Mr. Motilal Oswal, the founder of MOFSL, has, in his latest interview, recommended five large-cap and five small-cap stocks as being worthy of investment in 2016 and beyond.
“What are your top five multibagger ideas for 2016 with a minimum investment horizon of three years?
Motilal Oswal: Bajaj Finance, Sun Pharma, SBI, ONGC, and InterGlobe Aviation are the five largecap stocks to watch out. Among the smallcaps, I would bet on Alkem Labs, DFM Foods, Astra Micro, Eveready and Lincoln Pharma.”
Let’s take a quick look at the five small-cap stocks recommended by Mr. Motilal Oswal:
| Five Small-Cap stocks | ||
| Stock | CMP (Rs) | MCap (Rs Cr) |
| DFM Foods | 970 | 971 |
| Eveready | 302 | 2,197 |
| Astra Micro | 137 | 1,191 |
| Alkem Labs | 1533 | 1,544 |
| Lincoln Pharma | 251 | 409 |
The first thing worth noting is that of the five small cap stocks referred to, two are Pharma stocks. This is because Pharma stocks have been consistent wealth creators for the past several decades and are expected to be so in the future as well.
Of the five stocks, DFM Foods is somewhat familiar. This stock was first recommended by Ekansh Mittal’s Katalyst Wealth on 19th April 2015 when it was at Rs. 322. Today, the stock stands tall at Rs. 970, resulting in eye-popping gains of 200% in just nine months.
DFM Foods’ credentials as a quality stock are established by the fact that Westbridge/ Jwalamukhi holds a massive chunk of 25% of the equity.
It is worth noting that 82.18% of DFM Foods’ equity capital is collectively held by the promoters, Westbridge/ Jwalamukhi and two other HNI shareholders.
This means that there is really no floating stock available for sundry shareholders.
It may be recalled that Sumir Chadha, the whiz-kid behind Westbridge/ Jwalamukhi, had revealed that it is his strategy to corner large stakes in top-quality small cap stocks because this results in “mis-pricing” of the stock.
Eveready is also mildly familiar because Ashish Kacholia holds a major chunk in it. Akash Prakash’s Amansa Capital also bought a chunk of 5,48,000 shares of Eveready on 06.11.2015.
Astra Micro is of the same top-quality caliber. It happens to be one of Sanjoy Bhattacharrya’s favourite stocks and had pride of place in his famous Model Portfolio.
There is a detailed research report on Astra Microwave by Oscar Capital. The report explains how Astra’s expertise in the Defense sector coupled with the Government’s ‘Make in India’ will bring great prosperity to the Company.
Amongst the Pharma stocks, Alkem Labs made its IPO debut a few days ago. The IPO was highly recommended by most brokerages on the basis of the Company’s powerhouse track record and reasonable valuations.
Lincoln Pharma is a mystery stock that has never been heard of before. Preliminary inquiry reveals that the stock is a micro-cap with a market capitalisation of Rs. 409 crore. It has been a powerhouse so far with a mind-boggling return of 213% YoY and 625% in two years.
The interesting aspect is that none of the super-savvy investors appear to have discovered Lincoln Pharma so far. There are also no research reports on the stock so far.
So, of the five stocks referred to by Motilal Oswal, Lincoln Pharma appears to be the perfect “hidden gem” to take us to the road of riches if we are able to research the stock thoroughly and muster the courage to buy a truckload of it!
Thanks Arjun bro for the info. I am just wondering why MOSL is not recommending Good Luck Steel Tubes for investment. They are already owning 1.89% of the equity of the company. Excellent company, dividend paying, catering to high end auto parts, oil and gas, Solar Power, Indian Railways, Power transmission sectors. Very low paid up capital of 4.4 crores and reserves of 195 crores as of September 2015 and a 1100 crores topline company. Its customers are like who is who. In auto parts its customers are Mercedes Benz, VW, Audi, BMW, Renault. Oil and Gas customers are Reliance E&P Division, EIL, ONGC, IOC, and the list goes on. It has just completed a solar power project in AP of 55 MW, which is part of the massive 500 MW solar power venture of NTPC. All this is available with a market cap of one ninth of its topline! Excellent pick by MOSL. As per their September’15 shareholding pattern, MOSL owns 1.05%, and as per the Annual Report of the company, among the top ten shareholders, Motilal Oswal Financial Services owns 0.8%. Does MOSL not want to reveal all its cards?
Why is the profit margin for Good luck steel so low? Coupled with this, there has not been any significant profit growth over the years. ROE is less than 20%. What’s the fundamental play here if it does not reflect on the company numbers over the last 3-5 years?
