By all measures, 2017 was a stellar year for U.S. stocks, with the Dow hitting several record highs and the S&P 500 closing at an eye-popping level of 2,700.  But, will the smooth sail continue this year? Wall Street’s bulls believe that sweeping tax cuts by the Republican-led Congress will add up to bigger profits and larger stock gains this year. The market is also expected to continue its winning streak banking on a rise in wages and more confident consumers. Needless to say, the economy is on track to see the fastest expansion in decades. And it has successfully unloaded some of the baggage that had slowed it down since the Great Recession in 2009.

As many of the supportive conditions that boosted the market in 2017 are likely to stay in 2018, investing in multibaggers seems judicious. These stocks will make most of the bull run, courtesy of strong fundamentals and businesses that can multiply in a short span of time. After all, these stocks have seen their prices increase multiple times their initial investment values.

Markets Pin Hopes on Another Banner Year

In 2017, the Dow gained 25.1% after hitting 71 record closing highs, the highest since the blue-chip index’s creation in 1896. The S&P 500 added 19.4%, while the Nasdaq outperformed both with a 29% gain. The tech-heavy index moved north for the sixth straight year — its longest streak since the one that lasted from 1975 to 1980, per WSJ Market Data Group. In fact, all the three major bourses recorded the best year since 2013.

The most optimistic stock strategist further says that U.S. stocks will post sizeable returns this year as well. While some expect the Dow to hit 30,000, Tony Dwyer, the chief market strategist at New York financial firm Canaccord Genuity, raised 2018 year-end target for the S&P 500 to 3,100, up from an earlier projection of 2,800. This will mark a return of almost 16% higher than its current level of around 2,680.

So, what’s driving such bullish sentiments?

Landmark Tax Bill

President Trump’s tax cut had lifted optimism about corporate earnings, prompting many analysts to raise their forecast for business profits. The House of Representatives approved the biggest overhaul of the U.S. tax code in 30 years. Republicans successfully countered opposition from Democrats to pass the bill that will slash corporate taxes and provide temporary tax relief to both wealthy and middle-class Americans. The headline-grabbing move was that the corporate tax rate will be lowered from 35% to 21% and will be implemented next year, instead of being delayed until 2019.

Republicans also repealed the 20% corporate alternative minimum tax, while any income brought back from overseas will be taxed 8% to 15.5%, instead of the current 35%. Immediate offset of spending on short lived capital equipment is expected to further save U.S. companies around $32.5 billion in 2018, as per Congress’s joint committee on taxation (read more: GOP Passes Landmark Tax Bill: Best & Worst for Stocks).

Americans Upbeat About Economy

Consumers, in the meanwhile, have stepped into the new year with confidence. The minimum wage is poised to increase in 18 states and around 20 cities in the United States, according to an analysis by the National Employment Law Project. This will result in inching employees wage closer to $15 an hour, which is known as “living wage.” Jobless rate is already at its lowest since 2000 and job openings are abundant too.

A very strong job market fueled consumer confidence. As per the Conference Board, consumer confidence continues to hover near the 17-year high set in November. Lynn Franco, director of economic indicators at the Conference Board, added that “consumers’ expectations remain at historically strong levels, suggesting economic growth will continue well into 2018.” Diversified financial services company, Wells Fargo & Company has predicted that the U.S. economy will expand an average 2.5% each quarter this year and the next.

5 Multibaggers to Watch Out For in 2018

The Republican tax-cut plan, recently signed into law by Trump, uptick in minimum wage, consumers planning to make big-ticket purchases and a strengthening economy call for investing in multibaggers. These stocks will cash in on such positive developments and give returns that are several times their cost. We have, thus, selected five such stocks that flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Madrigal Pharmaceuticals, Inc. , a clinical-stage biopharmaceutical company, focuses on the development and commercialization of therapeutic candidates for the treatment of cardiovascular, metabolic, and liver diseases. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings rose more than 100% in the last 60 days.

Madrigal Pharmaceuticals has yielded a return of more than 100% in 2017. Moreover, its expected growth rate for the current year is 49.3%, better than the industry’s expected gain of 7.9%.

Boot Barn Holdings, Inc.  — a Zacks Rank #2 company — is a lifestyle retail chain which operates specialty retail stores in the United States. The Zacks Consensus Estimate for its current-year earnings advanced 3.4% over the last 60 days.

