If you open any book on investment theory, you will find a chapter in it which tutors investors to be “contrarian” and to buy stocks “when blood is on the street”. It is also always stated that we must be “greedy when others are fearful”.
Sadly, novice investors like you and me never have the opportunity of being “contrarians”. Also, if and when the opportunity presents itself, we are too petrified to do anything meaningful.
Fortunately, we now have the rare opportunity to put the theory to test under the tutelage of Ramesh Damani, the Nawab of Dalal Street.
Ramesh Damani has a lot of experience in being a contrarian. In fact, he is a multi-millionaire today because of his incredible ability to go against the tide and buy stocks that are totally out of favour.
There are several examples of this in the past. Ramesh Damani was earlier known as a “PSU Bull” because of his fascination with PSU stocks when they were out of favour. He made a huge fortune of these stocks when the tide turned and they became popular. Another example is liquor stocks. When these stocks were not in fashion owing to the Janata Government’s prohibition policy, Ramesh Damani was one of the few who accumulated large chunks of top-quality liquor stocks. He made gigantic gains out of these stocks as well.
In his latest interview, Ramesh Damani pointed out that well-known and trusted stocks from the Pharma and Info-Tech space are unlikely to give mega bucks owing to their exalted valuations.
On the other hand, realty stocks, which are beaten to the ground, have the potential to give mega gains when the tide turns.
Ramesh Damani explained that the fact that the newspapers are headlining the woes of the realty sector (Unsold inventory in Bengaluru crosses 84,000 mark in Q2 2015) is a clear indication that the pessimism level is at the highest.
He also pointed out that the fact that “smart money” (in the form of the investment of Rs. 3000 crore by Warburg Pincus and Goldman Sachs into Piramal Realty) is pouring into the realty sector tells us that the sector is close to bottoming out.
Ramesh Damani explained that even otherwise, it is only a question of time before the realty sector recovers owing to the falling interest rates, the rising GDP rate, the growing population and NAMO’s thrust on ‘housing for all’.
Ramesh Damani also pointed out that the realty business is a very “basic need” business, where there is no risk of competition from China and no risk of currency devaluation/ appreciation etc.
In terms of realty stocks, Damani emphasized that we must only look at stocks with good corporate governance and with a debt-free status or with manageable debt levels. He also suggested that we pick stocks with high liquidity so that there is an escape route available should things not go as per plan.
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There is also an article in ET which suggests that the time is ripe to do bottom-fishing in realty stocks.
If you are inclined to look at realty stocks, you can check DLF, Prestige Estate, Oberoi Realty, Godrej Properties, Sobha Developers, Kolte-Patil, Ashiana Housing, Peninsula Land, Poddar Developers.
Of this lot, two stocks, Ashiana Housing and Poddar Developers, are familiar names because they are backed by ace investors like Prof. Sanjay Bakshi, Brahmal Vasudevan and Kenneth Andrade and there are also credible research reports available.