Objective: This thread is an attempt to put together 20-stocks that have the potential to be Ten-Baggers within in next Five-years.
Let this be a crowd-thinking effort. Pitch in your ideas; the best ones.
A portfolio of only 20 best stocks will (should) be made, with each having a very high likelihood of surviving these calamitous times.
I am guessing that most stocks in this PF would be down and beaten, badly crashing with no end in sight. But are great stocks, with well established business/brands but are currently seeing huge selling by FIIs.
Here’s what I have currently, they may not be 10xes but most probably a 3-6x once we stabilise the corona problem.
Take solutions
Sterlite Technologies
Caplin point labs
Hero Motocorp
Sun TV
GIPCL
Care ratings
Watchlist - cupid, ion exchange, GM breweries.
My focus has been on finding companies with good ROCE and ROE, or very low PE or both. Growth must be more than 15% for the past 5 years. Low debt. No red flags on management side. Plus good growth prospects for the next decade. Also well diversified in terms of industry, and mostly small caps that have been hammered. This is a high risk portfolio and we may still see a 50% drawdown in corona doesn’t go away anytime soon, but I’m willing to buy and hold over the next few years. I’ll be slowly deploying my capital over the next 6 months to a year
Bearish on oil as a sector over the next decade with more climate friendly investments, solar and wind energy companies will have better opportunities for growth compared to oil.
Many companies considering implementing a carbon tax which will heavily affect a stock like this.
I have looked at a few of these companies and didn’t proceed further due to these issues. Would love your comments
Hero - motorcycles is a fairly well penetrated category and sales growth has been and is likely to be low - if you look at the period of 2011-2018 (before credit ILFS crisis and with a low starting point of 2011) the growth has been only 7 percent. Plus a greater portion of their cash flows will go into EV research and development - management has already announced this.
Caplin point - their debtor days has gone from being under 10 days to over 90 days in less than 3 years. Is this a red flag for you at all?
Care ratings - Who is going to raise debt over the next 2 years? Also why touch a company where the MD has been fired under mysterious circumstances?
Innovators facade system CMP RS.14.
PE 4 MCAP 27cr
BOOK VALUE 67
SALES OF 150cr NP 5 cr
Business looks promising ,at optimum utilization of their capacity and rising demand of Airports and high rise facades. I think it will not going to bankrupt in last 5 years
Mr.kedia holds 10% at an average of about 60 near IPO price.
Mr.Madhusudan kela also holds 3.7% …
If it do fairly average business as it does in past as market momentum came back it can touch 150+ level sooner or later…
A quick reading of the last 10 years of financial statements revealed a few things. Can you help me answer these?
Why has the company been diluting equity shares repeatedly over the last 10 years? Is this why they dont have a lot of debt?
They have been non-cooperating with CRISIL in the last 2 years (FY 19, FY 18). Why is this the case?
Their cash conversion ratio of EBITDA to CFO has been healthy @72% over the past 10 years. However, the CAPEX (~614 cr) has been greater than the generated CFO (~576 cr), which is probably why they have had to raise equity capital (~120 cr) to payout dividends (~29 cr) and repay the borrowings.
The 600 cr. of CAPEX led to sales increasing from ~55cr in FY10 to ~300cr in FY19 and accounted for cumulative profits of ~350 cr., reflecting the capital intensity of the business model.
Given their high current receivable day along with lower margins, its clear that this sector is undergoing tough times. But its probably captured in the current prices (Mcap ~ 150 cr.). It might be useful to answer a few of the above questions if this is to be a 10-bagger in the next 5 years (~58% CAGR, a bit outrageous ask!)
We need stocks that are crashing unreasonably, but are still good fundamentally, they have a long lasting business in place with a strong history.
Hero will survive, but will prove to be a laggard. We need 10X potential, even though it comes with more risky profile.
Sterlite Technologies is into the business of Connectivity. This has an important place in the economy of India. Promoter Holding is 54%.
Take Solutions too is promising. Promoter Holding is 67%. Business is good. Sun TV too has a high promoter holding of 70% and an established business which wont get wiped out anytime soon.
Caplin Point Debtor days have increased drastically @am648. But, this is what is happening in the entire sector. The good thing however, about Caplin is that it has zero debt. So it has a longer leash.
I hear some very good things about Caplins management ethics. So yes Caplin is a good candidate. And Promoter holding too is 70%
GICPL too falls in energy sector, although not oil related. It will see unprecedented price corrections. Yes, its a 10X candidate.
Care Ratings, might bite the dust. With no promoter holding. Its business will be quickly taken over by its competitors, Crisil, Icra. It may not make it. One such company Opto Circuits never bounced after it lost its sheen
I think the big bet is EV. Their existing business is going to be a cash cow, if you look at China, most of their two wheelers are EV now. As climate change regulations and pacts get stronger, India will need a stronger presence in EV.
Hero has the distribution and the IP for manufacturing it. As you can see with Tesla, it takes a lot of time to bring BOM down in the EV sector and if hero can figure it out before the boom, they are poised to capture a lot of that value.
Keeping the EV potential aside, the business has an ROCE of 23% last year and an average of 40% over the last few years which is phenomenal. The demand for two wheelers isn’t going anywhere in India, and though they are losing their market share their current business is valued at 2010 levels.
