Multibaggers: 2 stocks that may give you 40-50% returns

In an interview with CNBC-TV18, Aashish Tater, Head of Research at Fortunewizard.com picks two stocks as his multi-baggers for the day. Tater bets on IRB Infrastructure Developers and IL&FS Investment Manager (IVC). He sees 40-50 percent upside in both the stocks for the next six months.

Also read: No trade in Nifty, except for intraday day says Sukhani Below is a verbatim transcript of the interview: On IRB Infrastructure Developers To take a quantitative snapshot of this particular stock, IRB Infrastructure used to roll around Rs 170 mark before there was question on management. After that the stock tanked to Rs 110 given the involvement. However, now with things evening out, we feel the stock could easily go and test Rs 170-180 mark. If you see the balance sheet of this particular company, it is sitting on huge assets. We feel the cash flows that will be generated by these assets would be very good to support its fundamentals. We are working with profit after tax (PAT) of over Rs 350 crore for next fiscal given we are just projecting 5.6 percent average annual growth rate for next three years to various build–operate–transfer (BOT) projects and others. They are sitting on a pipeline of almost Rs 9,500 crore which is again going to give visibility of revenue stream. If I work out that, we are working with a price to earnings (P/E) multiple of 13-14 times for a company like IRB, which we feel is substantially underpriced for this particular stock even at Rs 160-170 mark. Every time there is a negative news, there is a denial of management and the management itself have promised that there is nothing of this sort. The technical pattern suggests that the higher top and higher bottoms are being made. Now, the stock is ready to give another breakout above Rs 137. If that Rs 137 is crossed, the predictors that we work out with gives us a complete W which will be a breakout for this particular stock for a target of Rs 168 to Rs 175.
 
Another positive is that, the Finance Minister P Chidambaram yesterday -- during his road show -- said that they want to focus on various sectors, which have been led down in the past. So that the fiscal gap is actually breached to 3 percent that is 60 basis every year they would like to cut on fiscal deficit for which we need infrastructure desperately and also focus on power stocks. These are two sectors, which we are working with some positive because he has hinted that it will not be a populist Budget and the focus will be on investment rather than giving a populist Budget. The entire thing if I work out, we feel by Budget itself the stock would be in a very good momentum and can give you 30-40 percent upside.
 
As a strategy one should keep a stop loss of Rs 120 or hedge with a Put because the risk reward is very good. At Rs 130, we are getting Rs 50 upside if the Budget works out well otherwise you can cut out through your Puts where the loss would be very limited. So from a quantitative strategy we feel 30- 40 percent upside till Budget -- this is one stock that can be looked upon by investors. On ILandFS Investment Managers (IVC) When you look at the yield curve for the entire scenario, it is now getting smoothened. That means, our experience shows that the high dividend yield stocks gets re-rated very fast when there is a likely possibility of aggressive rate cuts. With the smoothening of curve, it is confirmed. With this particular strategy, we are focusing on high dividend yield stocks and IVC fits this particular bill. The current dividend yield roughly works out to be 6 percent, which is very attractive giving post tax return of 6 percent and we are working with a target of Rs 36. There are a lot of fundamentals that are attached to the company apart from the dividend yield attractive preposition. First of all, this is a very strong management and the company has been doing well even during tough times. They have been able to consistently give you dividend of Rs 1.5 for last three-four years. If you see the history of this particular company it has rewarded its shareholders very handsomely. From a fundamental aspect, the quality and the fortune of this company is directly correlated with the growth of the economy. The investments they have done into the logistic sector or construction sector or Special Economic Zones (SEZs) warehousing will do well once the economy revives. We are forecasting a better economy for next year. We feel this is one stock, which fits the bill from this angle too. Another important thing is the investments they have been able to exit. They are the private equity investors and they are also managing USD 3.2 billion of funds so they are getting a streamline of cash flows, which is consistent and will end up with the same earning per share (EPS) even for next year even if a topsy-turvy situation arise for the economy. You are getting a Rs 3.5-4 of cash flow every year in terms of EPS, which is very attractive giving P/E of 6. With a strong parentage, we feel the stock could easily be re-rated by 40-50 percent from next six months perspective because of the dividend yield, yield curve smoothening and the fundamentals attached with the economy.
 
We feel by Budget, there will be a lot of investments or expectations built-up into sectors like power, infrastructure and this is a close proxy of investment with a very good management. We feel this is one stock, which will give you 50 percent from a very short-term perspective. Disclosure: Safe to assume that stocks discussed have been recommended to clients. No personal position.