Titan, Lupin, and Crisil:
Rakesh Jhunjhunwala reiterated his love story with the three stocks that are a part of his core portfolio viz, Titan, Lupin, and Crisil. These stocks are more that 55% of the total portfolio. He pointed out that these were defensives and focused on the domestic consumption story and though they were expensive, they were well worth the price.
He said he was very bullish on Titan even at the present high valuations because though the price has gone from Rs. 40 to Rs. 4,900 (pre split), it would continue to do well at the same PE if it could grow at 20-25 per cent and have a return on equity of at least 30-35 per cent and operational cash flow is equal to profits.
Even the other stocks had to grow by 15-20 per cent for the portfolio to grow by 15-20 per cent, he said, and added that he would then be “extremely happy“.
Rakesh Jhunjhunwala emphasized that all three of the core stocks in his portfolio were at life-time highs and far above the highs of 2007-08. Titan’s high in 2007-08 was Rs. 80 rupees effectively, today the price is Rs. 240. Similarly, Lupin is 2-3 times the 2007-08 high, he said with obvious pride in his voice.
Spice Jet & Aviation Stocks:
Rakesh Jhunjhunwala threw a surprise here because he indicated that while he had bought Spice Jet stock because the aviation sector had shown great potential, he was disillusioned about the high oil prices and had sold off the Spice Jet. He explained that he was not bullish on the sector until oil prices came down to the previous levels of $90 per barrel. He said that the FDI would not make a difference to their basic profitability because there are already operating at the maximum load. The key to the airlines’ profitability was the oil prices.
Karur Vysya Bank, Federal Bank & the Banking sector:
Rakesh Jhunjhunwala said he was very bullish on the banking sector because it was indirectly like a domestic consumption story and held two stocks Karur Vysya Bank & Federal Bank. These stocks constituted about 7-8% of the portfolio.
Karur Vysya Bank came in for special praise from Rakesh Jhunjhunwala. He pointed that he had invested a paltry Rs. 50 lakh in 1993 and it was worth Rs. 200 crore now. He explained that Karur Vysya Bank was still growing at 18-20 per cent and that it has a good management, is rewarding shareholders, and has a good dividend yield of about 4%.
Surprisingly, Rakesh Jhunjhunwala said that he did not trust public sector banks and had avoided investing any money in their stocks even though their valuations were cheap.
Geometric & the IT sector:
Rakesh Jhunjhunwala indicated that he was bullish on Geometric because there is going to be a big boom in engineering services and Geometric has performed very well in the last Quarter. If Geometric continues that performance, it is an extremely cheap stock, he added.
Delta Corp & the Gambling / entertainment sector:
Rakesh Jhunjhunwala said he was bullish on Delta Corp because it is a play on the consumption sector and there are four new projects opening up in the next three months. He pointed out that there are very few casinos in India, but in Malaysia and Macau, those companies have done exceedingly well and are very expensive in terms of in terms of price earnings multiples. He expected Delta Corp to also re-rate.
Nagarjuna Constructions & the infrastructure sector:
Rakesh Jhunjhunwala was quite optimistic about the infrastructure sector because while it was a sector with great potential owing to the need for investment in areas like power and roads, it was also totally beaten down. He expressed confidence that from these levels, in a period of two-three years, the infrastructure sector stocks would give very good returns.
Sectors To Invest In Now:
Rakesh Jhunjhunwala emphasized that he has a lot of investment in the retail sector and that the retail sector is going to be one of the fastest growing sectors in the economy. He stated that he is also bullish on things related to agriculture and that there will be opportunity in some of the badly beaten-down infrastructure and real estate stocks. There will be opportunity in media stocks, he added.
Stocks in which profits booked:
Rakesh Jhunjhunwala clarified that there were a number of stocks in which he has booked profits. He named Great Eastern, Bharat Electronics, BEML & Praj as stocks in which he had made good money.