Successful investors are known for deploying their capital into the opportunities which are capable of producing favourable returns over time. Value investing is also of similar concept, where investor buys the securities for less than what they are worth. The concept is simple but it is not easy. Why? Because most of the time when securities get cheap or start getting cheap investors within are dumping them for unfavourable future conditions.

In those circumstances if you are buying them, you are going against the wave of investors. But this is the only way to make extraordinary returns while investing in the stock market. Now to be successful within your conviction, your research should be thorough and right.

To invest successfully, the first step is to invest in the quality stocks. Infosys, TCS, Wipro and HCL Tech are really big brands and reputed businesses. The second step is to buy them when they are trading at cheap price to their intrinsic values. Well, we are writing this blog because we found many such businesses are trading now at cheaper price. Finally, it is important to only buy those stocks where future prospects are looking good. Which means we expect profits (earnings) to rise year after year.

Now here is the list of ten businesses from our universe that we found are trading within the spectrum of its future intrinsic values (2017).

hcl
tech mahindra
tcs logo
eclerx
zensar
infosys image.jpg
wipro logo
niit tech
persistent logo
mindtree

 

These all businesses are of investment quality and in the last 3 months the stock price of most of the businesses had nose-dived.

HCL Technologies 0.25%
Tech Mahindra -15.67%
TCS -3.69%
Eclerx 20.96%
Zensar Technologies 13%
Infosys -18.42%
Wipro -11.55%
NIIT Tech -16.63%
Persistent -15.53%
Mindtree -15.72%

 

There are few exceptions in the above list like Eclerx, Zensar Technologies and HCL Technologies whose share prices converges from the trend. But, the important point is what to expect from them in 2017 financial year. Below is the table that tells you about how much profits they had made in 2016 and what most of the analysts expects their profits for 2017 and where is its price if we compare it with its valuation spectrum.

Company 2016 Profits 2016 IV Expected 2017 profits Expected 2017 IV -range Market price/share
HCL Technologies Rs 5,605 Rs 404/share Rs 7,454 – Rs 8,936 Rs 594 – Rs 820/ share Rs 762
Tech Mahindra Rs 3,159 Rs 364/share Rs 2,985 – Rs 3,943 Rs 302 – Rs 520/share Rs 453
TCS Rs 24,375 Rs 2,280/share Rs 24,834 – Rs 27,750 Rs 2,080 – Rs 2,631/share Rs 2,482
Eclerx Rs 363 Rs 1,685/share Rs 357 – Rs 449 Rs 1,230 – Rs 2,062/share Rs 1,637
Zensar Technologies Rs 312 Rs 681/share Rs 337 – Rs 374 Rs 655 – Rs 810/share Rs 1,091
Infosys Rs 13,678 Rs 733/share Rs 14,062 – Rs 15,472 Rs 683 – Rs 820/share Rs 1,017
Wipro Rs 8,941 Rs 438/share Rs 8,162 – Rs 9,866 Rs 331 – Rs 481/share Rs 482
NIIT Tech Rs 297 Rs 372/share Rs 242 – Rs 325 Rs 238 – Rs 407/share Rs 396
Persistent Rs 297 Rs 376/share Rs 290 – Rs 348 Rs 308 – Rs 425/share Rs 617
Mindtree Rs 603 Rs 428/share Rs 528 – Rs 707 Rs 267 – Rs 424/share Rs 564

 

Normally, we haven’t seen IT businesses trading at discount price often. The reason is because they are most in demand as they do have solid past returns. Last time we seen such trend was in 2011 -12 financial year, almost four years back.

Finally, we just need to forecast its 2017 profits for each individual company. If you had done your research and want to share that profit figure with me and others on this blog, then I promise to share with you its intrinsic value for that business on the basis of those profit figures. Mine best pick from the above table is HCL Technologies and the worst pick is Mindtree.

Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise you to take professional advice before going ahead with our views.