Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Companies one can buy in 2011

with 54 comments

I like several ultra micro caps right now but I cannot disclose them for several reasons, including I am not invested, they require active monitoring, their inclusion has to be balanced from a portfolio perspective etc.

The ones I feel can return 20%+ cagr over next two – three year period if bought as a portfolio are:

Gandhimathi Appliances
LIC Housing Finance
TTK Healthcare and Prestige, both
Gujarat Reclaim and Rubber Products
Globus Spirits
AK Capital
SB of Travancore
J & K Bank
Panama Petrochem
Astral Poly Technik
Photoquip
Cravatex
Page Industries
Wim Plast

I do NOT think Simran Farms should be averaged for those who asked. Seeking change just for activity can cause more damage than benefit, best stocks may be the ones you have and know a good deal about. I also feel that no stock should have more than 20% weight in portfolio, of course I do not comply to it myself on occasions🙂 AK Capital and Panama Petrochem can surprise on upside, LIC HF is strongest of all.

All the best

Written by amitdipsite

March 26, 2011 at 8:59 pm

Posted in Uncategorized

54 Responses

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  1. Why Cravatex not in the list?

    Azmath

    March 27, 2011 at 3:18 am

  2. Photoquip, my biggest equity holding as of today was also not in the list. This is apart from what I have already mentioned because several people emailed me to post a few stocks. I've added them both now.

    Amit Arora

    March 27, 2011 at 5:01 am

  3. Glad to see J&K Bank and Globus Spirits here. I hold both of them.

    TTK Healthcare appears to be most interesting of all with brands like Eva and Woodward's among other things in the package. With market cap of 322 Crs it doesn't appear too expensive, considering that they have done very well in the last two years and once might expect them to continue the performance as there doesn't seem to be any cyclical nature in its business.

    MG

    March 27, 2011 at 5:10 am

  4. I do like AK Capital too – sustainable business and with good margins but am researching on the Promoters part of it…some integrity issues seem to be cropping up.

    Kiran

    March 27, 2011 at 7:15 am

  5. Hi Amit,
    From a valuation perspective don't u think Page industries is over valued?

    Vignesh

    March 27, 2011 at 8:10 am

  6. Page Industries is not at all over valued. March 2011 EPS of 60 and 35% projected growth makes it look quite reasonable.

    Amit Arora

    March 27, 2011 at 8:23 am

  7. glodyne already more than 23 baggers since its IPO looks the same even today.

    pradip

    March 27, 2011 at 8:54 am

  8. Hi Amit,

    I this current Bull run…..everybody is crazy on Consumer related sector as if India as lots of money and as of no problem exist in this country.
    I strongly feel this sector will soon go into hibernation once this bull run end and all these stocks with gr8 business at crazy valuation will lying damn cheap.Its better to wait patiently and stop predicating future, because future is always full of uncertainty and might provide us with loss of capital.

    Regards,
    Vikas

    Vikas

    March 27, 2011 at 11:43 am

  9. Hi Amit,

    Had a closer look at TTK Healthcare. My conclusion is that the business is not as cheap as it appears and one might wait for corrections to enter this.

    1. Woodward's is a brand from SSL International Plc (now part of Reckitt Benckiser) and there must be some kind of licensing agreement between TTK and SSL. Also brand extension of Woodward's might not work well since they are into a very niche product and regular baby care products already has players like Johnson & Johnson with a firm foot.
    2. Eva operates in a very competitive landscape with brands like Rexona, Fa and Dove already taking market share.
    3. The business of contraceptives where they are market leaders in India (they manage Durex and Kohinoor) are under TTK-LIG which is a closely held company and TTK Healthcare is only involved in product distribution. Here again the trend seem to be purchasing these products online and one might not really gain much being a distributor.
    4. The Heart Valve products and medical devices is understood to be smaller business units and does not influence the bottom line in a meaningful way.
    5. Looking at the way the group companies are structured it appears that they have kept the juicy ones as closely held (SSL-TTK and TTK-LIG) and only listed the ones that were capital intensive.

