Ashish Chugh’s visionary outlook delivers 600% gain from Vadilal Industries
Stocks like Vadilal Industries bring out the stark differences in the thinking of novice investors and that of visionary investors.
If someone had asked a novice investor like me in July 2012 whether Vadilal Industries, then quoting at a throwaway valuation of only Rs. 80 crore, was a good buy, I would have immediately said no.
My logic would have been that a minnow like Vadilal has no chance of survival against behemoths like Hindustan Lever and Amul and that it is only a question of time before the giants mercilessly crush it under their feet.
Yet, Ashish Chugh took a diametrically opposite view.
He explained that the fact that Vadilal Industries had, despite its diminutive size, a stranglehold over 18% of the ice-cream market share, showed that it had enormous competitive strengths that the behemoths did not have.
His logic for recommending a buy reflects visionary thinking and deserves to be reproduced in full:
“There is a lot of unexplored potential here and Vadilal has got 18% market share. It’s a well recognized brand. The company has got significant manufacturing capacity and all that is available at a market cap of just about Rs 80 crore. The market cap looks too small given the operations of the company and given the expanding size of the market and the presence which the company has in this market, the stock has all ingredients of a potential multibagger.”
Ashish Chugh knows that novice investors never listen when they are told the first time.
So, he laboriously repeated his buy recommendation in February 2014 on the same logic that there is “huge under-penetration of the ice-cream industry” and “low per-capital consumption” and that Vadilal will prosper despite the aggressive and cut-throat competition by the behemoths.
This recommendation has turned out to be prophetic because Vadilal Industries today stands tall with a market capitalisation of Rs. 575 crore and has put enormous gains of 600% on the table.
Porinju’s recommendation also fell on deaf ears
Porinju Veliyath’s interview of 20th March 2015 requires to be watched multiple times because his words have turned out to be prophetic.
“Maybe they are not great managements, they are not high quality companies, but if you make a portfolio of such 10 or 12 stocks, they are going to outperform any Nifty, Sensex or Page Industries or Sun Pharmas in this Country over a period of time”, Porinju said whilst recommending Vadilal Industries and two other stocks to us.
Unfortunately for us, this has turned out to be true because while the so-called blue-chips which are in our portfolio are languishing, the so-called low-quality companies have delivered multibagger gains.
Vadilal Industries is itself up an eye-popping 226% since then.
Ashish Kacholia gives vote of confidence to Vadilal Industries
Ashish Kacholia may or may not have heard Porinju’s advice. However, he also decided that Vadilal Industries merits investment and bought a massive chunk of 341,409 shares (including 110,279 shares in the name of Sushmita Ashish Kacholia) in the June 2015 quarter.
He has increased his holding to 3,81,183 shares as of 31st March 2017.
Parineeta Chopra appointed brand ambassador
Parineeta Chopra, the A-list film star, is known to be a heart throb for millions of youngsters across the Country. Appointing her the brand ambassador of Vadilal ice creams is a sensible move indeed and will catapult sales of ice cream to new heights.
As Vadilal Industries is still a minnow, does not the buy recommendation of Ashish Chugh and Porinju Veliyath still hold good?
At this stage, novice investors like you and me have to display our own visionary abilities by noting that Vadilal Industries is, despite the impressive multbagger gains notched up by it, still a minnow in comparison to the behemoths.
Also, the so-called “huge under-penetration of the ice-cream industry” and “low per-capital consumption” still persists.
This implies that nothing much has changed at a fundamental level since the time that Ashish Chugh and Porinju Veliyath made the recommendations and that there is still a chance for us to make amends and tuck into the stock.
Ashish Kacholia buys more and endorses theory
The ultimate endorsement of the theory that it is still not too late to buy Vadilal Industries comes from Ashish Kacholia.
Yesterday, he visited Dalal Street to buy a chunk of 38,750 shares of Vadilal Industries at Rs. 790 each.
His total investment in the Company now stands at 419,933 shares and is worth Rs. 33.17 crore at the CMP of Rs. 790.
In future, we have not only to attentively listen to the words of the visionaries but have also to act on them. The basket approach of buying small-cap stocks will ensure that the losers, if any, will get absorbed by the winners and the end result will be magnificent multibagger gains that we can feast on!