Theme 1: Executing the war against COVID-19
It has been rightly said that year 2021 could be the beginning of the end of COVID. That would pre-suppose that the vaccine production, vaccine impact and its distribution could be big challenges in the year 2021. One theme for multi-baggers could be the companies that will not only address this theme but also leverage this theme to the fullest.
The simplest will be pharma companies that produce vaccines and syringes to make mass inoculation a reality. India produces 60% of the world’s vaccines and at no time in recent memory have vaccine companies been at the centre of a war. You can add to that list logistics companies that handle safe movement, cold storage companies that facilitate and even last-mile networks that distribute. It could be a true blue multi-bagger theme.
Theme 2: Time to play the recovery in GDP growth
If you missed the bounce in stock prices between March 2020 and December 2020, don’t lose sleep over it. The real opportunity for the growth recovery will be in 2021. As GDP growth moves from -23.6% to +11.5%, you could see a plethora of opportunities in sectors like capital goods, consumer durables, financials etc.
Here is where you can play the value game in 2021. Most of these capital goods companies are perhaps at the same price they were in 2017 or even lower. As capital investments in India and abroad pick up in a big way, these companies could see a re-rating of their profits and cash flows. Of course, banks and financials could see derived demand in such cases.
Theme 3: Second rung financials become first rung financials
For a long time, financial sector in India was about banks and few financial institutions. Then the choice widened to NBFCs and HFCs. But 2021 could see the rise of a new story in the stock markets. Insurance stocks have already gained substantially in 2020, but this could just be the tip of the iceberg. Year 2021 could see a rush for bigger life covers, larger health covers and critical illness covers. Insurers could be the blue-eyed boys of 2021.
One interesting theme in 2021 could be the big shift towards equities as investors chase returns and long-term wealth creation. We have seen the exponential growth in SIP accounts and demat accounts in the last few years. This could create multi-baggers in the form of asset management companies, depository companies, registrars and even listed stock exchanges. These could be potential multi-baggers in 2021.
Theme 4: Can Atma Nirbhar Bharat be too far behind?
As India gears up for self-sufficiency, we may have just seen the tip of the iceberg. Samsung, Maruti Suzuki and many other Asian companies are looking to de-risk their China exposure by hiving off more production to India. Even a long-time China optimist like Apple has started producing in India. This could trigger huge demand for outsourcing capacity.
But the real multi-baggers in the Atma Nirbhar story could come from the defence space. Year 2021 will see the Indian government in a dilemma. It needs to ramp up defence spending but also needs to keep budgets on a tight leash. The answer could be in-sourcing to Indian defence companies. We could see much larger defence orders being farmed out to Indian defence players; boosting their multi-bagger potential.
Theme 5: QSR Model could be the surprise package of 2021
We have seen QSR stocks like Jubilant Foods and Burger King do extremely well in recent times. Quick Service Restaurants or QSR is a business model not too well understood. The pandemic has led to a phenomenal growth in the QSR model as social distancing put severe limits on dining out. It is very likely that these restrictions will continue in 2021; partially if not substantially. In most cases, social distancing would be voluntarily rather than being imposed. Either ways, it is great news for QSRs.
There are two multi-bagger models here. The first is the QSR origination model which is the traditional food business. We may see listed restaurants and even larger hotels getting into the QSR segment in a big way. These could also be other potential winners. The unlisted facilitators like Zomato and Swiggy and a host of such players will look to front-end their IPOs. All in all, this could be an interesting multi-bagger theme for 2021.
Year 2021 could be more about specific themes and stocks than a macro approach. To that extent it will be different from 2020. However, multi-bagger opportunities will still be available aplenty. That is the good news!