In the past, Indian stock market has seen big time investors investing taking risky bets by investing in troubled companies. These investors see value in these companies in the long run which make them buy stake in these companies.
Retail investors keep on looking for stocks that have the capacity to deliver good returns. But they try to avoid stocks that have not performed well in a rallying market.
Big investors with strong belief and huge investment potential make such decisions easily, even if such a stock happened to be that of a troubled company.
Radhakishan Damani’s Derive Investments’ move to buy half-a-per cent stake, or 26.59 lakh shares, in Fortis Healthcare on 19th February, 2018 is one of such case.
Porinju Veliyath, another famous investor who is known for smartly picking up small cap stocks, also purchased shares of the company as per media reports.
This can baffle investors over whether they too should make an investment in the troubled company, whose share prices have come down by 25 % in last one year or so.
Radhakishan Damani, a passionate stock picker who also owns the D-Mart chain of hypermarket stores, purchased shares of Fortis Healthcare at a time when lenders to the company’s promoter entity were busy dumping shares pledged with them. They took permission from the Supreme Counter to go ahead with the dumping of shares.
According to the data, Fortis Healthcare has dived to 8.85% from 34.43%, after a Supreme Court ruling on shares pledged with lenders. Brothers Malvinder Singh and Shivinder Singh have since resigned from the directorship of the company.
Damani’s average purchase price for Derive Investments at Rs 144.50 was greater than the average of Rs 134.65 at which Rakesh Jhunjhunwala’s wife Rekha Jhunjhunwala purchased the shares in August 2017. Some analysts believe the company could be a takeover target.
Jhunjhunwala’s wife had a 1.54% holding in Fortis Healthcare at the end of second quarter of 2017. But the shareholding pattern for third quarter shows that she either reduced or dumped the holding during these months.
The Managing Director of Kedia Securities, Vijay Kedia said that even an investor’s safest investments in the market is not 100% safe, and thus, retail investors with limited capital should not invest in risky stocks of troubled companies. These investments are for big investors with huge capital who might have 1 or 2% of their portfolio investments in such shares.
Value investors like Donald Francis believe there is no quick money in the market and that investors should not just invest blindly in risky stocks. Donald said special situations need great comprehensive knowledge about a specific business, financials and the specific situation. That is not something that retail investors can handle. One should just leave all that to market experts.
Kunj Bansal, ED & CIO, Centrum Wealth Management said that Fortis Healthcare looks like a Merger and Acquistion target. He has learnt in his investing experience of 25 years that one should only look at opportunities that can give him clear picture with valuation comfort. For medium to long-term investors he suggested not to look at shorter-term triggers. He further said that short term triggers are for traders and not value investors.
The small & midcap space which fell badly in the last 1 to 2 months had performed much better than large caps as well as every other asset class by a large margin in the year 2017.
Many analysts are afraid that the pain in this area is not over yet which gives plenty of opportunity to value investors to pick quality stocks on falls.
As per a BSE disclosure, the equity portfolio of Porinju Veliyath, also known as mid & small cap czar, includes 13 stocks in which his stakes are over 1%.
Out of these stocks, 4 increased up to 250% in the last 1 year include names like Emkay Global, followed by BCL Industries, IZMO (up 109 percent), and Vista Pharma.
Recently, Equity Intelligence has invested in Kaya Ltd. The stakes in this company is minor.
Portfolio Management customers of Equity Intelligence India Private Limited and EQ India Fund, which are owned by value investor Porinju Veliyath, purchased 13,350 shares (representing 0.1% of the total paid-up equity) of the company.
Investors made a lot of money because of the sharp increase seen in equity markets in the year 2017. This increase was of approximately 29%. But, 2018 will be different. It will give plenty of chances to long-term investors but may be hard for traders as consolidation in the market is likely to go on.
Porinju in an interview with CNBC-TV18 said that the valuation does look stretched in specific stock which could see some more pain, but overall the markets is not in a bubble zone and long-term investors have nothing to frightened about.
