Porinju Veliyath Recommends Two Multibagger Stocks in Housing & Infra Sector

Porinju knows that novice investors cannot be allowed to venture into Dalal Street unescorted. They will invariably buy junk stocks and burn their fingers.

So, to aid the thinking process, he has drawn attention to two top-quality stocks, namely, Everest Industries and Ramco Industries.

Both stocks are powerhouses with top-quality managements, though they are presently not in fancy amongst investors.

He opined that both stocks will do well given the huge boost that the housing and infra sector is going to get in the foreseeable future.

Everest Industries

About

EVEREST INDUSTRIES LTD – KEY FUNDAMENTALS
PARAMETER			VALUES
MARKET CAP	(Rs CR)		429
EPS – TTM	(Rs)	[*S]	1.60
P/E RATIO	(X)	[*S]	173.75
FACE VALUE	(Rs)		10
LATEST DIVIDEND	(%)		50.00
LATEST DIVIDEND DATE			21 JUN 2016
DIVIDEND YIELD	(%)		0.39
BOOK VALUE / SHARE	(Rs)	[*S]	225.94
P/B RATIO	(Rs)	[*S]	1.23

Pros:

- Company has been maintaining a healthy dividend payout of 24.37%

Cons:

- Company has low interest coverage ratio.

- Company has a low return on equity of 8.46% for last 3 years.

- Contingent liabilities of Rs.136.27 Cr.

- Company might be capitalizing the interest cost

How an investment of Rs.10000 grew to Rs.535 Crores in 34 years

Courtesy: getricher.in

If I had the technology to send a message back in time, I would tell my father in 1980 to “Use Rs.10,000 to buy 100 shares of Wipro as an one-time investment and never sell it for the next 30-35 years.” If he had done that his investment would now be worth about Rs.535 crores. Yes, you read that right. Crores, not thousands or lakhs.

Rs.10,000 to Rs.535 Crores

Lets just assume that you bought 100 shares of Wipro each at a face value of Rs.100 in the year 1980. Total investment: Rs.10,000. You don’t touch it at all, no profit booking or buying more shares. Occasionally companies provide benefits to its shareholders by way of corporate actions. They could provide bonus shares for shares that you hold, they could do a stock split where a high face value share would be broken down into smaller face value shares but number of shares increases proportionately, etc.

Wipro has done various such bonuses and stock splits in its history of 1980-2014. 

Wipro Investment growth

YEAR	ACTION	NUMBER OF SHARES
1980	Initial Investment	100
1981	1:1 Bonus	200
1985	1:1 Bonus	400
1986	Stock split to FV Rs.10	4,000
1987	1:1 Bonus	8,000
1989	1:1 Bonus	16,000
1992	1:1 Bonus	32,000
1995	1:1 Bonus	64,000
1997	2:1 Bonus	1,92,000
1999	Stock split to FV Rs.2	9,60,000
2004	2:1 Bonus	28,80,000
2005	1:1 Bonus	57,60,000
2010	2:3 Bonus	96,00,000

After the year 2010, there were no more bonuses or stock splits. But with just that initial investment of Rs.10,000 (100 shares) you now would end up with 96,00,000 shares of the company because of all the stock splits and bonus shares. Current stock price of Wipro is about Rs.557 per share, as of 7 April, 2014.

Rs.557 × 96,00,000 = Rs.534,72,00,000 or about Rs.535 crores. That is a CAGR (Compound Annual Growth Rate) of 47.39%. Does any of your bank FD give you 47% annual interest rate? It was all possible because of the free shares that the company gave to its shareholders as an incentive for investing in their company. If you immediately needed to liquidate this entire holding today (urgent need for >Rs.500 crores?), you can do it and you would have to pay a grand total of 0% tax on your profits, because long-term capital gains in equity is tax-free.

JHS Svendgaard: Update

This is to inform that the on-going disputes at various courts between the company (JHS Svendgaard) and various group companies of Procter & Gamble Inc. in India, have been settled with mutual consent and concluded positively for JHS 

Real Multibagger : Update

Freshtrop fruits recommended for Rs.60 now @ Rs.106.5

JHS Svendgaard recommended for Rs.38 now @ Rs.58

REASON BEHIND THE BEAR MARKET

IN THE RECENT PAST WE HAVE ALSO SEEN HOW MARKETS IGNORED BREXIT AND REXIT AND MOVED FORWARD

NOW LET US LOOK AT THE EVENTS WHICH WILL CAUSE UNCERTAINTY AND MAKE PEOPLE BELIEVE THAT RALLY WONT SUSTAIN

1. U.S ELECTIONS
2. Q2 EARNINGS ARE MIXED 
3. FED RATE HIKE IN DECEMBER
4. ITALIAN REFERENDUM
5. GDP DATA OF WORLD DURING JAN
6. BUDGET AROUND JAN FEB
7. U.P ELECTIONS 
8. WITHDRAWAL OF LONG TERM CAPITAL GAINS TAX
9. GAAR IMPLEMENTATION

NOW THESE ARE THE HEADWINDS WHICH WOULD KEEP THE NEAR TERM OUTLOOK UNCERTAIN AND MEDIA WOULD HYPE EACH EVENT TO GAIN T.R.P

Multibagger of 2017 : JHS Svendgaard

JHS Svendgaard Laboratories may be a multibagger stock in 2017. The stock looks good for a buy on declines for a long-term investment portfolio.

