Type C Businesses: building blocks laid for disproportionate future growth

Investing Strategies
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A super new concept introduced recently to ValuePickr by Mr M in the ART of Valuation thread. Many members have acknowledged this could be a powerful aid/mental model to possess in our search to up the ante - at becoming more refined investors.

Let’s dedicate this thread to taking forward Mr M’s gift. Folks have already started throwing examples that according to them can fit Type A+. Here’s hoping we have some very enriching debate/discussions that lead us to logical conclusions :slight_smile:

In Mr M’s words

I sort of mentally slot where the stock belongs to - what I call as © Laborious stocks (B) Average stocks and (A+) Smart stocks.

The origin of doing so has something to do with school or hostel days where all of us have classmates of different types.

You have very studious and extremely hard-working guys who generally do well in a class directly proportional to their study hours, night-out effort and time. Rank toppers & gold medalists generally come from this segment. Most disciplined & regimented guys also come from here. Some of the dumbest guys are also placed here because of family & peer pressure etc. they keep slogging with poor results. All these areLaborious stocksa Type C. They typically constitute 20-25% of the universe.

Then you have guys who are average studying types, will make same mistakes whenever faced with a googly question in the exam or viva. General tastes, fashion, fads etc. You wonat find any Sachin Tendulkars here. These areAverage stocksa Type B that typically constitute 60% of the universe.

Then you have few who study little but are actually much sharp, fast grasping power, excellent subject understanding of fundas and output they deliver_in relation to the inputs gone in_. Iam referring to only fair study means, no shortcuts or hanky panky stuff. These areSmart stocksa Type A+. They may not be rank toppers and sometimes they can even be laid back but my experience shows they have done fairly well in life (not always in conventional sense of the word). May be when you think back, youall find some real life examples.

It is this Type A+ a Smart stocks that I always look for when scanning emerging stocks that are yet to arrive (in terms of marketas institutional discovery and consistency of results) but have some advantage. Scale up, Network effect and expanding of moats are easier to achieve with this Type C stocks.

Pardon my saying but most of your ValuePickr stocks are the Laborious types including Manjushree, Vinati, Mayur, Balkrishna, GRP, Indag, Astral etc and even Kaveri that you are putting in A+ category. There is nothing wrong in being with laborious stocks and with right traits they make very good money so long as they preserve their traits just like gold medalists and most disciplined guys display. Mayur is a case in point. HDFC bank is a very laborious stock and very disciplined at that, so they can be really rewarding if you find them early and they themselves donat goof it up.

Ajanta Iall not comment as I donat understand it well.

I can slot PI in Type A+ where results can be disproportionate.

Last year, Alembic was a very easy Type A+ and we made an easy kill there, doesnat always happen. Two Type A+ that Iam betting on at the moment are JB Chemicals and Accelya Kale, though from much lower levels. One Type A+ where Iave_probably_gone wrong is IL&FS Investment Managers.

While dealing with Type A+ Stocks, one important caveat is that management quality & integrity should not be suspect. Second is when analyzing such a stock, we should be looking at the outcome of big would-be picture. Third is we should have a handle on the right metric to value such a business, not necessarily the PE or PB.

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And P Sharma’s words summarising the key takeaway from above, beautifully.

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A very interesting discussion. It is also very interesting the analogy of various kinds of students being compared to various kinds of companies.

My takeaway from this analogy is that we should look for companies which have laid the building blocks for disproportionate future growth. Laborious stocks will produce a rupee worth of incremental growth for the extra rupee of incremental input. It is not a one to one relationship but an extra rupee wouldn’t produce two rupees of incremental growth in this category.

Smart companies will produce disproportionate growth. This is a moat type company which will be able to rapidly expand because of its brand, IP or network.This is not very different to smart( moat as one is usually born this way) students who have a great grasp of the fundamentals and can combine diverse disciplines to answer complex problems. PI and Polymedicure clearly are in this group. Having built the base e.g Poly medicure can have a disproportionate growth if some large OEM order comes in. Another stock to be included in this category is Amararaja. It has done the hard work of building a dealer network and brand building. It is in the process of expanding capacities.It will capture a larger part of the market share with lesser incremental effort as in a two cornered fight, the spoils to the winner are disproportionate.

A great beginning to a very enriching discussion.

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Not to forget Subash Nayak, who was ready to get into the thick of it, immediately.

