6 high-risk, high-return stock ideas from Hemang Jani

"I feel since you are seeing this kind of an excitement around an IPO after a long time, people would surely want to have a pie of it and any correction that you may see, I honestly do not know how much will it correct and when, but surely it presents a great opportunity for investors," says Hemang Jani, Equity Strategist & Senior Group VP, MOFSL.

How can we not talk about Mankind Pharma, what a dhamakedar listing this one turned out to be, an issue price of 1080 and straightaway it shot up 1300 on opening and from there it only climbed up higher, almost 32 odd percent, 1422 is where it shut shop yesterday. But unfortunately, not everyone got the allocation, what do they do now?
The fact of the matter is that retail category was under subscribed so whoever applied in retail they got surely what they wanted, but yes the way the listing happened and post listing the way the stock ran up definitely was a bit of a technical factor also because typically what you see is that the guys who have got the holding or the allotment in the retail category they tend to exit because the stock has got a good listing and the anchor investors by the way who got much less than what they wanted because the overall holding would be very small, they want to really get more once it lists. When you see the momentum they want to really chase it up and the floating stock for this is extremely low because promoter holding is very high, almost at about 75 odd percent.

So, I feel since you are seeing this kind of an excitement around an IPO after a long time, people would surely want to have a pie of it and any correction that you may see, I honestly do not know how much will it correct and when, but surely it presents a great opportunity for investors.

But then do they buy it at these 1400 odd levels?
For those who are playing a momentum game surely it makes sense to participate because when the stock reaches a certain high level, low floating stock, that is a classic case for momentum players, surely they should participate. If one is really looking to buy for investment, I think it would be prudent to wait for some dip, I do not know how much would it be there, 5%, 7%, but this looks like a very clean, unique domestic pharma opportunity, valuations are slightly on a higher side now that it has already gone up by about 25% odd, but surely it deserves a pie in the portfolio of some of the large investors.

Where is Bajaj Finance headed? It cracked because of high valuations, pop right back up post numbers, FIIs are back, do you think this is one stock which should come back on everyone's radar?
NBFC as a theme or sector is back in the reckoning and now that the RBI has put a pause on the further rate hikes, globally also you are seeing that at some point the rates are not going to be further hiked which bodes extremely well for the NBFCs.

But within the NBFC names like Bajaj Finance or some of the auto financials -- M&M Finance, Chola these are the ones where we are seeing good traction in the business when you look at their business updates, quarterly numbers and the outlook, they are sounding far more optimistic.

The housing finance NBFCs would go through a little bit of stress because there is a sense that the rate hikes have been more than 200 basis points and the margins may not be looking that good. So, we will have to be a little more selective about which pocket are we getting into but surely NBFC as a space will do extremely well.


Paint stocks is an interesting space given that now things are likely to be challenged with the competition intensifying, do you think that those lofty valuations now are likely to get challenged and that Asian Paints is going to see some serious competitive intensity and, of course, some of the other players within the space?
My take is that already this is known that you will have very serious contenders who are going to go out aggressively in terms of putting up capacities, pricing, so on and so forth, so there is going to be some moderation in terms of the growth that some of the large players would have, but we have to understand that this market opportunity is too large so yes there will be certain amount of correction in terms of the valuations or the overall growth that the market is building in but I do not think that this is going to be a big issue for players like Asian Paints or some of the Kansai Nerolac or Berger. But I think the sector will go through a little bit of a PE correction in the near term, maybe six to twelve months and we should avoid aggressively buying into Asian Paints at this point of time.


Let us understand the spirit of the NCLT order yesterday, it is a delay, they have asked for more clarification, it is not that Embassy has pulled out and the merger is not going through, so it is a matter of maybe months or quarters I do not know, but the merger will go through, is not this a good entry point for somebody who wanted to buy it because soon it will be an Embassy Group company.
This company and certain stocks, there is a certain amount of uncertainty and if you see the track record you do see certain surprises which raises doubts on the corporate governance and what kind of news flow can come through. So, for investors who do not like these kind of surprises, I would certainly think that this stock one should avoid. But yes, for certain category of investors who are high beta and who are looking out for certain opportunities because of this kind of news flow and correction that you see in the stock price, it may present opportunity.

But as I said, the entire space, this housing, finance, etc, anyway, because of the way things have panned out, people are not too excited and then you have this kind of thing. And when you get into some sort of a legal issue, it is very difficult to put a time frame. We cannot say with any degree of conviction that this will get solved in 6 months or 10-12 months like that. It may just stretch itself out. So, I do not think it is a great idea to really buy because of this.


Nail it down to your high-risk, high-return idea.
So, in terms of the midcap names, we have been liking something like Paytm and Zomato that we had already discussed. I think these are high-risk, high-return ideas. For sure, I think Mankind is something that would present great opportunity for the momentum players. You might see a little bit of swing or volatility, but surely it looks like a clean trending story at this point of time. Apart from that, some of the numbers that were good, I think one can really look at SRF where the chemical business performance was extremely good and as I said, some of the NBFC companies, Mahindra Finance and Chola are the ones that we have been liking at this point.