3 stocks for wealth creation in long term: Milan Sharma, Rivergate Capital

In a chat with ET Now, Milan Sharma, Rivergate Capital, picks IDFC Bank, Asian Paints and Allcargo Logistics as three stocks to hold on to for next 3-5 years.

Edited excerpts:


What is the first stock you recommend?

Our first call is a buy call on IDFC Bank a new generation private sector bank which was carved out of the erstwhile IDFC Ltd. We see a lot of value buying in this bank at the levels that it is trading. This is the only bank to trade at almost 1.5 times to book value as compared to other banks. We are quite excited about the banking sector as a whole.

This stock offers a growth of a huge opportunity in times to come and the way this bank has been using technology and the network and the strong parentage it stands out clearly as far as the valuations are concerned so one should not miss out on this opportunity. At these levels, if someone buys with a long-term horizon of three to four years, you can easily double to triple from these levels in next two to three years. We do not see such value buying in any of the private sector banks right now as IDFC Bank .

This is one of the best wealth creating ideas from us and one should definitely go long with the horizon of three to five years from IDFC Bank.

What about the next recommendation?

Our second buy call is on Asian Paints, a blue chip company with a strong pedigree and in a strong position. There is hardly any valuation gap between the other peers in the sector and Asian Paints and if you try to value this stock looking at the long term growth prospects, the fair value works out to around Rs 1350 as against the Rs 1120 the stock trades.

Again the Asian Paints as such one of the blue chip company, there is hardly any downside risk though after demonetisation, the stock did correct to almost Rs 1000 levels but it offers good opportunity. In times to come, definitely it will be on that growth trajectory and with economy on the cusp of recovery, the decorative paint industry is doing well and with 51% market shares in this category, Asian Paints will do quite well in times to come. If someone has a horizon of two to three years time definitely makes a great call to hold on Asian Paint in the portfolio at these levels.

What about the third stock?

Our third call is a buy call from the logistic sector. Allcargo Logistics is a company which we are recommending from the valuation perspective. We find a lot of value compared to similar companies in similar space. When you try to value it in terms of multiples, there is almost 25% to 30% discount to the other players in the growth. Also, they offer the entire gamut of services to the clients and its operations almost 90 countries across the globe and the strong management pedigree. The company clearly stands out from the valuation perspective and should be definitely a hold on the portfolio with the vision to three to five years time.