“Super, Super Bullish” Stock gives 54% gain in just 3 months
First, we have to compliment Basant Maheshwari for candidly disclosing that he is “super, super bullish” about PNB Housing Finance and for assuring that the stock will do “phenomenally well”.
No doubt, several novice investors who may have never heard of PNB Housing Finance earlier would have mustered the courage to buy the stock only because of Basant’s confident recommendation.
PNB Housing Finance is flying like a rocket and has posted enormous gains of 54% in just the last three months.
This has resulted in much-needed gains trickling into the impoverished portfolios of novice investors.
Exasperating farrago of downgrade by novice analysts of Morgan Stanley
— ETMarkets (@ETMarkets) February 20, 2017
Morgan Stanley’s downgrade of PNB Housing Finance in February 2017 and prediction of a target price of Rs. 900 had sent shock waves amongst investors.
Today, it appears that the downgrade may have been the handiwork of a novice analyst who may have used his bookish knowledge to conclude that the stock is overpriced. The analyst would obviously not have Basant Maheshwari’s vision or foresight.
Knowledgeable investors rightly ridiculed the downgrade by Morgan Stanley.
PNB Housing – Strong move to 1450 from 850 levels !
More downgrades Shd follow ? https://t.co/fcLuFzWX89
— Rakesh Laroia (@r_laroia) April 25, 2017
Hopefully, Morgan Stanley will now cage its novice analysts and not permit them to run amok and terrorize novice investors.
Don’t avoid buying PNB Housing Finance because it is “expensive”; it is a “Lakh Crore Ki Kahani”: Raamdeo Agrawal
So far, we have been treating Raamdeo Agrawal’s words of wisdom and recommendations in a casual manner and without according them much seriousness. However, we can no longer afford to do that because he has proved his mettle by increasing his net worth to Rs. 6,500 crore and achieving the status of a Billionaire.
In the Sohn India 2017 Conference, Raamdeo earnestly recommended a buy of PNB Housing Finance on the assurance that it is a “Lakh Crore Ki Kahani”.
The reference by Raamdeo to the words “Lakh Crore Ki Kahani” is very significant. It means that we should not fuss over mundane issues like P/BV or P/E ratios and avoid buying the stock in the misconception that it is “expensive”.
Instead, we should focus on the big picture and understand the scale of opportunity and the ability of the Company to grow at a rapid pace.
— Rattan Joneja (@rattanjoneja) June 7, 2017
Ramdeo, through MOSL, already runs a promising HFC in Aspire. When a competitor recommends you, you are doing the right things #PNBHousing
— Rudra Chowdhury (@rudra84) June 7, 2017
Dump old horses that cannot run fast, mount news horses that will gallop in Budget 2018
Basant has left no room for doubt that he is an opportunistic investor and is not a believer in the old-school credo of buy-n-hold for generations to come.
“Identify new themes and play them rather than get on an old horse because an old horse never runs fast”, Basant said with a wink and a chuckle, hinting that we have to be proactive in our thought process and not stick to old investment adages.
Play the game the Government wants you to play
Basant opined that NAMO’s Budget of 2018 will be populist “lock, stock and barell” because he will have an eye on the elections scheduled for 2019.
“The Government will push for housing because this will also push forward its election mandate. It will create a base for itself to get re-elected,” Basant said, laying bare NAMO’s election strategy.
“So why not play the game the way the government wants to, and also benefit alongside,” he asked in a rhetorical tone.
Housing finance sector is “most stable” with “low delinquencies”: RBI
One of Basant’s earlier theories is that the housing finance sector stocks are better than other Bank and NBFC stocks because the NPAs are lower. Basant explained that people are loath to lose the roof over their heads and so make all efforts to ensure that the housing loans are repaid in time.
This has been corroborated by the RBI today by reducing the “risk weights” assigned to home loans lent on or after June 7.
The impact of the RBI’s move is that the interest payable by borrowers on housing loans will be slashed by 15 to 50 basis points.
This will in turn encourage borrowers to borrow more and buy homes for themselves instead of taking accommodation on rent and paying a higher sum as rental.
Experts named PNB Housing Finance as being one of the beneficiaries of the RBI’s move on the basis that it has “sizeable exposure to large-ticket housing”.
CRISIL To ET NOW: Housing finance most stable asset class of all time.
— ET NOW (@ETNOWlive) June 8, 2017
Krishnan Sitaraman of CRISIL Ratings rationalized the RBI’s move by pointing out that housing finance is the “most stable” space within the overall financial sector spectrum.
He also rubbished fears that the space is getting overcrowded with too many players jostling for the pie.
“There is room for all because in that segment the unmet demand is there across the country because India– we are looking at basic needs is roti, kapda and makaan. People need houses to stay in and that demand is going to be there and all these entities have the potential to grow and they have been showing that growth”, he said.
“All these players who have the adequate credit matrices and operations and branch networks in place, stand to benefit and they have a good potential for growth going forward,” he added.
A similar opinion has been expressed by Gautam Chhachharia of UBS.
Gautam Chhachharia, UBS To ET NOW: Best way to play housing theme is via housing finance companies.
— ET NOW (@ETNOWlive) June 8, 2017
It is worth recalling that in Budget 2017, the affordable housing sector has already been given the coveted status of “priority industry”, which entitles it to several benefits, including loans at concessional rates.
Basant’s logic makes sense and there is no reason why we should not follow it. On first principles, HFCs make a good investment because of their strong visibility on growth, resilient asset quality, low NPAs, high margins and return ratios. If NAMO does shower the bonanza that Basant expects him to do in Budget 2018, then the sky is the limit for these stocks. However, even if NAMO does not do so, it is certain that we will still be able to pocket handsome gains from these stocks!