The Question that is constantly asked to me is what will be the Multibaggers for 2017?
Today i am going to discuss a technique which i we have been using at stallion for last many years :
1)Look at macro Disruptions like change in government policy, change in prices of input/output etc.
2)Find Beneficiaries of that disruption and buy Them.
I will give you a Year by Year Example these Macro disruptions have created Multibaggers since i got in the Research business and how every year we have invested in it.
1) 2013- USDINR Crisis- A Year where USD:INR depreciated 25.5% in first 9 months,the key beneficiary were exporters like IT and Pharma. we went long IT and Pharma Stocks like Indoco Remedies, RS Software, Mindtree,NIIT and FDC which created massive alpha.
2) 2014- Ecommerce Gain Ground- Companies like Flipkart started getting frenzy valuation, in October 2013 flipkart was valued at $1.3 Billion, by July 2014 (9 months later) flipkart was valued at $7 Billion. Logistics companies which were redundant and were trading at bankruptcy valuations, were now the only e-commerce play in the market. Stocks like Gati went up 10x, TCI went up 8x within 12 months. We at Stallion Asset went long GATI, TCI and Patel Logistics.
3).2015- Decline in Crude Price- Crude prices fell 75% from about 108$ per barrel in July 2014 to about 25$ Feb 2016. The beneficiaries were easy, Airline companies, Oil Marketing companies, companies where crude derivatives were a large input like plastic etc. The Result was Spicejet went up 9x, Jet airways 2x, Nilkamal (Plastic)4x, HPCL 1x. We at Stallion went long Spicejet, Jet airways, Nilkamal, Wimplast and Premco global based on this theory.
4) 2016- Paper and Chemical – Paper companies went up Anywhere between 5-10x in 2016. Why did this happen? Ballarpur Industries, India’s biggest paper company, had shut down plants owing to its financial situation, leading to a shortage in paper supplies, which had driven up prices by 10-15%. This was a game changer for very low margin paper industry.
Chemical Sector stocks went up 5-10x in 2016 because the Chinese chemical giant Hubei Chuyuan, had to shut down its operations as its government asked its polluting plants to move from the east side to the west side as the former was heavily populated by humans. It was the largest dye intermediate manufacturer in the world making 2000 tonnes which is 30% of the global consumption and the largest producer of H-acid, K-acid and Para base. This caused prices of chemicals to increase by 60-300% because of which Indian chemical manufacturers like Bhageria, Bodal chemicals, Akshar chem etc went up 3-10x within 24 hours.
Today the biggest disruption is demonetization, i have absolutely no doubt that there will be many 5-10 baggers due to this event as well.
Stallion Asset is a SEBI Registered Equity Research Analyst and we specialize in catching long term trends.