Ramesh Damani, the Nawab of Dalal Street, is a bit like Warren Buffett. Just like the Oracle of Omaha, Ramesh Damani also does not tire of reminding investors that it doesn’t pay to hold cash – it pays to remain bullish and to hold stocks.
In his latest interview to CNBC-TV18, Ramesh Damani advised investors to put their heads down, shut out the noise and just buy top quality stocks.
He pointed out that though the index is close to lifetime highs and though good quality companies are at lifetime highs, equities is still a good option if one selected companies with good cash flow, good dividend yields, visibility of earnings strength of the basic core business and more importantly capital light models. He emphasized that companies that did not require huge amount of debt or repeated amounts of financing, are the favoured sector in stock markets across the world. He pointed out that even in the USA, the list of stocks hitting new 52 week highs is dominated by stocks like Johnson and Johnson, ADP etc which have very stable cash flow and whose yields are better than the bond yields in the market.
In India also, it is companies like HUL and Godrej Consumer with their predictable dividend cash flows that are a fairly benign space to invest money Ramesh Damani said.
Ramesh Damani expressed optimism that as global money was still finding attractive returns in India, the market would go higher and individual stocks would go higher. Markets tend to sell-off when they get extremely leveraged or buoyant in terms of sentiment and that stage has still not been reached, he said.
Ramesh Damani added a word of caution that he had learnt in equity markets that you just never know when a squall hits the sea. He advised that even in a calm sea, investors must always be prepared for a storm by ensuring that their use of leverage is minimized to the extent possible. He warned that if the Federal Reserve decides to taper off the QE and interest rates harden, there will be an instantaneous and disastrous effect on equity markets across the world.
Ramesh Damani pointed out that among his favourite stocks, he was very bullish on Tata Motors now after gratifying Q4 FY 2013 results. Tata Motors is a relatively cheap stock and it will have a good run ahead he confidently predicted.
He also pointed out that he was very bullish on media stocks (like CNBC-TV18, NDTV and ZEE TV) which had ample opportunities to grow but which are still quoting at very cheap valuations. The stocks were so cheap that one could buy tons of it and become like Rupert Murdoch he said.
Ramesh Damani also pointed out that he was bullish on top-quality real estate stocks like Godrej Properties and National Buildings Construction Corporation (NBCC), a PSU.
He also said he was also bullish on stocks like BPCL and HPCL which were stable business and quoting at cheap valuations. Their future looked bright, he said, with oil prices going down, subsidy burden going down, good deficit and great marketing though he added ruefully that he hadn’t made any money on these stocks so far.