What Mr Bajaj Needs?

Last week, we say what Mr Bajaj wanted to live a happy and contented life. Now, this week lets look at what he really needs. Often what you want and what you need to be successful are completely different. If we are able to crack Mr Bajaj's wants and needs we can be successful stock pickers.
India is a country which is woefully inadequate in terms of infrastructure. We takes ages to build good roads, flyovers and sea-links. India needs a lot of new roads and highways. The Golden Quadrilateral was just a start. As Kamal Nath, our Roads Ministers puts it, 20 kms to be added every day. L&T, Gammon, GMR Infra all build roads.
India needs new airports and the existing ones need to be upgraded. The GVK group handles the Mumbai airport and are well on their way in taking a major stake in the Bangalore airport. GMR Infra has Delhi and the Hyderabad airport. The airports have a unique business model as explained in 1 of my older posts.
Next we come to the ports.The Mundhra port has a very unique business model of Container terminals. Maruti uses this port for most of its exports.
India is a power deficient country. The companies which are the power equipment manufacturing companies like BHEL, Siemens and L&T are my favorite companies. The Power generators like Reliance Power, Adani Power all have 1 problem. When by 2012-2013, the supply demand mismatch is sorted out, the power they sell will not have that big margins.
Power and Infrastructure are the sectors to watch out for.
HCC is into construction, nuclear power and they are building a city of their own called Lavasa. Lavasa is what excites me the most about HCC.
If India wants to keep clocking higher GDP growth rates, its infrastructure has to be in place. Already the high base effect will kick in. The low lying fruits of GDP growth will be soon taken away.
What I look i a company is that it has to be in a right sector and the right management. Always in any sector the best and the worst company does well. (The worst does well while the going is good ad then tanks).
Any portfolio covering India has to have Larsen, HCC, (GMR infra or GVK power).
Ideal portfolio will cover Mr Bajaj's wants and his needs. Over the next few months, lets try to get into Mr Bajaj's mind and see what he wants.

The Key to Stock Picking in 2010:What Mr Bajaj Wants?

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.