Dolly Khanna has the traits of a great investor. Unlike clueless amateur investors who buy a little bit of this and a little bit of that and hope that something or the other will work out, Dolly Khanna does not touch a stock if she is not convinced about its prospects. And when she is convinced about the stock, she buys a meaningful quantity of it and holds on to it tight. This is the game plan that Dolly Khanna has implemented so far and she has got some huge multibaggers to her credit.
Let’s study Dolly Khanna’s latest portfolio to see if we can spot some secrets to her technique of finding multibaggers.
Latest Portfolio of Dolly Khanna As Of November 2013
|Company||%Holding||No of Shares (in Lakhs)||Rs Crore|
Selan Exploration Technology
RS Software (India)
Aditya Birla Chemicals
One thing that you can straightaway see is that Dolly Khanna does not believe in investing in large-cap stocks. Instead, all her investments are in small-cap and mid-cap stocks. This endorses Mark Mobius theory that your chances of finding multibagger stocks are best when you invest in small-cap & mid-cap stocks.
The second aspect is that most of the stocks are consumption-oriented, meaning that they deal in products like pressure cookers, bathroom fittings, shoes, plastic products etc that will be bought by the great Indian middle-class. This also endorses Mark Mobius theory that your best chance to find multibaggers is to target the “middle-class-products” companies.
The third aspect is the concentrated nature of the portfolio. With just 11 stocks in her core portfolio (she may have other minor holdings), you can be sure that Dolly Khanna keeps an eagle eye on her stocks and knows exactly what is happening.
The fourth aspect is that Dolly Khanna believes in actively churning her portfolio. If you compare her holdings from the recent past, you will find that a number of non-performers (like Emkay Global, Vimta Labs and Styrolution ABS (India)) have been given the boot while a number of new incumbents have been given pride of place in the portfolio.
The fifth (and surprising) aspect is that Dolly Khanna has no financial stocks. No banks, housing finance or NBFCs in her portfolio.
The sixth aspect is that each of the stocks in her portfolio is a proven multibagger. Dolly Khanna does not believe in buying unproven or experimental stocks. If a stock has done well in the past, it is likely to do well in the future is her philosophy (Incidentally, this happens to the philosophy of Prof. Sanjay Bakshi’s and Basant Maheshwari as is brought out in this article and article).
|DOLLY KHANNA’S SECRETS TO FINDING MULTIBAGGER STOCKS|
|- Only proven multibaggers. No new “experimental” stocks. Philosophy is that a stock that is doing well will continue to do well;|
|- Few number of stocks. Investment only after thorough research;|
|- Only Small/ Mid-cap stocks to increase chances of quicker multibaggers;|
|- Preference for stocks in consumption sector in view of huge scope;|
|- Avoid Banks & Financial Stocks.|
Now let’s take a close look at some of Dolly’s favourite stocks.
Dolly Khanna is Hawkins Cooker’s single largest individual public shareholder. The other large shareholder is SBI Emerging Business Fund, one of the top-performing mutual funds in the mid-cap space.
Hawkins has always been Dolly Khanna’s favourite stock. She started investing in Hawkins Cookers in December 2007 when she bought 66717 shares at the average price of about Rs. 202. After that, she has been steadily increasing her holdings in Hawkins and reached a peak of 1,54,417. She has slightly lightened her load and currently holds 105,227 shares, valued at a fabulous 22 crores. At the CMP of Rs. 2,000, Hawkins has been one of her biggest multibaggers.
Hawkins has been a bit under the weather in the past few quarters owing to some pollution control and labour problems. However, it reported excellent results for the September 2013 quarter with a huge jump in sales and EPS. If Hawkins reports good results in the next quarter as well, the stock will surge.
Dolly bought Relaxo in the December 2012 quarter, (probably in replacement of Amara Raja Batteries). The stock has been quite subdued in the recent past though it has been a super-duper multibagger in the past with a 37x return in 10 years and a 15x return in 5 years.
Prof. Sanjay Bakshi, an authority on value investing, has conducted a detailed study on Relaxo Footwear where he claims that the best is yet to come for Relaxo. “what I love about Relaxo is its growth potential” Bakshi says and adds that “I am conﬁdent that Relaxo will continue to grow faster than the market by taking market share from the unorganised players – just as it has been doing over the last several years”.
Firstcall Research says the same thing in its’ latest report “We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 900 for Medium to Long term investment”
Dolly Khanna has made quite a packet from Cera Sanitaryware. The stock has given 52% in the last one year and 181% over 2 years.
In the Quarter ended September 2013, Cera reported a huge jump of 42% in its net sales from 111.38 crore in Q2 FY 2012 to Rs. 158.76 crore though the net profit dipped from Rs. 11 crore to Rs. 10.62 crore.
Dolly Khanna is unlikely to be fazed by the dip in profitability of Cera Sanitaryware. It is probably just a short-term blip and the medium to long-term prospects of the stock look robust thanks to the growing affluence of the “middle-class”.
Amara Raja Batteries:
One notable exclusion from Dolly Khanna’s portfolio is Amara Raja Batteries, of which she held 17,41,208 shares as of December 2012. She bought the stock in June 2012 and after a fabulous 75% + gain sold off the entire holding because Amara ran into a bit of heavy weather in its quarterly results. Now, we had correctly predicted (for once) that the blip in the stock was temporary and that the stock would bounce back. Well, the stock has given a return of 28% since then. Dolly has probably invested the Amara Raja funds in Relaxo Footwears. Whether Relaxo will do better than Amara remains to be seen.