Boot Barn yielded a return 32.3% last year. The stock is expected to grow at a rate of 10.6% in the current year, in contrast to the industry’s projected decline of 3.3%.

Famous Dave's of America, Inc.-develops, owns, operates, and franchises restaurants under the Famous Daves name. The company sports a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings rose more than 100% in the last 60 days.

Famous Dave's of America gave a return 32.3% in 2017. Also, its expected growth rate for the current year is more than 100%, in contrast to the industry’s projected decline of 0.3%.

CVR Refining, LP  operates as an independent petroleum refiner and marketer of transportation fuels in the United States. The stock has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings rose 16.9% in the last 90 days.

CVR Refining has yielded a return of 59.1% in 2017. Moreover, its expected growth rate for the current year is more than 100%, way higher than the industry’s expected gain of 9.2%.

eGain Corporation  provides cloud-based customer engagement software solutions worldwide. The stock has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings climbed 13% in the last 60 days.

eGain has given a return of more than 100% last year. Further, its expected growth rate for the current year is 25%, higher than the industry’s projected gain of 12.8%.

Zacks Editor-in-Chief Goes ""All In"" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.

MORE WILL UPDATE SOON!!

Scared of investing @ record highs? Here are top 10 stocks which could turn multibaggers

Instead of looking at the Index, investors should focus more on stock specific opportunities and if you look for them, there are plenty available.

Indian market touched fresh record highs week-after-week helped by strong cues from global markets and domestic liquidity which continues to dominate in the year 2018.

The next big question in front of investors is – to buy stocks now or wait for declines? The general theory says that it is very tough to time the market but if investors keep a disciplined approach to investing, heavy losses could be avoided.

Instead of looking at the Index, investors should focus more on stock specific opportunities and if you look for them, there are plenty available. Sectors which are related to Indian economy should do well, suggest experts. Hence, sectors like consumption, GST-related, as well as rural focussed themes, are likely to do well in the coming years.

“Going ahead, we expect Equity market to continue to deliver consistent returns in 2018 as well on the back of stronger economic growth, recovery in corporate earnings. However the scale of returns expected would be in the range of 10-15% on the back of a high base and normalization of valuations playing out in 2018.

Our year-end target for Nifty is ~11450-11650. Some of the themes that we believe should do well in 2018 are Cyclicals like Cement, Infra, capital goods (benefit from the higher government spending), GST beneficiaries like jewelry retail, footwear, building material (value migration from unorganised to organised layers), rural recovery (sectors like Auto, FMCG, vehicle financing, etc.),” he said.

We have collated a list of top 10 stocks from different brokerage firms which could give multibagger returns in the next 2-3 years:

Analyst: Ravi Kataria, Managing Director, Imperative Associates Pvt. Ltd.

Talbros Automotive Components Limited:

Talbros Automotive is an industry leader in the manufacturing of Gaskets & Heat Shields, Forgings, Suspension Systems & Modules, Anti Vibration components, and Hoses. With experience and expertise, it has established a presence across all auto category from two-wheelers to Farm Equipment.

The company is expected to achieve revenues of Rs.700 crores by 2020, operating margin of 14 percent, and return on capital employed of 20%. Low leverage, higher promoter stake and lower than industry average valuations are factors imperative for investment in the company.

Ujaas Energy Ltd:

Ujaas Energy Limited has completed projects totalling 200 MW of solar power plants for corporates and retail clients. The company is also operating and maintaining more than 200 MW for its corporate clients like KRBL (KRBL), SRS, Friends Group, Rockwell, Avon Cycles, Solar Energy Corporation India or SECI.

We are expecting Ujaas’ topline to grow on the back of hybrid solar-wind policy, rooftop sales, and a gradual shift towards solar for sustainable low-cost power producing option. The company can double its EPS over the next couple of years on capacity augmentation.

Analyst: Sanjeev Mohta is the COO of East India Securities Ltd (EISL).

Nitin Spinners:

Nitin Spinners Ltd. (NSL), is a Rajasthan based manufacturer of 100% cotton yarn and knitted fabrics. Nitin has an installed capacity of 225,000 spindles.

Strong promoter pedigree - NSL is promoted by R. L. Nolkha who has spent around 25 years in the Industry before setting up NSL. Over the last 25 years, the Nolkha family has grown the business very efficiently and have successfully navigated the challenges and threats.

NSL’s expansions have been prudently planned in order to keep gearing in check and the management has consciously capped the interest cost to sales at 5%.

