The One Thing OysterRock Capital’s Mehul Bhatt Looks For While Picking Stocks

As the pandemic-related economic crisis batters equity market, finding value in stocks can be quite challenging. But OysterRock Capital's Mehul Bhatt has narrowed it down to one way — look for change.

Bhatt said at OysterRock Capital, they are constantly looking at companies where there is “undiscounted change”: a change in management motivation or a change in the behaviour of the company. “Wherever the market is not pricing in a change, that is our zone for the hunt,” he told BloombergQuint's Niraj Shah in an interview.

The change could be anything, Bhatt said. It could be a change in strategy from business-to-business to business-to-consumer, or change in the company's size, or a change in its offerings, he said. While looking for change, Bhatt said investors should also look for companies that have set up a large capacity but are underutilised.

“What investors need to look at is not the change in earnings per growth, but rather what is leading to that change,” Bhatt said.

When asked about his favoured sectors, Bhatt said they have been dominant in the pharmaceutical sector since the last year. He said even though the sector has had a tough time for the past few years, a significant amount of unused capacity in the sector is now getting unlocked, owing to the pandemic.

Other Key Highlights From The Conversation:

• The PSU space is extremely cheap with the private sector taking over market share but there is an inability to access it's value.
• Defence manufacturing is cheap and attractive too but have no immediate catalysts.
• Companies' aversion towards debt is not necessarily a good thing.
• Not sure if the evident demand is a pent-up demand or demand brought about by festivities.
• Even though Covid-19 is a huge challenge, the market is showing that the economy is back on its feet.

Watch the full interview here: