Super, Super Bullish about housing finance stocks: Basant Maheshwari
Basant Maheshwari’s USP is his child-like enthusiasm about stocks. When Basant backs a stock, he goes the full throttle. He does not believe in halfway houses.
“We were super bullish on HFCs all these years but now there is one more super to the super bullishness. Now we are super, super bullish,” Basant said, his voice quivering in excitement, even as Ayesha Faridi and Nikunj Dalmia stared at him with an amused expression on their faces.
Of course, Basant’s bullishness about housing finance stocks is based on solid reasoning.
Basant explained that the situation that has now developed as a result of the initiatives of the Government is that it is far cheaper to own a home than to rent a home if you are in the 20-25-30 lakh bracket.
“So that is just going to rock,” he exclaimed.
Pay top-dollar for high-growth HFCs to get top-dollar returns
Basant explained that housing finance companies are “the highest growing companies” in the economy and that it makes sense to back them.
“Growth is scarce. We are ready to pay top dollar for anything that is growing 30-40%,” he said.
Go wrong on valuations but not on quality
Basant sent a veiled warning that novice investors who flock to so-called “cheap stocks” are taking a big risk because there could be any number of dangers hidden in the stock.
“If you want to get it wrong, get it wrong on valuation, do not get it wrong on quality,” he warned in a stern tone.
Can Fin Homes & PNB Housing Finance, the stocks to back
Basant has made no secret of the fact that Can Fin Homes and PNB Housing Finance are his present all-time favourite stocks
Basant has earlier assured that PNB Housing Finance will do “phenomenally well” because it is growing at 40% CAGR. There is also the possibility of a stake sale in it.
“Can Fin Homes today trades five times book and three-four years it was trading one time, two times book. That is the classic point of a bull market,” Basant said with obvious delight at the massive gains that have gushed into his portfolio.
Can Fin Homes will double every year?
According to Rajat Sharma, a noted stock market expert, Can Fin Homes “has doubled every year for the past 4 years straight”.
He assured that the next four years “could be better”, implying that the annual gains could be more than 100%.
Can Fin Homes – on average the stock has doubled every year for the past 4 years straight. Next 4 years could be better!
— Rajat Sharma (@SanaSecurities) July 27, 2016
As mentioned, this has doubled yet again for the year. So double now will be 6000!! https://t.co/hz51AVm2VA
— Rajat Sharma (@SanaSecurities) May 2, 2017
Mortgage finance companies will sparkle: Sanjay Dutt
Sanjay Dutt of Quantum Securities has also come out with all guns blazing in favour of housing finance stocks.
“We have no option, we are a country which is short of housing, short of affordable housing more than anything else. The government is giving a push towards that. I would say some cheap mortgage finance companies with excellent managements,” he said.
Porinju Veliyath pockets 100% gain from GIC Housing Finance in 3 months
Porinju Veliyath has the salutary habit of pocketing mega gains from almost any stock that he recommends.
GIC Housing Finance has surged a mammoth 100% in just three months since he publicly recommended it.
— Porinju Veliyath (@porinju) May 4, 2017
Housing finance is a trillion-dollar-plus market: CLSA
Now, the big news is that CLSA, the internationally reputed broking house, has put the spotlight on housing finance and building material stocks and recommended a buy.
This was revealed by Ajaya Sharma, the research head of ET Now.
Housing Fin broad based rally yesterday got me digging. Found this brilliant note from CLSA: pic.twitter.com/CI2IrFwLQx
— Ajaya Sharma (@Ajaya_buddy) May 3, 2017
As expected, the logic propounded by CLSA is flawless.
