On Jan. 22, when the market was
halfway thru its current meltdown, I had mentioned that there are opportunities
which need to be capitalized on, and which would provide rewarding in the long
run. Among the stocks I had picked then were Infosys, SKS Micro, Sintex, and
DHFL, among many more, and these have become even cheaper today than they were
3 weeks back. And this margin is not small either with the exception of Infy
which has fallen by only about 5% while SKS Micro has actually gained about 3% since
Jan. 22. Sintex has fallen by 13% while DHFL has been hammered by about 18%
since then. If these scrips were attractive then, then doesn’t it follow that
they are even more attractive now after the recent fall? And when the recovery
happens, u can bet that these scrips will recover way more than the fall that
they have gone thru now. It is just that there is a fear psychosis in the
market currently when people just don’t want to see their money go down further
from what they already have lost, and which is not insignificant either. And it
all comes down to your holding power and risk appetite. As I have repeatedly
said earlier, equity is a long term game and 10 years is the average time
someone should remain invested in a stock to really reap the rewards. And if u
do hold a stock for 10 years or more, even if it is average, I can say with
confidence that barring crooked or dishonest promoters, it would give u returns
which would be way above any other investment would give u.
As they say history repeats itself, and I
believe in this adage from personal experience, and in the last 15 years, this has happened
twice already, and I am sure the ground is well set for a third time in a few
months time. The first time was in 2001 when people had assumed that the markets
will close down any moment and then again in 2008 when nobody wanted to touch
equities with a barge pole, only to regret a few years later when these very
same stocks bounced back with a vengeance, more than wiping out the earlier
bitter experience. And the stage is set now for an encore.
Since the last time I had written, as
explained above, market has further gone down in the last 3 weeks, and more
stocks are joining the potential multi-bagger list. And even if they do not
turn out to be multi-baggers, they would surely make u smile all the way to the
bank.
So let’s look at some of the stocks,
which I personally believe would bounce back with a vengeance, once dust
settles on this gloom and doom environment.
ICICI Bank
One of my Diwali picks, this has been
hammered out of shape by a whopping 27% in just 3 months since then. Though
there have been concerns about the asset quality for this bank, I have full
confidence in the management to turn it around in the coming months to more
than regain the lost ground. As I had said, the recovery would be far in excess
of the current fall.
The main reasons for the hammering
that ICICI Bank has been experiencing over the last few months, has been due to
it reporting highest NPAs in past five years (jumped 33% q/q, 62% y/y),
three-fold spike in provisioning and tepid profitability. And the ride may not
be smooth immediately either especially in the light of the new RBI directive
and the bank’s meaningful exposure to the leveraged corporate and troubled
sectors of the economy.
The other factor, as I see it, which
ICICI Bank has going for it is its multiple businesses which are as yet its
majority owned subsidiaries - MF, Insurance arms, Broking, Home Finance etc.
which will unlock tremendous value when the time comes. On a SOTP (Sum Of The
Parts) basis, I believe ICICI Bank is valued at more than at least 50% from
current levels and will start reflecting over the coming years, if not months.
And it is again a scrip which is not likely to be impacted by global developments,
be it China or oil, other than a pessimistic view by FII who hold a major hunk
of it.
Axis Bank
This bank, one of New Year picks, is
also following the same script as ICICI Bank. This is another one which has
been hammered due to concerns over its asset quality. This is primarily because
nobody expected a bank like Axis to go the way it has. And market doesn’t take
kindly to unexpected/unpleasant surprises as has been seen numerous times, past
and present. However, what Axis has going for it is its strong retail
franchisee and healthy operating metrics. So once the economy is back on track,
this again should go by at least 50% in the next couple of years if not
earlier. In the last month alone, since the beginning of the year, it has
fallen about 9% and gives a very good opportunity to buy for rewarding returns.
Wockhardt
The only way to describe the downward
spiral in this pharma major’s price is that it has cracked down the middle. Impossible
as it may sound, it is down by 50% since the beginning of the year. Volatility
has been a major feature of this stock over the last few years, and it has made
a lot of investors laugh as well as cry in this period. So it has become more
of a trading stock rather than an investment grade one, much as I would like to
consider it as otherwise. This is not a reflection on the promoters by any
standard, but the reality is that it has happened. This has gone up and down by
anywhere between 25-50% over the last few years which can’t be a feature of an
investment grade stock.
And I think currently it is at a
juncture where money can surely be made if u can wait for a few months. This is
not to say that it won’t go down again in the current market mayhem, but that
will only be another opportunity to accumulate. And in a few moths time I won’t
be surprised to see this quoting at levels of 1200 or more, as it has done
several times in the past. That in itself is 50% gain from the current level,
and this is a conservative estimate. Chances of going even higher are much
more, at which point money should be taken off the table.
Zicom
Another niche company which has been
cracked similar to Wockhardt by close to 50% is Zicom. Again this is another company
which is totally unrelated to china, oil etc., the very factors causing the
current market upheavals. But the one thing which this company and some others
like it would surely benefit from is the govt’s actual move on the Smart
cities. I expect Zicom to have a large role to play here along with the likes
of Schneider which are specialists in this area. So very good levels to enter
Zicom and average out the earlier buys, if done, to reap net benefits, when the
turnaround happens.
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