    MG

    March 27, 2011 at 2:42 pm

  10. Hi Amit..

    Dont you think Jubilant Foodworks too deserves a place in the above list??

    sandeep maddali

    March 27, 2011 at 7:10 pm

  11. Sandeep,

    Jubilant Foodworks is looking good man.

    The list is just indicative portfolio. Making money in stock market has never been easier than in India.

    Amit Arora

    March 27, 2011 at 11:09 pm

  12. Vikas,

    Would you be happier if I remove expensive TTK Healthcare and Page from the list and add Mayur Uniquoters and WIM Plast in the list🙂

    This way with each opinion list will change infinite times🙂 Its just an opinion at a point in time. I understand if anyone else's opinion is different, we all don't have to savour same flavour of ice cream, its okay..

    Amit Arora

    March 27, 2011 at 11:18 pm

  13. Hi Amit,

    I didn't meant to prove your list as wrong….i was just trying to pin point the expensive part at which the companies are trading.
    All the companies you have mentioned above are without doubt gr8 companies with all having moat in it. Wht i meant earlier was these are gr8 companies but not gr8 stock which will help us earn money as there are less upside and huge downside.
    You are a good analyst and i have always learned some or the other things from you.Please consider it as just an opinion.

    Regards,
    Vikas

    Vikas

    March 28, 2011 at 1:19 am

  14. I Agree, it will be difficult to get a 3 bagger or even a 2 bagger in any 365 day period from Page or TTK Healthcare but it is possible to hit a 3 bagger within a year from second rate stock like Superhouse Ltd. Its a matter of restructuring portfolio for Alpha😉

    Amit Arora

    March 28, 2011 at 2:07 am

  15. sir in ur list u have missed relaxo foot wear sir

    vijayawada

    March 28, 2011 at 3:27 am

  16. Hello Amit,

    What is your opinion of JHS Stevangaard Labs which is into contract manufacturing having Mcap 95 crores and EPS(TTM) of 9.6. JHS reported an
    89% rise in revenue and 138.88% jump in the net profit for quarter ending December 31, 2010.
    For the 9M ending net sales increased by 168% to Rs. 965.41 million, PAT increased by 263.93% to Rs. 104.74 million and EPS increased by 234.56% to Rs. 7.26.

    Isn't it worthy of being in the list of your recommended stocks. Will appreciate your feedback.

    Amar

    Amar

    March 28, 2011 at 1:17 pm

  17. Thanks for the picks. Will look into them in detail. I would personally narrow down the list for myself to the following:
    > Gujarat Reclaim
    > AK Capital
    > Globus Spirits
    > Photoquip
    > Cravatex

    Why? Because I kind of understand these businesses and have been tracking these closely for the last few quarters. And for some reason believe that these would multiply wealth much faster than most other stocks in the next 3 to 5 years span.

    Thanks again for continuously sharing your thoughts and picks.

    ManishBG

    March 28, 2011 at 4:41 pm

  18. Sir,
    Is there any reason for avoiding Puneet Resin?

    Sho

    March 28, 2011 at 8:27 pm

  19. Hi Manish BG,

    Thanks, sounds good plan, to invest in what you understand. You may actually make more money than anyone else in world in certain stocks including RJ's of the world (remember he sold TTK, Hawkins etc after losing patience or finding something attractive and 30% of his investments are also dud), so makes sense to stick to what you understand and know.

    MG,

    Investment in TTK Healthcare may be premature, which is usually a wrong investment decision, but sometimes a sentence one reads can change life or reveal everything about management intention towards the company. I read something similar. But best to be late..

    Sho,

    I have some Puneet Resins myself. Nothing additional to add there. Have you read about the company ?

    Regards

    Amit

    Amit Arora

    March 28, 2011 at 8:43 pm

  20. Added WIM Plast, building brand, potential market is big.

    Amit Arora

    March 28, 2011 at 11:55 pm

  21. Amit,
    TTK Healthcare in news. They are in preliminary talks with Clorox for a JV (http://www.mydigitalfc.com/news/ttk-healthcare-talks-clorox-set-jv-356). Clorox owns an array of household brands in the US and other countries. It currently trades at 37 times earnings on NYSE.

    MG

    March 29, 2011 at 7:56 am

  22. I dont have holding in any of these stocks in my large portfolio. I think i need to have a look at these.

    mith_the_great

    March 29, 2011 at 11:59 am

  23. sir..

    the above provided scripts are a mix of small and mid caps..and one is large cup also. apart from the above i would like to know few micro caps like photoquip,cravatex etc.. which have got great potential in them. Would be really glad if you name a few.

    sandeep maddali

    March 29, 2011 at 7:45 pm

  24. Can you please address me as Amit, there is no need of Sir, thanks in advance.

    As I buy micro caps, I'll let you know.

    Regards

    Amit Arora

    March 29, 2011 at 7:53 pm

  25. Hi Amit,
    I am sure you must be having a very good reason for recommending Panama Petrochem. I am just a beginner and have benefited from your blog.

    My findings on Panama – yes, this is a good company going dirt cheap at PE of 3.6 – Cash component as of 31 March 2010 constituted Rs.51 per share. Product profile and fundamentals are good but the only thing that is a bit worrying are the Contingent Liabilities which stood at Rs.99 crores which effectively constitutes roughly 7.5 years of company’s profits! Too scary. But pray that the contingent liability [ whether relating to Excise, Sales Tax SCN’S or whatever does not devolve on the company)

    Request you to let us know your findings please.

    March 29, 2011 8:09 PM

    Amar

    March 30, 2011 at 3:11 am

  26. Hello Amit,

    Any pointers on JHS Svendgaard Labs? Markcap of 95 crores and EPS of 9.6. JHS reported an
    89% rise in revenue and 138.88% jump in the net profit for Q3 FY11.
    For the 9M ending net sales increased by 168% to Rs. 965.41 million, PAT increased by 263.93% to Rs. 104.74 million and EPS increased by 234.56% to Rs. 7.26.

    Recently a US-bases PE got 15% of it.
    Also, SBI MF is invested.

    Please tell us what you think.

    Arvind

    March 30, 2011 at 5:33 am

  27. JHS on first look appears fine. Risks are rejection from a big client and increase of capex to scale up operations. Positives could be its own line of products if they command brand name, market size is big for its products.

    Amit Arora

    March 30, 2011 at 7:53 am

  28. Hi Amar,

    Good question. Of all the things to dislike in AR, Contingent Liability is nothing to worry about it's industry norm in petrochem imports. The Issuing Bank on behalf of Panama Petrochem sends payment to supplier of Oil via letter of credit. The liability may never arise but if Oil is supplied by vendor to Panama Petrochem then money paid by Bank has to be made good. Its for goods in transit sold to Panama.

    Regards

    Amit Arora

    March 30, 2011 at 8:12 am

  29. Hi Arvind,

    To add my 2 cents for whatever its worth, I like JHS Svendgaard. If I could define the idea in the simplest terms according to me, JHS Svendgaard could be to contract manufacturing, what Infosys has become to outsourcing. Am also invested quite heavily into the same.

    Regards.

    ManishBG

    March 30, 2011 at 9:44 am

  30. dear arora sahab,Write something about discounted cash flow method of valuing stocks

    vivek srivastava

    March 30, 2011 at 2:39 pm

  31. ManishBG and Arvind,

    The difference between Infosys and JHS being, relatively cheaper and dispensable human labour vs costly depreciating machinery. Fact that comparison is made with Infosys is a big deal.

