Five high-value, high-growth stock ideas for your portfolio

Five high-value, high-growth stock ideas for your portfolio



With global equity markets undergoing a severe bout of volatility these past few days, it has served investors as a perfect hunting opportunity to purchase stocks at bargain prices.

As the doyen of value investing, Warren Buffett, said, prospective buyers of shares should feel good when prices go down rather than up -- though few can claim they practise this successfully in their investing lives. 

To make it a cross between Buffett and legendary fund manager Peter Lynch, whose growth-at-a-reasonable-price (GARP) strategy can be put to good use during such downturns, we went about looking for stocks that could fit the criteria. 

Using data from Capitaline, we zeroed in on stocks that are trading at a price-to-earnings ratio that is less than the market's (16) but which had doubled or nearly doubled their consolidated revenues and profits in the past five years. 

In order to weed out debt-laden companies, we applied a cap of a debt-to-equity ratio of 2 to our search. 

Further, we put in a minimum criteria of Rs 10,000 crore market capitalization so as to only consider reasonably-sized companies. 

Investors should note that the stocks that turned up using our screening approach are merely ideas that can be considered for further research, rather than being considered outright recommendations. (As is said, past performance is no indicator of future result.) 

With that out of the way, here are our five picks. 

Tata Motors 

Price-to-earnings ratio: 9.8 

Debt-to-equity ratio: 1.1 

5-year sales growth (absolute): 184 percent 

5-year profit growth: 347 percent 

Even as the company's local business has been nothing to write home about, its overseas subsidiary Jaguar LandRover has set the charts on fire over the past few years, as it came back from near-bankruptcy to again become one of the world's top premium car brands. 

JLR has also been responsible for the recent collapse in Tata Motors' stock price (down 42 percent in six months), with its key Chinese market facing a slowdown, but many analysts believe the fall is overdone. 

Hindustan Zinc 

PE: 8.3 D/E: 0 

5-year sales growth: 82 percent 

5-year profit growth: 102 percent 

Shares of commodity companies have bore the brunt in the recent stock collapse, following the slump in commodity prices but Hindustan Zinc has been one company that has consistently scored well on sales and profit growth measures. 

The Vedanta subsidiary is also one of the few commodity companies that have zero debt. 

BPCL 

PE: 10.2 D/E: 1.83 

5-year sales growth: 96 percent 

5-year profit growth: 194 percent 

The perennial laggards, oil marketing companies got a fresh lease of life after the central government last year allowed them to start pricing diesel at a market-based profit instead of selling at a subsidized price. 

BPCL's share price has seen a large rally over the past one year but purely on valuation metrics, it still seems cheap. 

MRF 

PE: 10.2 

D/E: 0.43 

5-year sales growth: 135 percent 

5-year profit growth: 262 percent 

One of the country's top tyre companies, MRF benefits from a strong brand, falling rubber and crude prices, as well as a revival in auto sales. 

Some analysts, however, are worried about discriminate dumping of Chinese tyres in the Indian market. 

Sun TV Network 

PE: 14.46 

D/E: 0 

5-year sales growth: 267 percent 

5-year profit growth: 268 percent 

Sun TV's shares have been under the weather of late following a tussle with the government over issue of broadcast and radio licences. 

But the debt-free company is a dominant player in the southern broadcast market. As well, phase III digitization is expected to unlock major value for media companies.

These suggestions are for long term investors, who can wait to let the growth play out in next 3 to 5 yrs.

Happy Investing

Source:Moneycontrol.com