You’re right annualised growth is quite low but if you factor that in with their current EPS, their intrinsic value is is around 2500-3000 levels easy. This is not considering their investment in EV.
I have to look a bit deeper into their auditors but the number looks very good and historic perfomance has been very stable. It’s the largest cap company on my portfolio but also consider it low risk at current prices. My weightage for it is going to be lower than others.
Caplin has been expanding to other geographic areas, so having an increase in debtor days isn’t that much of a red flag as long as people pay. Take has debtor days at around 100 ish days, so I’m guessing this is not as bad. I haven’t noticed the increase though but if it is because of how business is done in different geographies, I think its fine. Thanks for pointing it out, will take a deeper look.
CARE I haven’t yet started buying in but looked very attractive because of its current price and EPS. Its at around a 11% dividend yield and generally ratings is a recurring business from my basic understanding. Its enforced by regulations, I haven’t taken a deeper look into competitive landscape here but the ROCE and earnings attracted to me this one. Even if they don’t grow their business for the next 10 years, and don’t loose their current customers, they wil do well. Though MD being fired under mysterious circumstances is definitely a red flag. Thanks for this. I am currently building up the portfolio, and started investing in Take and Sterlite where I have finished most of my DD into management, moat and competitive landscape. Now looking at the other over the rest of the week.
It has very low ROE of 9% and low Interest Coverage Ratio of 4 making it difficult to put together the fire power to jump. Sure, an operator can play it. Other businesses appear to be better bets… but I could be wrong.
Oil exploration is capital intensive business and there is no doubt about that. All its cash is tied in assets. Therefore, I think, the management does not like taking on debt and prefers the equity route, which is an acceptable strategy.
Margins are pretty good OPM goes 50% in good times.
Quite recently its cash flow from ONGC was delayed. Yes, it requires cash left right and center. It is not a cash generating machine. Its Gross Block is 2.5 times its annual sale. That is huge. Moreover, its Trade Receivables has increased 5 times since 2015, whereas sales has increased only 3 times.
The Crisil issue is a known risk.
But, none of these reasons are sufficient to bring this company down.
GIPCL is a value trap. It used to be Rs100 10 years back. And since last 10 years I am seeing this being recommended as value buy with potential to double, but has halved in 10 years.
GIPCL has participated in 2009 bull run and the recent one. It has decent numbers, and if bought at a crash and burn price tag like Rs.15, then it appears to be a 10X, but yes you are right, this may be not a typical growth stock.
At these prices, the following companies are looking attractive.
Bharat Rasayan (trading at 13 PE) - Agrochemical Technicals Manufacturer
Benefiting from the China plant shutdown and supply chain de-risking in the Chemicals space. Excellent track record in compounding and established relationships with global MNCs which can take years to crack. Just completed the capex for backward integration to reduce raw material dependence on China.
Reduced crude oil prices, increasing sales to MNCs formulators for domestic and export sales and entering into Agrochemical Innovator CRAMS should aid margins expansion. Revenue growth, margin expansion and PE expansion, likely to be on the cards when held over long term.
PSP Projects (trading at 7 PE) - EPC Construction Player
Consistent high growth company - 30% CAGR over 3 years. Current market cap at 970 crores with 220 crores cash in the balance sheet. Primarily deals in institutional and industrial construction projects. Primarily focussed on the 50-500 crores orders category (some competition with larger organised players at higher end of this spectrum) where there is less organised competition.
Significantly low debt, efficient working capital management due to the nature of the order book allowing for mobilisation advances in industrial and institutional orders plus monthly billing based on the quantum of work completed. Very less dependence on govt orders is a positive.
Earnings growth guided at 20-25% levels as the company enters new geographies as well as takes on larger projects. Margin expansion likely as the company takes on more complex projects. PE expansion likely too as the cycle turns.
Key risk remains company ability to execute in newer geographies while maintaining working capital discipline and management bandwidth to handle multiple concurrent projects.
For a 10x returns the stock should unreasonably correct for such an opportunity to open. Both the companies are good as they appear to have the potential to survive this bear market. But their prices are still very high. May be after sufficient correction they could be in 10x PF.
IMO, Deep Industries is not a good candidate for any long term investment. Its historical return of past 12 years is disastrous. Its business also is not growth oriented.
I am not saying that it is a good fundamental stock or a growth stock, which will be put into the core PF.
This 10x portfolio will only have stocks that have crashed and burned in the bear market but will survive it. And if we buy them at all time low prices they are likely to give 10x returns.
Deep Industries has shot up twice in the past after sharply correcting.
Thanks. I am happy that you acknowledge. Your own statement is enough to decide that such stock should not be found in any serious Investor PF because it is not a good fundamental stock or a growth stock. I burnt my hand so I thought of warning gullible audience who are in search of holy grail of multibagger without doing proper study and research. I invested 10k in 2007 @ 98 and my return including dividend as on 23/Mar/2020 is just 4600/-! So please take care.
I dont want to talk about fundamentals since everyone can see it,
So, you are saying 10x is not based on fundamentals but on a few other things like how much it fallen by, past price movement etc. What makes you think a 144 cr market company will become 1440 cr market company?. Obviously institutional buyers wont touch it. ( Atleast till 500 cr )
