Dolly Khanna’s spook about risks of Avanti Feeds causes loss of 1,000% gain
Prima facie, buffoonery on my part may have caused Dolly Khanna to lose out on mega gains.
In July 2014, when I spotted Dolly with a chunk of 91,500 shares (pre-split) of Avanti Feeds in her portfolio, I immediately sounded the red alert.
However, after a thorough analysis of the prospects of the stock in my usual meticulous style, I warned that the stock is exposed to numerous risks such as ‘EMS disease’, floods, cyclone, drought etc.
“I am not sure why someone like Dolly Khanna, who is so jittery of external factors like DPCO, FDA & RBI, would venture into something so blatantly risky like Avanti Feeds,” I asked, exposing my naivety.
Dolly Khanna launches top-secret mission to dump Avanti Feeds
Prima facie, Dolly appears to have been spooked by my comments because soon thereafter, she rushed to Dalal Street to dump her holdings.
|Nos of shares bought/ sold
As one can see, till 20th June 2014, Dolly was merrily tucking into the stock without a care in the World.
On and from 14th November onwards, Dolly staged a U-turn. She made numerous forays into Dalal Street, palming off a bit of her holding on each occasion.
This has continued in FY 2015-16 and also in FY 2016-17 as the data shows.
In fact, it is amusing to note that Dolly went to great length to keep her dumping of the stock a top secret.
She visited Dalal Street on 28 occasions to reduce her holding from 404,010 shares (post split) as of 1st April 2015 to 308,365 shares as of 31st March 2016.
In FY 2016-17, Dolly came to Dalal Street on 25 occasions and reduced her holding from 308,365 shares as of 1st April 2016 to 247,454 shares as of 13th January 2017.
Savage surge in Avanti Feeds’ stock price takes all by surprise
It is unbelievable that since I wrote the piece junking the stock, it is up a mind-boggling 874%.
The surge since 1st July 2014 is an eye-popping 1038% (10-bagger!).
Dolly again stages U-Turn
Now, the most important aspect is that Dolly appears to have changed her mind again about the prospects of Avanti Feeds.
After her last sale on 13th January 2017, she has been slowly but steadily nibbling on the stock.
This is what the data about Dolly’s purchases looks like:
|Nos of shares bought
Dolly’s holding of Avanti Feeds as of 31st March 2017 stands at 289,423 shares.
The investment is worth Rs. 45.64 crore at the CMP of Rs. 1577.
Did Dolly initially buy Avanti Feeds based on Ashish Chugh’s recommendation?
It may not be an exaggeration to say that Dolly was inspired by Ashish Chugh’s buy recommendation of 27th May 2013.
In a short but succinct note which reflected his brilliant thinking, Ashish recommended Avanti Feeds in the following words:
“The company has, each year, in the last 2 years distributed 25% of the profits earned (PAT) as dividend (plus dividend distribution tax). If the company continues with this payout & maintains this track, we believe this will lead to a change in perception and gradual re-rating of the stock. We believe that with an EPS of Rs.33, PE of less than 3.5, CAGR of over 70 % (over last 3 years), and a dividend yield of 6%, the stock merits investment at the current valuations.”
In the four years ago that have gone by, Avanti Feeds has surged from Rs. 98 crore to Rs. 7,100 crore, putting mind-boggling gains of 70x (7000%) into the portfolios of Ashish Chugh and his faithful followers.
|AVANTI FEEDS LTD – KEY FUNDAMENTALS
|EPS – TTM
|LATEST DIVIDEND DATE
|03 AUG 2017
|BOOK VALUE / SHARE
[*C] Consolidated [*S] Standalone
|AVANTI FEEDS LTD – FINANCIAL RESULTS
|PARTICULARS (Rs CR)
(Source: Business Standard)
Ayush Mittal makes 100-bagger from Avanti Feeds
Ayush Mittal, the illustrious co-founder of the valuepickr forum, is yet another beneficiary of Avanti Feeds’ incredible success.
He revealed that he invested in the company seven years ago, when the stock price was quoting at a beggarly price of Rs 35 and has pocketed massive 100-bagger gains.
“Avanti Feeds has doubled its capacity every few years and still the demand for its product is very high. The company is efficiently managed and has grown at a very fast rate,” Ayush Mittal said, the joy clearly evident from his face.
“I like to buy the stock on every opportunity,” he added, implying that the stock has a lot of steam left in it.
