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Saturday, May 21, 2016

The 5 interesting small and midcap counters


It's been a long time since the blog got updated. Life has changed for good after the launch of  Sharebazaar android app. Search "Share Bazaar Arun" in playstore to download it. In a very short time as you know folks we attained the scale of nearly 30000 subscribers,without resorting to any publicity or marketing gimmick.From conferences to conducting pan India workshops,many things kept me occupied. Soon,will be conducting International workshops,starting from Dubai shortly.

Sebi too definitely stood out in terms of screwing the retailers in a better manner. Hence,won't like to name any stocks but hints may just help you to make out the names and dig further on the stories.

1) Been mighty impressed with the Chinese compounder which has also recently changed its name to signify its renewed focus. The parent has achieved an astounding track record of growing 65% CAGR in the last 20 years or so. The Chinese parent quoted at an average PE of over 50 since its listing. Even if it can do a fraction of what parent has done,the stock which comes with almost nil floating stock,would move in a different orbit. It's been a doubler since my Twitter rants.Company has recently bagged big orders from IFB and Symphony. Company's fortunes are further set to change as its biggest clients are shifting base from countries like Australia to outsource everything from India. Should keep outperforming coz of its 500crs expansion,parentage and growth prospects.Expensive at present levels but with its expected 50% bottom line growth for next 3-4 years,stock presents an interesting opportunity at slight dips. It's debt free as on date with market cap of around 800crs. Results which should be outstanding comes on 30th May.

2) The desi cloud player hailing from chennai has been a favourite of mine for the last 3 years. Company recently delivered decent set of numbers. Exclude the employee costs and it would look awesome. The company also refrains from taking any orders with gross margins beneath 65-70%. It's a massively scalable business with cumulative addressable market size of 2.5 lakh cr which is crazily expanding and set to expand further at 26-30% for coming atleast 5 years.Operating leverage coupled with strong rich tailwinds and an ultra super sales guy(
He had started off with a staff of three people in Singapore for Satyam in 2000, and went on to scale up the business into 15 development centres and 33 sales offices across 20 countries with over 4,000 employees. Quit to join HCL-During his time, HCL's growth in the region was spectacular,60 percent year-on-year growth, for instance.It became the fastest growing region for HCL)makes a perfect recipe for a potential multibagger. The fiscal 2016-17 should be the best for them. Oh yeah in case the same gold standard honcho resigns,spare no time in exiting it right away. That remains the biggest risk of this particular company. It's debt free as on date with market cap of around 2000crs.

3) Had an amazing Sharebazaar whole day workshop in Cochin recently. Had some spare time which was coolly utilised in visiting the areas of God's own country. Did get a chance to get glimpses of this company's plant. It comes with a highly credible management which is doing everything possible to create loads of shareholders wealth.Tyre 
Retreading is gaining traction led by improving awareness, brand creation by the players and cost consciousness for fleet owners. A new truck tyre costs 20k, while retreaded tyre costs 5k and has 80% life of new tyre.They are in the process of changing their distribution network from only distributors to a mix of distributors and exclusive franchisees. In FY16 10% of revenue came through franchisees in FY16 (6% in FY15) and they expect it to go up to 40% in FY17. They currently have 46 franchisees and will keep adding these. The advantage is they can charge higher prices by 15-20% through exclusive franchisees and also save on channel margin. This results in 5% higher gross margin. For instance, earlier Midas was selling at 140/kg and the company at 120...now It is able to sell at 170/kg. Company is almost debt free as far the long term debts are concerned. Company is set to grow at 30% CAGR for next 5 years.Tyre radialization would be a big theme to watch out for and look no further to ride the theme. Kerala"s Buffett did make it expensive with his tweets but long term prospects look more than robust. Marketcap stands at around 60crs.

