Spotting undervalued growth stocks is a process at Vivekam. Over time, the supremacy of Vivekam’s identified undervalued growth stocks is proven beyond anyone’s doubt. Stocks thus identified broadly fall into two categories.
1. Stocks reckoned to be growing for the first time.
2. Stocks that continue to be part of the growing list by Vivekam.
Historically, Vivekam noticed that stocks in the first category witnessed an accelerated appreciation than the second category. The reason one can attribute to this phenomenon is that the PE multiple also expands for a company when it turns around for the first time and reports improved margins. Giving weight to this factor of larger growth for stocks in first category, Vivekam puts a premium on such stocks and calibrates the expected price through normal process to some extent. This is done to ensure that these stocks stand a better chance to be reckoned for investment on any given day.
The fair prices given by Vivekam are valid for the entire quarter. However, the market prices of stocks keep changing during the day and from day-to-day leading to changes in scope to grow. The difference between current market price and expected market price is called scope to grow. Since stocks are arranged in the descending order of scope to grow at any given point of time, the order in which the stocks appear or the stocks that appear as top 10 preferred stocks keep changing. Based on 2013 December results, though available for a limited number of stocks, Vivekam has identified the following as the most preferred stocks for investment.
As on 28 January 2014 evening the list is topped by Coromandel International which falls in first category with an expected market price of 321 as against the current market price of 216. The trailing 12 months EPS of this stock has gone up from Rs. 9.56 to reach Rs. 10.50. With a scope to grow of 60% this stock’s business value was computed at Rs. 203 by Vivekam. With its current market price close to its business value, downside seem seriously limited while the upside potential appears attractive.
Tata Elxi is also a stock from the first category which has reported an overall improvement in its working and looks fairly underpriced at Rs. 394. Its business value stood at Rs. 224 and the estimated fair price for this stock is above Rs. 630 offering approximately 60% scope to grow. This company’s trailing 12 months EPS has shot up to Rs. 18.80 from Rs. 14.69.
TCS too is from the first category of stocks and it comes next in the most preferred list with trailing 12 month EPS rising to Rs. 89.75 from a level of Rs. 80.63. Falling rupee and appreciating dollar has led Vivekam to set its expected market price at Rs. 3458 thereby giving 56% scope to grow. Its business value according to Vivekam stood at Rs. 1972.
LIC Housing Finance also is from the first category of stocks picked up by Vivekam to be the next best undervalued growth stock. Apart from improving the trailing 12 month EPS to Rs. 25.03 from Rs. 23.24, this company has reported improved performance on several parameters leading Vivekam to believe that it’s fair price for this quarter should be around Rs. 312. With its business value standing at Rs. 153, we see a scope of 56% growth from the current levels.
The list continued with Essar Ports, Axis Bank, Raymond and Kajaria Ceramics which are offering a scope of 49%, 47%, 45% and 38% from their current levels of Rs 55.80, Rs. 1121.75, Rs. 271.65 and Rs. 312.85. Vivekam makes the list of stocks public on all days to its subscribers and to premium clients. Vivekam’s products also use the same methodology and picks stocks from this list on the date of investment for any client. Though the selling strategy may differ from client to client, the buy logic mostly remains the same with some minor variations between one product and other.
The performance of spots was widely discussed in the blog section of Vivekam website at regular intervals and helps to provide an insight on its effectiveness for any discerning investor. This list is regularly updated after announcement of quarterly results by other companies. Keep watching this space for the most updated list of most preferred stocks from Vivekam to gain from your investments.