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kulman
Senior Member
Joined: 02/Sep/2006
Location: India
Online Status: Offline
Posts: 9319
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   Topic: Making money from niche businesses!
Posted: 17/Sep/2007 at 11:22am |
| Companies with unique business models are typically rewarding investments. |
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| There are two kinds of businesses. The first one fights tooth-and-nail in trying out to be the next big thing in an already crowded universe of businesses. The second kind attempts something different and tries to succeed. |
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| Some of these niche players aim for leadership even if it is a small industry segment. These companies demonstrate a strong growth both in their top lines as well as profitability, as their niche grows in size. Some niches grow large enough to support more than one player. |
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| Consequently, the stocks of these companies earn fabulous returns and their valuation commands a scarcity premium. Although we came across quite a few companies which operate in market niches that are unparalleled, here are some interesting ones. |
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Some of these companies have a first-mover advantage, which prohibits competitors from entering their specific niche. In a few cases, certain technological capability may give them an edge.
| MASTERS OF THEIR TRADES |
| Company |
FY07 |
Stock price (Rs) |
FY08E |
FY09E |
Net Sales
(Rs crore) |
% chg |
OPM
(%) |
NPM
(%) |
EPS
(Rs) |
Sept
14 |
EPS
(Rs) |
P/E
(x) |
EPS
(Rs) |
P/E
(x) |
| Bartronics |
63.5 |
119.1 |
26.6 |
21.2 |
4.5 |
250.6 |
13.7 |
18.3 |
23.6 |
10.6 |
| Bilcare |
407.9 |
54.8 |
28.7 |
14.7 |
42.2 |
1130.2 |
51.7 |
21.9 |
65.0 |
17.4 |
| Dish TV |
191.7 |
509.0 |
- |
- |
-6.0 |
75.4 |
-5.0 |
NA |
-3.0 |
NA |
| Educomp |
115.0 |
107.2 |
56.0 |
26.0 |
17.3 |
2873.9 |
32.0 |
89.8 |
58.0 |
49.5 |
| Nitin Fire |
100.5 |
46.9 |
16.5 |
10.0 |
11.3 |
438.9 |
22.5 |
19.5 |
41.0 |
10.7 |
| Everest Kanto |
379.4 |
61.1 |
27.3 |
16.0 |
13.1 |
225.3 |
49.0 |
4.6 |
73.0 |
3.1 |
| GMR Infra |
1696.7 |
59.8 |
32.0 |
14.3 |
7.3 |
765.7 |
17.0 |
45.0 |
29.5 |
26.0 |
| Jain Irrigation |
1238.9 |
52.0 |
14.4 |
6.7 |
13.5 |
470.0 |
22.9 |
20.5 |
28.8 |
16.3 |
| MIC Electronics |
239.7 |
139.0 |
17.6 |
13.4 |
16.0 |
547.7 |
26.0 |
21.1 |
35.0 |
15.6 |
| Opto Circuits |
251.6 |
80.0 |
30.0 |
29.0 |
11.9 |
490.0 |
17.5 |
28.0 |
25.0 |
19.6 |
| Zicom |
154.6 |
106.0 |
10.9 |
5.1 |
7.4 |
201.0 |
8.5 |
23.6 |
9.8 |
20.5 | |
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Life can only be understood backwards—but it must be lived forwards
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basant
Admin Group
Joined: 01/Jan/2006
Location: India
Online Status: Offline
Posts: 18403
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Posted: 17/Sep/2007 at 11:50am |
Good post Kulmanji but as in many of these articles they appear only after the stocks have become multibaggers. The biggest problem that investing for multibaggers faces is that of recognition.
So if you open the moneycontrol MF holdings link and you see the list extending all the way to the bottom of the page you should be rest assured that the stocks have been recognized and it is difficult to make a multibagger out of it. On the other hand if that list does not extend a great deal on the page then this stock is yet to meet recognition - this coupled with illiquidity is a great supplementary tool for identification.
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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kulman
Senior Member
Joined: 02/Sep/2006
Location: India
Online Status: Offline
Posts: 9319
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Posted: 18/Sep/2007 at 12:06pm |
So if you open the moneycontrol MF holdings link and you see the list extending all the way to the bottom of the page you should be rest assured that the stocks have been recognized and it is difficult to make a multibagger out of it. On the other hand if that list does not extend a great deal on the page then this stock is yet to meet recognition - this coupled with illiquidity is a great supplementary tool for identification.
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That's another way to profit from being a contrarian to Fund Managers' holdings! You had mentioned about TV18 being underowned by institutions for a long duration few years back.
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Life can only be understood backwards—but it must be lived forwards
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basant
Admin Group
Joined: 01/Jan/2006
Location: India
Online Status: Offline
Posts: 18403
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Posted: 18/Sep/2007 at 12:11pm |
Originally posted by kulman
So if you open the moneycontrol MF holdings link and you see the list extending all the way to the bottom of the page you should be rest assured that the stocks have been recognized and it is difficult to make a multibagger out of it. On the other hand if that list does not extend a great deal on the page then this stock is yet to meet recognition - this coupled with illiquidity is a great supplementary tool for identification.
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That's another way to profit from being a contrarian to Fund Managers' holdings! You had mentioned about TV18 being underowned by institutions for a long duration few years back.
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Yes, those were the golden days. pantaloon had just one fund invested in 2003 and that too booked out as it rose, Tv18 had just a few but now it is a horror show. Longer the list larger the potential sellers and smaller the potential buyers.
Contra does not mean we buy HP/BP but excellent fundamentals with little inst. ownership is like iceing on the cake. Fundamentals are the first thing to look out for in any case.
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'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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omshivaya
Senior Member
Joined: 06/Sep/2006
Location: India
Online Status: Offline
Posts: 5966
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Posted: 18/Sep/2007 at 12:12pm |
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Yes, very true Kulman jee. Basant jee has helped pick some gems early on. I am sure few more to come from his stable in the time ahead.
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The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it
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smartcat
Senior Member
Joined: 29/Mar/2007
Location: India
Online Status: Offline
Posts: 4243
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Posted: 18/Sep/2007 at 12:15pm |
The reason why the author mentions stocks that are already multi-baggers because (s)he is trying to prove a point. If there are unknown names in the list, the readers won't be convinced about the subject matter.
Identifying niche businesses is the easiest thing to do. But doing a time travel and looking into a company's future is the difficult part.
For every Bartronics and Opto Circuits, there are a hundred Biocons, Himachal Futuristics and NEPCs.
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surjeetk21
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Joined: 18/Nov/2009
Location: India
Online Status: Offline
Posts: 56
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Posted: 26/May/2010 at 3:38pm |
is there any company as on date.if yes, then pls name and justify.
Edited by surjeetk21 - 26/May/2010 at 3:39pm
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Vamsee
Senior Member
Joined: 09/Dec/2007
Location: United States
Online Status: Offline
Posts: 149
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Posted: 26/May/2010 at 1:15am |
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Talking about niche players, CRISIL and ICRA would be obvious candidates.
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May you live in interesting times
-- Ancient Chinese Curse
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