incurring high capex in buying the titles of movies, however, management guided, FY18 closing inventory to be lower than FY17 inventory, which indicates investment phase is getting over.
– New media segment is high margin business growing at a CAGR of 44.4% from FY12-17
– With 3585 titles, 948 perpetual rights & 2637 aggregate rights as on FY17, Shemaroo, has the largest content base in Bollywood which makes vital for a broadcaster to purchase contents from Shemaroo in order to run a meaningful Bollywood content service.
S Chand, new kid on the block
S Chand’s profile is not familiar to us. None of our favourite stock wizards have invested in the stock or recommended it.
However, given that Nirmal Bang has recommended it, we will have to keep it in our radar to see whether it does generate multibagger gains for investors.
The investment rationale is quite impressive:
– Highest growth in last 5 years – Over, FY12- FY17, Sales grew to Rs 684cr in FY17 led by both organic and inorganic way (CAGR 31.6%)
– Presence in the growing industry will support the growth of the company
– Strong Financials Support Inorganic Growth – S Chand reported constantly higher Ebitda margin of above 20% and requires limited investment in fixed asset. From FY12-17, S Chand has invested almost around Rs 584 cr in acquisition and digital platform which lead to lower ROCE but excluding digital investment ROCE stands at 17.2% in FY17.