The company took decision to go via the debt way rather than equity to fund their expansion. Their interest cost has increased from 11 crores in 2011 to 41 crores expected in FY16. But at the same time its operational cash flow has increased from 31.9 crores in 2011 to 82.1 crores in FY15. This FY, it should be 113 crores. EBIDTA is constantly on the rise – from 39 crores to expected 116 crores this FY. It should easily start repaying the debts from next FY onwards, if not started from this FY itself. In fact they have repayed some LT debt in this FY as shown in the statement of Sept15. From the past 5 years it is a net cash flow positive company except in 2012. You wont get 25+ ROE companies at such low valuations! PE is 5.3 and EV/EBIDTA is 3.64 on FY 16 basis !
Also promoters holding down from 70 to 60 % since 2011 to 2015 in goodluck, why so
The company is family controlled. They gave shares to all sorts of relatives. And it is these guys who have sold shares to make some money. Whereas the main persons of the Company Mr MC Garg Chairman and Mr. RC Garg Director, Ram Aggarwal, CEO, has remained the same (number of shares in their name) from 2011 to Sept’15. And these relatives who sold the shares really made little money because for years the share was languishing in the 20s range even as late as June 2014 when the promoter shareholding came down to 64%. They missed out. Only from July 2014 did it increase from 30s to 100 plus by June 2015.
What made them give shares to relatives?
Dear Arjun,
I am having KRBL Ltd and Camphor & Allied Products Ltd, could you please share your views / target ideas for KRBL Ltd and CAPL for mid term (One Year) ?
KRBL hold with SL of 215
hi sir,
please give opinion about dishman pharma
Hold for now with strict SL of 280, fresh positions can also be taken.
I have found Lincoln pharma and gained some as well. But I sold before it got listed on NSE. Now, thinking, Ah!
Here is the link too:
http://newsviews.satya-weblog.com/2015/08/lincoln-pharma-value-and-growth-stocks.html
I am not updating the blog now but may do so.
I think MCap of Alkem Lab mentioned as 1544 Cr is incorrect.
Hi Venky, agree with you on Good Luck Steel. Just glanced at the company’s numbers and I like the fundamentals. Steady growth in top line & bottom line. Very low price to sales of 0.2 is indicative of a lot more potential left in the stock. PE < 7 and EV/EBIT of 6 is attractive. ROE of 17% for an Iron & steel Co is definitely good. The only negative is the debt Equity of 1.7x. Operating cash flows in the last 3 years is positive. I'll make a small investment, to start with.
Hi Vinay, I must disclose that I have 5.5K shares of Good Luck steel at 92.6. I have done my homework and am quite impressed by the progress of the company. If you see the updates by the company to the stock exchanges, recently they have been approved by Indian Railways as a vendor for supply of underpasses that will replace railway crossings all over India. The opportunity is immense. They are already supplying to Railways other items. Operating cash flows from the past four years is as follows: FY12: minus 21.5 crores, FY13: 22.2 crores, FY14: 49.43 crores, FY15: 82.1 crores. I expect FY16 to be 113.3 crores. Since the op. cash flow is so strong, I expect the debt to be repayed easily from now on. Also, as regards your observation on Debt to equity, the company has already published its debt and reserves for the half year ended 30th Sept’15. This came along with the Q2 results. The debt to equity works out to 1.46. Not only this, the stock is a strong bonus candidate.
Ekansh Mittal recommended DFM Foods when it was at Rs. 322 , but the famous blogger valuepick recommended it at mere Rs.48 and I bought it then and still holding .
http://value-picks.blogspot.in/2010/09/dfm-foods-ltd-bse-code-519588-buy.html
Hi Venky – thanks for your meaningful inputs. Will buy Good Luck. If the price drops to Rs 100 it would be a good price point to enter.
Dear Arjun
I am holding shares of Pincon Spirit in large qty. Share has spurt today by 15 %.
Can you guide me about the prospect of company?
Should I hold or sale , to me results are very good
Strange analysis , Just notice recommendation given for alkem and indigo ,
both tanked more than 10% in last few days.
I feel I should consider buy call means sell it , and sell call means buy it.
#Niveza #Review on Multibagger stocks::
Investing in multibagger stocks is digging its pillars on and on. Now a days investors want risk less and zero time consuming returns. So multibagger strategy could be perfectly placed. Considering the recent market correction, we can have number of fundamentally perfect stocks which can be placed in the portfolio with long term vision. State Bank of India has already corrected more then 50 percent in the China crash and again spiked around 30 percent from 150 levels. with the vision of 3-4 years or even more could be a better buy. The risk associated with the bans is their NPAs. But as the Government has taken a positive hand for the Banks, the stock is like ever green with long term vision. Sun Pharma is looking decent after the crash as the China impact hardly affected the stock. During the crash, the stock spiked 5-6 percent and still looking better buy with 3-4 years vision.
All the stocks in the above article except DFM foods are currently negative returns.