He further added that the market is not looking into any bubble territory, they look reasonable and healthy. In the fantastic rally of 29% on the Nifty in 2017, investors made an average return of 30 to 40% and smart investors made 80 to 90% returns. In 2018, investors have to be satisfied with much lesser return expectations.
He went on saying that the correction, for the time being, is done, but some stocks, which are still overpriced, may correct more. Smart investors can generate wealth by using mid cap and small cap stocks for another 2 to 3 years.
Porinju strongly believes politics will play an important role on Dalal Street over next one-and-half-years. In fact, politics will be trend decider for the capital market.
All-in-all, year 2018 is a year of consolidation but he is positive on investing front. Porinju believes that India is in the midst of huge economic reforms.
|Company name||Dec Holding%||1 year return|
|Emkay Global Financial Services Ltd||1.06||255.76|
|BCL Industries Ltd||1.41||228.90|
|Vista Pharmaceuticals Ltd||1.08||108.50|
|Ansal Buildwell Ltd||2.03||45.47|
|Parnax Lab Ltd||1.23||35.27|
|ABC India Ltd||1.11||19.31|
|Sarda Plywood Industries Ltd||3.51||13.61|
|Kerela Ayurveda Ltd||1.33||9.96|
|Raunaq EPC International Ltd||1.50||-0.04|
|Palred Technologies Ltd||1.03||-15.57|
Investor Ramesh Damani is 57 years old and is the founder of a company called Ramesh S Damani Finance Pvt Ltd. Damani is highly qualified. He holds a Bachelor’s Degree in Commerce from HR College in Mumbai and Master’s Degree in Business Administration from California State University.
His portfolio is full of a number of multibagger stocks. Damani has been known for his investments in both unlisted and listed companies. He is known for high-quality value picks, that can be kept in the portfolio for a longer duration. He practices the Warren Buffett model of investing, which prefers to invest in companies with strong management background.
He unveiled in a talk at the Value Investing Forum that his net worth could have been equal to that of a Forbes Billionaire if he had the sense to purchase 10% of the equity capital of United Breweries and Bharat Electronics Ltd.
If he had purchased only 10% of the equity capital of each company, his net worth would today be in excess of Rs. 6,500 crore.
We can anticipate roughly that Ramesh Damani’s net worth may be close to Rs. 1,000 crore because of the vast range of stocks in his portfolio.
Infosys was Ramesh Damani’s first pick. He purchased Rs. 10 lakh worth of stock when Infosys got listed with an IPO in 1993. By 1999, the investment in Infosys had become a multibagger stock with 100x profit.
Ramesh Damani was also one of the early identifiers of the chance in liquor shares. He understood that because of the prohibition policies of the Government, the whole liquor business in India could be purchased for only Rs 500 crore.
He purchased big share in McDowell and other liquor and they also became multibaggers stocks in the portfolio.
This renowned investor is also a strong believer in PSU stocks. His preferred PSU shares are Bharat Electronic Ltd and Bharat Earth Movers Ltd.
These shares were quoting at extremely cheap valuations and they gave very high dividend yield.
(i) National Building Construction Corporation (NBCC)
(ii) Sundaram Finance
(iii) Agrotech Foods
(v) Intellect Design Arena
(viii) Tata Elxsi
(ix) Oil PSU stocks
(x) GIC Housing
(xi) ICICI Bank
(xii) United Spirits
(xiii) Andhra International Paper
(iv) TCPL Packaging
(xv) Balmer Lawrie & Co
(xvi) Quick Heal
As revealed to the market, this renowned investor’s latest recommendations have been stocks in Public Sector Unit Banks, Oil Marketing Companies and Liquor companies. He has also taken interest in cyber-security shares like Quick Heal which he believes will give advantage in the new economy. As of 31st December 2017, he himself holds 744,079 of Quick Heal Technologies.
TV Today enjoys strong viewership ranking in Hindi and English news genre. The company’s Hindi news channel i.e. Aaj Tak has kept its market leadership position for many consecutive years in terms of viewership and keeps on dominating by being the channel of preference for viewers during unwinding of key national as well as international events. Further, TV Today’s English news channel i.e. India Today has been continuously improving viewership ranking, it has now taken the No. 2 spot from No. 4 earlier. Its other channels like Dilli Aaj Tak and Tez are also famous among viewers.