    Vivek🙂,

    Fortunately I don't have to write on DCF

    http://www.google.co.nz/search?q=discounted+cash+flow+method

    Regards

    Amit Arora

    March 30, 2011 at 7:07 pm

  32. Glodyne seems to have more potantial than Infosys to me . Dr.Pradip .

    pradip

    March 31, 2011 at 7:12 am

  33. Amit,

    Totally agree with you on JHS and Infosys. But both models have their own pros and cons. The irony being I have been into branding of IT and tech companies for the last 14 years. Have worked with most of the Top 10 Software and Top 10 BPO companies of India. So know this business too well, and actually despise it, after having seen their internal workings so closely. To me personally most of these companies look like a sham and leave me wondering as to how they are making any money at all. Its shocking as to how inefficient and indecisive most of these companies are. And they way they overbill / over charge their clients is not funny. May be its like the case of “grass on the other side appears greener” or “I am too close to the whole industry to see the big picture”. For example the costly depreciating machinery do not have a mind of their own and no attrition issues. Which is a very large issue with relatively cheaper and dispensable human labour. Plus if and when this over billing / over charging issue is ever exposed, it would definitely be comparable if not bigger than the scam investment bankers and brokers run by selling their clients products on which they make larger commissions rather than what is actually good for the client.

    To sum it up I completely agree with you that while the exact comparison I may have made might be wrong, but I was just trying to give a metaphor. Sorry if I have overstepped my use of this forum or misguided any of the respected readers here by my personal opinion.

    Regards.

    ManishBG

    March 31, 2011 at 2:21 pm

  34. Hello MG,

    I checked on TTK Healthcare on BSE and they clarified following news regarding JV with Clorox.

    TTK Healthcare Ltd has informed BSE that:

    “It has been brought to our notice that a section of the Press Media has reported that TTK Healthcare is in talks with a multinational Company for a JV in the Household Cleaners Segment.

    This report is speculative and there is no basis for the same.”

    Regards,

    Amar

    March 31, 2011 at 2:41 pm

  35. JHS looks like a promising story. Niche area and largely untapped market. However what's the view on the recent diversification into laundry (for P&G) and hygiene products (hand sanitizers etc.)? Oral healthcare seems to be have been their focus all these years. Is the company losing focus by expanding too early or is will this expansion into the wider FMCG segment be for the good?

    Investor

    March 31, 2011 at 3:20 pm

  36. Dear Manish,

    Interesting points you bring in comparison. Niche manufacturing is a nice place to be in. Is JHS really manufacturing equivalent of 25% of India's tooth brushes ?

    I have also seen similar abuse in IT industry in terms of billing. Some companies charge 5X the amount they pay as salary for no value addition. At max they would send their employees for training couple of weeks in a year and a seminar or couple. Seriously, whats wrong with this world ? Where are competitive forces ? I too wonder. IBM would pay 90K but charge half a million to give additional satisfaction to big corporates. Very early in my career I decided to never venture to be an asinine manager or aim to rise in corporate ladder, driving a bus and owning a fleet would be more productive alternative. Being born in salaried middle class family its hard to break the mould and be iconoclast. But I clearly used to think of running a HALWAI shop as early as 10 years old. My mains issues at the time on mind were, how would I hire proficient cooks🙂

    No Man, you are free to be your own funky self and use any comparisons fearlessly as long as its without personal affront to anyone. You have all the right to advertise, publish in newspaper or scream at top of lungs from rooftop on any script🙂 This is just a blog not any forum with rules.

    Its the responsibility of buyer to conduct due diligence or invest in Mutual Fund. After all the profits and losses are personal. Amar Remedies in similar place and owns brand but has higher debt.

    Kind regards

    Amit Arora

    March 31, 2011 at 8:08 pm

  37. Hi Amit,

    You are right, they are manufacturing quite a lot of tooth brushes. They have an installed capacity of about 300 million tooth brushes. Even if they do not already do 25% they are geared to reached the same soon. They cater to lot of of retail, FMCG and pharma companies such as Cipla, Big Bazaar, Elder, Lavoris (of US) and the likes.