The company has been successful in maintaining best among the industry operating metrics resulting in a healthy RoAE – 27%/24%/25% for FY15/FY16/FY17. Trading at an attractive valuation of 9x FY19.

Westlife Development (WDL):

Indian food retail market is the sixth-largest in the world and estimated to grow to Rs.61trn by 2020, posting a CAGR of more than 15% over a six-year period. QSR segment contributes 16.3% to overall sales of food retail division.

WDL enjoys certain competitive advantages like long-term rent agreements with a longer tenure for acceleration on a relative basis which leads to faster store breakeven periods. The Company continued with the strategic and consistent expansion of its store base by setting up 22 stores in FY17.

Piramal Enterprises Ltd (PEL):

In a span of just five years, PEL has evolved to become one of the largest real estate financiers in India. NBFC business - largely catering to real estate developers financing is expected to remain on a robust growth path.

In 2013, PEL acquired 10% stake in Shriram Transport. It followed this up with the acquisition of 20% stake in Shriram Capital and 10% stake in Shriram City Union Finance in 2014. With these investments, PEL has also diversified into retail financing.

PEL is the third-largest player (after Abbott and Baxter) in the global inhalation anesthesia space. PEL’s consumer product business is the 7th largest amongst all OTC companies in India. It has a good portfolio of high-ranked brands.

Agrotech Foods Ltd:

Sales growth has picked up, clocking 22% YTD FY18 (excluding CSD) doubling the growth rate from 11% during the year-ago period. Nachos is a nascent but fast growing segment in India and Agro Tech has become the No.2 player in this market.

The company plans to launch different flavours and spin-offs of peanut butter (combination with jelly or chocolate). Peanut butter is expected to clock sales of Rs400-500m, and we expect it to touch Rs1bn by FY21.

The company has five plants currently and the sixth one is under construction at Chittoor. Once the company has its “seven-plant model” in place, we should see better growth in RTE popcorn.

Analyst: Abhinav Gupta, President - Capital Markets, Share India Securities

Rajoo Engineers:

Rajoo Engineers supplies machinery for packaging products and is bound to gain with strong consumption demand and an uptick in FMCG sales.

Currently trading at higher multiples with respect to trailing multiples we confident strong sales and higher profitability due to positioning in the industry. Rajoo has maintained strong return ratios and will continue to do so.

Greaves Cotton:

Greaves Cotton has tied up with Piaggo to supply BS VI diesel and alternative fuel engines. Policy embargo on CV's and environmental concerns from NGT make us confident on prospects of the company.

Greaves Cotton drive a significant portion of its revenue from agri-equipment and construction equipment. This makes Company uniquely positioned to gain from all quarters of government policies. Strong return ratios make us confident on management's capabilities to deliver.

Flex Foods:

Flex Foods is an associate company of Uflex and a leader in flexible packaging technology. Flex Foods cultivates and processes food products and supplies vacuum freeze-dried, air-dried, frozen and an individually quick frozen (IQF) product range.

It sources its raw materials through contract farming through a dedicated network of 500 farmers. Strong pedigree, good product range, and low forward earning multiples make us confident of a better outlook for the stock.

Hindustan Oil Exploration:

First O&G company in private sector with the professional board, debt-free balance sheet and proven development/operating experience puts this company in the sweet spot with rising crude prices and gas demand in India.

The company is planning to ramp up production capacity, raise capital for inorganic growth and acquire additional acreage.

Open Acreage Licensing Program & Discovered Small Field (DSF) bid round 2 announced by the Government present excellent opportunities to grow the portfolio.

 MORE WILL UPDATE SOON!!

Mid & smallcaps hinting at overbought levels; 3 stocks which could give up to 20% return

MidCap and SmallCap Indices have reached an overbought territory portending to minor profit booking on the cards before it resumes its uptrend.

 

The Nifty index extended its 3rd impulse wave forming new all-time highs. Further, it is also approaching near the upper end of the channel resistance placed in the zone of 11,000-11,100.

However, the immediate resistance on the way up is placed at 10,780, and a failure to cross this resistance may trigger the start of 4th corrective wave dragging it to levels of 10,560-10,415.

Moreover, the relative strength index or RSI continues to form higher highs in line with price making higher highs affirming the strong bullishness dominant at the moment.

