This Indian car manufacturer has recently seen 141 institutions increasing their holdings of its stock by 19 million shares.
Tata Motors (TTM)
From Cabot China & Emerging Markets Report
In the 1990s, Tata started making India’s first domestic passenger car. The company matured as a manufacturer in the 2000s, designing and manufacturing a full line of cars, trucks, SUVs and buses, including some lines it acquired from competitors outside India.
But it took two big moves to really bring Tata Motors to the attention of Western investors. The first was the company’s purchase of the Jaguar and Land Rover brands from Ford in June 2008 for $2.3 billion during the crisis in Detroit. And the second was the 2009 launch of the Tata Nano, a tiny passenger car designed to sell to a huge mass market—India’s expanding middle class.
It’s been a success, but it has been pretty much overshadowed by Tata’s adept handling of the Jaguar and Land Rover brands. These two luxury automobile lines have been a global triumph for Tata, bringing high-margin sales from Europe, the U.S. and especially China, where the cachet of these legendary brands has made them sought-after items. Tata’s sales in China now exceed sales in India!
Tata’s revenue grew an astonishing 67% in 2009, partly as a result of the new lines. And while revenue growth slowed to 9% in the fiscal year that ended in March 2013, the most recent quarterly result showed a strong 23% jump in revenue and an impressive 163% hike in earnings to $1.21 per share.
TTM peaked at 38 in late 2010, corrected to 15 in September 2011 and has spent several years trading in a tightening range with resistance from 29 to 31 and support in the low 20s. The rally that finally lifted TTM out of this trading range came in February when the stock rallied from 26.5 to 35. A two-week correction in early March gave way to another breakout to new highs. TTM’s trading on the first three days of this week came on steadily increasing volume, which is a good sign.
TTM is attractively priced, with a P/E ratio of just 10. BUY A HALF.
ID Editor’s note: The China/EM portfolio is intended to have ten equal-dollar positions. We recommend taking half a position, or 5% of the amount allocated to emerging markets exposure.
Paul Goodwin, Cabot China & Emerging Markets Report, www.cabot.net, 978-745-5532, April 10, 2014