Basant Maheshwari’s Top 3 Potential Multibagger Sectors

In this post I will analyze Basant Maheshwari’s Top 3 Potential Multibagger Sectors. This is based on his various interviews and programs over the last year or so.

Basant Maheshwari on ISMAC Space

Companies from the ISMAC space (internet of things, social media, mobility, analytics and cloud computing) have the potential to generate very strong earnings growth. The ISMAC space could become huge in 3-7 years. (1)

He says:
With 28 billion devices to be connected, the Internet of Things should become very big. It is called the fourth industrial revolution after the steam engine and the internet. It is difficult to find out plays there but the returns would come from there because markets pay for growth. (3)

Basant explains the potential of ISMAC space very beautifully, in his usual lucid style and says:
Let us assume we go into a new website and it says please log into your Facebook ID and you click on that and you go in through a Facebook ID, it allows robot to get into your Facebook account and then they go and search what you are doing there, so if you have clicked on a few Nike shoes and then what they do is when you go to an e-commerce website, they put the Nike brands in front of you. This is called analytics. So that is going to SMAC space basically. So companies would be doing it. There are companies which are focussed only on the cloud. There are companies which are doing the entire bouquet of services. This is supposed to get big. (3)

Basant Maheshwari on Pharma Sector

He ís bullish on pharma companies that are focused on B2B or business to business space. He says:
the best part of the Pharma sector is that no matter what you do, you don’t get killed. How many times have Wockhardt and Aurobindo bungled it up? Still they are up. Pharma gives you the chance to rise again and again”. (2)

According to Basant once a drug goes off-patent, its’ selling price will fall and the high cost of production will make it difficult to sustain in developed countries and hence they will be out-sourced to low-cost countries like India. It is a $150 billion opportunity according to him.

Talking about largecap and midcap pharama space he says: “In the large cap space Cadila is a good one. They can give you 25 percent; they have got a lot of interesting things happening. Torrent Pharma is good. So, a mix of these things should be good.” (5)

Basant Maheshwari on Housing Finance Sector

He says: “Even in the HFCs, there are companies which are growing at 40 per cent and there are companies which are stuck at 20-25 per cent. So you are going to have a broad mind and look at companies that are growing at 40 per cent. Of course, they could be backed by public sector enterprises” (3)

He goes on to say: “Pay rent and buy a basket of HFC stock, buy four, five, six of them.Two would not do well, two will do well but ultimately you make 20 per cent CAGR. I do not think real estate will give you 20 per cent CAGR.” (3)

Mortgage finance has much lower penetration in India as compared to developed economies, and housing finance is a very promising sector. I personally have been associated with affordable HFC companies in private equity as part of Impact Investments section, and have been witness to the dedication, integrity and hard-working management of these organizations. In fact we had been tracking REPCO through informal sources much before its IPO.

As per Basant, given that the Banks do not disburse small ticket loans, HFCs will have a “free ride”. He says: “A blind buy in this situation would be non-banking finance companies – NBFCs specifically relating to the housing finance sector. You can buy them, buy them 5 percent lower, 5 percent up from here, keep them for 5-10 years. The two which I own, are from western India and southern India. I wouldn’t like to take names.” (4) (5)

Conclusion

Basant Maheshwari’s Top 3 Potential Multibagger Sectors for the future are thus:

  • ISMAC space (internet of things, social media, mobility, analytics and cloud computing)
  • HFC Companies (Housing Finance)
  • Mid-cap Pharma

I have very high regards for Shri Basant Maheshwari and his investing acumen. He has given us all the clues to identify potential multibaggers, some of which could be game-changers (and potential 100-baggers). It is our job as amateur investors to piece together what the guru is saying, understand and reflect on what he is saying, read more and listen more to his views and then to finally trying to implement them.

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Reference

(1) Own A Few ‘Yusuf Pathan’ Type Of Stocks In Portfolio: Basant Maheshwari [ May 16, 2016]
(2) Basant Maheshwari Breaks Taboo & Recommends A Potential 100-Bagger Pharma Stock [May 5 2015]
(3) Housing fin cos, pharma midcaps and hi-tech IT are favourites: Basant Maheshwari, Wealth Advisers [Mar 11 2016]
(4) Housing Finance NBFCs Are A “Blind Buy”: Basant Maheshwari [Jun 14th, 2015]
(5) Look at established players than midcaps: Basant Maheshwari [Jun 15, 2015]

A Few Last Words

Before making any investment decision, please contact your financial adviser.

I am not registered with SEBI under SEBI (Research Analysts) Regulations, 2014. I do not offer any opinion concerning securities or public offers. Whatever analysis I provide is through public media only on Mkerj. I am not covered under RA Regulations.

I have provided this article for educational purpose only.

I hope you found this article on Basant Maheshwari’s Top 3 Potential Multibagger Sectors useful. If you have something to add please leave a comment in the post. Please feel free to contact me.

Subhodeep Mukhopadhyay

I am a Management Consultant in the Education Sector. In my previous corporate career, I have worked in Banking, Private Equity and Software industry. I am an MBA in Finance/ Computer Engineer and enjoy doing equity research and financial analysis in my free time.

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