How to find multibagger ideas in Stock Market?

The recent downfall in the stock market has created opportunity for the investors to start looking into Equity. Often people come up with the question on how to find the multibagger stock which would create wealth for them?

Today I’ll provide tips and tricks of finding hidden gems from the stock market.

Business you understand:

Ask yourself one question, if you would have got enough money, time, and skills to start on the business which business you would have picked to become next Narayan Murthy?

Identify all such businesses which you understands, which you would like to do or would have done, if given a chance. This is really important, because it’s about achieving your dreams.

Companies in your business:

Once you identify these businesses that you want to start with, identify companies having presence in the same sector/business. Make a list of such companies based on their size. i.e. largecaps, midcaps, smallcaps. Now start comparing these companies based on different parameters like,

- Management:

o       Check management skills by reviewing their interviews, their confidence in the company, how they started the company?, Ownership in the company. Do they love their business?

-    Last 3-5 years results :

o       Check past performance of all these companies. (EBITA , Profit)

-   Corporate Governance:

o       Try to figure out the strength of the company by checking obligations made against it. It at all that is true then how they are dealing with it?

-    Future growth, Scalability :

o       Make sure that the management is right on track with expansions and they have vision to take the company to the next level.

You can add your own parameters as well, which you would try to meet for your own business. Once you find answer for all these parameter you’ll get true hidden gems for your self.

Own a stock or business:

I know it’s not possible for everyone to start business not that they don’t have skills but there are constraints like, personal commitment, finance, family, good job, risk and many other things. But, Is it stopping you from executing your idea? I don’t think so. Now with this exercise you’ve ignited the energy to live your dream. Now you’ve found the same company/business which you would have established, if given the opportunity. More over, these companies have decent experience, growth prospects and management who are equally passionate about the business as you are. In other word, it’s basically you own part of the company, doing the same business and still not sacrificing on your current commitments.

Sounds like excellent deal? Yes it is.

It makes sense to mention here, “Warren Buffet owns stake in many companies/business. He is having CEO and MD of different company reporting to him. But guess what, He is still able to sleep in the afternoon? “Yes that’s correct.

Hope this would help all the readers in finding their own hidden gems !!

Please click here to become expert in riding investor behavior in stock market.

Happy Investing !!

Learn investor behavior - How to ride stock market sentiment?

As there's lot of pessimism prevailing in the stock market, I’m forced to right this article which will guide and help retail investors in selecting best investment course for themselves.

No matter how expert are you? But you tend to take emotional decisions to pick right investment for your self and today’s article would help in understanding investor behaviour in stock market.

Investor Behavior

As depicted in the above fig. , it’s the “Optimism” which drives every investment that you do. Be it stock market, reality, fixed deposit, ULIP, it’s your optimism which leads you to invest in any of the financial instruments.

Once your decision pays off and becomes reality then excitement, thrill and euphoria takes over and drives the investor sentiment. At that point of time investor shows overconfidence due to the success he has made using his investment decision, stock market is at it’s pick and making quick money for the investors. He starts believing every research report, news that he understand and starts taking larger investment exposure. This situation is largely driven by the Euphoria in the market and it’s the “Point of Maximum Financial Risk” for the individual.

Once the rally is over, soaring market calms down and tries to level off that is to balance out the premium at which market was trading due to euphoria VS actual valuation based on earnings. This leads to Anxiety, Denial and Fear in the Investors which was totally bullish and riding through market sentiments. At that point of time investor feels that “I’m a long tem Investor”.

As the market continues to fall, the same investor starts feeling desperation, panic, capitulation, despondency. This is time when investor feels that, “This is not for me.” He tries to sell his holding in the stock market even at enormous loss as he has suffered huge erosion of the wealth. Investors become depressed about the stock market and there’s lot of negative news floating around which keeps them away from the stock market. But dear investor, this is the “Point of Maximum Financial Opportunity.”

When I look at the current situation, there’ fear prevailing in the stock market due to U.S. downgrade, U.K. nations hanging bankruptcy issue, U.S. double dip recession worries, inflation in emerging markets and local political issues in India. It has turned into panic selling globally but despondency and depression is yet to come. Does this mean it’s not the right time to buy? Well, no one can time the market, as we’re in bottom cycle of the stock market, I would advice to start accumulating stocks/businesses in your portfolio from the longer term point of view with the knowledge that it could go down more.

