Sie sind auf Seite 1von 20

Powered by:

TABLE OF CONTENTS
Page

Are Indian Stocks on Sale? 3

The Coronavirus Impact on Stock Markets May Not be Done Yet 4

Strategy For Your Long-Term Portfolio 6

Once in a Decade Opportunity in Smallcaps 8

Strategy For Your Near-Term Portfolio 12

Strategy For Your Trading Portfolio 15

Disclaimer 20

Covid-19 Proof Multibagger Stocks | 2


Are Indian Stocks on Sale?
Thank you for downloading this free guide.

Stock markets, not just in India but world over, witnessed one of the sharpest
corrections in history, in March 2020.

The Covid-19 pandemic was initially expected to cast a gloom over stock markets
for a prolonged period.

But as the lockdowns were gradually lifted, stock indices surprised us with the
sharp upturn.

India’s benchmark indices, Sensex and Nifty were among the top gainers during
this period.
Global Indices During 3-Month Lockdown

Data Source: Yahoo Finance


So, should investors get carried away with the euphoria? Should you be buying
stocks anticipating a V-shaped recovery like in 2009?

Let’s get this right.

Unlike 2008, when the financial crisis had its roots in just one sector, the Covid-19
crisis is all encompassing.

No country and no business have been spared. The tenure of the crisis and extent
of economic loss is still uncertain. Until a medicine or vaccine is discovered, the
Covid-19 will be with us.

Let’s take a look at the possible investments you can make one at a time…

3 | Covid-19 Proof Multibagger Stocks


The Coronavirus Impact on Stock Markets May Not be
Done Yet…
Legendary investor, Howard Marks, wrote in one of his memos…

In the real world, things generally fluctuate between ‘pretty good’ and ‘not
so hot.’ But in the world of investing, perception often swings from ‘flawless’
to ‘hopeless.’

The sentiment of hopelessness, could therefore, continue to spook markets longer


than we expect it to.

Everyone expected markets to bounce back with the same vigor as they did after
SARS, Ebola or Zika virus.

And they did bounce back!

As I write this, the Sensex is already trading about 32% higher than its 52-week
lows.

Also, the pace of correction in the 45 trading sessions (upto 23 March 2020) has
been one of the sharpest in decades.

So, one wonders if the correction could carry for longer, like in the case of 2000
and 2008 crashes.

Will Market Recovery Sustain?

Correction No. of trading sessions


2000 -56% 405
2004 -27% 84
2006 -29% 25
2008 -61% 285
2010 -27% 277
2020* -37% 45
*Until 23 Mar 2020

Covid-19 Proof Multibagger Stocks | 4


If we go purely by past data, a second market crash cannot be ruled out. That too
one as scathing as the first one.

Is Sensex' Second Crash Around the Corner?

First crash Pullback Second crash


1992 -44% 37% -32%
2000 -24% 18% -27%
2008 -30% 25% -32%
2020 -37% 22%* ?
*Until 15 April 2020

Which is why investors need to take a patient and staggered approach to buying
the best businesses that can tide over the volatile times and rebound the fastest.

We, the editors in the Profit Hunter team, have put together this urgent report
to help you tread through the Coronavirus crisis, safely….and profit immensely
from the ensuing rebound!

It outlines some of the best investing strategies in the current uncertain environment.

A small caveat though.

This guide carries strategies from Equitymaster editors with different approaches
to investing.

Of course, each of our strategies are very different from one another, as we see the
investing space through different prisms. But all have one common goal – to help
you profit from the post coronavirus market rebound.

Happy Investing.

Editors – Profit Hunter

5 | Covid-19 Proof Multibagger Stocks


For Your Long-Term Portfolio
(Investment Horizon of at least 3 Years or More)
The simple steps outlined in this report can help you tide over such extreme volatility.

These are some time-tested ideas for investing success.

Even if some of these ideas seem familiar or simplistic, we urge you to incorporate
them into your investing strategies. Remember, it’s usually the time-tested ideas
that come out winners in the end.

I am strongly of the belief that given the uncertainty in the markets, an investor
should have a workable plan and then have the discipline to stick to it all times.

In fact, this is the single most important element that separates the investing men
from the boys over the long term.

Here are the steps you could take…

Do NOT Sell in Panic


There’s no doubt that the coronavirus is a major problem and. the market's reaction
so far has been severe.

But what really matters is whether the correction is proportional to the worsening
fundamentals of corporate India.

A lot of investors believe that getting rid of stocks is the best way to avoid the decline
in share prices. They think selling the stocks even in their long-term portfolio could
help avoid further carnage. But that is far from truth.

Selling stocks due to panic can only harm a long-term investing portfolio. For along
with some questionable stocks you may also let go of potential multibaggers. Selling
the stocks with strong fundamentals could deprive your portfolio of the safety net
that it deserves for the long term.