(i) Housing market growth set to improve. The improvement in the growth trajectory is imminent driven by two factors: (1) A government push for social/affordable housing; and (2) close to two-decade best affordability;
(ii) The volume growth in new housing construction will jump from 0% over the past five years to an 8% Cagr over FY17-24 with value growth of 13%;
(iii) Close to 6om new houses to be built at a total spend of R583tn (US$1.3tn) during FY18-24 i.e. a seven-year period;
(iv) The slowness in property sales will reverse from 2HFY18 with the affordable-housing (unit price less than Rs. 5m) segment turning the corner. The premium housing recovery should happen from late FY19/early FY20.
CLSA has assured that “the housing sector is at a tipping point and will be the economy’s next big growth driver”. It is pointed out that the catalyst is the government’s big push for an ambitious affordable housing programme and that this “will unleash a trillion-dollar-plus housing market opportunity over the next seven years”.
Other ancillary sectors will also prosper
CLSA has also stated that apart from the obvious beneficiaries in housing finance, property development and cement businesses, a host of building material sub-segments, such as tiles, sanitary ware, plywood, electrical, lighting and other household durables, are likely to see strong demand trends over the next three to five years.
Model portfolio of high conviction stocks
To make decision making really easy for us, CLSA has also provided a ready-made model portfolio of high conviction buy stocks.
These stocks are blue chip large-cap and mid-cap stocks like HDFC, Astral and Crompton Greaves.
Cogent reasons have been given in support of each stock.
Housing finance will be the next market leader: Vijay Kedia
At the risk of repetition, we must bear in mind that Vijay Kedia has also sent the clarion call that the housing finance sector could be the next market leader.
In my view, 'Housing Finance' sector could be the next market leader.
— Vijay Kedia (@VijayKedia1) January 30, 2017
Mohnish Pabrai is also bullish about the realty sector
it is not a coincidence that Mohnish Pabrai, the internationally renowned investor, chose two realty stocks, Kolte-Patil Developers and Sunteck Realty, to invest in. It proves that he also believes that the entire realty sector is on the verge of a vertical take-off.
What about Shyam Sekhar’s pessimism about housing finance stocks?
Shyam Sekhar, the noted value investor, appears to have an allergy towards some banking and finance stocks.
It may be recalled that he has earlier condemned the entire micro-finance sector as being a business of “organized usury” which does not “deserve any P/E”.
This logic now appears to be flawless because eminent experts such as Samir Arora, who had earlier foreseen multibagger gains from the sector, have now staged a somersault and declared no-confidence in the sector (see Samir Arora Vows To Never Buy Micro-Finance Stocks Again).
Shyam Sekhar is also not in favour of housing finance stocks as is evident from his views on the sector in general and Repco Home Finance in particular.
“Home finance will send a number of analysts/fund managers finally home,” he said in a tone which sent a chill down the spine of novice investors.
Home finance will send a number of analysts/fund managers finally home.
— Shyam Sekhar (@shyamsek) November 15, 2016
He also accused Repco of being involved in a “scam” and “dark deals”.
Huge scam in Repco home finance. Raids by CBI. I always knew this Co was upto dark deals.
— Shyam Sekhar (@shyamsek) October 8, 2016
Much water has flow down the bridge since this view was expressed. We will have to see whether Shyam Sekhar has changed his stance in the light of the recent developments affecting the realty and housing finance sector.
DHFL is clearly the cheapest in terms of valuations in housing finance sector. pic.twitter.com/vWe7UQHtF2
— Varinder Bansal (@varinder_bansal) April 20, 2017
What about the panic sale of Can Fin Homes stock by Billionaire Narayana Murthy?
It may be recalled that the during the height of the demonetisation crises when realty and HFC stocks were tumbling like a ton of bricks, Billionaire Narayana Murthy had rushed to Dalal Street to dump a massive truckload of Can Fin Homes stock.
The action had sparked fear amongst novice investors that it was the end game for the entire realty and HFC sector.
Today, we can confidently say that the panic sale was a big blunder by Narayana Murthy. The stock is up more than 100% since then.
It would be a blunder on our part to not read the clear writing on the wall. We also need to turn “super, super bullish” and aggressively load on to the best housing finance stocks without any further delay!