My Best Pick 2020

Corona wrecks the world, but Arunagiri N bets on a beneficiary

Coronavirus has wreaked havoc on global markets, but it could prove to be a boon for specialty rubber chemicals player Nocil

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Published a year ago on Apr 09, 2020 7 minutes Read
RA Chandroo

It isn’t that hard to choose, and it’s a no-brainer. Yes, it’s a prim adaptation of the Justin Beiber song You stick out of the crowd, baby. But he’s singing about his love interest and this is about Nocil, a no-brainer stock, or a deep-value stock.

Is this the best time to be talking about value stocks? Value as a strategy has been under-performing for an extended period of time since early 2018 because of flight to safety and polarised market dynamics. As a result, a value investor is a beast that is vanishing. Even the last man standing is being tested for his tenacity. One needs to be brave to back a value stock. But, do not be mistaken, it is not a ‘value for value’s sake’ kind of stock, rather a ‘growth at a discount’ stock. Nothing beats value that comes from trying to buy ‘quality-cum-growth’ at a discount, be it large-cap or small-cap. Of course, in small-caps, such spicy opportunities come more often, because the space is under-researched and under-covered — Nocil is one such opportunity.

Openings in both — successful screenplays and stock research — are crucial. Good opening moves in stock selection usually start with the most critical question, that is, whether there is a competitive edge in the business and, more importantly, where does it come from? The answer to this question will determine whether one takes a deep dive into more due-diligence.

When one has the following factors supporting a product in any business, it invariably has a towering entry barrier or in other words, a durable competitive edge (leaving out the most obvious moats such as consumer brands):

  •  Highly critical ingredient that contributes to the quality of end product, but at the same time, constitutes a very low percent of the end product in terms of unit value.
  •  Long lead time for customer approval and stringent approval process.
  •  Exceptional need for technical knowhow and long gestation period for setting up capacity.
  •  Favourable replacement cycle in the end user markets.
  •  Few limited specialised players (niche oligopo
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