#1. Focus on the growth sector. If the sector is growing or expected to grow at a high pace all the stocks in the sector bound to give good return but remember the growth must be stable or secular.[like Packaging sector, Food Processing sector, Power sector, Auto Ancillary sector, Dairy sector, Retail Sector etc ]
#2. Focus on business model like asset light [like in Pharma sector Caplin Point & Ajanta Pharma gives unparalleled return from any of it's peers due to their major focus into a marketing distribution company than a pharma. This unique business model help them to achieve negative working capital which is a huge plus ]
#3. Focus on operational efficiency or economy of scale [like Cosmo Films due to it's operational efficiency has been able to earn significance profit growth over small sales growth. Also with it's new product it is able to pass on the raw material (crud oil) price volatility to it's customer ] i.e. the company is having a good operating leverage.
#4. Focus on Operating Leverage [like Wonderella Holiday having asset established with a very nominal maintenance cost ensure high operating leverage ]
#5. Focus on state of the art technology [like SSWL installing new state of the art technology for steel wheel rims is a added advantage over it's competitor ]
#6. Focus on value migration [like SSWL in a JV with Kalnik is setting up Alloy Wheel facility which will be operational from FY17 add high margin to the existing business. Similarly Granules India moving up in the value chain from Pharma API to FPI and FDs will add extra value]
#7. Focus on Niche High Margin Area [like Tata Elxsi in VFX,Embeded Engineering and Persistent in IoT which are the growth driver for next decade. Also like Oncology and CNS drug maker Shilpa & Natco]
#8. Validate your expected growth rate or current growth rate with the Order Book.
#9. Trust the established brand and it's value among the customer[like SSWL, Tata Elxsi etc].
#10. Avoid leveraged sector or company.
#11. Focus on High ROE, ROCE , lean working capital cycle, high free cash flow.
#12. Avoid any company which have retain large cash in account and debt alongside.[like Kitex Garments]
#13. Avoid any company which have large number of revenue coming from one customer or one geographical region. Since any change in the operating business of the customer or any slowdown in the region will drastically effect the company. [like UK region slowdown hit Marksans Pharma, Nokia downturn hit Sasken Communication, VISA project withdrawal hit RS Software etc ]
#14. Look for transparency in the management.
#15. Avoid a company which is into multiple division than to focus on the major portfolio.[Like Lloyd Electric (into high margin Consumer Durable but low margin HAVC as well ), HSIL (into high margin sanitary sector but also having loss making glass division)]
#16. Look for Value Unlocking [Like Heritage Food which was having many division like Retail, Energy apart from it's main Dairy business but recently their stake sell of Retail business to Future group will have a huge value unlocking opportunity for the investor]
#2. Focus on business model like asset light [like in Pharma sector Caplin Point & Ajanta Pharma gives unparalleled return from any of it's peers due to their major focus into a marketing distribution company than a pharma. This unique business model help them to achieve negative working capital which is a huge plus ]
#3. Focus on operational efficiency or economy of scale [like Cosmo Films due to it's operational efficiency has been able to earn significance profit growth over small sales growth. Also with it's new product it is able to pass on the raw material (crud oil) price volatility to it's customer ] i.e. the company is having a good operating leverage.
#4. Focus on Operating Leverage [like Wonderella Holiday having asset established with a very nominal maintenance cost ensure high operating leverage ]
#5. Focus on state of the art technology [like SSWL installing new state of the art technology for steel wheel rims is a added advantage over it's competitor ]
#6. Focus on value migration [like SSWL in a JV with Kalnik is setting up Alloy Wheel facility which will be operational from FY17 add high margin to the existing business. Similarly Granules India moving up in the value chain from Pharma API to FPI and FDs will add extra value]
#7. Focus on Niche High Margin Area [like Tata Elxsi in VFX,Embeded Engineering and Persistent in IoT which are the growth driver for next decade. Also like Oncology and CNS drug maker Shilpa & Natco]
#8. Validate your expected growth rate or current growth rate with the Order Book.
#9. Trust the established brand and it's value among the customer[like SSWL, Tata Elxsi etc].
#10. Avoid leveraged sector or company.
#11. Focus on High ROE, ROCE , lean working capital cycle, high free cash flow.
#12. Avoid any company which have retain large cash in account and debt alongside.[like Kitex Garments]
#13. Avoid any company which have large number of revenue coming from one customer or one geographical region. Since any change in the operating business of the customer or any slowdown in the region will drastically effect the company. [like UK region slowdown hit Marksans Pharma, Nokia downturn hit Sasken Communication, VISA project withdrawal hit RS Software etc ]
#14. Look for transparency in the management.
#15. Avoid a company which is into multiple division than to focus on the major portfolio.[Like Lloyd Electric (into high margin Consumer Durable but low margin HAVC as well ), HSIL (into high margin sanitary sector but also having loss making glass division)]
#16. Look for Value Unlocking [Like Heritage Food which was having many division like Retail, Energy apart from it's main Dairy business but recently their stake sell of Retail business to Future group will have a huge value unlocking opportunity for the investor]
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