Going forward the TV industry is anticipated to register a 16% CAGR over CY2014-19E on back of increased advertisement allocations by the corporates, government, and E-Commerce set ups, which are a noteworthy new category.
There is also anticipated to be a betterment in subscription revenue due to digitization of phase 3 & 4. Since the past 6 to 7 quarters, FMCG and automobile companies, which incur significantly high advertisement costs, are underperforming due to poor consumer purchasing sentiments in rural areas owing to 2 previous consecutive years of bad monsoon.
However, there is now some betterment in TV advertisement costs in expectation of a betterment in the rural economy with the country having received good monsoon this year. TV Today will benefit on account of all these factors.
Why Mandhana Retail Ventures Ltd?
The Mandhana Retail Ventures Ltd (TMRVL) has signed a global exclusive Trademark Licence Agreement with Salman Khan’s Being Human Foundation to design, production, retail and distribute men’s wear, women’s wear and accessories under “Being Human” trademark until March 2020.
TMRVL has given great financial results with a good rise in revenues, EBITDA and PAT. TMRVL is presently having a modest PE of 9.9x in FY17E, EPS of Rs.17.5.
With the retail story ready to improve, TMRVL, with a strong growth in topline and the margins, is giving attractive investment opportunity with a price target of Rs. 300 in medium to long term perspective. The branded and retail business along with the great brand value of India’s beloved Salman Khan should contribute a strong value for the investors and shareholders.
Avenue Supermarts (DMart) operates stores under ‘D-Mart’ brand, which is an established national supermarket chain, with a primary focus on value retailing. Supermarts offers a variety of products with concentration on food (53% of revenues), FMCG (20% of revenues) and general merchandise & apparel (28% of revenues) product categories. With a network of 118 stores across 45 cities, supermarts controls a retail space of 3.6 mn sq ft. The cluster based approach for opening new stores allows DMart to efficiently control acquiring, inventory and logistics costs. DMart believes in operating by owning outlets wherein it concentrates on development of stores with area ranging from 10000 square feet (sq ft) to 60000 sq ft. It is operating on the low cost model and passing on the advantages to consumers, DMart concentrates on gains growth, maintaining gross margins at 15%. Supermarts targets densely-populated residential locality with a majority of lower middle, middle and upper-middle class customers.
DMart had a revenue growth at 40% CAGR in FY12-16 to Rs 8588.2 crore whereas net profit increased at 52% CAGR to Rs 320.7 crore in the same period. For the 9 months ended December 31, 2016, the company made operating revenues of Rs 8784 crore and net gains of Rs 393 crore. The company has made a like to like (LTL) sales growth of 26.1%, 22.4% and 21.5% for FY14, FY15 and FY16, respectively.
Over the past many years, the holdings of Rakesh Jhunjhunwala’s shares have changed a lot.
It is seen that the great investor likes to churn his portfolio often by selling non-performers and increasing the stakes of the performing shares.
There are many example of how the portfolio has been churned and the stakes have been reduced.
The stakes in Alphageo was sold because it was felt that the adverse price movement of crude oil would put a lot of stress on the company shares.
At the same time, the stakes in Titan Industries was raised because it was felt that the jewellery sector had bottomed out and the jewellery stocks had reached good valuations. Aurobindo Pharma is also one example of churning of stocks by Jhunjunwala.
Rakesh Jhunjhunwala has been periodically raising his shareholding in Aurobindo Pharma to take benefits of the quick growth in the Pharma sector and in the Company. He has added more and more of the share to the portfolio as his confidence in the performance of Aurobindo Pharma increased.
Delta Corp is also an example of how Rakesh Jhunjhunwala has been continously holding the shares because he feels that there is great prospects in the shares to give good returns to shareholders if the gaming laws in Daman are changed to favour gambling and casinos.
