Its always a real challenge to pick out the right stocks. 2010 more than anytime else would be a stock pickers markets. With the Sensex giving about 80% Returns in 2009, not all stocks will rise in 2010. So, how do we identify the winners for 2010. The Key lies in identifying what Mr Bajaj Wants?
Who is Mr Bajaj?
He is a young Indian Male in his early 30s employed in one of the Great Indian Back offices making about 12-15 lakhs a year. He is married with a kid.
So, now where would Mr Bajaj spend his hard earned salary?
It would firstly be on Roti, Kapda and Makaan.
Being a family man, he would like to own his own house. So, he would take a housing loan and get set with a EMI for the next 20 years. For this, the best plays would be reputed Housing Finance companies like HDFC.
Having a roof over his head, he would like wheels to move about in town. He would buy a car again on EMI. The Market leader in India is Maruti with about 51% Market share with car models in every segment of the market. From 2 lakhs to 10 lakhs. It has the widest Service Network to boot in India.
Now, what Kapda and Roti.Mr Bajaj would like to do his shopping in malls and hang out over the weekends in places which offer Movies and Bowling. Pantaloon is one the largest mall chains in India with Big Bazaar, Grand Centrals ad Bowling Alleys to boot. They get prime properties at low rentals for being the anchor tenant.
PVR Cinemas offers prime viewing experiences all across India. Given the multiplex ticket prices and the long queue for Movies, this segment cannot be ignored.
UTV Software offers an amazing package of content for Movies to TV Serials to kid programmes. Disney has a 15% stake in the company.
I would look at Indian Hotels and EIH Hotels simply because of the amazing properties they own.
ITC and Tata tea are premium FMCG brands which offer the upwardly mobile Indian just the right products he desires. Tata Tea also has the Mount Everest (Himalaya) premium packaged drinking water.
Coming to Health care. Mr Bajaj would like to access the Best Health care facilities in the country for himself and his family. 2 big pan India chains are Apollo and Fortis. Apollo used to be my favorite, but the aggressive intent and cash rich Shivinder/Malvinder Singh duo tip the scales in Fortis favor. Fortis would have 7000 beds by end of next year.
If the India story has to grow, the above Consumer driven themes cannot be ignored. One of the touted strengths of India is Domestic Consumption. The above companies are best suited to take advantage of the Domestic Consumption Story.
The Great Indian Middle Class is what will drive the surge forward. If we look at companies taking care of their needs, half the battle is won.
The other half of the Battle will be won in identifying companies which help India build the Infrastructure it needs to make the leap from a developing nation to a developed nation.