Now, the question is that if you don’t listen to advice from people who have made millions and billions from the stock market, then who do you listen to?
Anyway, now lets see the stock picks of these stalwarts for 2013.
Rakesh Jhunjhunwala, in his latest interview to the ET, was very clear that stocks which benefit from the great India consumption story is where your money should be.
The logic is very simple. The consumer market is presently at $400 billion. By 2020 (7 years), the market will be $5 trillion. Stocks that will cater to this great consumer market will be the one’s that will benefit.
“So the kind of growth that is possible is unbelievable and that is what makes me bullish” the Badshah exclaimed.
Rakesh Jhunjhunwala made it clear that you don’t have to look far for stocks that will register the most progress. His crown jewel stock Titan Industries, with its strong brand, dominant market share and ambitious management, will continue to dominate.
Rakesh Jhunjhunwala also suggested that investors should stop worrying about Titan Industries’ ‘expensive‘ valuations. He explained that Titan was growing at 18-20% per annum and what you pay for the stock now will appear ridiculous cheap when you look at Titan’s market cap in 5 or 10 years.
Rakesh Jhunjhunwala’s advice makes immense sense. When he bought truckloads of the stock in 2003, Titan was an “expensive” stock. However, that price is really just a pittance at today’s profits and price.
This theory is also supported by a recent article in the ET that if one bought stocks quoting at 52 week highs, one would have made a huge packet.
If one were to stretch Rakesh Jhunjhunwala’s logic, the result is that all strong companies that will benefit from the great Indian consumer boom like HDFC Bank, Page Industries, Hawkins Cookers, Amara Raja Batteries, Tata Motors etc will benefit immensely.
Rakesh Jhunjhunwala’s second favourite investment sector is agriculture.
Here again, Rakesh Jhunjhunwala gave strong logic to back up his preference. He pointed out that while food demand is going up year-on-year, land is a limiting factor owing to rapid urbanisation. The only way to increase production is through technology advancements, the Legend pointed out.
“We are using the lowest mode of agrochemicals and seeds. So there is a lot of scope of both the products. And as time will pass, farmers will also get a better price for their produce,” Rakesh Jhunjhunwala pointed out.
Stocks like Rallis, Coromandel Industries and Agro-Tech Industries have an immense growth opportunity in this field.
Rakesh Jhunjhunwala had two pieces of advice for investors. First, he said investors should only buy good quality stocks, with good governance, good cash flows & reasonable growth. He explained that it was easy for these companies to have a growth rate of 18% to 20% growth given the size of the economy. The stocks would give a give a return which is equivalent to their earnings growth.
Second, he said that retail investor should invest small sums of money every month. They must remember that India is in a long-term bull market and predicting the market is difficult. So, if you have a long-term bull market, you should invest every month regardless of the index situation, he said, and pointed out that a return between 15% and 24% on a compounded basis could be achieved.
Shankar Sharma of First Global, despite giving the impression that he is an adventurous investor, is really conservative at heart when it comes to money matters. His precious advice to investors was that they should be “conservative” and “very afraid” of the stock market, meaning thereby that they should not entrust their precious money to anyone but the best run companies. Stay clear of stocks with dubious managements which promise to be overnight multibagger stocks was Shankar Sharma’s warning.
One doesn’t have to go far to find Shankar Sharma’s favourite stocks. His pet stock is Bajaj Auto, the blue chip that has consistently generated high ROE but still quotes at reasonable valuations. His other favourites are FMCG heavy weights Hindustan Lever and ITC which have survived may a recession in the economy and lived to tell the tale. His other all-time favourite stock is Tata Motors which is staring at a huge untapped luxury car market with JLR.
So, this is the time to wake up, rub the sleep off your eyes, listen to the stalwarts and start buying stocks of top-quality companies in a slow and steady manner.