The macro-economic environment is improving and the market looks directionally positive (albeit interspersed with volatility). Interestingly, while headline indices led the rally in H1FY10, broader indices are now following suit. In this backdrop, though the valuation discount for mid caps vis-a-vis large caps has already narrowed to the business cycle mean, we believe the differential is set to converge further in view of the high growth potential offered by midcaps. From our basket of Mid Cap Ideas, we have cherry-picked a few stocks including Karuturi Global, Mahindra Holidays, Nilkamal, Solar Industries and UB Engineering. These companies exhibit a common theme - a strong underlying core business, proven deliverance by the management and material option triggers going forward. However, they also come with critical risks pertaining to execution, capitalization, lack of transparency or illiquidity. Our sense is that as these concerns get addressed, the business potential will reign supreme and make a case for re-rating of these stocks.
Management lies in dropping the last alphabet: manage – men. still better, drop one more alphabet: manage – me.
Samir Kumar Shah.
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