4) It so happened was hell bent on searching for a player which is snatching market share from a giant. Jivanjor,the adhesive player seemed the best fit and I continued with my research. For Scuttlebutt means,interacted with lot of dealers and sales managers but the result wasn't that appealing. Finally,ended my research after a former sales manager disclosed a lot of uninspiring stuff which forced him to quit the company. He also mentioned of his new company and how it has kept him motivated to the extent which has led to a scorching 70% growth in his region. Incidentally,the same company happened to be a listed one which at that time had a tiny Marketcap of just 15crs. The company with a brand name of Euro 7000,is into white glue adhesives,scaled up 11x in the last 5 years and looking to achieve a 100crs bounty by next 2 years. Company got a phenomenal product named D3 which takes 60kgs to provide the required bond while Fevicol does the same in 100 kgs.They have pricing power,got a gross margin of 45-50% and spends a fortune in its marketing front. Company also posses a very strong supply and distribution reach of 7000 dealers in 13 states and 130 cities. Fevicol,over the last couple of years acquired similar companies by paying over 2x Sales. Stock since then has more than doubled with present Marketcap still at a paltry figure of 40crs. Promoters shareholding where 97% of it was pledged has recently been fully released.

5)Its not even required to pen anything for this one. Prem Watsa with his large investments in it,opines craftly.
In 2010 Nahoosh Jariwala and three childhood friends and their families were holidaying together at a tiger reserve in Central India. Nahoosh and his older cousin Rajan had founded the company in 1985 and listed it on the BSE in 1995. While Nahoosh had big dreams for the business, Rajan was not so keen, so while still on the holiday Nahoosh’s three friends decided they would buy out Rajan and support Nahoosh’s aggressive growth plans. Over the following five years until we came to hear of This company,Nahoosh had exponentially grown its  manufacturing capacity from 8,000 to 45,000 metric tons per annum.It is an oleo chemicals company. Oleo chemicals are, broadly, chemicals that are derived from plant or animal fat, which can be used for making both edible products and non-edible products. In recent years the production of oleo chemicals has been moving from the U.S., Europe and Japan to Asian countries because of the local availability of key raw materials.It occupies a unique niche in this large global playing field. It has developed an in-house technology that uses machinery manufactured by leading European companies to convert waste generated during the production of soy, sunflower, corn and cotton oil into valuable chemicals. Those chemicals include acids that go into non-edible products like soap, detergents, personal care products and paints, and other products that are used in the manufacture of health foods and vitamin E. The company’s customers include major multinational companies including BASF, Archer Daniels Midland, Cargill, Advanced Organic Materials, IFFCO Chemicals and Asian Paints.Co operates out of a single plant in Ahmedabad.It has the largest processing capacity for natural soft oil-based fatty acids in India. Over the last ten years, sales have grown at 23% per year to $27 million, and profit after tax has grown at 30% per year to $2.3 million.On February 8, 2016 we purchased 45% stake from the three friends of Nahoosh and other shareholders at rupees 212 ($3.12) per share.

My two cents: A tremendous scalable business with high entry barriers. Present headwinds provides an opportunity of a lifetime for value seekers looking to multiply capital over the next 5 years.


Btw: We are set to launch some interesting services only meant for long term investors. Interested guys pls mail at arunsharemarket@gmail.com for details. Also you can whatsapp dip at 9007652301. Happy investing folks.

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This blog does not share personal information with third parties nor do we store any information about your visit to this blog other than to analyze and optimize your content and reading experience through the use of cookies.You can turn off the use of cookies at anytime by changing your specific browser settings.This privacy policy is subject to change without notice and was last updated on 20.3.2013. If you have any questions, feel free to contact me directly here: arunsharemarket@gmail.com Investment in equity shares has its own risks.Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that I consider reliable. I,however,do not vouch for the accuracy or the completeness thereof.This material is for personal information and am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.The stock price projections shown are not necessarily indicative of future price performance.The information herein, together with all estimates and forecasts, can change without notice.
 
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