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A well-known veteran investor once said, "Be fearful when others are greedy, and greedy when others are fearful." The wisdom of the investing guru has guided us to some of our most rewarding bets over the years. These have usually been established large-cap companies with a history of wealth creation. But the market had become fearful of them. Their fears, however, were short-sighted.
A case in point would be one of our recommendations in 2017. The stock, at the time of our recommendation, was a known name in the Indian pharmaceutical industry. Market sentiments towards it had turned sour as it was caught in the crosshairs of the US FDA. The stock had fallen 63 per cent from its peak. However, we recognised that many segments of the market were underestimating its proven track record of adeptly handling such regulatory challenges. We viewed this as a golden opportunity amid the adversity.The company went on to clear subsequent US FDA inspections in record time, and the stock rewarded our subscribers handsomely.
Today, we are caught in a deja vu. A company that has dominated a thriving industry in India for decades has lost the market's favour. D-street fears that the industry it once ruled is now filled with new contenders to the throne. But, we believe the fear has blinded many to the fact that the company has nearly doubled its earnings in the past four years. Also, several other factors hint that the market has been hasty to write off the stock.
- A competitive DNA. It has withstood several competitive threats in its decades of dominance.
- Cash rich. It is a cash-rich company and has the financial strength to battle new competitive threats.
- Impressive growth ahead. The company is expanding its capacity and is confident of growing its revenue multifold.
- Once-in-a-lifetime valuations. Fears of rising competition have stagnated the share price while earnings have continued to soar. The stock now trades at 71 per cent lower than its peak valuations.
So, it is time to put on your investing hat again. This unpopular large cap offers an investment opportunity that should not be ignored.
Not convinced? We have several other recommendations waiting for you!
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