Stocks like Bajaj Finance are meant to be held and cherished for decades. Such stocks should form the bulwark of every portfolio. They are immune to market conditions and instead churn out a steady return year after year. The sheer magic of compounding turns these stalwarts into magnificent multi-baggers. The best part is these multi-bagger gains come with almost no risk to our capital in view of the impeccable management pedigree.
Daljeet Kohli is a devoted fan of Bajaj Finance. He issued an initiating coverage report on 12th July 2012 when Bajaj Finance was quoting at Rs. 939. He called its valuations “compelling” and recommended a “strong buy”.
Today, Bajaj Finance rules at Rs. 6974, resulting in an appreciation of 646% in just 48 months since Daljeet’s recommendation.
Daljeet keeps a hawk eye on the stock. Whenever there is a severe correction, he rushes out a buy call. One example is of 22nd February 2016 when the stock slumped a bit. “Recent correction gives good opportunity to accumulate… upgrade to BUY from hold with TP of Rs 7200…” Daljeet said.
Later, when the stock effortlessly crossed Rs. 7200, Daljeet promptly downgraded the stock to “hold” on the basis that the valuations have gone slightly beyond comfort zone.
Hiren Ved of Alchemy Capital is an equally devoted fan of Bajaj Finance. It forms a part of the core holding of his PMS and he has made more than 10x gains from the stock. In his latest interview to ET, Hiren admitted that it would be “stupid” to expect similar scorching returns from the stock given that the market has already rewarded it for “strong growth and very high asset quality and a very well diversified book”.
However, Hiren made it very clear that he has no intention of bidding adieu to the stock. This is for two reasons.
The first is that Bajaj Finance’s earnings will still grow at 20-25 per cent. “So that is the kind of return that you will continue to get from a stock like that which means that stock price will now compound at the rate at which earnings compound. That is not a bad compounding rate” Hiren said.
The second is that Bajaj Finance is going to enter a new phase of growth. It has a credible plan to take its balance sheet size from Rs 35,000-40,000 crore to Rs 75,000-80,000 crore. “So there is still a lot of scope and opportunity to remain invested in a stock like that” Hiren added.
Now, the question is whether there is any other gold-mine NBFC stock like Bajaj Finance that can given similar humongous returns.
While Hiren Ved has maintained his customary tight lip with regard to stock recommendations, Daljeet Kohli has called Capital First the “next Bajaj Finance”.
Daljeet issued an initiating coverage report on Capital First on 16th July 2014 when the stock was at Rs. 223. At the CMP of Rs. 445, gains of 89% are on the table.
Daljeet has given cogent reasons on why Capital First deserves to be equated with the venerable Bajaj Finance. Only time will tell whether Daljeet’s confidence is justified or not!