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Wednesday, March 2, 2011

Midcap Shares expected more than 100% return in next 2-3 Years

1) Kansai Nerolac:
It's amazing how much more time we spend on the roads today - driving and stuck in the traffic - than just a couple of years ago.

Clearly the number of 2-wheelers, 4-wheelers, trucks and other commercial vehicles has ballooned in the recent years.

But while you and I may rue the traffic scenario today, there's one company which benefitted immensely from this development.

You see, much before the current auto boom kicked off in 2008, we began looking for new ways to play it besides investing in auto manufacturers.

It was then that we uncovered a midcap gem in the form of Kansai Nerolac.

Kansai Nerolac had been a strong player in the automotive paints segment. It was the primary supplier to passenger car leader Maruti Suzuki, commercial vehicles leader Tata Motors, Honda, Toyota, Volvo, Mitsubishi and even Bajaj Auto and TVS.

Plus, it also had the technical knowhow of its Japanese partner Kansai to bank on.

So we knew from the outset that this company would benefit greatly from the trend.

In addition, the company was also trying hard to establish itself in the decorative paints segment which had immense potential.

The auto growth story and the demand for decorative paints continued, and with it the company's ascendancy on the price charts, enabling our subscribers to more than double their money in just 13 months.

2) Cadila Healthcare:
Now picturize a company going from annual revenues of Rs 500 million to Rs 6,715 million in just 6 years of operation!

Believe it or not, this is actually something that the US arm of Cadila Healthcare has been able to pull off.

And it did so by focusing more on niche products which would give it greater monopoly and ensure bigger revenues and profits in the long term.

We observed that Cadila Healthcare was now employing the same strategy in India also, and doing pretty well at it.

Sugar Free, Everyuth and Nutralite are just some of the products associated with this company which you might recognize instantly.

But what you probably didn't know is that the company launched 25 new products and over 30 line extensions during FY09.

The acquisition of niche businesses Carnation Foods, Recon Healthcare and German Remedies over the years further strengthened its position in India.

Cadila's niche-oriented approach, along with the fact that it was doing well overseas also, made it a strong candidate for being considered a "Blue-chip of Tomorrow."

3) Kajaria Ceramics:

Suppose a company is the second largest player in its industry... the largest exporter of its product in the country... and the demand for its product is growing by the day in India and internationally...

Wouldn't you expect it to at least double easily in the next 3-4 years?

Why just double? You'd expect it to do even better and turn blue-chip in a few years.

We recommended Kajaria Ceramics, a ceramic tile company, in November 2007 when the housing activity was on an upswing due to both increase in personal income levels and easier availability of home mortgage finance.

Kajaria was already one of the leaders in this industry, so it already had an advantage.

And we had faith in the company's long-term ability to further grow its profits on the back of its flexible approach, and a strong distribution network of 600 dealers across the country.
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