For Kanpur-based contrarian investor Ekansh Mittal, the last four-five years have been fruitful, with two pharma investments in 2017 and 2018, an auto accessory investment in 2019, an online US retailing stock (2017-2021 holding period) and a construction product stock Turning Multibaggers.
The value investor says he isn’t worried about the current market consolidation, because investing is, after all, about picking stocks from the bottom. Mittal has handpicked his potential multibaggers.
His investment mantra is: seek growth at reasonable valuations.
Mittal, who is known to have picked up a multibagger early on, recalls November when he opened his demat account in 2008. He made it to the 2015 edition of Forbes India’s Wealth Wizards at the age of 27.
Cera Sanitaryware, VST Tillers Tractors, Wim Plast, Amara Raja Batteries, Symphony and Can Fin Homes were among the stocks which reportedly gave him multibagger returns. Mittal, 34, a SEBI registered research analyst, talks less about individual stocks now.
Nevertheless, Mittal said, one space he finds extremely attractive is pharma APIs (active pharma ingredients). He said he recently invested in one of the listed rice-exporting stocks. Midcap and smallcap NBFCs in the gold loan segment is the third place where it finds value and hopes to find potential multibaggers.
potential multibaggers
Mittal said that API makers had a good time around the Covid pandemic, but from 2021 onwards the stocks of such drug makers were under pressure. In fact the stocks were down 50-60 per cent from 2021 levels, he recalled.
Mittal said he found value in some of the API shares.
The Kanpur-based investor said he also recently bought shares of a basmati rice-exporter after the government finally did not ban basmati rice exports. There are only a few listed companies in this segment and basically all of them are doing well, he added.
“We also find value in some of the mid and smallcap NBFCs. Last 3-4 years were really bad for these NBFCs, thanks to IIFL crisis, demonetisation and subsequent Covid crisis. Credit cost for NBFCs should come down Many of these companies are trading at almost book value; have never diluted equity and are still doing well. Here I am talking about gold loan companies, though some of them have ventured into microfinance, Has also diversified into other areas including commercial vehicle finance and housing finance.Business Today.
He clarified that these are all opposite bets. He asked why the chemical sector gave so many multibaggers.
This is because the valuations of the sector till 2014 were reasonable and companies were treated as commodity stocks and not ‘specialty chemicals’, he said.
“Of course, chemical companies set up facilities and tried to reduce their dependence on China. Later, China started addressing environmental issues and customers started looking for secondary sources. That’s how the chemical sector did so well.” It did. It’s all cyclical. Things that may sound great today can do great bad tomorrow,” he said.
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From 2008 to 2022, Mittal said his investment style has improved. In the past, Mittal was not much interested in deeply cyclical businesses such as commodities, metals and cement. But over time, he realized that a lot of businesses are cyclical in nature, moderate or intense.
“Sometimes these metals, paper and cement stocks, which are deeply cyclical sectors, can give very good returns over a period of 2-3 years. This is especially true if you are able to buy them when the cycle is down.” When companies are doing badly and when nobody wants to touch them,” Mittal said, adding that nobody needs to hold them for long.
“You can get good ratings in a cycle of 2-3 years,” he said.
Mittal said he sees cyclical stocks as good opportunities from a medium-term perspective.
Cyclicality is something that has helped Mittal improve his thought process. This, he said, has fueled their contrarian thinking.
“There are not only deep cyclical sectors but also medium ones. Auto ancillaries are one example. Till 2018, they were doing quite well, but in 2019 and 2020 there was a big contraction in demand and a lot of stocks fell 50-60. per cent. We took a call and those companies have done quite well for us,” Mittal said.
What is longer term: 3, 5 or 10 years?
Mittal said it is not a matter of years, but whether the companies in which the investment is made have performed consistently over the period. One needs to keep evaluating them, determine how the management’s performance has been, keep an eye on future plans and outlook of the ever-changing sector. Valuation also plays a role, Mittal said. He added that sometimes a stock gets way overpowered by the fundamentals and even if the company is registering growth, the shares fail to reward the investors.
Mittal said his longest holding is a stock called Carysil (earlier Acrysil), which he bought in 2010. He partially booked profits, but still owns the stock.
Mittal’s father was active in stock investments since the 1980s. He says that he had several examples of stocks reaching 100 times at a very young age, which made him understand the true potential of compounding. He founded Catalyst Wealth in 2011.
