10 Promising Midcaps Still Available Cheap
01-Jan-2015 •Mohammed Ekramul Haque
"As the Sensex crosses 28,000, we are up 30 per cent this year - remarkable, because no other emerging market has gained as much. On one hand, our portfolios have made handsome gains, on the other; stocks in every sector have run up. There are no cheap sectors in the market anymore. Cyclicals have gone up in expectation of a turnaround while the traditional defensives; pharma, IT and FMCG continue to command a premium. Where to find value then?
Midcap is one place where you can still pick up high-quality companies trading at reasonable valuations. To bring you the top names we sought to look at consistent earnings compounders. Cyclicals such as auto, cement, engineering, infrastructure, metals and realty therefore got the boot. The remaining stocks that did make the cut went through rigorous quality checks. In the end, we struck the top 10 consistent earnings compounders that you can still buy cheap.
The top 10 earnings compounders, you will see, come from two primary sectors -technology and pharma. The other defensive, FMCG, with the exception of Britannia, did not make it to our list as most of the sector is already trading at lifetime-high valuations. Among the top earnings compounders are Monsanto India that has grown its earnings by close to 70 per cent annually in the last three years. Not far behind is Ajanta Pharma with earnings growth of 68 per cent.
Many of the stocks that you will find in the following pages will have already run up smartly in the last one year but their higher earnings growth has meant valuations have still not run away. In the following pages are 10 midcap earnings compounders that still trade at reasonable valuations. Grab them before they run up too.
We recommend the following midcap stocks:
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