If you want a textbook example of how investing in top-quality small and mid-cap companies can generate enormous wealth with virtually no risk, you have to study the portfolio and investment process followed by Brahmal Vasudevan’s Creador Capital.
I have been diligently reporting on all of Creador’s purchases and sales and the results are stunning to say the least.
|Stock||Date of purchase||Price paid (Rs)||CMP (Rs)||Gains (%)|
|Chola Finance||February 2012||160||956||497|
|Somany Ceramics||February 2014||115||584||407|
|Repco Home Finance||April 2013 (pre IPO)||170||773||380|
|PC Jeweller||February 2015||244||382||56|
|Ashiana Housing||February 2015||220||172||(22)|
A portfolio which mindlessly cloned the portfolio of Creador Capital/ Idria would have been richer by a fabulous 264%.
It is worth noting that Creador has exited from Chola and Repco. However, these exits are due to compulsions of having to return money to investors and not due to fundamental reasons relating to the stocks.
City Union Bank is Creador Capital’s latest stock pick. This sensational news was revealed by Bhawna Gupta of Deal Street Asia. Bhawna Gupta has pointed out that Creador has acquired a 2.45% stake in City Union Bank for a consideration of Rs 130 crore ($19.5 million) through secondary market share purchase.
|CITY UNION BANK LTD – KEY FUNDAMENTALS|
|MARKET CAP||(Rs. CR)||7,160|
|EPS – TTM||(Rs.)||[*S]||7.43|
|LATEST DIVIDEND DATE||18 MAR 2016|
|BOOK VALUE / SHARE||(Rs.)||[*S]||51.02|
[*C] Consolidated [*S] Standalone
|CITY UNION BANK LTD – FINANCIAL RESULTS|
|PARTICULARS (Rs. CR)||MAR 2016||MAR 2015||% CHG|
(Source: Business Standard)
Daljeet Kohli was one of the first to recommend City Union Bank at a time when banking stocks were out of favour owing to the surging NPAs. He issued an initiating coverage report on 30.03.2016, when the stock was languishing at Rs. 90, and promised a target price of Rs. 105.
Today, barely three months later, CUB has surged to Rs. 120, giving fabulous gains of 33%.
Rahul Shah of Motilal Oswal showered rich praise on CUB and called it a “dark horse“:
“We like City Union Bank because of the way the stock has done and they way they have been performing the past few quarters. If you look at reasonable valuations, price to book, which is trading at very well controlled NPAs at around 1.5 per cent and net NPA levels compared to other smaller banks. Secondly the good ROE in spite of the dilution that they did in FY15. Post that also, the decent ROE of 16-17 per cent which they have been able to deliver and also a lower exposure in the corporate sector (around 6-7 per cent) and the focus is again on the MSME segment as well as agri and the home loan segment. So very well capitalised with a smaller bank, going forward if they continue to do well with the controlled NPA, this can be a dark horse in coming times. Now compared to other banks, if you look at it, we had two smaller banks again getting listed in near term. So if you compare with it and a newer bank also which is getting listed, we have seen that over the years, initially those banks has taken time to perform. So, may be yes at initial levels or may be Kotak at the earlier stages or something and then they have delivered. The management is aggressive but not at the cost of the asset quality and that is a very important thing to look at. I feel at least 30 per cent is easily achievable and obviously if they continue to do well with the way the management is guiding, I think it could be a dark horse going forward as well.”
AK Prabhakar of IDBI Capital has issued a ‘techno-funda’ research report on City Union Bank in which a target price of Rs. 145 is predicted.
N Kamakodi, MD & CEO, City Union Bank: Slippage ratio should be below 2% for FY17.
— CNBC-TV18 News (@CNBCTV18News) June 9, 2016
N Kamakodi, MD & CEO, City Union Bank appeared on CNBC-TV18 and assured that the slippage ratio would be below 2% for FY 2017-18.
So, all indications are that we will have to prepare to congratulate Brahmal Vasudevan and Anand Narayan a few months later for yet another stellar stock pick!