Porinju Veliyath has offered a number of stock tips and recommendations of what to buy. The stocks recommended by Porinju are of good quality and are at reasonable valuations.
The valuations of the stocks to buy are paid attention to by Porinju. He does not buy stocks which are overvalued and quoting at high valuations.
He is afraid that buying stocks which are at high valuations and high P/E such as Nestle, ITC, Page Industries is risky because there is no margin of safety available for investors.
A stock trades at a high P/E because of the expectation that it will continue to grow at a rapid pace of, say, 25% to 30% CAGR. But, if the growth of the Company slows down due to any reason, the stock price can correct and cause huge loss to investors and traders.
Veliyath also does not buy stocks which have management of questionable integrity. He also checks that the Companies have a good growth plan and are able to increase their sales and profits in the near future.
In an interview with Sonia Shenoy of CNBC-TV18, Porinju stated that his investment strategy is to find stocks which are quoting at reasonable valuations and which are at an “inflection” point.
Sonia Shenoy asked and Porinju replied that if one can buy such stocks which are at inflection points and hold them for a long time, there are huge gains that can be made.
Porinju Veliyath Portfolio
Porinju Veliyath’s portfolio has a number of stocks which are at inflection point. There are stocks like Tata Global Beverages, Indian Hotels, HSIL, Emkay Global, Transport Corporation etc.
Two recent multibagger stocks
Two of Porinju’s recent recommendations have become multibagger stocks.
The first is Kalyani Steels. This is a small-cap company which manufactures steel ingots. The Company has posted good quarterly results. The net profit increased to Rs 46.80 crore as against Rs 28.89 crore YoY. This is an increase of 61.98 per cent. The net sales increased to Rs 344.43 crore from Rs 301.34 crore last year. This is an increase of 14.30 per cent YoY.
The operating profit of Kalyani Steels increased to Rs 87.98 crore from Rs 57.67 crore last year reflecting an increase of 52.57 per cent YoY.
Jubilant Life Sciences is also a multibagger.
Porinju Veliyath recommended Jubilant Life Sciences in a talk with Sonia Shenoy. He said that Company is not in fancy today even though it is a very high quality pharmaceutical business and a very niche business. It is becoming a global leader.
Porinju added that Jubilant Life Sciences has many things in the pipeline. There is growth ahead. Once it brings down the debt, the stock will gain. The management is dynamic and doing a good job.
Today, the shares of Jubilant Life Sciences shares hit new all-time record high of Rs 546.70. The Pharma company announced that it has received Abbreviated New Drug Application (ANDA) final approval for Felodipine Extended-Release Tablets.
This drug is used for cure of hypertension.
Jubilant stated that as on June 30, 2016, the company had a total of 770 filings for Oral Solids of which 578 have been approved in various regions globally. This includes 70 ANDAs filed in the US, of which 44 have been approved and 104 filings in Europe.
Jubilant Life Sciences reported strong Q1FY17 results. The consolidated net profit was Rs 161.60 crore against Rs 131.93 crore in Q1FY16. The increase is 22.49 per cent. The net sales decreased 1.72 per cent to Rs 1,400.97 crore from Rs 1425.53 crore in Q1FY16. The operating profit grew 13.25 per cent YoY to Rs 372.45 crore in Q1FY17.
The promoters of Jubilant Life Sciences hold 54.02 percent stake. The public and others hold 43.53 percent and 2.44 percent stake.