    Additionally, they had set up a detergent manufacturing facility to manufacture about 10,000 tons of Tide every month for Procter and Gamble. The plant would be manufacturing 17 variants of Tide detergent. They have already started using this plant since Dec 2010 or so, though still not running at full capacity.

    Plus the opportunity seems enormous – beyond what we can think or visualize. What has started as dental care and detergents today, could be just about anything such as beauty, skin care, shaving, and so on tomorrow.

    Regards.

    ManishBG

    April 1, 2011 at 4:49 am

  38. NASSCOM has projected IMS revenues of 75000 crores for Indian companies by 2013. It would not be unreasonable to expect Glodyne to get a small fraction, say 5000 crores out of this.This can result in an eps of around 700 on 10 rupees paid up ,(now post bonus 1:1 and split to 6 rupees). Doesn't that sounds too good to be true?Yes but wealth can be created simply..Glodyne has already started the journey and yes again it seems to be the beginning of the journey.Dr.Pradip.

    pradip

    April 1, 2011 at 9:17 am

  39. Hi Amit,

    Two more interesting things on JHS Svendgaard. First, it counts some of the marquee companies in the oral care, retail and FMCG industry as its clients. Second the company operates primarily from two facilities. And both these facilities are in SEZs (Noida and Himachal Pradesh) which make them eligible for various tax benefits and subsidies.

    The company enjoys the status of preferred supplier for oral products for various national and global companies. The company also supplies products to several leading pharma companies – manufacture of AM PM mouthwash and tooth brushes for Elder Pharma, tooth paste under the brand name “Lavoris” for Evergreen of USA, tooth paste and mouthwash for Cipla under their brand “Sefdent” and tooth paste branded Close-up for Church & Dwight of USA. The company has also licensed India rights for “Infectiguard” the third largest brand hand sanitizer brand of US. In the retail segment the company has been manufacturing tooth paste branded as “SACH” for Big Bazaar, the largest retail chain in India. Big Bazaar sells SACH brand across all their retail outlets. And after the contract for manufacturing Tide from Procter & Gamble, the company is now expecting more orders for manufacturing tooth brushes and other FMCG products such as Shampoos and other skin care products for them.

    Coming to the manufacturing facilities, the first one is situated out of a Noida based SEZ and is 100% export oriented unit. This makes the facility eligible for duty free imports and other tax benefits. Additionally, there are also benefits such as single window clearance for exports, saving time involved in customs clearance and hence resulting in faster execution of deliveries. The second unit is Kalaamb, Himachal Pradesh. This unit has the same advantages as the Noida unit, and also stands to gain from the industry friendly policies of Himachal Pradesh state. The most significant benefits being 100% excise exemption for first 10 years, 100% exemption from income tax for first 5 years and 30% for the next 5 years. Plus the unit also enjoys 15% capital subsidy on processing machinery and lower power tariffs. These strategic benefits provide a great competitive advantage to the company in addition to higher operating margins and post tax margins. Its anyone's guess as to what these advantages could do to the earnings of the company.

    Thanks and regard.

    ManishBG

    April 5, 2011 at 6:46 pm

  40. Thanks Manish for your detailed comments on JHS,

    There is another company in a similar space, though not very small now, called Vivimed Labs into more of skin/personal care and bit of oral care. Contract manufacturer like JHS.

    Women will spend *all* their money on these products, jewelery etc. Okay I's exaggerating, not *all* but most🙂 As much as we may hate unproductive gold asset, India continues to defy gold consumption.

    http://www.vivimedlabs.com

    Regards

    Discolsure: I am not invested as of today in Vivimed.

