If one carefully studies the annual return of Reliance Industries for the year ended 31st March 2013, there are several secrets as to Mukesh Ambani’s investment techniques that emerge.
The first noteworthy point is that Mukesh Ambani is an active buy-n-hold investor in the sense that he buys for the long-term but does not hesitate to shuffle the stocks if he feels that his existing holdings are overpriced and better prospects are available.
Evidence of this strategy is in the fact that Reliance Industries liquidated its’ holdings in four blue chip banks, HDFC Bank, Axis Bank, Canara Bank and PNB, but increased its holdings in State Bank of India and ICICI Bank.
If you ponder for a moment, you will realize Mukesh Ambani’s game plan here. HDFC Bank is presently quoting at very expensive valuations of price – to – book of nearly 6 times. Axis Bank has also run up a lot. Canara Bank and PNB have huge NPA issues and are a bit in the doldrums. On the other hand, SBI and ICICI Bank are quoting at a price to book of under 2 times and have their NPAs under control. Their future is bright. So, it makes immense sense for Reliance to shift from an overvalued investment to an undervalued one which has great future prospects.
The other aspect worth noting is that Mukesh Ambani is betting big on the gas and natural commodities sector this year. He is also a believer that PSU stocks will deliver big. This is evident when you see that Reliance has made fresh investments in shares of four public sector conglomerates – NMDC, NTPC, ONGC and Oil India. There can be no doubt that these are extremely well managed companies and virtual monopolies in their field. You can hold these stocks for decades to come without worry.
Yet another sensible trait in Mukesh Ambani’s investment strategy is that he is a firm believer in the virtues of portfolio allocation. His portfolio has a nice mix of equity and debt. And even in Debt, Mukesh Ambani does not believe in taking a risk and has got Relienace Industries to invest only in top-notch blue chip debt like the debentures of Tata Sons Ltd and units of Reliance Mutual Fund.
If you want proof that Mukesh Ambani is a buy-n-hold investor, you can see that from the fact that Reliance’s long-term investments in EIH Ltd (Rs 1,433 crore), HFCL (Rs 57 crore) and HDFC Ltd (Rs 949 crore) have not been touched. These blue chips have continued to compound and given huge returns over the years.