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I can clearly see why PI Industry should be in “Type A+” category, especially because of its CSM business, which we all know has a huge order book (for next 3-4 yrs), is sticky nature as its customer dont change CRAMS partner unless in extreme situations, is based on high trust environment. Plus the cashflow generating out of CSM business can be used for building new plants in CSM segment, and boosting agrichem business, which we know has huge potential in future.

What I don’t get is why Alembic was a “Type A+” stock (I am invested in it from 100 level, and it was a pure undervaluation play for me), and why JB Chem/Accelya are “Type A+” stocks. May be you can get reasoning for these 3, so that we can get the framework for identifying “Type A+” stock.

Also why “ILFS Inv Management” was a “Type A+” stocks and why it failed. As per my knowledge it was the only listed PE firm (and hence a concept stock), and it failed because of its investment in Real Estate cos.

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Dhwanil too was quick on the take :slight_smile:

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The whole idea of Type A+ stock and comparison with “smart” student is very interesting and conveys the central idea so effectively! It is pleasure to learn the diversity of metaphors and mental models successful investors use!

My hunch is that many of the Type A+ stocks will be clouded by uncertainties. It is important to distinguish between uncertainty and risk. Uncertainty does not ALWAYS mean risk! However, market more often than not ALWAYS considers uncertainty as risk.

For example, JB Chem which decided to keep large chunk of cash on the books created an uncertain environment where investors and market were not sure how and when the cash will be deployed in the business. But management made it clear that cash will be deployed for the growth of pharma business. However market was still looking for “proof” and in absence of proof it discounted the value of the business heavily. As management started walking the talk, and slowly but steadily started deploying cash in business, market has started to realize that “perceived risk” no longer exist or the odds of risk materializing is low. Eventually, it will give “due respect” to hard cash…! Same is the case with Piramal. At current price of PEL, one can get exposed to number of positive black swans and a share in high quality businesses on extremely favourable terms . Having said this, senior investor is so right in saying that management integrity is absolutely must in some of these situations. Market is full of value traps where “uncertainty” has materialized into risk due to lack of management integrity.

The whole idea of investing in Type A+ stock can be very very rewarding! So, again great concept.

In the wake of recent actions taken by FMC of

-marginalizing FT representation on board

-clear indication of no financial liability for MCX on account of NSEL

-Today’s FMC order asking FT to reduce its stake from 26% to 2%

Can we consider investment in MCX Type A+ opportunity? MCX (or for that matter any DOMINANT exchange" in general) is a very high quality business with expanding moat (network effect as “winner takes all”) which is still scratching surface in India. Can we systematically understand the current uncertainty and its repercussions to evaluate whether there exist significant risk or not. But I will take that up separately on MCX thread.

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And here’s Vinod MS’s take

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Type-A+may not be exactly related only to Moat/IP. It looks like a high conviction+high undervaluation concoction. The larger picture may be just hiding out there like the example of Warren Buffet’s investment in American Express.

Shilpa looks like a Type-A+. I had placed JB under opportunistic bet, but looks like it can turn out to be more than that especially if the company can keep building brands like Rantac.

Symphony was surely a Type-A+at 270 levels and maybe even now.

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Fascinating discussions on the ‘Art of Valuation’ thread.

I have a fundamental question though - and hence starting on this thread than ‘Art of Valuation’ thread.

Classification of businesses into Type A+, B, C (or Laborious/Average etc.) is a fantastic mental model.

Before answering ‘What constitutes a Type A+ business’ (which of course most of us are eager to find like the ‘next TTK’ or something), I think we also need to answer, more fundamentally, why should we invest in Type A+ businesses and if a Type A+ business is intertwined with valuations?

With the valuepickr portfolio, we have demonstrated that Type A/B businesses also generate superior return over 3-5 years (> 25% CAGR - superior return in my mind). So, why should we think and invest in Type C businesses (of course, I am looking for more specific answers than ‘let’s take it to the next level’). Are we moving towards the spectrum of Type A+ businesses because they would continue to provide superior return for a long time or is it because there are lesser variables to track or is it because we expect multi-fold return in the near-term or is it because they are stocks for all seasons - bull or bear or any other reasons? Why should we move away from A/B which we do quite well, and move into A+?