Bank Nifty has broken out of a long consolidation phase with healthy volumes suggesting an extended uptrend which can fuel a rally in the Nifty Index as well.

MidCap and SmallCap Indices, on the other hand, have reached an overbought territory portending to minor profit booking on the cards before it resumes its uptrend.

Here is a list of top 3 stocks which could give up to 20% return in the next 3-4 weeks:

PTC India Financial Services Ltd: BUY| Target Rs 46| Stop Loss Rs 35.50| Return 20%

On the weekly chart, PTC India Financial Services Ltd. (PFS) has taken support at the lower end of the bullish wedge pattern and is now approaching upper end of the wedge placed at 41 suggesting uptrend on cards (as indicated on chart).

A sustained trade above 41 i.e. neckline of the pattern on higher volumes may trigger a bullish breakout. On the daily chart, the stock has started forming higher highs and the higher low affirming start of a bull trend.

RSI has formed a positive divergence with respect to price after taking support at the 40 level. The stock may be bought in the range of 38-39 for targets of 43-46, keeping a stop loss below 35.50.

UltraTech Cement Ltd: BUY| Target Rs 5150| Stop Loss Rs 4240| Return 14%

On the weekly chart, Ultra Tech Cement Ltd. (ULTRACEMCO) has broken out from an ascending triangle pattern triggering a bull trend reversal. The neckline of the pattern is at 4500; sustained trade above the neckline with healthy volumes can extend the up move.

On the daily chart, the stock has broken out from a flag pattern on good volumes affirming strong bullishness. RSI has turned upwards breaking out of the upper band of the Bollinger Bands suggesting higher levels in the coming trading sessions.

The stock may be bought in the range of Rs4500-4530 for targets of Rs5000-5150, and keeping a stop loss below Rs4240.

Bajaj Finserv Ltd: SELL| Target Rs 4450| Stop Loss Rs 5220| Return 11%

On the weekly chart, Bajaj Finserv Ltd. (BAJAJFINSV) has broken down from a rising channel pattern triggering the start of a bear trend. Further, a sustained trade below 4910 can extend the downtrend in the coming trading sessions.

On the daily chart, it is on the verge of a breakdown from a bearish flag pattern suggesting weakening uptrend. Further, RSI has also broken down from the lower Bollinger band suggesting lower levels.

The stock may be sold in the range of 5030-5000 for targets of 4650-4450, keeping a stop loss below 5220.

MORE WILL UPDATE SOON!!

Don’t ignore out of Out-of-favor stocks; top 10 contrarians buy & sell ideas

Most of the high beta stocks saw strong momentum in the year 2017 and is finding favour in the year 2018 as well. But, will it work every time? Well, analysts are of the view that out-of-favor stocks have beaten the benchmark in the last 10 years.

Indian market rose effortlessly in the year 2017, thanks to global and domestic liquidity which pushed benchmark indices to record highs. The liquidity rally drove many stocks beyond their historical averages but what will the momentum continue if liquidity tapers?

Most of the high beta stocks saw strong momentum in the year 2017 and is finding favour in the year 2018 as well. But, will it work every time? Well, analysts are of the view that out-of-favor stocks have beaten the benchmark in the last 10 years.

In this quarter, neutral to moderately popular stocks as well as the most popular stocks failed to beat the benchmark. The most popular stocks delivered the worst return in this quarter, whereas the least popular stocks performed the best.

Over the long term, out-of-favor low P/E stocks delivered disproportionate returns, significantly beating the benchmark. In contrast, the performance of high P/E stocks is dismal.

In this quarter, high P/E stocks delivered the best returns, whereas the low P/E quintile failed to beat the benchmark. Similarly, out-of-favor low price/cash flow or P/CF stocks deliver disproportionate returns, significantly beating the benchmark, said Motilal Oswal.

In contrast, the performance of high P/CF stocks is dismal. In this quarter, low P/CF stocks delivered the 2nd best returns, whereas the high P/CF quintile performed the worst.

Motilal Oswal findings suggested that a simple strategy of investing in stocks for which analysts’ consensus has changed from “net sell to net buy” with a holding period of one year has delivered 24.1% annual returns over the last 10 years.

Net Sell to Net Buy stocks for 3QFY18 include names like Jet Airways, Marico, PNB, United Spirits, and Dr. Reddy’s.

Contrarian sell ideas include names like Kotak Mahindra Bank, UltraTech Cement, JSTL, GAIL, and Bajaj Finance.