    Amit Arora

    April 5, 2011 at 9:30 pm

  41. i think the way you all discuss and study, i would like to draw your attention to TRITON VALVES.it fits in your psyche, Amit ,a microcap idea seems to be a perfact match for the portfolio you like, Dr.Pradip.

    pradip

    April 6, 2011 at 5:22 am

  42. Dr Pradip,

    Thanks. Please note the comments here

    http://multibaggersindia.blogspot.com/2011/01/result-season.html

    Comparison was made with Light Grids

    Regards

    Amit Arora

    April 6, 2011 at 6:34 am

  43. Hi Amit,

    Thanks for the info on Vivimed. Have been tracking this one too for a long time, but as you rightly said its larger. So like JHS more. Plus will get into Vivimed when it comes down to better levels. Not comfortable at its current price point. But all in all, I like the company.

    Regards.

    ManishBG

    April 6, 2011 at 10:56 am

  44. Hi Amit,
    Did you notice the promoter;s stake has reduced by more than 10% in Gandhimathi Appl Ltd. Any idea what could be the reason for it.

    Regards,

    Amar

    April 12, 2011 at 1:54 pm

  45. Hi Amar,

    My understanding is that its due to merger with group company to which would otherwise take holding above SEBI prescribed limit of 75%

    Regards

    Amit Arora

    April 13, 2011 at 7:25 am

  46. Hi Can you comment on Zydus Wellness Ltd.
    The EPS Growth Rate above 90% in previous 3 years They are Specialized in creating high quality researched Branded Products (EVERYOUTH, SUGARFREE etc)
    Many International Healthcare Giants holding shares of the company . Promotors hold 72.54%
    17% by institutuion sincluding FII and general public 10%. LIC holds 5%.

    My name is Anil James you can mail me at anilachayan@rediffmail.com.
    MArket capital of 2,423.71 crores

    Anonymous

    April 15, 2011 at 3:16 pm

  47. You have already done you research on this half a billion $ company🙂

    My comments: I don't look at EPS growth in isolation, I look at Sales growth and that is appearing more in 25-30% range. Stock price will only compound at sales growth rate over long term. I don't pay above 30PE multiple for 25% grower.

    Amit Arora

    April 16, 2011 at 12:14 am

  48. Hi All,

    “cravatex is brand licensing for FILA” is that means all the exclusive showroom are under cravatex

    Please clarify on same

    vishal

    April 21, 2011 at 8:21 pm

  49. Hi Amit

    According to my research Can Fin Homes can touch 500 in next 4 years. http://www.canfinhomes.com/
    They already recruited 30 Probationary Officers
    and are recruiting 21 Marketing Officers and opening 6 New Branches.They have plan to recruit more Marketing Officers in coming years.Their Annual Sales should touch 1000 Crores in next 4 years and 70 Rs EPS.
    I think it is a good buy @ 107 Rs and can be accumulated on dips.

    Thanks & Regards
    Manjunatha.

    Manjunatha

    July 30, 2011 at 7:56 am

  50. Hi All,

    Note it that “Wim Plast” is going to a multi multi bagger company within a very short period of time. The reason, its is debt free company, expansion plans, sustained earning, good dividend paying and above all strong Management. Take it and forget it. It could touch any high…………

    Shashi

    October 27, 2011 at 11:55 am

  51. Hi Manjunatha,

    CAN FIN Homes will not be able to touch 500 in four years, they will need massive equity dilution to do that CAR is not very high.

    Shadhi,

    Noted your point and enthusiasm !

    Regards

    Amit Arora

    October 27, 2011 at 7:56 pm

  52. Hi Amit

    It seems you are right about Can Fin homes.
    My logic was Can Fin homes will get big benefit from Canara Banks growth in next 5 years.But I feel it is a good stock with limited downside which can give 25% CAGR returns over next 5 years.

    What is going to happen for Kingfisher Airlines ? http://www.bseindia.com/shareholding/shareholdingPattern_60.asp?scripcd=532747&qtrid=71.00

    6 Banks hold around 19% of the equity.

    Whether one can buy small quantity if it trades at single digit ?

    Thanks & Regards
    Manjunatha

    Manjunatha

    November 13, 2011 at 7:03 am


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