Mohnish Pabrai is one of our favourite stock wizards. Apart from his mastery in stock picking, his humility, down-to-earth attitude and self-deprecating humour, makes him the ideal role model for us.
The best part is that Mohnish Pabrai treats his enormous success lightly. One would never guess that he has today a net worth of at least Rs. 350 crore. The entire fortune has come out of buying and selling stocks and compounding his gains at a fantastic CAGR of about 29%.
Mohnish’s investment strategy is based on the credo of “Heads I Win, Tails I Don’t Lose Much”. This is similar to Warren Buffett’s “Rule No.1: Never Lose Money. Rule No.2: Never Forget Rule No.1”.
In other words, Mohnish Pabrai’s belief is that capital preservation is paramount. One has to be so careful and conservative with investments that even in the worst case scenario, there is a chance of recovering the capital.
GIC Housing Finance is a text book example of such a conservative investment. The mid-cap PSU has everything going for it – good management, reasonable growth trajectory, reasonable RoE and RoA, high dividend yield and reasonable valuations in comparison to its peers.
Mohnish bought a chunk of 993,558 shares of GIC Housing Finance in the July – September 2014 quarter. His holding as of 30.09.2015 is 5,58,127 shares. Today, there are gains of 35% on the table from the stock, which is excellent for a conservative and safe investment.
Daljeet Kohli has conducted an expert analysis of the merits of GIC Hosuing Finance and has recommended a buy. Daljeet’s logic is as follows:
“We continue to prefer Housing Finance stocks over Asset financing and Infra Financing NBFCs as housing finance segment remains unaffected both on growth as well as on asset quality front. We believe GICHSG is likely to be next candidate for re-rating due to reasons stated above. Although the growth for closest peers is high compared to GICHSG but we believe average valuation gap of 53% (excl. HDFC and Gruh) is ignoring the positives of GICHSG. At CMP of Rs 211, GICHSG is trading at P/ABV of 1.5x and 1.3x for FY17E and FY18E respectively. We initiate coverage on GICHSG with buy rating and target price of Rs 265, valuing it at 1.6x FY18E ABV.”
Daljeet has predicted a target price of Rs. 265 for GIC Housing Finance which means that Mohnish Pabrai can look forward to an attractive gain in addition to a hefty dividend yield of about 2.12%. Not bad at all for a safe and conservative investment!
ARJUN – there is one error in your post…cmp OF GICHF is Rs 237.75 (not Rs 211) which you have mentioned…please correct it.
They say the best sector to invest is the worst sector…the whole financial product ( NDFC, Housing, Brokers and Sub brokers, distributors) is been ignored and trading at throwaway valuations. Please click on my image to visit my blog and FB account for many such undervalued ideas.
can’t see ur blog link…can you share the link on my email id – jitesh.dhawan@gmail.com
https://ride2rich.wordpress.com/
Click on his username
In uncertain times,Housing Finiance Companies looks like safe bets .This sector can give above market returns for atleast next 10 years.Basket buying ( betting on three or four compnies)is a good stretagy in this sector.
Pabrai is the best investor. One of his gems south indian bank continues to ‘bang da dance floor…..hahahhahhahha’ in the words of one blog operator.
MOHNISH PABRAI is sitting on ~40% loss on J&K bank. Like most other investors, he is also not infallible.
In stock market one is not judged by no. Of stocks failed after ones reco. Rather how many hv outperformed is the way to judge one.every big investor hv been proved wrong many times this does not mean that person is not experienced. Even warren buffet, rakesh jhunjhunwala,ramesh damani,radakrishan damani,samir arora,gul tek chandani even many more hv been wrong many times,this does not mean they hv not made mega bucks.i am sure mohnish will b right in gic hsg.it is good stock.he is experienced has his own way to judge the situation.thats why he is sitting on 350 crore.
Makeing money in stock market is simple but it’s simplicity becomes complicated when you start investing. He has made 350 Crore is feat itself ,failures are part of them game .How soon you get rid of failed pick and how long you ride your successful call, is name of the game .
Mohnish Pabrai seems to have exited from South Indian Bank , Jammu and kashmir bank , GIC housing Finance , his fund name has disappeared from these 3 stocks shareholding lists , the only stock still persisting as Indian investment is Rain Industry .