So, do not pay heed to talking heads who are propagating panic. Such irrational
activity could only do more harm to your portfolio.

Covid-19 Proof Multibagger Stocks | 6


Review your Portfolio
In times like these, it is most important to review your portfolio. Both in terms of
overall allocation to stocks and the quality of stocks.

A phase of rare market correction could be the opportunity to buy some of the best
businesses relatively cheap. Many stocks in your wish list could have come to multi
year lows in terms of valuations.

Then again there may be some questionable stocks that you may wish to sell to
free up some cash.

Be Very Selective
Take a close look at the stocks you were hoping to buy once the valuations offered
more margin of safety. Act only on the safest ones.

Like we said before, coronavirus will certainly impact the economy and businesses.
The market correction may continue for a while. So being selective about the stocks
you wish to buy or keep in your portfolio can help weed out the laggards.

Consider Dividend Bargains


Attractive valuations can go a long way in compounding your returns from great
stocks.

But don’t forget to count the mouthwatering dividend yields. In fact, stocks that
offer steady and attractive dividend yields over long periods are the ones to hunt
for during such market corrections.

I believe there are some pockets of businesses in India that have a huge upside.
Not just because of the valuations.

But because they are the prime contenders and possibly catalysts of India's bounce
back from the Corona crisis.

Tanushree Banerjee is the editor of StockSelect, Equitymaster's safe bluechip


recommendation service, with a track record of over 18 years.

7 | Covid-19 Proof Multibagger Stocks


Once in a Decade Opportunity in to Get Rich with
Smallcaps
The number of coronavirus infected cases in the economy is less than 0.02%.
However, there is hardly any sector that will not be negatively impacted by the
lockdown measures taken to control the spread.

While it is clear that the economy and almost every business will be hurt, we do not
know the extent of the damage, or the period for which it might continue.

I hope you are prepared for challenging times ahead and have enough cash and
liquid assets to sail through it.

Once you have taken care of that, I believe it's a great time to buy value and growth
stocks in a staggered manner.

Let’s dig a bit deeper into this opportunity.

First, the negatives…

Over the next few quarters, earnings of the companies will suffer. Markets have
been factoring this in as can be seen from the performance of benchmark indices:

www.equitymaster.com Data Source: Ace Equity

Covid-19 Proof Multibagger Stocks | 8


Even after considering the recent relief, it’s a pretty sharp fall across market caps.
Also, the cases haven’t peaked yet. So there could be a further decline in the
indices the near term.

This is an event with hardly any precedent. There are also second order effects,
which will continue even after the crisis subsides.

Even after the easing of the lockdown, most manufacturing plants are operating at
unviable utilization levels. Workers have migrated, and no one knows if and when
they will return and at what cost to the companies.

Consumption has slowed down. Product launches have been delayed.

Banking/NBFC sectors are staring at the possibility of bad debts shooting up and a
liquidity crunch.

Logistics/supply chain networks have been derailed. The informal economy (and
consumption driven by them) has crashed.

People are staring at pay cuts, even job losses, that will eventually be reflected in
demand slowdown.

But I believe there is a silver lining as well to this crisis.

Global companies are looking beyond China for sourcing raw materials and
manufacturing, and some Indian companies are already lapping up the opportunity.

More of the rural population is likely to shift to agriculture rather than moving back
to factory floors (a positive for agri and allied stocks).

Firms with higher automation will gain market share. Firms with less fixed cost, low
debt levels, and high liquidity will have the sustaining power, and will bite into the
market shares of their competitors.

There will be a greater formalisation in the economy, and there will consolidation
across sectors, thus benefiting well run listed companies in the long term.

As such, despite all these negatives, Coronavirus induced crash would turn out to
be a rare opportunity to create generational wealth for long-term investors.

As I am writing this, the drug companies are in a race to find a cure. Unless the
world is coming to an end, we will get over this crisis. Imagine the world three to
five years from now.

9 | Covid-19 Proof Multibagger Stocks


The way I see it, life will be back to normal. Yet, there would be some structural
changes, that will ensure only the fittest businesses emerge out of the crisis and
turn stronger.

The challenging times at present will penalize weaker businesses (high debt on
the balance sheet, peripheral/informal players) a lot more than stronger and agile
business.

Only the fittest companies – cash rich, strong balance-sheets, high market shares
and critical to clients they serve – will survive and will gain market share from the
others.

While the stock price crash is temporary for such strong businesses, the positives
will be lasting.

I hope you would not mistake size of a business for this ability to withstand the
crisis. Borrowing from Darwin’s theory of evolution, I believe that it won’t be the
biggest who will survive but those who can best manage the change.

