P. N. Vijay has a mixed track record as a stock-picker. His stock pick Zylog Systems is a huge flop. He strongly recommended the stock in February 2012 when it was at Rs. 245. At today’s CMP of Rs. 13, investors who heeded that advice have lost 95% of their precious wealth.
What makes the situation grimmer is the fact that P. N. Vijay was/is the “financial advisor” to Zylog when he made the recommendation. So, it is difficult to believe that he was totally unaware of the dangers that lurked in Zylog when he let it loose on unsuspecting investors.
Anyway, P. N. Vijay has made up for the Zylog fiasco by his stock pick, Kajaria Ceramics. Vijay homed in on Kajaria in January 2012 when it was languishing at Rs. 98. “It can give a return of 35-40%” he said with confidence in his voice and a sparkle in his eyes.
Then, when Kajaria Ceramics began its upward trajectory and touched Rs. 256, it came into the radar of Credit Suisse. Credit Suisse promised a further upside of 40%.
Today, when Kajaria Ceramics spurted 5% to touch Rs. 311, all predictions had been exceeded.
P. N. Vijay’s delirious followers were taking home gains of 200% + in just 2 years.
Now, the important point to note is that though Kajaria Ceramics reported luke-warm results owing to the gas-availability problems in Morbi, Gujarat, its’ CMD, Ashok Kajaria, promised 20% growth with better margins in 2015.
The other important takeaway point is that a lot of savvy investors are heavily buying stocks like Kajaria Ceramics, Cera Sanitaryware and Somany Ceramics. We saw how Nalanda Capital is increasing its stake in Cera while Creador has bought a huge quantity of Somany Ceramics. Some even more savvy investors like Dolly Khanna and Vijay Kedia have already cornered large quantities of the stock and are not letting go.
The common factor in all these mid-cap stocks is that they are dominant market players with strong brand names. They have a lot of pricing power which is reflected in their high ROEs. The burgeoning middle class means that there is increased demand for their products. The best part is that their valuations are not unreasonable if you look at the FY 2015 or 2016 expected earnings.
Speaking for myself, I already have nice little chunks of Cera Sanitaryware and Kajaria Ceramics sitting pretty in my portfolio. If you do not, you should put these stocks on your watch-list and take advantage of dips to start nibbling slowly and steadily.