I would like to put forth my top 5 picks to be held for a period of around 2-3 years. Current prices at which the picks are made are attractive but since markets are correcting with a vengeance, one could add more on declines with a definite gameplan.
1). Ajanta pharma )-- consistent growth, good brands in domestic markets, strengthening its presence in overseas markets, relatively recession proof, reducing debt since around last few quarters. cmp 192, stock available at a pe of around 5-6. On a scale of 1 to 10, valuation is very attractive and so gets a grade of 9, conviction also at around 9.
2). **Aries Agro – **It is a play on the agri space. The company makes micro nutrients and seems to have good products in the space. Overseas revenues would start to contribute to topline significantly from fy 11-12 onwards and boost profitability. cmp 117-119, Conservative estimates for FY 11 are for eps of around 12-14. Valuation grade around 7, conviction around 8
3). **VST Tillers **cmp 439 This is a market leader in its space of tillers and now concentrating on small tractors. FY 11 eps likely to be around 55-60, very high ROE, excellent balance sheet and valuation comfort of land value at Whitefield in Bangalore. Valuation grade 9, conviction grade 10
4). **Globus Spirits cmp 158-159 **This company currently is into bottling for bigger players but has plans to launch its own brands and establish them in the markets. FY 11 EPS could be around 15-18, but real growth would start from FY 12. Management has maintained good balance sheet while concentrating on growth. Valuation grade around 7, conviction 9.
5). **Intl Travel House cmp 210 **This is an ITC group company which is into travel as the name suggests. Bulk of revenues comes from its car hire services but the management is now focussing on MICE segment for future growth-- meeting, conference, entertainment etc where there dont seem to be too many established listed players. Good debt free balance sheet and strong parentage. Valuation grade 7, conviction 9.
Besides these, I am looking at some large caps namely IDBI bank, IDFC, LIC HF, EssDee Aluminium and Mah Seamless for building up some positions in relatively larger caps. I am still observing the correction in these stocks and want them to stabilise before taking the plunge.