On the Road to Find This Month's Smart Money Secrets Recommendation - The 5 Minute WrapUp by Equitymaster
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On the Road to Find This Month's Smart Money Secrets Recommendation

Aug 10, 2018

Kunal Thanvi, Research analyst

Last week was quite hectic.

As a general practice Sarvajeet and I love to attend Annual General Meetings (AGMs).

It not only helps us interact with managements but in some cases with fellow shareholders.

Last week we attended quite a few such meetings.

We went to a city in the south for our first meeting. We had recommended this company to our Smart Money Secrets subscribers in July 2017.

It has been in business since 1998 and promoted by a reputed group. The promoters are continuously increasing their stake in the company.

The numbers for the last three quarters are impressive. We believe, the upside in the stock is 50% from current levels.

Some of the best super investors from my list are holding this stock. In fact, two of them have increased their stake last year.

Since, the management doesn't meet analysts, we got the opportunity to ask questions at the AGM.

Annual General Meetings - The Best Time to Meet Companies

They answered all our questions.

They entered a new segment few years ago, which has 4 times higher margins compared to the core business.

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The management believes, the contribution to sales from this new segment could double in next two to three years.

Now, if that happens, the stock price will most likely soar.

The meeting helped boost our conviction about the business.

Our meeting ended at 2:30 and we had our flight to a city in Gujarat at 4:30.

We rushed to the airport and almost missed the flight. The next day we were up for the meeting. This company is on our shortlist. We could recommend it if it ticks all the boxes.

We've been tracking it for a while. It has always been expensive - given the quality of business and the national brand it commands.

However, it has corrected more than 50% from its peak recently. The management seldom meets, so we attended the AGM in a remote city in Gujarat.

While it competes with some of the well-known brands in the country, it has the best margins and profitably in the industry.

Will this company make it as a Smart Money Secrets recommendation?

We'll run it through our Smart Money Score. It needs to pass that test first. Stay tuned...

Sarvajeet and I have a long list of companies that we plan to meet in the next two months.

I am excited and think these meetings can throw up some great opportunities for my subscribers.

If you haven't signed up for Smart Money Secrets, you can do so here...

Chart of the Day

Talking about brands, there is a huge difference between a strong brand and a weak brand.

A strong brand commands pricing power and is a leader in the industry in terms of profitability.

A weak brand is often not a leader in terms of profitability.

The basic difference is - 'Pricing Power'.

To Identify Pricing Power, Compare Companies Like This

The company we met recently in Gujarat is the second largest player in terms of revenue. However, in terms of profitability it is the market leader.

The reason is quite simple. The brand recall for this company is very strong in regions of Gujarat and Rajasthan, which has helped it to command a strong 'Pricing Power'.

This pricing power along with the increased efficiencies in the operations (owing to scale), has helped the company to command industry best operating margins.

We at Smart Money Secrets and the super investors we track are always on the lookout for companies with economic moats. And the first tenet of a moat is - Pricing Power.


Kunal Thanvi
Kunal Thanvi (Research Analyst)
Editor, Smart Money Secrets

PS: Kunal Thanvi is the Sherlock Holmes of investing. He is on a mission to reveal the top picks of India's best investors to you. For clean, high quality stocks that won't put your wealth in peril, subscribe to Kunal's Smart Money Secrets.

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