I am looking for one bluechip stock with high probability and safety which has potential to atleast double within next two years. Please suggest only single and best pick from your end with the rational for the same. Valuepickr forum is great and this is my first post on the forum.
Sorry, this is the forum for discussion of stocks and not for the recommendations. Also what you are looking for is safety plus high returns(that too double in two years) - both does not go along together. You can at the best look at the steady compounders which has high probability to give you 20% returns like Gruh, HDFC Bank etc.
Manish, Thanks for your response. May be phrasing of my question is wrong. What i wanted to discuss is a high conviction bet with reasonably good chance of doubling money within two years time frame. Also safety of capital is paramount importance and it is ideas followed by most of great value investor and concept of risk and return dont have strong correlation in reality. Also like discussed in some thread over here concentrated bat likely to give better returns and initial stage to create greater wealth it is preffered route so this question for some seniors/experts to guide.
Manish, why you think for example that Gruh, HDFC bank can be better bet than SBI for example. It most likely to be due to their past years performance history. why you think even going forward this is likely to continue given that competition in housing loan and banking is increasing day by day and expected to increase in future. Hardly banks/housing finance suitable for investment should available on book value of more than 5 (In case of gruh it is currently more than 7).
If one can double the money with a single stock in 2 yearswithout any downside possibilities,it will be a great find. And if one can do it with little consistency for 20 years a modest 1 lac can become 1024 lacs or 10.24 cr
Raj, you are correct but except Pharma, FMCG and to some extend banking/financial there is hardly any sector which has created any wealth in last 5-6 years in indian equity. Looking at valuation of power, realty, metal, CG companies five years back it is hard to believe that their conditions can be so bad. Same may happen to current hot sectors also. Even if one look at sensex history hardly same companies has done well for more than decades, so it is safe to assume that most of current favorite stocks we are not likely to get good investment return in next decade.
So will it be better to focus on companies which can double their profit’s in next 3-4 years and with higher certainty (Our conviction being higher on them) ? and be ready to pay-up a reasonable price for that, and hope that market doesn’t ignore the consistent performance. But the market price can get ignored after good performance too, like you say, who knows ?
Niraj kumar if you take the space of pharma,fmcg and banking only the performers have been rewarded not the laggards. Only when even laggards are rewarded and performer or over valued one can say its just hot sector. See the PSU banks they have gone no where,while hdfc have been 4 bagger in last 5-6 years.
Companies like Cera,Astral tough in segment like real estate have done extremely well. Look at their returns in last 5 years.
So market in general reward those that perform not just hot sector. Senses has gone no where from 2008 but if you have chosen right set of stocks you money would have 3,4,8,even 10 bagger.
Prabeesh thats why my requirements is very simple. I just wanted to double in next 2 years. Please suggest some good own from your end. I think that even laggards in pharma and FMCG is awarded otherwise it cannot be said that all companies in metal, CG, power etc has become poorly managed suddenly in last 5-6 years and all FMCG , pharma cxompanies have suddenly become excellent management. Even pharma companies like alembic pharma becomes 5 bagger in last 2-3 years even though companies is in business from last about 100 years. Market try to follow earnings but earnings for sector as a whole changes suddenly.
just go with strong consumer brand even without looking at valuations or financial performance. … In WORST CASE, with that u may not make money but you will also not loose money due to strong brand
Some names that come to my mind
Brands that you like
It is very very easy to find stocks with expected return cagr 40% (double in 2yrs) looking backward.
It is virtually impossible to find a single such stock with absolute certainty looking forward. Because if it is there, than any sane person will take loan at 12% and invest in to get super/duper return. And as 1000s of such sane person jump into investing in the stock, it will raise and diminish the expected return to FD rate + equity related uncertainty premium.
It is very very difficult to find the same with reasonable margin of safety. Only due diligence can be done which choosing stocks, to find 1-2 such stock amongst 10-12 stock one has in his portfolio. It is almost impossible to decide which amongst them will turn out to be such 40% compunder.
Pharma case is because of many patents expired in last 5 years and opened great revenue for generics. Take the example of L&T it has done well in same period even though similar fields have been bashed out…in long term the market always pay for the earnings.
For a short 2 year term i am not visionary to predict a doubler.if i know one for sure i would load up all my money and tell u later
Thanks for your reply Prabeesh, Subash, Samir. Actually i am in share market from last 5 years and new member of valuepickr , however reading this forum from last 2-3 years. I have mixed investment success in my short 5 years time period (means i have not loose money ,but neither i have make any serious money). I was thinking if i should have just put my money in bond or FD atleast it should have been double in 5-6 years. Some of my investments which has done well during the period is Alembic Pharma, Satyam Computers, United Spirites, Cera, Mayur, Zydus, Shilpa medicare, polymedicure etc while some others (like opto circuit, punj etc) has not done well and i have to exit them in partial loss, so overall my protofolio is only get slight overall gain during the period. Thats why i asked this query to get some expert help so that atleast i hope to double in next 2-3 years time frame and should not repeat the same.