Secondly, is a TypeA+business intertwined with valuations? For example, let’s take a valuepickr pick - Astral Poly. At 8 P/E and when they were expanding their dealer network to multiple parts of India in 2010-11 period (than just Gujarat), they were laying building blocks for disproportionate growth as we are seeing today. Does that mean that Astral Poly was a TypeA+business in 2010-11 and it is not a TypeA+business right now? (Of course, it also leads to the question of how can we track A/B type move to A+type etc., but that’s a more involved answer - am looking for more fundamental answers on why than what)

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Hi Kiran,

I am not sure why most people are missing P Sharma’s beautiful summary and takeaway from the TypeA+Mental Model introduction. I will not tire of re-iterating this again & again.

>>My takeaway from this analogy is that we should look for companies which have laid the building blocks for disproportionate future growth. Laborious stocks will produce a rupee worth of incremental growth for the extra rupee of incremental input. It is not a one to one relationship but an extra rupee wouldn’t produce two rupees of incremental growth in this category.

Re: Why

Please read this again for the full import. And ponder. If you were invited with open arms, where would you like to be ideally placed in? In a business that produces input x disproportionate performance, or one that produces a more linear performance.

No one is downplaying the solid Astrals or Mayurs. Mr M has made it very very clear - those holding solid labourious businesses from lower levels should not get discouraged. These too can prove equally good over the long term as any Type A+ business can. But Laborious businesses have to keep working extra hard to stay ahead, right. Type A+ businesses due to disproportionate growth returns are in a much easier position. They work smarter but need to work less to stay ahead. laborious businesses may not have that luxury!

We need the solid, industrious types in our portfolio for sure too. Just as we need the Opportunistic bets. But which type would you prefer more of in your Portfolio?

And if you could catch a solid laborious type and a solid TypeA+in both their nascent stages, say at the same time - where would you allocate more Capital??

To me that answer is obvious :slight_smile:

Re: Ultimate Valuations: will they be any better?

Think one needs to spend some time pondering over above first - and then look for historical price cagr evidence.

there are many examples around :slight_smile:

** why valuations? **

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I think it would be further interesting to discuss individual cases of companies where one feels that the company belongs toA+category of business…

There are some lazy companies out there like jb chem, fdc, hawkins etc which till now have done nothing but some or other trigger might unlock the hidden potential.

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That is the idea for this dedicated thread.But its good to clarify things at the start like Kiran is doing, before diving headlong in. such discussions will help bring home the concept quicker and will benefit others who join in later.

Some examples have been made above. I am hoping the dissection get kick-started soon.

Who’s the most passionate about his TypeA+idea? The floor is all yours :slight_smile:

toA+category of business.

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Donald

Mr.M has nudged us to find co’s which are at the cusp of exponential growth… Believe we can find most of them in an industry which itself is nascent and some smart co’s which can leap ahead in a mature industry as well (Pointed by many esteemed members)…

Then most rewarding will be to catch them young, stay until they transform into Type Aand stick to them through thick and thin if they reach even A+…

Have i grasped it properly or missing the core…

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Its discussions like these which make Valuepickr stand apart. Honestly despite all money made in the markets and all experience, I am feeling very small in front of everyone here. Such clarity, such thought process. Hats off.

A special word for Donald : Ur a great admin. Kudos to you.

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Mallikarjun,

Okay I get it now - the confusion is coming from ValuePickr existing terminology of B category, A category and A+ category in an improving hierarchy, A+ being the best.

Whereas Mr M termed C type as the best businesses of the lot - somewhat in reverse order. if you read carefully though, he has mentioned that our A+ businesses are a subset of his C type business.

Hope your confusion is over now! His categorisation is unrelated to ours. Just take the central concept about laborious business (producing results linear to inputs) vs smart business (results disproportionately huge compared to inputs).

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hello,

wonderful discussion in progress.

would like to suggest 2 ideas

panasonic energy ( rs.46)

  1. 56 cr dry cell battery pieces sold last year. Pan India distribution set up, 2 factories, well depreciated assets

  2. gaining market share by approx 1% every year last 3 years

  3. 34 cr m/cap , zero debt , approx 11 cr cash

  4. zinc prices have been soft

  5. Raised selling prices 3 - 10% over the last 4-5 months.( others including eveready too have increased) . This is is the 1st increase in last 6/7 years

  6. battery market per se though demand in elastic has been stagnant for many years. Present growth helped by larger base of in use gadgets & also digitization ( more remotes)

  7. chinese import threat has died a natural death as market has rejected due to poor quality & performance

  8. high fixed costs ( largely personnel ) have been dragging PAT.

