Cloning Dolly Khanna’s latest portfolio would have given us 100%+ YoY gain
As far back as in 2014, I made the comment, in my typical flippant manner, that the most sensible thing that any investor can do is to clone Dolly Khanna’s portfolio instead of foraging in the bushes, looking for good stocks to buy.
I also later commented that it is sheer buffoonery for anyone to miss out on a stock bought by Dolly Khanna.
However, the tragedy is that I myself did not follow my own advice.
One can see the folly of this from the spectacular returns that Dolly Khanna’s portfolio has given on a YoY basis.
|Latest Portfolio Of Dolly Khanna|
|Company||No of Shares (in Lakhs)||Rs Crore||CMP (Rs)||YoY Gain (%)|
|Lloyd Electric and Engineering||4.46||12||260||43|
|Dwarikesh Sugar Industries||2.35||9||398||271|
|IFB Agro Industries||1.40||6||440||15|
|Emkay Global Financial Services||3.84||3||66||31|
|ADF Foods Industries||2.20||3||145||119|
Net worth of Dolly Khanna
|Simple average return||111.72|
Out of the 18 stocks in the portfolio, seven have given a YoY return in excess of 100% with one, Thirumalai Chemicals, having given a mind-boggling return in excess of 400%.
Only one stock, Nandan Denim, has given a negative return of 3%. Another, IFB Agro Industries, has remained relatively sedate with a gain of 15%.
The simple average return from the said 18 stocks is 111.72% which is eye-popping in itself.
Dolly Khanna’s latest stock pick: Trident Ltd
In April 2015, I spotted Dolly Khanna with 763,076 shares of Trident Ltd in her kitty. Later, my top-secret radar alerted me that Dolly had increased her holding in Trident Ltd to 40,62,591 shares as of April 2016.
Dolly’s aggressive action ought to have set alarm bells clanging and we ought to have scrambled to battle stations.
However, as is my wont, I turned a blind eye and did not sound a red alert.
This again, has been a mega folly because the stock has taken off like a rocket and posted hefty YoY gains of 55%.
Anyway, now we simply cannot ignore Trident Ltd because Dolly has further aggressively increased her stake in the Company to 52.59 lakh shares as of 31st December 2016. The investment is worth Rs. 37 crore at the CMP of Rs. 70 per share.
It is notable that Trident Ltd comes third in Dolly’s portfolio in terms of valuation. This implies that the stock is a high-conviction bet for her.
Trident Ltd is an addition to the arsenal of textile stocks in the portfolio
Dolly has a formidable array of textile stocks in her portfolio. Trident joins the illustrious trio of RSWM, Nandan Denim and Nitin Spinners.
I have earlier explained that the reason for Dolly’s fascination for textile stocks is because she believes that the sector will prosper as India wrests more global share from China.
In fact, it is based on this logic (that India will wrest market share from China) that Dolly aggressively bought speciality chemicals stocks like Thirumalai Chemicals, Dai-Ichi Karkaria and NOCIL. Needless to say, the bet has paid off big time and all three stocks are multibaggers (see Dolly Khanna’s Portfolio Sparkles As Specialty Chem Stocks Surge Like Rockets)
It also appears that after the tragedy in Bangladesh, big-ticket buyers of ready-made garments like Walmart, Marks & Spencer, Macy, etc prefer to source their purchases of textiles from India instead of from other Countries.
This is the reason why eminent stock pickers like Prof Sanjay Bakshi and Sanjoy Bhattacharyya have invested large sums in Kitex Garments while Ashish Kacholia has done the same in SP Apparels (see Sanjoy Bhattacharyya & Prof Sanjay Bakshi Load Up On “Hidden Gem” Quoting At “Compelling Valuations”)
Home Textile Industry is in a “sweet spot”: IDBI Capital
IDBI Capital has conducted a masterful analysis of the home textile industry and explained how and why it is likely to prosper. The report emphasizes that the sector is in a “sweet spot” and that Indian players are poised to gain market share.
The report makes the following salient points:
• Indian home textile companies are in a sweet spot currently with potential to increase sales in the export market. Over the last five years, there have been structural shifts in the dynamics of the industry where Indian companies have gained advantage over their Chinese counterparts.
• Indian companies have become increasingly competitive in the textile exports markets due to 1) availability of raw material (cotton) at lower costs compared to China, Pakistan who are net importers, 2) labour cost advantage over China, and 3) rupee depreciation of ~20% against the yuan during the last five years.
• Moreover, Indian companies continue to benefit from supportive government policies with assistance such as TUFS loans, capital subsidy, tax breaks, etc.
• Looking ahead, we expect Indian companies to continue to gain market share in the terry towel and cotton sheet markets in the US; also they remain well poised to penetrate other geographies such as Japan, Middle East and Australia.