Sumeet Nagar’s Malbar India Fund shows mastery by aggressively buying Avanti Feeds
The attitude of Sumeet Nagar of Malabar India Fund is in sharp contrast with the ramblings of novice investors like me.
The Fund made its debut into Avanti Feeds on 25th July 2014 with a token investment of 1852 shares and rapidly scaled its holding to 257,000 shares as of 31st March 2015, 14,16,260 shares as of 31st March 2016 and 14,85,759 shares as of 31st March 2017.
This is a textbook example of how savvy investors average when the stock price moves upwards.
The investment is worth Rs. 234 crore as of date.
Investment in Avanti Feeds is actually safer vis-à-vis people’s fears
Sumeet Nagar was grilled by Nikung Dalmia about the reasons for his confidence in Avanti Feeds despite all the fears surrounding it. He gave a masterful explanation:
“Avanti Feeds is a company that a lot of people have had concerns about. There is fear about what can happen because of disease and the volumes can just plummet, the market can go down, the market share can go down — without really digging deeper and understanding it. If you do a lot of work and try to understand that what happened in Thailand was a set of issues specific to that country and those kind of risks are very difficult to replicate in India.
Here, you have a company which is very strong. There are two players with combined 80% plus market share and that means they do something specialised.
To be able to establish that, we have to go to a number of shrimp farms across the country, meet a lot of people, understand their advice, talk to people from Thailand and what happened there.
You have to do a lot of research to find out why this investment is actually safer vis-à-vis people’s fears.
If you honestly cannot answer the fact that we know something about this company or investment better than other people out there, then basically you are just camping because whenever you are buying somebody else is selling and that is a very good construct to have in mind to make sure that you really understand the business well and you understand it from a long term perspective as opposed to what is happening in the next one or two quarters.”
Future prospects of Avanti Feeds
Indra Kumar, the illustrious promoter of Avanti Feeds has explained the entire business model of the Company and also laid bare the plans for future growth.
He explained that the Company has expanded its capacity in shrimp feeds by 50% and by 200% capacity in processed shrimps and that this will make it more competitive in the global market place.
He emphasized that in both expansions, the company has gone in for next-generation infrastructure to be globally competitive. The company is also more focused on its dual core competencies now, having hived off its promising shrimp processing business into a subsidiary – Avanti Frozen Foods – into which its long-term overseas partner and world leading shrimps player Thai Union has invested.
Indra Kumar also complimented the Government for its commitment to grow marine exports by 20% every year and for providing support to shrimp and fish farmers by way of faster clearances, power tariffs, improving crop quality etc.
The important aspect is that Indra Kumar indicated that the expanded capacity of 4.5 lakh tons will enable Avanti to clock an annual turnover of Rs.2750 crores, with corresponding surge in EBITDA, PAT etc.
An article in Forbes (Value creator: How Avanti Feeds continues to grow at 60% annually) by Pravin Palande also explains in detail how a strategic shift in product and a tie-up with a global major enabled the phenomenal surge in the fortunes of Avanti Feeds.
Avanti Feeds’ robust performance will continue: Religare
Religare has conducted a formal assessment of Avanti’s prospects and opined that the stock is good for a buy on the following logic:
“The future outlook for the Indian shrimp industry looks promising. India with its vast coastline, increasing shrimp culture activities and better prevention measures to overcome diseases, is likely to emerge as a major beneficiary and could become the largest shrimp exporter in the world in the coming few years. Avanti Feeds is setting up hatchery (backward integration) and expanding capacities of processed shrimps and shrimp feeds.
We remain positive on the aquaculture industry and Avanti Feeds remains our preferred pick in the sector with robust financials (return ratios > 35%), experienced management, capacity expansion plans and bright future outlook. We reiterate a Buy on the stock with an upgraded target of Rs. 1,390.”
Of course, the so-called target price has been effortlessly breached by Avanti.
Prima facie, it is buffoonery to talk of target prices when one is dealing with powerhouse stocks of the caliber of Avanti Feeds.
Is Dolly Khanna buying Avanti Feeds even now?
The million dollar question for which we have to keep a red alert is whether Dolly Khanna has resumed her buying activity even after 31st March 2017 and what she holds as of 30th June 2017. Assuming Dolly is buying, there is no question that we have to en masse follow her illustrious footsteps and also launch an aggressive and no-holds-barred buying action!