Stock Picks Of Hiren Ved, Alchemy Capital

Hiren Ved revealed his stock picking strategy in January 2013 and identified his favourite stocks as being Maruti Suzuki, Tata Motors, Mothersun Sumi, Amara Raja, PSU Banks etc.

Now, in the latest interview to ET, Hiren Ved reveals a few more stocks that he is bullish on.

Bata India:

Hiren Ved indicated that consumer stocks were likely to be the big trade going forward and that Bata India was one of his favourite stocks.

What Hiren Ved likes about Bata is that it is a leader in the footwear market with a small ticket size of about Rs. 320 which would increase over time. Bata has a 7% free cash flow yield, a ROE of about 20-25% which can increase to 40-50% in a couple of years, no equity dilution, no capex requirement and with a lot of headroom to grow. Stocks like Bata should be in the core portfolio because they just keep compounding year after year at 15-20% and become multibaggers by sheer passage of time, Hiren Ved said.

Bajaj Finance:

Bajaj Finance is another of Hiren Ved’s favourite stocks that he has held on to for the past several years and reaped a rich harvest. What Hiren Ved likes about Bajaj Finance is its’ management team which he says is one of the best management teams in terms of execution. Proof of this is in the way they have turned around the company and grown the business.

Hiren Ved also likes the conservative approach of the Bajaj Finance team and their focus. Its’ credit processes are very strong and they have been able to keep their NPAs low. For example, Bajaj Finance decided to reduce its exposure to infrastructure financing when it realized that there was stress. The management is very focused on keeping the book very tight and the NPAs low. It is very conscious of the risk. Also, while it started as a two-wheeler financing company, it has moved on to consumer durables and is one of the largest consumer durable financing companies in the country. It is now moving on to loan against properties, SME loans, credit cards this year and the headroom to grow is tremendous.

Hiren Ved emphasized that Bajaj Finance was quoting at reasonable valuations at 1.7 times book even though its profits had grown at 30-40% compounded for the last three-four years. He explained that once the confidence comes in amongst the investing public, Bajaj Finance would command a multiple that was commensurate with earnings growth. After all, if Shriram Transport can trade at 3.5 times book, there is no reason why Bajaj Finance cannot trade at the same multiple, a couple of years down the line, Hiren Ved said.

Tata Motors:

Tata Motors is Hiren Ved’s old favourite. What he likes best is the huge global demand for JLR. He pointed out that in China, while there was discounting of some of the other bands, Jaguar Land Rover had no discounting in terms of pricing. JLR has a fantastic line up of new products that is coming up and it is still a very aspirational brand in China, he said. Even the US and UK market are very big and JLR is also now getting into newer markets like Latin America and Saudi Arabia, he pointed out. Hiren Ved emphasized that there is a lot of momentum in the JLR segement that was propelling Tata Motors. On the domestic side, Tata Motors was struggling but even that would change if the interest rates became more benign, he said.

ING Vysya Bank:

Hiren Ved cited ING Vysya as a good example of how you have sometimes to wait for a long time before your stock pick bears fruit. Hiren Ved homed in on ING Vysya a couple of years ago but to his disappointment, it didn’t budge at all. Then the turnaround took place and the ING Vysya stock has surged 70% + in the last one year.

Hiren Ved explained that there was still room for improvement in ING Vysya and when the market is convinced about the durability of the turnaround, it could command the premium that other top private sectors banks command.

Federal Bank:

Federal Bank is another stock that Hiren Ved is banking on though it hasn’t still come good. He explained that Federal Bank had some legacy NPA issues which kept its valautions depressed. Federal Bank also has a large exposure to gold loans and the falling gold prices increases the risk of NPAs. He expressed hope that these problems would get resolved by FY14 and that the stock would take off.