IDBI Capital recommends Buy for target price of Rs. 98 (41% upside)
IDBI Capital has followed up on its masterful analysis of the home textile industry by recommending a buy of Trident Ltd.
The investment logic is as follows:
“Incorporated in 1990 by a first generation entrepreneur Mr. Rajinder Gupta, Trident is one of the largest integrated home textile producers in the world. It also manufactures wheat straw-based paper. During FY14-16, Trident expanded capacity in both towels and sheets with backward integration in yarn manufacturing.
With current utilization levels under 50% for terry towel and 30% for bed linen, the company remains wellpoised to capture market share in home textile export markets.
We expect Trident’s revenues/EBITDA/ net profit to grow at a CAGR of 15.5% /19.6%/34.5%, respectively over FY16-19E. ROEs and ROCEs are expected to expand to 19.7% and 17.2% in FY18E, respectively, from 14.2% and 10.7% in FY16. With rising sales of terry towel and bed linen and no major capex plans in the near future, we expect free cash flows to be utilized towards deleveraging balance sheet and paying dividends. On a valuation front, the stock is currently trading at a PE of 8.5x on its FY18E earnings. We assign a PE multiple of 12.0x to our FY18 EPS estimate of Rs8.2 and derive a target price of Rs98, translating in a 41% upside to the current market price”.
Ventura Securities recommends Buy for target price of Rs. 104 (48% upside)
Ventura’s logic for recommending Trident Ltd as an investment candidate makes for interesting reading:
“We are optimistic about the company’s prospects given that:
• Globally the retail value of home textiles is expected to reach USD 117.10 billion by 2018 (CAGR of 2.4%) with Asia Pacific growing at a much faster CAGR of 8%.
• The Indian home textile industry is expected to expand at a CAGR of 8.3% during 2014–21 to USD8.2 billion in 2021 (from USD4.7 billion in 2014) on the back of increasing spending on premium products, higher per capita income and increasing brand awareness.”
CRISIL recommends Buy for target price of Rs. 93 (32% upside)
CRISIL, the blue-chip rating agency, has confirmed that Trident has a valuation grade of 5/5 which means that the CMP has “strong upside”. CRISIL has predicted a target price of Rs. 93 which means that gains of 30%+ are waiting to be harvested from the stock.
HDFC Sec recommends Buy for target price of Rs. 88 (25% upside)
“The home textile business growth (out of the capex incurred over FY14-FY16) combined with steady contributions from the paper and yarn segments will lead to a healthy revenue and profit growth over FY16-FY19. The benefits of increasing scale of operations, highly integrated manufacturing process in both home textiles and paper, and continued access to low-cost raw material for paper division will ensure healthy and sustained operating profitability in the medium term.
Trident’s financial risk profile will improve significantly over the medium term given the absence of major debt-funded capital expenditure (capex), progressive retirement of debt and improvement in liquidity. Its credit rating was revised upwards by CARE and CRISIL in Oct 2016 to ‘A’.”
Dynamic Levels recommends Buy for target price of Rs. 80 (15% upside)
The wizards at Dynamic Levels appear to know Trident Ltd like the back of their hands. They first recommended the stock in May 2016 when it was languishing at Rs. 45. At the CMP of Rs. 70, hefty gains of 55% are on the table.
Dynamic Levels have assured that there is more upside in the stock and recommended a buy with an increased target price of Rs. 80. We can expect a further upgrade in the target price in the future.
Trident Ltd will be the “hidden gem” for 2017: Sanjiv Bhasin
Sanjiv Bhasin, the veteran stock picker with IIFL, is a die-hard fan of Trident Ltd. He has heaped rich praise on the Company and called it a “hidden gem” and assured that the stock will achieve its target of Rs. 100.
His prophetic words are as follows:
“Trident. I first recommended it around Rs 50. It is now around Rs 60 but I still think there is it will be in three digits within one year. It is the best play on the textile market) and they are getting a huge traction after the whole Welspun imbroglio . They should be one of the biggest beneficiaries for the likes of JC Penny’s. In the paper business, their margins are the highest in the agri based products. Paper is in short supply and pulp prices are headed up. This is very good combined company. It has a market cap of less than Rs 3000 crore. You could easily look for a market cap doubling in the next two years. This should be our hidden gem for the next two years for a target of Rs 100 plus and we recommend that strongly but on declines.”
Upgrade in rating by CARE
That Trident Ltd’s financials are in fine fettle is shown by the fact that CARE has upgraded the credit rating to ‘A1’ which presumably means that everything is ship-shape and there are no hidden dangers lurking around.
The unanimous opinion of the experts makes it clear that Dolly Khanna has once again snared a magnificent potential multibagger stock for her portfolio. We have to compliment her as we always do!