  9. operating at about 50-% capacity utilization

  10. only manufacturer of AAA batteries in India…eveready, nippo source from them. AAA is the fastest growing sub segment within batteries

  11. sales growth can lead to exponential profit growth provided zinc prices dont rise big time or Re depreciates beyond Rs.65 ( price hike taken was considering Re. range of about rs.63-65)

  12. last year Pansonic bought out approx 7% stake from Indian promoters @ 90 / share

Saregama ( rs.68)

  1. licensing revenues grown from 5 cr 10 yrs back to about 115 cr

  2. library of 3 lakh songs - an invaluable asset - CANNOT be recreated

  3. Open magazine ( subsidiary ) advances dragging down profit. B/S cleaning in progress

  4. TV serial division turned around last quarter. Even if this maintains break even going ahead, will help tremendously

  5. Phase III auction of radio licenes will increase radio station from 250 to 750

. This will take about minimum 18 months to come on stream

  1. debt netted off by investments in CESC

  2. EV about 120 cr

would be happy to reply to comments or queries if any.

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Thanku Donald…Hmmm to choose/allocate capital to the best among the best (A+) whereoutputs are/will bedisproportionate vis-a-vis inputs… ala Polymedicure…

(Since haven’t thoroughly studied PI, Accelya or Amara Rajafound it tough and got mixed up)…

Regards

mallikarjun

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One of the first companies that comes to mind about disproportionate high quality growth is SYMHPONY.

Reasons for the same:

Industrial coolers segment which is a huge market by itself and is dominated by unorganised sector presents a huge opportunity for the company to grow… It has done a good start and in around 3 years has notched up sales of 54 crores in fy 13… This again is an asset light kind of business. And here also management has clarified in AGM that they wont compromise on margins in a bid to garner sales.

The subsidiaries which till now were dragging down the performance of the parent company now are likely to add to profits. Atleast thats the sense I got from attending AGM.

Window air coolers is the next growth avenue for the company… They manufacture it both in metal and non metal variants… Here the aesthetics and design capability of the company is likely to propel growth.

Air coolers by itself… the bread and butter business is doing quite well and company aims to increase its distribution network further… Plus they also aim to focus on exports to various geographies.

Some other key attributes are:

Company is market leader by far in an emerging line of business

There is likely to be shift of preference from unbranded to branded products (in all product lines … regular portable air coolers, window coolers and industrial coolers ) and being market leader, Symphony is likely to benefit.

All the production for domestic market is outsourced while that for exports is done from an SEZ with tax benefits.

It generates good amount of free cash…

It has excellent return ratios.

It has a clean balance sheet.

It has a high dividend payout ratio.

It has high promoter holding (no pledging ) with a visionary promoter in Mr Achal Bakeri.

Current market cap is around 1500 crores and company is looking at a huge market opportunity.

Valuation wise one might think it optically expensive based on expected eps of 22-25…

But looking at much higher growth than what was shown in past 2-3 years likely to be shown by the company, I think this company can provide disproportionate returns.

The fly in the ointment is that fortunes of the company of the company are tied somewhat to the severity of summer…

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i think what we are saying is that typeA+business have several factors which are coming together to create alollapalooza effect (effect of all these individual factors together is greater than the sum of the parts). I think charlie munger has referred to this from psychology standpoint and other mental model he has used is - autocatalysis from chemistry.

In addition, market are generally slow in recognizing these effects.

On other scenario where this happens is when an industry consolidates in 2-3 players and the industry is also profitable as a whole. in such cases, a no.2 or no.3 player benefits a lot - look at batteries for that or 3 wheelers.

the reverse is telecom where the industry fragmented and the profit pool shrunk with higher competition

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What I gather from the illustrations given from TypeA+stock is that these category of stocks exposes the investor to very large upsides with very limited down side. That is if things work out, there is lot to gain, but there is not much to lose. A recent example of a TypeA+Stock to me is MCX . Again it’s a probability game and market is perceiving uncertainty as Risk.

Here are the reasons why MCX at current valuation can be a typeA+stock

)- MCX has suffered large collateral damage in the market due to NSEL event as it has common promoter FT. However, there is no tangible damage to MCX because of NSEL case. Also, there is no related party transaction/relationship with NSEL. So, no liabilities arising for MCX

)- MCX is the largest commodity exchange in India with more than 85% market share. Like for any exchanges, it’s network effect creates “winner takes all” situation. MCX has gone from strength to strength in last few years and inspite of 4 other commodity exchanges operating, none of them have been able to make dent so far.