In fact, I believe some of the most deft change managers amid this upheaval would
be the agile and well run smallcap companies.

Here’s what makes me confident about a strong rebound in such stocks in the long
term:

a) Market leaders in niche segments – All these companies are critical suppliers
themselves or to the blue-chip companies in India (and in some cases for the global
players) and command the maximum market shares in their respective segments.

b) Competent and ethical managements These are managements who have been
running their businesses since a long time and have shown prudence amid tough
times in the past.

c) Healthy financials - Debt free balance sheets with enough liquidity, strong
returns, lesser fixed costs and high profit margins,

d) Some of these players have products that fall in the category of essential goods/
critical services, and will be less impacted by the lockdown.

e) Potential beneficiaries from second order effects – Agri/farm-based businesses


could benefit from reverse migration and more migrant workers going back to
farming.

Covid-19 Proof Multibagger Stocks | 10


Last but not the least….

The Coronavirus crash and attractive valuations offer a great opportunity to


enter these smallcap stocks, with a strong margin of safety.

I have shortlisted a few smallcaps that I believe will be resilient to Corona virus
crisis and a temporary lock down in the economy.

Smallcaps with the Capacity to Suffer, and Emerge Stronger from the Covid 19
Crisis

www.equitymaster.com Data Source: Ace Equity


*TTM P/E: trailing 12 months price to earnings

In a lot of these stocks, there is additional comfort of heavy insider buying in the
month of March 2020 (insider buying is not allowed in April ahead of earnings
season), attractive dividend yields and consistent dividend payout history.
Now I do not recommend you go all in. But it would be even worse to wait for
markets to stabilise, as by then the upside in these stocks might reduce to half of
what it is now.

So keep your emergency funds aside, be very selective in stocks, buy in a


staggered manner and follow the right asset allocation. Last but not the least,
have a three to five yar horizon period in mind.

Then you will set to make the most of the biggest buying opportunity in a decade
to get rich in smallcaps.

Richa Agarwal is the editor of two extremely successful services in the small cap space -
Hidden Treasure and Phase One Alert.

11 | Covid-19 Proof Multibagger Stocks


For Your Near-Term Portfolio
(Investment Horizon of Up to 2 Years)
One of my best quotes around forecasting comes from the famous economist, John
Kenneth Galbraith.

There are two kinds of forecasters: those who don't know and those who
don't know they don't know.

Then there’s Warren Buffett who once said that forecasting tells you more about
the forecaster than the actual forecast.

However, despite the mockery of forecasting from these two esteemed gentlemen,
I am going to go ahead and make a forecast.

My forecast is that over the next couple of years, the universe of small and microcaps
could give rise to a lot of multi-baggers. In fact, the number of such multibaggers
could be the highest in recent history.

But why should you trust my forecast? After all, even the most brilliant forecasters
get it wrong most of the times.

Well, the reason you should do so is the following chart.


Number of Bargains and a Bull Market Usually go Hand in Hand

Covid-19 Proof Multibagger Stocks | 12


Do you know why Warren Buffett shut down his early partnership in 1969 after
having a spectacular decade in the stock market?

Well, it was getting impossible for him to find new bargains.

And therefore, not wanting to risk his clients’ money by buying stocks at expensive
valuations, he decided to return it and shut shop.

What does this have to do with the above chart you may wonder?

Well, Warren Buffet was simply hinting at the fact that there is a strong co-relation
between number of stocks that are available at attractive valuations and the broader
market valuation.

The greater the number of stocks that are available at attractive valuations, the
greater the possibility that the markets will do well over the long term.

As you can see in the chart, back in December 2013, a total of 242 stocks with
a revenue of at least Rs 2 bn and debt to equity ratio for the latest financial year
below 1, were trading at a minimum 20% discount to book value.

And how did the small cap index perform over the next two years? Well, it went up
at a CAGR of an impressive 34%.

Now, look at 2017. The number of stocks below book value and a strong balance
sheet had come down to a mere 70.

And expectedly, the stock market did poorly over the next couple of years and gave
a negative CAGR of 16%.

The takeaway is simple.

Whenever there are more than 200 stocks trading at a discount of at least 20% to
book value, there’s a strong chance the markets will do well over the next couple of
years and produce a few multibaggers.

However, when this number falls to below 100, it is time to turn cautious and reduce
exposure to small and micro caps.

Here’s the good news. Thanks to the correction in the small cap index over the past
couple of years, the number of stocks that are available at a minimum discount of
20% to book value has gone up to an impressive 264.

13 | Covid-19 Proof Multibagger Stocks


Yes, the number of stocks with attractive valuations are significantly higher than
200 right now.

And this is a strong enough reason for me to conclude that there’s a strong chance
the small and microcap stocks could end up doing quite well over the next couple
of years. What is more, they can even produce quite a few multi baggers.

