I reported a few days ago on how the actions of the ace stock pickers like Dolly Khanna, Prof. Sanjay Bakshi, Anil Kumar Goel and Kenneth Andrade is sending the clear indication that the textile sector is at the beginning of a cyclical upmove and that the time is opportune to aggressively buy textile stocks. These ace stock pickers have bought textile stocks like Ambika Cotton, RSWM, Nandan Denim etc in the recent past and are sitting on huge gains.
Porinju Veliyath followed the footsteps of his illustrious peers by buying Gokaldas Exports.
Now, Ashish Kacholia has also entered the fray by buying 295,850 shares of Welspun Syntex today at Rs. 118.08 per share, making an investment of Rs. 3.50 crore.
The important question that we have to ponder over is why Ashish Kacholia chose Welspun Syntex instead of the other top-quality stocks like Ambika Cotton, Nandan Denim, RSWM etc.
The answer probably is that Ashish Kacholia is impressed by the scorching performance shown by Welspun India, which is Welspun Syntex’s larger sister concern. Also, Welspun Syntex is still a micro-cap with a market capitalisation of Rs. 464 crore while its peers are larger. Nandan Denim has a market cap of Rs. 578 crore, Ambika Cotton has a market cap of 606 crore and RSWM has a market cap of 837 crore. Even in terms of P/E, Welspun Syntex is available at a P/E of 10.87 which compares favourably with the P/E of 11.25 for Nandan Denim and the P/E of 11.85 for Ambika Cotton. (RSWM, which is Dolly Khanna’s pick, is cheaper at a P/E of 8.37 and also offers a dividend yield of 3.46%).
One noteworthy aspect about Ashish Kacholia’s investment technique is that when he is considering whether to buy a stock or not, he is not deterred by how much the stock has moved up in the recent past.
We saw earlier, in the context of Pokarna, that Ashish Kacholia follows the salutary practice of “averaging upwards”, i.e. he does not hesitate to buy more of his favourite stocks at higher prices if the fundamentals justify that.
We can see that in the case of Welspun Sytex as well. Though the stock is up a mind-boggling 631% on a YOY basis (195% in 3 months and 55% in one month), it has not deterred Ashish Kacholia one little bit.
An important takeaway from Ashish Kacholia’s action is that, despite their scorching performance in the recent past, the textile sector stocks are not overvalued and there is a lot of value left in them. In fact, Ashish Kacholia does not bother with a stock if he is not assured of at least a 2x return from it in the foreseeable future.
So, Ashish Kacholia’s buying action implies that if you are thinking of tucking into some top-quality textile stock(s), you still have a chance!