Hope this article would help lot of investor and guide through this turbulent time. You can also check my article on "Risk VS Stock Market" to understand are we at risk by not investing in the stock market?

Happy Investing!!

Systematic Investment Plan - Tax saving, money making and more...

This article is devoted to all the investors who want to take advantage of India growth story but refrain from doing this due to less knowledge about stock market or economy fundamentals.

I recommend them to go with Systematic Investment in ELSS or Equity focused Mutual Funds. Let me explain this in detail and why I’m so bullish on this kind of investment.

Systematic Investment Plan:

                In a simple terminology, it’s about investing specific amount of money at regular intervals for continuous period of time. I hope most of the people know about RD – Recurring Deposit, where we deposit specific amount of money to the bank/post regularly for specific time duration. Here method of investment remains same, but only investment instrument changes. In SIP, investment goes to the equity via MF scheme. Here investor can choose MF scheme based on his own risk appetite.

Benefits:

• SIP gives relief to the investors from the task of timing the stock markets. Believe me, it’s the most difficult task which even Investment Gurus are not able to do very well.
•  It makes investment as habit and not the gambling. SIP allows the investor to buy units on a given date every month/every week. The investor decides the amount and also the mutual fund scheme.
• Investment amount remains same, but investor can definitely buy more units in declining market and less number of units when market is trading at high valuation.
• Investor automatically participates in the market swings, so there’s no need to time the market.
• SIP averages the risk through consistent investment at every level of market. We don’t need to bother, if market is down or up and still we get handsome returns. This is because now we have made investment as habit.
• SIP can start with minimum investment of Rs. 500, so even small investor can participate in this investment instrument.
• Fix amount of money automatically gets deducted through ECS, every month/week. This is best way of investment when you don’t have to control when to invest or not to invest. This would make a habit of keeping some corpus aside for the SIP, every Month.
• SIP in Tax Saver MF Schemes:  I believe this is the best way to invest through SIP. Investor gets many advantages.

1). Tax Saving: Investor gets immediate tax benefit in the respective tax bracket.

2). Investment Lock in – 3 Years:  I believe investment horizon of more than 3 year enhances

3). Tax free income: All this ELSS scheme gives you tax free return.

4). Invest for 3 Year – “Forget your tax worries”: We all know when it comes to Feb, March then we’re always worried about the next pay check, which may be cut heavily due to tax liability. With the help of SIP investor just needs to invest for 3 years consistently and that’s it. At the end of third year, the same SIP amount which was invested at the beginning of SIP could be withdrawn (without any tax liability) and reinvested in the SIP again. This will manage and save your tax using the same SIP year after year once you invest for 3 consecutive years.

5). Minimum lock in Period: Tax Saver MF has the minimum lock in period, compared to other tax saving instruments. This means if you’re in 30% tax bracket, then ideally you’re making/saving 30% on the investment every 3 years. Just compare it to NSC where the lock in period is very high and at the same time you’re liable to pay tax on the gain from NSC.

I hope this article would encourage and help investors in creating wealth over the period of time using SIP.

Happy Investing !!

Stock Market Outlook & Investment Idea - 2011

It's been really long time since I've given recommendation to the investors and readers of this blog.

There have been tones of ups and downs in the markets during last one year, but finally Nifty and Sensex are managing to hold and give good returns to the investors.

I have got many queries asking for the stock recommendation which could prove to be good investment idea at this point of time.

Indian stock market Outlook - 2011

First of all let me reiterate the fact that there’s immense potential in the Indian stock market to do well over the next 3-5 years. I believe Indian economy would be triple in the size over the course of next 10 years. You can imagine the amount of wealth could be created if you invest in right company, right business at right time.

In particular outlook for 2011 looks good to me from the Indian stock market point of view. I expect earnings to grow around 15-18% next year, which would provide further upside to the stock market and justify valuation for the market. I believe sectors which are underperforming over the last 1 year or so would start catching up with rest of the market. It could be infrastructure, metals and oil & gas. I’m not so bullish on Real Estate even after recent crash in many of the stocks. I believe IT stocks should also do well and grow earnings by 18-20%. It’s worth to put money in some of the beaten down midcaps which has high growth potential. Let me recommend some of this which could make money for readers of this blog.