By the way, isn’t this akin to making a forecast? It certainly is.

But the difference is that this forecast is based on the underlying valuations of
stocks and is not just a wild shot in the dark.

Rahul Shah is the editor of Microcap Millionaires, a deep value investing service that has
beat the Sensex 1.7x since inception; and Exponential Profits, a service whose goal is to
identify the most SOLID penny stocks.

Covid-19 Proof Multibagger Stocks | 14


For Your Trading Portfolio
The world is still grappling with Coronavirus crisis which started in China. Despite
all the government’s efforts the virus is still thriving and growing.

Despite unlock 1.0 and 2.0 that’s announced by the government many businesses
are shut and paying a price for it. This has led to an adverse impact on the markets
and stocks which are off significantly from the highs.

Coronavirus is a crisis we have never seen before. But this doesn’t mean you
can’t identify solid money-making opportunities while the world grapples with
coronavirus.

We are living in unprecedented times and markets have also reacted sharply to
the pandemic. However, this isn’t the first time that our markets are going through
a rough patch.

The BSE Sensex has witnessed three major bear markets over the last 15 years.
Sensex ended the years 2008, 2011 and 2015 on a negative note.

Simply looking at the benchmark index is useless until you learn to look beneath
the hood. The Sensex numbers hide more than it reveals. If you want to identify
investment opportunities in times of crisis then you must learn to look one level
deeper to gauge the pulse of the market.

Let’s look how some of the major sectors performed during these years. Let’s begin
with 2008.

15 | Covid-19 Proof Multibagger Stocks


The global financial crisis (GFC) hit out our markets in January 2008. Our markets
spent the whole year trending downwards. Sensex fell by 52%. All the sectors fell
along with the Sensex.

But all were not equally affected. Some managed to outperform the rest. Notice the
top 3 sectors in the above chart. They are FMCG, Healthcare and IT.

Covid-19 Proof Multibagger Stocks | 16


The world had barely recovered from GFC by 2010 and we were struck in yet
another crisis. Europe’s debt problems started spiraling out of control by late 2010.

The year 2011 began on a terrible note. Sensex slipped lower in 2011 and ended
down by 25%. Most sectors underperformed the benchmark but notice the top 3
performers in the above chart.

These are the same which outperformed in 2008. FMCG, Healthcare and IT were
the top 3 outperformers.

The currency crisis in ‘Fragile 5’ nations - Brazil, India, Indonesia, South Africa, and
Turkey rattled the markets once again in 2015. Sensex ended the year down by 5%.

FMCG, Healthcare and IT not only outperformed the Sensex but also ended on a
positive note for the year. Healthcare generated double digit gains of 15%.

17 | Covid-19 Proof Multibagger Stocks


Half of the year 2020 is over and it looks like we have gone through a lot in just
six months. Sensex is down 15% on a year to date basis and the virus is spreading
faster than wildfire.

The virus has affected every business on the planet. There are lot of uncertainties
still lurking around. But the markets have moved in a predictable fashion across
cycle.
You would have already noticed the top 3 outperformers so far are Healthcare,
FMCG and IT. History repeats…huh!

Now one could argue that all three sectors are generally considered as defensives
and It isn’t any surprise that they are outperforming right now.

But despite this common knowledge how many retail investors own stocks from
these sectors? I guess not many.

On the contrary, most investors look for investing opportunities in stocks or sectors
which have fallen the most.

I know that beaten down sectors bounce back sharply like they are doing right now.
But that’s about it. The probability of resuming downtrend is high in such sectors.

Covid-19 Proof Multibagger Stocks | 18


Therefore, investors should stick to the defensives until the uncertainty related
to the virus is cleared. It will enable you to conserve and grow your capital with
minimal risk.

So, I suggest sticking to FMCG, Pharma and IT at least until we find a permanent
solution for coronavirus.

Now if you are wondering how one could identify trading or investing opportunity
in these sectors then you must watch this YouTube video where I have explained
a simple technique which you could use to spot stocks which could outperform in
current market environment. Enjoy!

Apurva Sheth is our lead Chartist and has been guiding our readers for last five years.

19 | Covid-19 Proof Multibagger Stocks


Coverpage image source: da-kuk / www.istockphoto.com

© Equitymaster Agora Research Private Limited. All rights reserved.

LEGAL DISCLAIMER:

Equitymaster Agora Research Private Limited (Research Analyst), bearing registration number INH000000537 (hereinafter
referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information
herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation
to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/
or not taken based on the information provided herein. Information contained herein does not constitute investment advice
or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of
individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their
particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use
by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or
which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is
provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant
its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied.
Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and
website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past
performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant,
Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-6143 4055. Fax: +91-22-2202 8550.
Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

Disclaimer | 20