MORE WILL UPDATE SOON!!

Newgen Software IPO opens today. Should you subscribe?

The issue price has been set in the range of Rs 240-245 apiece and the company plans to raise around Rs 450 crore.

  

Another addition to the IPO bandwagon is Newgen Software, which is set to open its initial public offering on Tuesday.

The issue price has been set in the range of Rs 240-245 apiece, and the company plans to raise around Rs 450 crore.

"We are financially doing very well and registering good growth year-on-year. The IPO is mainly to provide exit or monetisation opportunity to some of our existing investors who have been with us since very long time. Around Rs 95-100 crore of the total fund will be used for setting up a new office in Noida," Newgen Software MD Diwakar Nigam told PTI.

Newgen Software recorded consolidated revenues of Rs 433.76 crore for 2016-17 and an operating profit of Rs 52.36 crore.

Brokerages largely recommend subscribing to the issue, barring Choice Broking, which has an ‘Avoid’ call.

SSJ Finance | Rating: Subscribe

The brokerage said the company reported a CAGR of 20.7 percent and 9.1 percent on revenue and net profit fronts, respectively, over FY2013-2017. “On its upper band of price of Rs 245, the issue is priced at PE ratio of 30.6x of its FY2017 EPS of Rs 8.0. We believe the IPO is fairly priced leaving a room for upside,” it said in a report. Hence, it recommends subscribing to the IPO.

Hem Securities | Rating: Subscribe

The brokerage highlighted the company’s enterprise-wide, mission-critical solutions, and said they have been used by some of the leading global businesses in various sectors including banking, govern-ment/PSUs, BPO/IT, insurance and healthcare.

Further, it is bringing the issue at P/E multiple of 33 on FY17 EPS of Rs 8.26 at higher price band of Rs 240-245/share. Looking after financials of the company we recommend “Long Term Subscribe” on it.

Choice Broking | Rating: Avoid

Choice Broking highlighted the issue is aggressively priced as the company is demanding valuation of Rs 16,962.7 million at P/E of 32.4 (x) to FY17 restated EPS. As per the management, there is no listed peer in domestic market with the similar business model. “However if we consider IBM, which the management mentioned a peer on global level, is trading at P/E multiple of 14(x).

Given the high sensitivity of business to global macro events, repellent receivable policy, completely exits of PE players and high demanding valuation, we are of the view that the issue is aggressively priced leaving no space for further upside. Thus we assign ‘Avoid’ rating to the issue.

MORE WILL UPDATE SOON!!

Saurabh Mukherjea expects metals & mining sector to shine in 2018; lists 5 themes to bet on

The Indian market climbed all wall of worries in the year 2017 but which sector will work in the year 2018? Saurabh Mukherjea of Ambit Capital decodes sectors to invest in the new calendar year.

  

Metals & Mining:

The sector which was among the top-performing sectors in the year 2017 is likely to continue its dream run in the calendar year 2018. The metals & mining sector are beneficiaries of global economic recovery. The demand could pick up without any significant change in supply dynamics. Capacity augmentation in this sector is a long time coming.

Construction/Road Building:

The road and construction sector which also outperformed in the previous calendar years could well find favour in 2018.

Consumer Discretionary:

On the back of two GST rollbacks in the last year, consumer discretionary as a theme will see some activity. More specifically, Auto and OEMs will have good 12-15 months until GST is tightened again.

CASA Funded Banks:

If you are aggressive investors then CASA funded banks as a play on the economic recovery will be a good theme to bet on. As inflation picks up, wholesale market borrowing costs will rise and that will hurt the NBFCs – which will shift the market share towards CASA-funded banks.

Better PSU, private sector banks will do quite nicely on the back of economic recovery.

IT Stocks:

Our IT analysts suggest US President Donald Trump is falling in love with Indian IT. The hostility which we saw in his speeches against H-1B visas 6-7 months ago seems to have dissipated.

The pullback over the last 12 months has put atleast 2 out of big 4 IT stocks are at a place where valuations aren’t that demanding. If you have attractive valuations, proven track record, healthy cash flow delivery, give dividend and return capital employed is good that 2 out of 4 stocks which have a good run.

I think there is more upside for IT companies going ahead. The worst of regulatory storms seem to have passed it companies, said Mukherjea. Indian IT companies stand to benefit if EU & American economic growth continues.

MORE WILL UPDATE SOON!!