(i) The average duration for which Rakesh Jhunjhunwala is holding shares in his portfolio is 3.44 years. There are 9 companies which includes Crisil, Titan and Lupin where the holding duration is for 10 years or more. The shares in 15 companies have been held for duration ranging from 5 to 10 years.
(ii) The average returns from the shares held for the longest duration have also been the highest. The average absolute return on shares held for at least 10 years is very high at 3,271.52%.
(iii) There are several multibagger stocks which have contributed to the great profits in the portfolio.
(iv) Stocks like Lupin (13,855.7%), Crisil (5,588.6%) and Titan (8,272%) are the major multibaggers in the ace investor’s portfolio.
One of Rakesh Jhunjhunwala’s latest purchase is Aptech, a software company. On 10th August 2016, he bought 7 lakh stocks of the company at an average rate of Rs 91.62 per share.
Aptech is engaged in providing IT training services. The investor is believed to have purchased Aptech because he believes that the worst is already experienced by the company and that its future prospects can only get better from thereon. There are also talks that there will be a takeover bid for Aptech in the near future.
If one is choosing the best shares to buy from this ace investor’s portfolio, it is better to select the mid-cap shares from the portfolio.
Dewan Housing Finance (DHFL) is a very good share because it is quoting at a low P/BV and has great prospects ahead.
Another great stock is Tata Motors DVR. Tata Motors is this ace investor’s favourite pick. The share has very good future prospect because of CV market and Jaguar and Land Rover.
Intellect Design Arena is also a good pick because of its innovative approach in technology product making.
Ramesh Damani has also suggested Intellect Design Arena (formerly known as Polaris).
In addition to Rakesh Jhunjhunwala, even Ramesh Damani has stakes in Intellect Design Arena in the portfolio.
Karur Vyasya Bank, Aurobindo Pharma and MCX are also very good picks because they have a strong growth potential and are quoting at reasonable valuations.
Several brokerages like IndiaNivesh, Angel Broking and Nirmal Bang have also suggested Dewan Housing Finance (DHFL) as a good share.
Rare Enterprises is Rakesh Jhunjhunwala’s proprietary trading concern. All trading and investment activity is done through Rare Enterprises.
Rare is derived from the names of “Rakesh” and “Rekha” jhunjhunwala.
Rare Enterprises has a number of intelligent fundamental investors and traders in its company. The skilful investor on the fundamental side is Utpal Sheth. The smart trader on the trading side is Atul Suri. Atul Suri is a self-taught trader. He is a specialist in stocks, mutual funds, commodities and more.
|Company Name||No of shares||Holding%||Networth|
|Delta Corp Limited||20,000,000||7.48%||661.90|
|Dewan Housing Finance Corporation Limited||10,000,000||3.2%||521.15|
|Rallis India Limited||18,805,820||9.67%||442.50|
|Tata Motors Limited (DVR)||12,425,788||2.4%||336.73|
|Federal Bank Limited||34,733,085||1.80%||323.02|
|Edelweiss Financial Services Limited||10,000,000||1.1%||258.95|
|Karur Vysya Bank||22,462,288||3.09%||251.02|
|TV18 Broadcast Limited||44,560,000||2.60%||239.96|
|Geojit BNP Paribas Financial Services Limited||18,037,500||7.59%||171.81|
|Multi Commodity Exchange of India Limited||2,000,000||3.9%||147.18|
|Firstsource Solutions Limited||25,000,000||3.7%||109.25|
|VIP Industries Limited||5,215,000||3.7%||179.61|
|Agro Tech Foods Limited||1,717,259||7.05%||109.28|
|Anant Raj Limited||9,500,000||3.2%||55.86|
|ION EXCHANGE (INDIA) LTD.||800,000||5.5%||41.89|
|The Mandhana Retail Ventures Ltd||2,813,274||12.7%||40.51|
|Orient Cement Limited||2,500,000||1.2%||36.48|
|Prozone Intu Properties Limited||3,750,000||2.46%||21.19|
|Mcnally Bharat Engineering||2,311,349||4.3%||11.09|
Disclaimer: the views expressed here are of the author and do not reflect those of Groww.