Opportunities in the Carnage - Brainstorming required

From different threads, I made a list of what I felt were interesting companies at this point. Maybe we can try to organize them with decreasing order of potential upside for next 1-2 years.

Canfin Homes

Caplin

MPS

Astral

Unichem

Mayur

Wimplast

I forgot to mention that we should also give an estimate of bottom price as Hitesh said above.

Few of the scripts which have good fundamentals and have come down to a nice undervaluation level are

1). La Opala RG --> At cmp, seems worth accumulating by looking at the future expansion. Should give a nice return in 1-2 year time frame

2). CanFin Home

3). GIC Home Finance (~4.7% dividend yield gives us a nice cushion)

4). Caplin Point Lab

5). RS Software

6). Unichem Lab

7). Garnules

8). Somany Ceramics

9). Bliss GVS Pharma

10). Alembic Pharma - This one is actually quoting near 52 week high, and is an unsung hero. Has rose from 49 odd to 100 (100% gain in a year). With solid 20+ ROE, and new drug approvals from USFDA, things seems brighter for this.

GIC housing has a very safe business model. They give loan against 120% collateral :slight_smile:

But share price is still very high, leaving a lot of room on the downside, keeping in mind the moodiness of Mr.Market.

Every sector goes through a sell-off phase, in which a value investor seeā€™s his advantage. GIC, has seen sell offs twice in recent history:

  1. In 2008, price corrected from a high of 108 to 30; A 70% correction

  2. Again in 2011, price plummeted from the new all time high of 161 to 68; A 57% correction.

In summary, to make a staggering-type investment like Hitesh so correctly suggested, one would be better off starting after at least a 50% correction; i.e. around Rs.75. (Iā€™d vote for 2011 low as a good place to take 50% position.)

This grants us one very big edge of safety. Without this basic safety, buying in such tumultuous times is a big risk.

The fundamental may also justify deep correction. Housing Finance Sector is directly correlated to the Realty sector, which is in absolute dumps with no sign of revival. Hence, HF sector should also follow. Moreover, GIC is not as well positioned as HDFC, LIC or Gruh. So, it should see a sharp fall.

A conservative investor should probably wait for a couple of quarters of reduced revenues. This when coupled with poor realty sector would paint a real picture.

Revenues have steadily increased for LIC and GIC for past 8 quarters. Going is still kinda good for them, they have not seen the worst yet. RBI too has reduced interest rates so, that is a plus.

Can someone kindly advise regarding Bilcare?

Presently reading BEATING THE STREET by Peter Lynch. Here is what he says:

ā€œBargains are the holy grail of a true stock picker. The fact that 10-30 percent of our net worth is lost in a market sell-off is of little consequence. We see the latest correction not as a disaster but as an opportunity to acquire more shares at low prices. This is how great fortunes are made overtime.ā€

Reading Lynch is always a pleasure. Its not too heavy on the brain. And a lot of what he says often happens in market place. We just have to imbibe what he says and just implement it when the opportunity arises.

Hi Subhash,

Interesting list you got there. Few questions for you and othersā€¦

  1. Do you know what is the public perception of quality of Kajaria vs Somany vs Orient bell tiles? I am not in india so cant check myself but as far as I have checked with family/ friends from Punjab, they will go with Kajaria. Not sure about markets. Just trying to see if there is quality concerns with companies - If I am laying tiles, I wont mind little premium to get better tiles than to have issues later - so if Kjarai has best tiles, they can rule to roost for long. Public perception may be acting as big moat for them.

  2. Bliss GVS - What is your view on this? So far I believe they have grown by developing sales in un-regulated markets. Now for growth they need to enter into tender based sales - which means they need to tie up with other companies for manufacturing as they dont have approved plants (remember from top my head) which will reduce markets. Also, I dont know how well they can develop thier brands for Today.

Hi Saurabh,

Not much idea on quality of various Ceramics makers. I have got interested in Somany after seeing their slowly increasing ROE numbers, slowly decreasing DE ratio, and available at a low PE of ~7, and half the price of their peak.

Return On Capital Employed(%) 20.59 17.18 18.74 16.20 12.31
Return On Net Worth(%) 19.95 22.86 24.99 13.69 7.22
Debt Equity Ratio 1.21 1.79 1.87 2.04 2.56

Besides it got recommended by microsec guys, who if going by past record have shown an uncanny ability to choose multibaggers from indian midcap market. Plus I am already having ARBL, Cera, La Opala, Wimplast from their list.

http://rakesh-jhunjhunwala.in/index.php/2012/09/12/best-small-mid-cap-stocks-to-buy/

Regarding Bliss GVS, I think we have a thread in valuepickr for the same. What attracts me to Bliss GVS is its 25+ ROE/ROCE, 18% Net Margin, ~0 DE ratio, and mouth watering 5 PE and 2.5% dividend yield. Reading multiple books have ingrained one good concept in my head, the laziest way to beat sensex by a large margin is to buy stocks which have a combo of low PE, low P/FCF, low P/S, ~0 DE, high ROE, high Dividend yield. They tend to fall less in a bear market and beat sensex hands down in a bull market.

Regards,

-Subash

So I started the thread and went on a Holiday.

Anyways used the carnage till now to stock up on :

1). Page

2). Hawkins

3). Indusind

4). HDFC Bank

5). TV 18

Seriously looking at BHEL, SAIL and Hindalco

What about Gold! Never thought it will correct so much and suddenly its at almost 52-week low!!

I have just invested a small amount in Goldbees ETF at around 2500/- and wish to keep on adding more if it goes down further.

I think gold prices are headed for a big correction . Once rupee starts appreciating against dollar 5-10 % correction will be seen in the domestic gold prices .