A dark horse is a little-known horse (or a stock for our purpose) that emerges to victory in-spite of the fact that not many players knew about the horse and were skeptical about its prospects earlier.
In today's market situation where most of the focus is on Nifty 50 and Top 30 Sensex stocks, there is very little research focus on companies which are small-caps or micro-caps, but have unique dominant position in their own sector.
Also, there are some companies, which used to be very successful but have fallen into temporary issues. Due to which they have been severely punished and their stock price has crashed to 90% or lower. Issues like government pricing policy in sugar space, high interest rates in Infra space, some of which will get resolved as the year 2013 passes by.
In StockFundoo Dark Horse Portfolio, we will look at such firms every week and will highlight their strong and weak points.
StockFundoo Dark Horse Portfolio
Detailed analysis is available on the link above. This firm has 800-900 stores India wide of varying carpet area. It takes a minimum of 50 lakhs to setup a decent retail shop, meaning you would need 450 crores of investment to setup a business like this.
Currently its trading at market cap of Rs 64 crores only, with debt of Rs 113 crores. Mr. Market is definitely very negative on this.
2. Dhunseri Petrochem and Tea
Dhunseri is essentially a Tea production and marketing firm and also engages in two other businesses - Greenfield PET rasin factory and development of IT infrastructure. The firm is a growth tiger and has grown revenues from 66 crores in 2008 to more than 1900 crores in year 2012.
Where most of smallcap, midcap stocks are bleeding currently in red, Dhunseri is profitable in four out of last five quarters and improved topline numbers consistently. Firm is a regular dividend paying company, with 45% dividend declared in 2012 itself.
Book Value of Dhunseri is high at 213 Rs and current market price is only at 88 Rs. The firm is available at paltry market cap of Rs 308 crores only. A good value buy.
3. Titagarh Wagons (TWL)
Railway stocks got battered severely due to lack of any new announcements in railway budget, and fiscal austerity by Indian government.
However, this is a good opportunity to pick deep value railway stocks, because the country will always need growth and development in railways. Titagarh is a leading private sector wagon manufacturer in India.
TWL is engaged in the business of manufacturing Railway Wagons & EMUs, Bailey Bridges, Heavy Earth Moving and Mining Equipment, Steel and SG iron castings etc. TWL also manufactures certain products for the Indian defence establishment, such as special wagons, shelters and other engineering equipments.
Looking at number, sales numbers are stable from past 5 quarters and showing a uptrend. This is a low debt firm, and regular dividend paying with 80% dividend in 2012. Promoters hold a strong 53.1% holding in the firm with general public having a small 9% share.
Stock is at yearly lows of Rs 165, and market cap is at paltry 332 crores only. A good value buy.
4. Hyderabad Industries(HIL)
HIL Limited is a flagship Company of the C.K. Birla Group of Companies. Incorporated in 1946, HIL is one of the oldest fibre cement roof manufacturing companies in India. HIL's sheeting brand “Charminar” is most popular sheeting brand in India from past 60 years.
The firm has shown terrific growth in revenues from past 5 years, from 482 crores in 2008 to 860 crores in year 2012. Profits have grown three fold in this duration as well. Quarterly growth is pointing to a yearly revenue of 1000 crores in next fiscal, which is great growth.
Firm has low debt and great track record of dividends, 75% in 2012 itself. Promoter shareholding is at 41%, which is robust.
Available at paltry market cap of Rs 280 crores and near to yearly lows of Rs 373 as we speak.
HIL is another deep value pick.
5. Jain Irrigation
Jain irrigation was the favorite of stock pickers for many years before it fell out of favor.
Jain irrigation is manufacturer of Drip and Sprinkler Irrigation Systems and Components; PVC, Polyethylene (HDPE, MDPE) & Polypropylene Piping Systems; Plastic Sheets (PVC & PC sheets); Agro Processed Products Greenhouses, Poly and Shade Houses; Bio-fertilizers; Green Energy and Solar water heating systems.
The firm has doubled its revenues in past 5 years from Rs 1667 crores in 2008 to Rs 3791 in year ending 2012. Profits have doubled as well. Firm is facing challenge of large debt of Rs 2500 crores on its books. Also the promoter shareholding is low at 27% now.
Firm has paid regular dividends and paid 50% in 2012 itself. At current price of Rs 61, it is close to its Book Value and is a good dark horse to bet on, considering its market leadership in its business segments.
Voltas is a very trusted name in India and needs no introduction. Voltas is a Tata group firm, is India's largest central airconditioning company, and is one of the world's premier engineering solutions providers and project specialists.
Voltas offers engineering solutions for a wide spectrum of industries in areas such as heating, ventilation and air conditioning, refrigeration, electro-mechanical projects, textile machinery, mining and construction equipment, water management & treatment, cold chain solutions, building management systems, and indoor air quality.
Voltas revenues have grown in past 5 years, from 3086 crores in 2008 to Rs 5169 crores in 2012. Balance sheet is clean with low debt. Firm is regular dividend paying and paid 120% dividend in 2012 itself. Promoter shareholding is low at 30%. Book Value is at Rs 41 and firm is trading less than 2X of its BV, which is a reasonable range for its pedigree and past valuations.
Voltas is trading at yearly low of Rs 75.45 and is a good value pick at these levels.
More stocks to be added every week in this portfolio...