My current holding is as below:
Name Protofolio Percentage
Zydus Wellness Buy price (470) (20 %)
Indraprastha GasBuy price (260) (15%)
Gruh Buy price (210) (10%). I also holdALSTOM INDIA LIMITED,BEML LIMITED,BLUE STAR LIMITED,CROMPTON GREAVES LIMITED,FAG BEARINGS INDIA LIMITED,HAWKINS COOKERS,HERITAGE FOODS,JINDAL STEEL POWER LIMITED,LIC HOUSING FINANCE LIMITED, Nestle, Pidilite, NMDC, Siemens, SKF, Tata Spone,Titan, Trent, Yes Bank (varying from 4-8 % of protofolio). Some of them in profit while some others are in small loss and overall not much gain.
GasBuy holdALSTOM INDIA LIMITED,BEML LIMITED,BLUE STAR LIMITED,CROMPTON GREAVES LIMITED,FAG BEARINGS INDIA LIMITED,HAWKINS COOKERS,HERITAGE FOODS,JINDAL STEEL POWER LIMITED,LIC
First list the investment rationale behind buying each one of the stocks in your portfolio. How is going to be the future growth for each one of them. I used to have portfolio similar to you 5yrs back. Then I got into touch with Hitesh, TED and now Valuepickr and it changed entirely. I would advice you to go through the portfolio threads of seniors, read the whole threads of valuepickr favourite stocks like Ajanta, Kaveri Seeds, Mayur Uniquoters, Astral etc. Then your entire approach towards investing would change.
Tata Steel. CMP - 240, Mcap - 23400 cr
Mgmt expects indian opn rev to incr by 15 %. **_ASSUMING _**an increase of 10 % in domestic rev. the indian opn rev after 3 yrs will be abt 50000 cr.Tata steel indian opn historical NP margins have been in excess of 15 % . Assuming a NP margin of 15 %, NP after 3 yrs = 7500 cr.
ASSUMING that the company is able to breakeven its overseas operations ( rev from overseas opn in fy 13 was abt 96000 cr) in 3 yrs , that is ZERO net profit from overseas.
So total NP = 7500 cr + 0 = 7500 cr. A PE of 8 means Mcap of 60000 cr. a CAGR return of abt 37 %.
Data FOR FY 2013
Domestic Operations - capacity - 10 mtpa, Deliveries in fy 13 - 7.5 mt, turnover - 38200 cr, PBT for domestic opn - 8511 cr, assuming tax rate of 30 %, PAT - 6000 cr approx.
Greenfield expansion in odisha - 6 mt ( million ton) in 2 phases. First phase of 3mt to come on stream next year.
European opn - rev of abt 78000 cr. Making loss and is likely to report big loss in this qtr - June 13 also. Delivery of 13 million ton in Fy 13.
SE asia opn - deliveries of 3.1 mt
As per company the following initiatives have been taken to improve European opn -
1.In Europe, the Group has invested over £1 billion in the last 3 years towards improving the
structural competitiveness of the business including £220m in rebuilding blast furnace no. 4 at
Port Talbot.Itcontinues to implement a series of initiatives to enhance competitiveness by cutting costs,
increasing operational efficiency, improving product mix, and restructuring its asset portfolio.
Tata Steel is also investing in developing and training people at the Tata Steel Academy and has
taken on board around 500 apprentices in the UK in the last couple of years, of which 122 were
taken on during the year.We took US£250 million of cost out of the
business and reduced our steel stocks to record lows by year-end. We also acted to restructure our
support functions and asset base. But we did not allow the downturn to divert us from our longerterm
objective of building an all-weather business. We invested significantly in improvements to our
operational base and we made substantial progress in strengthening our long-term relationships
with end customers in our chosen sectors. And we increased the proportion of high-value,
differentiated products and services in our sales, which have risen by almost 20% in the last two
years. These improvements have given us a firmer foundation as we enter another tough year of
subdued steel demand in Europe.â
As per Company analyst presentation :
European steel demand ( yoy change) dropped by 9.3 % in 2012, and expected to drop 0.5 % in 2013 and rise by abt 3.3 % in 2014.
Its a giant company tracked by analyst, any improvement in fiancials will reflect on the stock price.
If European opn fail to recover , the stock may give negative or no returns at all.
If the steel prices go down , the stock will go down. At present the steel prices are supposedly under pressure due to low demand and dumping by china.
This one is a commodity and cyclical business and cannot be expected to trade on high PE.
Huge debt. Gross debt of 66000 cr, net debt - 56000 cr.
Disc : I have taken a very small stake and may increase stake with the fall in share prices. I can be wrong (like many times before) in my analysis. Invest at your own risk.
