One of the gospels of Warren Buffett, the greatest investor of all time, is that a “great investment opportunity” arises when an “excellent company” is surrounded by unusual circumstances and the stock is mispriced.
Rajat Sharma of Sana Securities has been inspired by this gospel when evaluating whether Tata Motors, the beleaguered blue-chip powerhouse stock, is worthy of a buy now.
In the course of the detailed analysis, Rajat points out that the impact of the slowdown in China on the fortunes of Tata Motors is “clearly exaggerated”. He also opines that there is no fundamental reason why Tata Motors stock should trade at current levels and that the major reason for the beaten down valuations is “aggressive selling by traders”.
At the end, Rajat confidently advises that Tata Motors is a “screaming buy” for pure value investors.
It is worth noting that similar advice has been offered by other savvy investors including Shruti Aggarwal, Motilal Oswal and HDFC Securities. All experts are unanimous in their opinion that the present valuation of Tata Motors is an aberration and that the stock has huge upside in it.
It is also worth noting that Tata Motors is one of the eleven stocks chosen by Motilal Oswal as most likely to make the transition from “good to great”. Motilal Oswal points out that Tata Motors has all the attributes that one expects to find in a “great” company such as (i) Industry Attractiveness, (ii) Disciplined Management, (iii) Disciplined Thought, (iv) Disciplined Action and (v) Expected Results. The report forecasts Tata Motors’ target price at Rs. 488 which is a 65% upside from the CMP of Rs. 296.
So, we need to carefully evaluate the situation and take an appropriate decision.