Manish Bhandari Of Vallum Capital states that his investment strategy is to look for companies that are on the verge of a “turnaround”. He explains that the rationale for this is that the equity value is “mispriced” and there is less competition from other stock pickers.
This seemingly simple strategy has yielded Manish Bhandari humongous gains if you go by some of his latest stock picks:
Manish recommended PI Industries in Outlook Business in January 2013 on the logic that the company is one of the “fastest growing and most profitable agri-input players” in India. He emphasized that while PI’s CAGR in profits for the past five years was 67%, the CAGR of sales is 18%. This suggested that profits were growing faster than sales owing to better asset utilisation and financial efficiency.
Manish predicted that PI’s revenue growth would exceed 20% per annum for the next couple of years, driven by CRAMs, core business and new products. He also pointed out that the return ratios would look better as the product mix improves and economies of scale kick in. He also predicted that the agri-business will grow by 20-25% pa and CSM by 35% over the next three-four years.
Well, so far Manish’s hypotheisis for PI Industries has proved correct. The company has been reporting blockbuster results quarter after quarter.
Manish has also been richly rewarded for his trust in PI Industries. On 05.01.2013 (the date of recommendation), PI was quoting at Rs. 125. Today, two years later, PI is at Rs. 719. This means that incredible gains of 475% are on the table.
You can learn more about PI Industries in the piece “Why Is PI Industries So Alluring? Experts Explain”.
|Manish Bhandari’s Stock Picks|
|Stock||Date of reco||Absolute Gains (%)|
Shilpa Medicare & Pennar Industries:
In an interview to CNBC TV18, Manish Bhandari recommended two stocks which are very familiar to us, Shilpa Medicare and Pennar Industries. Since that date (30.12.2014), Shilpa has given gains of 67% while Pennar has given gains of 25%.
Manish Bhandari’s logic for both companies is simple and yet compelling.
To learn more about Shilpa Medicare and Pennar Industries see Mid-Cap Pharma Stock Backed By Raamdeo Agrawal & Daljeet Kohli Is On Way To Being 100-Bagger and Daljeet Kohli Promises Mega “Value Unlocking” Gains From Ashish Kacholia’s Fav NAMO Stock
Aditya Birla Nuvo:
Manish Bhandari recommended Aditya Birla Nuvo on 04.01.2014 on the basis that the company has an interesting mix of value-creating businesses that represent domestic consumption (telecom, fashion and garments), import substitution (fertiliser, viscose fibre yarn) and financial services (insurance, NBFC lending, asset management) among several others. He opined that these business lines give it a “unique competitive advantage in allocating funds across varied businesses and lower cost of capital”.
Manish also confidently predicted that ABNL would see an improvement of 100 basis points a year in consolidated RoCE from the current 11% for the next three years and that “this tipping point — superior RoCE in these businesses — will be the most powerful re-rating trigger for the company, a fact missed by market participants”. He also emphasized that ABNL was (then) trading at an attractive valuation of 11x FY15 estimated earnings.
ABNL has lived up to Manish’s expectations and the stock has appreciated by an attractive 90% since 04.01.2014. This is especially appreciable when you bear in mind that ABNL is a large-cap blue chip stock.
Manish Bhandari’s latest stock pick – KRBL:
Manish Bhandari’s latest stock pick is KRBL, the producers of the popular ‘India Gate’ brand of basmati rice. Manish has given facts and figures to support his analysis on why KRBL is a good buy. He emphasizes that over the past four years, KRBL has seen a revenue growth of 22% and operating profit growth of 25%. He also points out that KRBL’s high return on equity of 27-30% suggests brand power in a non-descript and highly commoditised business. He also emphasizes that KRBL has a very comfortable financial position and that the balance sheet is leveraged only to the extent of working capital. KRBL’s use of husk, a by-product of rice milling, to generate renewable power of 15.8 MW businesses has also met with Manish’s approval. “The current value highly under-represents the business value created by the company’s management over these years” he says with his customary soft-spoken but confident style.
Incidentally, Anil Kumar Goel, the whiz-kid stock wizard, is one of the major shareholders of KRBL with a holding of 76,75,000 shares worth a whopping Rs. 142 crore as of 30.06.2015.
Now, whether KRBL will match the spirited performance of Manish Bhandari’s other stock picks requires to be keenly watched.