)- Commodity derivative trade in India has grown CAGR 35-40% in last 5 years however we are still scratching the surface! World over ratio of derivate/physical market size is 30-35 while that in India is 3! So we are lagging by a factor of 10.

)- Though, as value investor, we abhor speculation. However the business created primarily for hedging risk, but thriving on “speculative” urge of humans is steady, very rewarding and largely recession proof! Operating margins of exchanges are in the range of 60-80% and return generated on capital are equally attractive.

)- Very high operating leverage as very little additional cost is incurred with increase in volume and revenue. Moreover, no significant Capex needed for growth, leaving high free cash flows to be distributed back to shareholders!

)- And to top this all, it enjoys float of margin money and security deposits which they are allowed to invest in liquid securities earning 7-8% interest. And as market expand, the size of the float grows!

)- Unlike NSEL, which was not regulated (I was aghast to learn this, but it’s true! There was no one agency overseeing the operations of spot exchange!), MCX is very well regulated by FMC from the beginning. From whatever I have read and learnt about FMC, it seems to be a very effective regulator with hawk eye oversight but very little meddling in the business!

So, In all a perfect high quality business with immense growth potential in the long run! And so market assigned a reasonable valuation of 20-25 P/E to MCX before NSEL. But post NSEL, market is estimating value of MCX @ around 2100 crores.

If we deduct margin money, deposits and settlement guaranty fund, it still leaves with current investment + cash + non current investment (Stake in Dubai Gold exchange, MCX-SX, SME Exchange etc) of around 700 crores on the books. So, net of this, business is available at 1400 crores.

MCX had net profit of 250 crores in FY 13. So it’s less than 6 times FY 13 earning. However it’s better to be devil’s advocate than lose hard earned money! So It’s important to analyze what will change / has changed for MCX?

)- Due to collateral damage, some people would have lost trust in the exchange run by the same promoters (though FT holds only 26%, rest is held by financial institutions) hence people will move away from MCX to other commodity exchanges. If we look at data produced by FMC on fortnightly basis, it appears that there is no material shift from MCX to other exchanges so far. And, if it has not materialized so far, likelihood of that materializing is very less. Though, the volumes on MCX has gone down drastically in last 5 months, but that is due to various other factors such as increase in CTT, restricting trading of some commodities on exchange, change in trading hours and restrictions, rising equity markets which have no relevance with NSEL event. To be conservative, I will assume that volume traded on exchange will be 50% of the previous year.

)- FT held 26% in MCX and was the largest shareholder. Mr.Jinesh shah was Vice chairman and MD was also an FT nominee. However, post NSEL, both have resigned and board is in the process of appointing new MD. Secondly, FMC has acted very swiftly and further improved the governance mechanism by restricting only 2 members on board for anchor investors (FTIL). Majority of board is now represented by FI and independent directors appointed/approved by FMC. Yesterday, it has come out with an order asking FT and Jignesh Shah to reduce stake in MCX from 26% to 2% as they are found not “fit and proper” to hold equity of more than 2%. They also can not be on the board of any commodity exchange. Though, in all likelihood, FT will appeal against this judgement, it will definitely mean that FT will largely be marginalized in decision making

So, If I take pessimistic scenario and assume that volumes traded on exchange will be reduced by 50% and remain at reduced level, still MCX will make around 150 crores a year. This means, at 1500 crores, under most pessimistic scenario, you are paying 10 times earning for a very high quality and scalable business having 50% dividend payout policy resulting in to 3.5-4% yield!

But, in next 10 years, in all probabilities, as we get more integrated with the world trade more progressive policies for financial markets will be implemented. If we reach even 30-40% of world benchmarks on Derivative/Physical trade, volumes have to quadruple!

So, again without getting exposed to much of downside and at very decent valuation, there is an opportunity to make investment in a very high quality and high growth business! Looks to me TypeA+opportunity.

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Excellent thought by all veterans on **TypeA+**company. In my opinion such companies are on a upswing due to a favorable tailwind such as changing demographics, technology etc. **These are the companies who will give disproportionate return for next many years. **The companies who are expected to grow for next 2-3 years and then fizzle out will not fit into this category. **Catching them young will provide huge returns over a period of time, however they will continue to compound for very long even when they become a discovered stock. **Few examples can be Asian paints, Nestle, Page and Gruh etc. Something like Symphony and Polymed can be the next ones in line as these things are known/confirmed only in hindsight.