It has all the qualities that investors and traders look for in a multibagger stock such as debt-free status, good management, operating capacity, strong brands etc.

Business

Starting with manufacturing of only Toothbrushes the company widened its scope to Toothpastes, Mouthwash and Denture Tablets and today is an oral care product manufacturer and exporter. Apart from working on its own brands the company also offers Contract Manufacturing Partnership to brands in the domestic and the international market. One of the most prominent brands manufactured under the company’s name is Dr. Gold which was launched in April 2009 with economy, mid economy and premium
Toothbrush categories.Some of the prominent brands partnered with in the domestic market are P&G, Amway India Enterprises Pvt. Ltd., Dabur India Limited, Elder Health Care Limited, J. L. Morison’s India Limited and in the international market are – Dr Fresh

Tano mauritius,the private equity firm which got a great success ratio, bought shares worth 25crs at 98rs around 2010

JHS SVENDGAARD is a  perfect fmcg proxy.The largest toothbrush manufacturer from India(300 million tooth brushes).It caters to the need of 1 trillion Proctor and gamble in our country.The company has got number of amazing tax and excise benefits. Replacement cost of its assets would be minimum 300-400crs. Present market-cap is only 75crs.

JHS has a client base of strong & leading players in the Industry.

• Proctor & Gamble : JHS manufactures ‘ORAL B’ toothbrushes for P&G.
• Pantaloon : ‘SACH’ brand for toothpaste & toothbrush.
• Dr. Fresh : ‘Dr.Fresh’ is the largest selling oral care brand in America.
• Himalaya : Leaders in premium dental cream market.
• Dabur : Owns big brands like ‘Promise’, ‘Babool’, ‘Dabur Red’, ‘Meswak’.
• Elder Healthcare : Sells mouthwash & other dental care under ‘AMPM’ brand.
• Aquawhite : Sells premium category mouthwash & dental whitening gel.
• Lavoris : One of the leading oral care brands in America.

Another big news is patanjali is in talks with jhs for contract manufacturing as it has huge spare capacity and good quality control

Promoters hike stake

Recently, total warrants of Rs 3.3 crore were issued. Out of this Rs 1.2 crore have been converted which is promoters and non promoters both in accordance with the SEBI guidelines allowed by the promoters.

After the warrant conversion, the promoter holding in the company goes up to 38 percent of the total equity. The Company gets Rs 11 crore in the form of converted stocks.

JHS Svendgaard Laboratories already has about Rs 5.5 crore of the warrant money.

The promoter holding will go up from 38 percent currently to 43 percent on full conversion.

Debt Free

JHS Svendgaard Laboratories would be a debt free company as on March 31st 2016. It will have no debt on books whether it is in form of secured or unsecured loan.

Profit making

The losses have started coming down in FY17 because as the Company improve the capacity utilisation it has a huge asset base and needs to churn out production from that asset base.

JHS Svendgaard Laboratories is expected to become profitable in the first quarter of FY17. It is working hard and trying to make it as soon as possible.

Revenue Growth

In the last two years JHS Svendgaard Laboratories has grown almost 80-85 percent on revenue basis. If it is able to utilise capacities, it should be at least between 30 -35 percent this year also because the baseline has almost tripled as compared to the last two years.

USE ALL THE DECLINE IN THE MARKETS TO BUY THIS STOCK SOME DAY MARKET AND SENTIMENTS WILL TURN AND DURING GOOD TIMES WE WONT GET THIS STOCK AS THE STOCK IS DEBT FREE AND BUSINESS IS GLOBAL AND REPLACEMENT COST OF THE SAME IS BETWEEN 300 TO 400 CRORES WHILE MARKET CAP IS JUST 75 CRORES 

Technical Terms of the day : Bottom Fishing

DEFINITION of 'Bottom Fishing'

Investing in stocks that are cheap because of a problem with the company or the economy. A bottom-fishing investor speculates that the stock's depressed price is temporary, will recover and make for a profitable investment. Bottom fishing is a risky strategy because the company's stock price is depressed for a reason and may not bounce back.

BREAKING DOWN 'Bottom Fishing'

Here are some examples of bottom fishing: 

• Investing in the stock of an aluminum company when aluminum prices are depressed.
• Buying the stock of a container shipping company during an economic depression.
• Investing in a print media company when the Internet is putting such companies out of business.
• Buying shares of a bank during a financial crisis. 

In each of these cases, it is unclear when or if the stock's price will recover. 

Courtesy: investopedia.com