-       UCO BANK – CMP RS. 115: UCO BANK is one of my favorite stocks. I recommended this stock at Rs. 59 in January’2010 - http://indianstockmarketexpert.blogspot.com/2010/01/investment-idea-uco-bank-by-stock.html . It has proven to be good investment for the readers as it has touched high of Rs. 150. It was one of the best performing stock over the last one year. Now stock has retraced a bit due to recent scam news in PSU BANK.  It’s been consolidating for a while and formed a base around current levels. I believe it has potential upside of RS. 140 over next few months. I recommend buy for the stock with target price of RS. 162 and RS. 180 for the medium and long term view respectively.

-        IDBI BANK – CMP RS. 165: This is also one of the very good stock to remain invested for longer period. I recommended this stock at RS. 129 on 29^th Dec – 2009 http://indianstockmarketexpert.blogspot.com/2009/12/stock-recommendation.html. It has touched high of RS. 200 and now again available at reasonable valuation to get into the stock again. I believe this bank has got huge potential to become one of the larger PSU BANKS in India. It has got huge customer base, strong financial performance and investment in lot of companies in the stock market. There’s potential chance of listing of subsidiaries in the company which would again unlock value of this stock. I recommend buy on this stock with potential target of RS. 216 and RS. 234 over the medium and long term view.

Happy Investing!!

Investment Idea - Cox and Kings

If some one will ask me about investment in the indian stock market, I'll go with only one theme. Invest in the companies which are leaders in their respective sectors or company which is showing excellent growth potential.

Cox and Kings come under both the above categories. Its leader in tours and travels and company is posting excellent results if you check last 5 years track record.

Indian tourism industry accounts for 6% of GDP. So I believe there is immense opportunity for the company to expand. Think from common mans point of view. You can see now lots of people are spending money on trip outside India or within India as well. Industry is growing at really good pace and leader like Cox and kings will definitely get benefit out of it.

Financial:

- Company has posted excellent top line and bottom line numbers for last 5 years. One of the most consistent growth I've seen ever.
- Company was managed to achieve almost 23% CAGR growth for last 5 years.
- Company is looking to grow inorganically as well by several acquisitions.

News and Peers comparison:
Today stock price was quoting at around 430 rs. It's still looks cheap when we compare its peer Thomas Cook.
Also there's going to be news flow in this counter. Company has tie-up with Indian Railway for special tourist train which is going be launch in January. This positive announcement will definitely help the counter to break its highs and move towards 500 Rs.

Mutual Fund:
Most of the mutual fund which are doing good have opted for Cox and Kings. They do so after doing lot of research about the company growth which can reflect in their own growth.

I recommend BUY on Cox and kings at current levels with medium term price target of 510 Rs and 1 year target of 660 Rs.

Happy Investing!!
Disclaimer: I do hold Cox and kings since it's IPO.

Investment Idea - Rural Electrification Corporation

After recent rally people are really skeptical about picking stocks as they've seen really huge correction in stock market once after market was making new highs.

Now people use to ask me which stocks to buy after markets have doubled in last 8 months. They are long term investors and want to invest for 5-10 years.

I recommend REC to all these investors and there's enough reason for me to do so. This is the must buy stock which should be there in ideal portfolio.

REC is a Navratna company having robust revenue and growth. It's operating into landing money for power generation distribution and electrification to the various project across India. As we know there's lot more buzz on power sector and it's likely to be sector of next decade. So what to pick out of these sector? Let's pick the best stock which will turn multibagger for us in next ten years. It's already multibagger for the people who have accumulated the stock on each down turn.

Now there's news flow as well. Government will come up with Follow on Public issue for REC, mostly in Jan-Feb. We've heard lot more about disinvestment and REC will get benefit out of it.

I personally hold REC since IPO - Feb 08 when I got it for 105 Rs. and then stock moved to 60 Rs during pick of downturn. Afterwards it's marching towards new highs only. This price movement is based on fundamentals, robust revenue growth and news flow as well. It has touched all time high of 266 Rs. It has already turned multibagger for lot of people. Now it has corrected almost 12-14% and trading at around 230 Rs.

People who missed recent rally should go and buy stock like REC on every dip which will definitely reward them with good returns in upcoming years.

I think this is the best buy for the person who believes in INDIA GROWTH STORY.

Hope this investment idea would help lot of people. Please post your comment in case you have some query.

Happy Investing!!