Now, how to identify them. I am trying to put some points below. Please add if I have missed something.

  1. There is a huge tailwind providing them an exploding demand for their products/services, which can propel them on higher growth trajectory.

  2. Company shares their market with only a few players, the minimum the better it is.

  3. Excellent management who walk the talk and are frugal not flashy.

  4. The financial parameters are excellent and getting better.

  5. Debt is minimal and reducing.

  6. The business doesn’t need much of cash for expansion and hence dividend payout is good or will become good after a size is achieved.

  7. The brand recall is good and getting better.

Regards,

Raj

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Excellent thoughts Dhwanil. I am also studying MCX and have the following counter-points. Hopefully, we’ll get to some reasonable conclusion of why it may/may not be a TypeA+business -

a) A typeA+business as I understand should have asymmetrical returns as well as the ability to compound for a long time (say 10 years)

b) How can MCX volumes (and hence profits) increase? Either by addition of participants or by increasing commodity volatility, enabling major financial participants like Banks/FIs participate in it (and be allowed to do some options). Massive addition of participants looks unlikely. Increasing commodity volatility - well, who can predict it. But would there be say a 20% compounded growth in commodity volumes from here say for 10 years? Difficult to say (in other words, probability is quite less).

I am not denying the fact that MCX may double from here, maybe in quick time (< 2-3 years) (thereby, asymmetry kicks in), but am only saying that to qualify as TypeA+, it needs to compound say at 20% for a long time, which I don’t see happening.

Would love to hear your views. (And of course, can continue the conversation in the MCX thread)

P.S: a) I see very high probability of a HDFC/Kotak or some other player of pedigree taking Jignesh Shah’s 22% stake quite soon and hence the doubler in < 2 yrs argument

b) Volumes in NCDEX have actually dropped quite significantly from 2012 to 2013. I would have thought players would shift from MCX to NCDEX in the face of such a carnage. But nope - the data indicates otherwise. Forget the increase in NCDEX, there has been an average drop of 33% in value on NCDEX (and 31% drop in volume) indicating the moat of MCX.

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Great thoughts again. The two words that have struck to my mind in this entire discussion are:

a) Undervaluation play

b) laying buildng blocks for dispropotionate growth

Now in my opinion and as also expressed by other senior members the stock stories in ValuePickr forum have generally been “Undervaluation play”. In ValuePickr forum I have seen three stages that goes with an ‘UnderValuation play’:

Stage1:

a) Identifying: This is relatively easy. You look at the balance sheet, historical data, screener, pe ratio roe/roce, debt and other data. This data is easily available and even novices like me can figure it out.

Stage2:

b) Confirming the belief: This involves talking to management, analyzing balance sheet for frauds, talking to the distributors, retailers, end users. Generally getting a perception of the management and product. This is a laborious process, less analytical. Most companies do not even pass stage 2. I think the senior members at Valuepickr have taken great pain in this stage and have been consistently right. Personally, I have been horribly wrong.

Stage3:

c) Predicting future growth: This is the trickiest part which requires tremendous amount of business and industry knowledge, a regular interaction with management, assessing market size, competitors, triggers, stock re-rating etc. This is the most analytical part.

Now coming to “laying buildng blocks for dispropotionate growth”. It is pretty obvious that this is a harder problem than undervaluation play. I have a generally different thinking here than most people. The analogy that I have is again building blocks to construct a real building. I do not think these companies will generally have good or great ratios because most of their money would be spent on constructing the ‘building’. There would be a decent amount of debt on books, decent amount of capex (same as loan and capital expenditure on a building construction). Here comes the problem and also the challenge which is that you will find tonnes of companies with such characteristics and how do you differentiate “wheat from the chaff”? I do not have a clear answers to this question but one thing I would look for is when the building is about to complete. Personally I see two companies exhibiting such characterstics

a) Hathway Cable: I think this is already discovered by the market. The stock has given 3x returns in last two years (stagnant in last year though). High debt, would become more exciting once interest levels start easing.

b) Centum Electronics: Had a few bad years where a major client defaulted, but has come back strongly in the last three quarters. In a niche area current ROE/ROCE numbers are not exciting. Good management.

Disclosure: I am invested in Centum.