We are always on the lookout for good companies with a strong growth track record and potential and whose shares are available at attractive valuations. The best case scenario is to find mid-caps which are trading at low valuations or in single-digit price to earnings (PE) multiples on the basis of their trailing one-year earnings. Low valuations mean that the downside is protected while leaving huge scope for appreciation in the stock prices. The factors to look out in finding such good companies are the dividend track record, cash flow from operations, return ratios, management track record and the future prospects.
Hong Kong is home to several billion dollar mega corporations that are several times the size of the largest Indian corporations. The advantage of investing in such mega corporations is that they are not unduly affected by exposures to one geographic location. For example, McDonald, Coke & Pepsi were relatively unaffected by the US slowdown because they had substantial investments in other countries. Likewise, HSBC Holdings plc and Hang Seng Bank Ltd have substatial exposure to other territories.
Educomp reported robust performance recording 37.2% yoy growth in Top-line and a robust 92.3% yoy increase in Bottom-line with EBIDTA Margins expanding by 580bp to 52.4% in 3QFY2010. Strong government backing pertaining to higher budgetary spends to spur growth of the Education and Training Sector across the globe, and particularly in India, is a key positive for companies in this space like Educomp, which has been growing aggressively through its strong execution capabilities. Educomp can be expected to thrive on the upcoming opportunities in Education space and continue to witness strong growth trajectory backed by ongoing investments for newer initiatives with focus on product and content innovation.
It is clear Mphasis is benefiting from strong brand-equity of HP and EDS as it added several new clients through HP during the quarter. The only question is whether the shift in revenue and EPS for Mphasis was one-time or can be expected to continue. The stock is not cheap, at about 16 times FY 10 earnings. However, leveraging its association with HP and EDS, Mphasis can be expected to do good business flows for all the verticals. Besides, with improving economic indicators all over the world, the volume growth can be expected to improve.
If you are an investor like us, you are not bothered about whether the markets are at an uptrend or at a downtrend. You are not bothered about short-term volatility. What you really want is to identify a blue chip company with excellent growth prospects, sound management and reasonable valued. Once you have these companies in your sights, all you have to do is use market volatility to your advantage. Every time the markets crash, you add these large cap blue chips to your portfolio and sit tight – confident that these blue chips will secure you a compounded annual growth rate (CAGR) of at least 25%
Raj Rajaratnam’s, the billionaire founder of Galleon Group, was the story that dreams are made of. However, he now stands charged in a $20 million insider trading scheme by the U.S. Securities and Exchange Commission. The SEC says that he didn’t deserve his reputation for “genius trading strategies” or “astute study of company fundamentals or marketplace trends” but that it was a simple case of insider trading.
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