Housing finance companies (HFC) stocks give magnificent gains
First, we have to cast a glance at the magnificent gains that have accrued from HFC stocks on a YoY basis.
| Stock | YoY Gain (%) |
| Can Fin Homes | 166 |
| DHFL | 124 |
| GIC Housing | 119 |
| PNB Housing | 92* |
| LIC Housing | 66 |
| IndiaBulls Housing | 62 |
| Gruh Finance | 62 |
| HDFC | 36 |
| Repco Home | 21 |
*IPO in Nov 2016
As one can see, with the exception of Repco Home Finance and HDFC, the other HFC stocks have given fabulous gains to investors. Three stocks have given returns in excess of 100%, which is incredible by any standards.
HFC Stocks will quote in five digits: Basant Maheshwari
Basant Maheshwari has been spearheading the bullishness for HFC stocks.
He was amongst the first to call them “blind buys”. He later singled out two stocks (PNB Housing and Can Fin Homes) to say that he is “super, super bullish” about their prospects.
In his latest interview, Basant asserted (@5.40) that one housing finance company would “trade in five digits (Rs. 10,000)” in the foreseeable future, implying that the stocks are still not overvalued and hefty gains are still waiting to be harvested from these stocks.
HFC stocks are “Lakh crore ki kahani”
Understandably, the bullishness for HFC stocks has spread amongst other eminent investors as well.
Vijay Kedia solemnly declared that the housing finance sector could be the “next market leader”, implying that they will surge to new heights in an unstoppable Bull Run.
CLSA claimed that the housing finance sector is a “trillion dollar plus market” and that it is at the “tipping point”.
Dolly Khanna gave her green signal by breaking her long standing rule of not investing in Banks and NBFC stocks. Instead, she made Manappuram Finance the number one stock in her portfolio.
Raamdeo Agrawal has also come out with all guns blazing in favour of HFC stocks. He called PNB Housing Finance a “lakh crore ki kahani” stock, implying that the stock will shower enormous and incalculable wealth on its lucky shareholders.
Government policies will not help HFCs and it not the best theme in the World: Samir Arora
Samir Arora appears to be somewhat irked at the hype surrounding HFC stocks.
When he was asked what he makes of the recent rally in HFCs and whether there is scope for more gains, he replied in a testy manner:
“The first thing is on HFCs. We have not bought any on the basis of the low cost housing or home loan subsidy or ‘housing for all’ themes. My belief is that while the government has allocated enough money, what is the term?”
He appears to take the view that the Government policies are too little to justify the hype.
“They are giving this Rs 2.5 lakh effective subsidy per year under the new policy, but they have only allocated Rs 1,000 crore for it, which is nothing.”
He dismissively called HFCs “one of the themes” which is not worthy of being called “the biggest theme in the World”.
“India is still underpenetrated and India is underleveraged and there is housing demand and NPAs are less. It is one of the themes, but we do not go around the world shouting about it that this is the biggest theme that the world has,” he added in an irritable tone.
HFCs have “few moats to entry” and valuations are “frothy”: Ramesh Damani
When Ayesha Faridi (@5.40) asked Ramesh Damani whether there are any “pockets of froth building up” in the Indian stock markets, he singled out housing finance companies.
“Just look at the housing finance companies, for example, I mean it is a business there are very few moats to entry and in fact as the valuations are growing richer a lot more people are coming into, you know, entering these businesses.”
He made it clear that the valuations are “stretched” and sent the chilling warning that “if you pay a high price you almost assure poor returns in the future.”
Conclusion
It is clear that there is a difference of opinion amongst the eminent experts. While one school of thought is that HFCs have a long runway ahead, the other is apprehensive that there is hype and froth in the sector.
In the light of the difference of opinion, it may be better for us to tread with caution and to go slow on our purchases of HFC stocks. Once, there is a cool down in the valuations of the stocks, we can merrily resume our buying activity!
I think it is the biggest bubble being created in India. Govt. is trying to create Housing demand by artificial ways like providing subsidies and infra status. The demand should be generated by economic conditions. No good builder wants to enter in this section of the low-cost housing. And most important thing is that the section govt. wants to cater in LCH(middle & lower-middle-class people) never wanted or dreamed of living in FLATS. They always want home, with land and roof.
I fear that people might be on streets after 10 years to waive-off their home loans.
Use of word Froth for only housing finance compnies is Biggest Joke of The Year 2017.Where is Froth not there in this over heated market Truck operater company ( in fact many)was just trading above par ,now has multiplied in name of GST in last few years and ,forgetting that India is making special freight corridor by Indian railways and there will be less Zig Zag transportation due to GST..For Nawab of Dalal street it is not Froth as may be his portfolio stock.Singapore based invester who is mostly invested in pvt reatil banking , why he would like money flowing in Housing Finance compnies. .Froth is every where in market world over,there is more Froth in third grade compnies invested by a big invester whom followers call expert in investing in Chor Compnies.So Froth is in market world over and in more than 99% stocks.So if market corrects ,blood bath will be more in compnies where Froth is without Growth and fundamentals.So in my views in long term money can be still made in housing finance compnies specialy like in DHFL,Lic housing ,Gic housing etc where growth is available still at reasonable valuation which are just in line with broader market with 20 plus growth.RERA may give confidence to actual end use buyers,where Builders may continue to struggle due to past misdeeds ,but housing finance, paints and cement sector may be on secular bull run on secular growth .No doubt housing finance compnies may also correct along with broader market correction but will be first to bounce back.So pvt banking,nbfc,housing finance,insurance ,auto,infra like L& T,paints,consumption,cement ,retail ,RIL etc may continue to lead this rally ,and in between corrections will keep on coming so that market grows only around 15% CAGR.
I think power trading is gonna be big beneficiery in long term.ptc india ltd. Is one such safe stock . Good dividend and rising business. Significant share in power trading mkt of india. Very safe stock to invest in and going to get benefit of project uday
yeah its froth because they are not invested in HFC, damani was invested in mc dowell which was overvalued during those days…each bull market produces some froth and its upto us to take or leave it!!!
I think the takeaway is that if you already own these shares, good for you but fresh investment at these levels is not advised. Take it or leave it of course.
In my view fresh stagred investment in DHFL still can give 20 %CAGR return and is still among best investment ideas.L IC housing and GIC can still give 15% CAGR return .
Pick DHFL, it still has value ….
More jobs , more earnings , and housing finance will rock for sure,
Samir Arora thinks govt policies are not enough , and he says tax on long term gains from 1 to 3 year is end game . I think he was liking he was liking the paralised govt , which taking India to some stone age