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Why I Broke My Own Allocation Rule for this South India Based Smallcap Company...

Aug 20, 2019

Richa Agarwal, Research analyst

NBFCs are facing a crunch in liquidity which is like their lifeblood for survival...

Builders are exiting some of the country's biggest realty markets...

Hard pressed to find growth opportunities, the big auto companies are planning to sail through the slowdown by cutting the costs. Layoffs are hogging the headlines. Sending SOS to the government has become fashionable now with Maruti Suzuki and M&M joining the trend...

If you go by the financial dailies and channels, the economy and India Inc. are not in a good shape.

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Real estate, NBFCs, auto sector...the critical sectors that matter a lot to the Indian economy are reportedly down in the dumps.

The mid and smallcaps have crashed.

I would not blame you if you think that it's all gloom and doom for markets.

If reading these dailies and watching financial channels were the only thing I was doing, I would believe that too.

But then, through my travels, I'm lucky to see the real picture and capture the opportunities that the mainstream media is not bothered about.

I have a firm faith in my 'boots on the ground' approach rather than arm chair analysis. I have had the chance to visit many companies' plants and managements in the smallcap space.

And I believe this is the single most important factor that helped Hidden Treasure generate an 'alpha' - the service has beaten benchmark indices by nearly 2.5 times since inception.

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Of the many smallcap companies I have met, there are a few that are first among equals.

Their stories do not end with the target price being met...Or the stock generating expected returns.

Page Industries was one such stock. We did not recommend a 'Sell' view on the stock when the stock doubled from the recommendation price of Rs 305. Knowing the company and management personally through one on one meetings helped us find our first multibagger.

But then that's a story you all already know.

Today, I want to share with you another opportunity which has the potential to be next Page Industries. And which the market is yet to discover.

It's been over two years since I recommended this smallcap company based in Hyderabad.

It has met my original target price. But I believe this is just an initial milestone for the stock.

Having met the management, and following its journey over this period, my conviction in the company has only grown with time. So much so that for the first time, I broke my rule of limiting allocation to 2%- 3% to a single stock. Recently, I recommended subscribers to increase allocation to 5% of their portfolio.

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Here's the story...

From being a proxy play on consumer discretionary segment for a long time, this company has recently shifted its focus to the Rs 4 trillion food and FMCG segment, where the margins are even better. With clients like HUL, Cadbury and Amul in its kitty, it's already off to a flying start. The runway and potential profits are huge.

But the management is not willing to rest at this.

The team is under discussions with clients like Pepsi, Coke and food delivery apps like Zomato and Swiggy. If all goes well, it could open a whole new market segment for the company to benefit from. And the profits could potentially explode.

At a time when big companies are selling assets and putting capex on hold, the company has acquiring land to make the most of the upcoming opportunities. And all this while maintaining a dividend payout at nearly 35%.

You won't read or hear about this company in the newspapers or financial channels. Don't let that keep you from making the most of this opportunity.

To know more about this extra ordinary smallcap company, click here.

And stay tuned for more of such lesser known opportunities in the smallcap space.

Warm regards,

Richa Agarwal
Richa Agarwal
Editor and Research Analyst, Hidden Treasure

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