Indraprastha GasBuy holdALSTOM INDIA LIMITED,BEML LIMITED,BLUE STAR LIMITED,CROMPTON GREAVES LIMITED,FAG BEARINGS INDIA LIMITED,HAWKINS COOKERS,HERITAGE FOODS,JINDAL STEEL POWER LIMITED,LIC
** First change.
Manish thanks for your advise. I will definitely go through all threads in Value Pickr and thread and try to understand the rational behind stocks suggested by you. My rational for investment in my profolio:
Zydus Wellness: Leadership product in wellness segment particularly sugar free, ever youth and nutralite. Expected growth CAGR of 15-20 % and profit CAGR of 20-25 % in next 5 years. High quality management with willigness to launch new products in the category. Huge potential market opportunity including export market.
Indraprastha Gas: Leader in city gas distribution business with near monopoly in Dehli NCR regions. Expected market in punjab , UP etc. Gas in indian energy basket is expected to reach 25 % from current about 10-12 % by 2025. Also shale gas future potential can increase gas use further in future. Expected to grow topline CAGR of 15 % and bottomline CAGR of about 12 % in next 5 years. Available at reasonable valuation. Govt pricing intervention may be a big red flag though.
Gruh Finance: Large market potential in small town and rural areas for housing. Good quality management. Expected to grow at CAGR of 20 % (both topline and bottomline ) for next 5 years. Expensive current valuation is a drag.
NMDC: Leader in iron ore production in india. India need lots of steel if it has to develop and without NMDC it is not possible. One of the lowest cost producer in iron ore. Also iron ore is a dollar asset so prices going to beyond govt control.
BEML: Play for mining equipment, railway infra and defence products. Govt can not afford to close down this company because of sensitive nature of business involved so going to back it strongely with huge order books. FDI in defence may be near term triggers. Available at 1/3 of book. Only concern in huge employee cost but with increase in order book it can be under control. This is basically turn around story for me.
Jindal Steel and Power: Among best and most aggresive companies in pvt sector in steel and power sector with great record of execution of the project. Debt level is manageable. Good quality management and biggest coal producer in pvt sector (12 mt per annum). This is my bet on steel and power sector combined. All new projects progress happening and visible at ground level unlike many other peers who struct in various govt clearness etc.
Alstom, Siemens, Crompton: My bet on revival of investment cycle and it grow india need to invest in infra nad power sector. Even if no new projects after 3-4 years to maintain existing capacities one need product of these companies. Have technology global leaders in their respective sectors.
Titan, Pidilite, Nestle, Hawkins: Small holding due to rich valuation but holding for tracking purpose and increase in holding when valuation reaches within reasonable levels.
Trent: For retail story if ever it reaches its true potential. Currently seems difficult though. Only small holding.
Tata Sponge: Among company with best financial in steel/metal sector. Also good management with actively supported by Tata Steel. India is among better global player in steel and iron ore sector among all metal sector. Third largest steel producer and five largest iron ore producer. It gives competitive advantage to indian companies in global steel market.
SKF/FAG: Again by proxy for revival in auto/ capital goods sector. Well managed companies with long operating history.
Heritage food: Retail and milk sector play. Good traction seen in south market for the same. Huge potential opportunities. Small bet just in case turn out to be a success in long term.
Yes Bank: Aggressive pvt sector bank available at reasonable valuation and still in mid size category. Can grow with more than 20 % topline/bottomline CAGR. Good management.
LIC housing: LIC brand name and expected to get banking license. Wide reach and network. Even housing business best player after HDFC.
My rational for holding about 20 companies i am not sure which one can turn out to be multibagger in few years so top 3 have 45 % holding rest other holding distributed between 2-8 % based on conviction level. even if 2-3 among these companies turn out 4-5 baggers in next 3-4 years it will give good protofolio return because my target in just to double money in next 2 years.
**_ASSUMING _**an cr.Tata
1.In £1 £220m Talbot.Itcontinues year.We took US£250 Europe.â
Manish thanks for your suggestion. Tata steel is a great company with huge legacy . However i am not comfortable with its huge debt level. Also unions is strong in steel industry and management is more inclined towards employees than shareholders. I find tata sponge better bet than tata steel for investment return.
nice thread. that is the holy grail of investing !
don’t have any ideas at this point of time, but would like to share my views for your comments…
most of the blue chips typically grow by 20-30% a year, so in 2 years they should give 40-60% return. to make balance 50% return, one needs to buy undervalued or sell overvalued or combination of both.
eg. from dec 2011, hdfc bank gave 75% in 1 year from 400 to 700, titan gave 100% return in 1 year from 150 to 300…
so i guess if one is patient and keeps tracking these businesses, one can invest big in corrections…
Ash thanks for your response. You are correct that stocks keep fluctuating but it is not easy to find resources (money) or out of 3-4 bets just 1-2 may work as expected and 1-2 may be in loss and overall not much gain. Thats why i felt why not to find a solid fundamental company with reasonable valuation with potential of doubling in next 2 years in place of investing in 20 companies. If market or sector has to fall most of shares fall anyway. Some where i read that 40-50 % of share movement happen just due to general market condition, 20-30 % due to industry specific conditions and 20 % due to company specific conditions overall.