This Stock Could be the Future WalMart of the IT Sector - The 5 Minute WrapUp by Equitymaster
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This Stock Could be the Future WalMart of the IT Sector

Mar 1, 2018

Kunal Thanvi, Research analyst

The best investor in the world Warren Buffett and his partner Charlie Munger have always made a case of 'finding great companies with stellar management when they are just starting out'.

Well, they have quoted owner and manager of world's biggest retail chain, i.e. Sam Walton of WalMart.

The basic idea is to find a great company when it is small and young. This gives you an opportunity ride along with the success of great entrepreneurs like Sam Walton.

As I wrote to you last week, I have zeroed in a niche IT company. This month's Smart Money Secrets recommendation certainly makes the cut as far as this novel idea is concerned.

I believe both the business and the management looks good, this stock has all the ingredients of being a future WalMart.

Of course, the business of WalMart and this IT company are entirely different. But there are some common patterns that I've seen.

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Why do I call it a niche IT company?

Reason# 1 - It's not an IT services company which is a commoditized business, with big players like Infosys and TCS. These companies have advantages of size and long-term businesses relationships. However, this little gem is one of the best software product companies in the world.

Reason# 2 - One of the common characteristics of a typical IT company is its concentration with respect to - clients, products, and geography.

Smart diversification in all these three parameters has been instrumental in building a highly resilient business model.

Reason# 3 - It has multiple patents under its belt.

It has filed dozens of copyrights and patents in India and the US. This is its Intellectual Property (IP).

The IP provides it a strong competitive advantage.

Reason# 4 - It has a 'sticky' business model. It's one of the few companies in the world which provides multiple products in diverse industries like banking, insurance, government, healthcare, telecom, and more.

Once it acquires a client, it has a huge opportunity for more business by cross-selling its products. This is shown in the repeat customers (80% of the total revenue is from repeat clients).

Reason# 5 - It stays ahead of the curve.

One of the key challenges for the IT companies is innovation and disruption.

This company has always stayed ahead of the curve and spent around 7-8% of revenues on Research and Development.

It has been recognized by market research firms like Gartner and Forrester as one of the leading players in innovation.

This Niche Company's Numbers Look Good

In the past, players like IBM, Microsoft, and Oracle have tried acquiring the company.

This could be a future WalMart in the IT sector.

Smart Money Secrets subscribers have received our detailed report.

You can get it too.

Kunal Thanvi
Kunal Thanvi (Research Analyst)

PS: Every day the markets are open, Ankit cherry picks one idea from our 9 premium publications, the one he considers the best moneymaking opportunity. This one idea is then shared with an exclusive group of readers on Ankit's 'Insider' list. Today, you have the chance to join this exclusive group. Find out here...

Editor's note: There will be no issue of The 5 Minute Wrapup on 2nd March 2018 on account of Holi. We wish our readers Happy Holi!

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3 Responses to "This Stock Could be the Future WalMart of the IT Sector"

Ruchit Mehta

Mar 9, 2018

I agree with your many points and even IT sector will out perfrom all the indexes this year. This share will do good in near term too. Still fingers crossed, let's see how market goes till 19 election.


Atul khamar

Mar 5, 2018

Please advise how to make Make money in volitile mkt or correction mkt.

Like (2)

Pradeep Kumar Nair

Mar 5, 2018

Copyrights and Patents provide protection to some extent, maybe some valuation but do not repeat do not provide any competetive advantage even in the medium term. Those days are long gone... please do not give weightage to that factor...

Like (2)
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