Tanvir Gill coaxes Mohnish Pabrai into recommending three stocks
Tanvir Gill’s interviews of leading personalities are required to be listened to by us with rapt attention because she is always able to extract valuable and actionable information from them.
We saw earlier how Tanvir extracted a Diwali Gift recommendation from Mark Mobius, the legendary fund manager with Templeton Mutual Fund.
Though Mark Mobius knew that he would be charge-sheeted by the SEC for talking about specific stocks, he couldn’t resist Tanvir’s charm and recommended Federal Bank to us.
Similarly, Tanvir was able to skillfully extract an admission from the legendary Warren Buffett that India is an “incredible investment opportunity“. This has paved the way for billions of dollars of FII money to gush into the Country.
Mohnish was a relatively easy conquest for Tanvir because he has a very pleasant demeanour and is always willing to go out of his way to help novice investors.
“One prediction as a Diwali gift for our viewers…,” Tanvir asked gently and tentatively, using immense tact and diplomacy so as not to spook Mohnish.
Mohnish pondered for a moment and was ready with the answer.
“The real estate basket I mentioned to you – Kolte-Patil, Sunteck and Oberoi,” he said.
“My bet would be they would be materially higher a year from now than they are today,” he added with a big smile on his face.
Sunteck Realty: Mohnish Pabrai hikes stake in aggressive manner
Mohnish Pabrai bought his first tranche of Sunteck Realty stock in the Jan-March 2017 quarter.
His initial holding of 21,48,442 shares (adjusted for split) as of 31st March 2017 has swelled to 84,61,285 shares as of 30th September 2017.
No doubt, the surge of 68% in the stock price since April 2017 has convinced Mohnish that he is on the right track.
The stock is up 127% on a YoY basis.
Is the investment in Sunteck Realty inspired by Billionaire Ajay Piramal?
Prima facie, Mohnish may be inspired by the fact that Billionaire Ajay Piramal holds a massive chunk of 53,75,013 shares of Sunteck Realty comprising 4.27% of its equity.
Mohnish has described Ajay Piramal as the “Warren Buffett of India” and described Piramal Enterprises as “India’s Berkshire Hathaway”.
He has also exhorted us to walk in the footsteps of the illustrious Billionaire.
Investors’ presentation reveals ambitious growth plans
Sunteck Realty’s latest investors’ presentation reveals ambitious growth plans. There is no doubt that the Company will be a powerhouse multibagger if things go as per plan.
Kolte-Patil – strong track record, strong balance sheet and good management
The Pabrai Investment Fund II holds 10,85,653 shares of Kolte-Patil Developers as of 30th September 2017.
These were also bought in the Jan-March 2017 quarter.
The stock is up 27% since April 2017. It is up 73% on a YoY basis.
Amitabh Sonthalia of SKS Capital, who is famed for his contra investing skills, has heaped rich praise on Kolte-Patil Developers.
He described it as a “Poona focussed realty company with a very strong track record, strong balance sheet and a good management. It was available at multi-year lows and below book value at earnings yield of about less than 10x.”
No doubt, Mohnish has the same opinion about Kolte-Patil as that of Amitabh Sonthalia.
Oberoi Realty – new investment
Mohnish’s disclosure that he holds stock in Oberoi Realty has come as a revelation because his name does not appear in the list of major shareholders either as of 31st March 2017 or as of 30th September 2017.
Oberoi Realty is also a fail-safe investment given that it is focused on Mumbai and has high-quality management in the form of Billionaire Vikas Oberoi.
The latest Q2FY18 investors’ presentation provides valuable information about the various projects being executed and the status of their completion.
Realty stocks are/were quoting at 1/4th liquidation value?
Mohnish Pabrai is a proponent of the famous theory that investment should be made only in those stocks where the odds are such that “Heads I win, tails, I don’t lose much”.
His fascination for real estate stocks appears to stem from the belief that the stocks have plunged to such unrealistic levels owing to the crippling blows of demonetization, GST etc that there is not much to lose.
“These businesses got down in some cases to one-fourth of liquidation value. If you are buying a business at a significant discount to what you can liquidate it to and on top of it has a great earnings engine and good management and other good things, how can you lose?” Mohnish asked in a rhetorical tone.
He also opined that the Slum Rehabilitation Development (SRD) Scheme, demonetization and GST have combined to give realty stocks the “Lollapalooza effect” where one plus one is not two, but becomes 11.
Identify businesses going through temporary hiccups
Mohnish took advantage of the situation to drill a bit of investing sense into us.
He explained that even in fully priced or overpriced markets, like we have right now, there are always individual businesses that are going through temporary hiccups.
He advised that investors should identify whether the underlying causes are temporary and if so, they should aggressively tuck into the stocks.
Porinju Veliyath also recommends investment in realty stocks
As if Mohnish Pabrai’s recommendation is not enough, Porinju Veliyath has also advised us to aggressively buy realty stocks as part of his Diwali Dhamaka recommendations.
“A year ago on ET Now, I was talking about three high quality real estate companies — Oberoi Realty, Sobha Developers and Godrej Properties, they have moved up very well. But even 2074 can be a very good year for these companies. And not only for next one year, next 5 to 10 years these efficient and well managed real estate developers can do well. As a business they have a long way to go, We cannot underestimate,” Porinju said.
“Investors should focus on smart developers with capability to execute and we need to go far in this business. I am bullish on these three stocks — Oberoi, Sobha and Godrej Properties. We are not holding stocks in the portfolio right now except Godrej Industries which holds Godrej Properties,” he added with an air of supreme confidence that investors cannot go wrong with such stocks.
— ET NOW (@ETNOWlive) October 19, 2017
It is obvious that we cannot defy the joint recommendations of Mohnish Pabrai and Porinju Veliyath. We have to obediently tuck into one or more blue-chip realty stocks and wait patiently for the gains to gush into our portfolios!