I was in “Vanvas” for 3 years due to the losses suffered by clients & have learnt lessons
One of Porinju Veliyath’s good points is that he is not loath to admit that he made mistakes and suffered heavy losses.
“As everybody knows, we had two tough years of painful time in value investing. But these mistakes happen to even the best of investment gurus. The most important thing is to learn from these mistakes and move ahead. That is exactly what we have been doing,” he candidly admitted.
“I was betting on certain aspects of the economy. We have a pro-business government and so there has been some very important long-term reforms like GST, RERA and IBC. I was betting on themes like formalisation of the economy and better compliance. But I made a mistake. When I look back, perhaps I played the theme a bit early,” he added.
Porinju also admitted that the clients of his PMS Fund named ‘Equity Intelligence’ suffered huge losses though much of that has been recovered now.
“That was definitely a big loss for my clients, but we have been recovering extremely well. We gave 153% return in the last financial year. That does not mean all the pain is over. A few accounts, which started at the peak of that smallcap strategy, are still slightly negative. It was very painful to see a middle-class family’s investment of Rs 50 lakh going down to below Rs 25 lakh in a short period of time. It’s okay if it was a rich guy. Now their Rs 25 lakh has gone up to Rs 40-60 lakh. The portfolio of those who invested a year ago is up by 200%,” he said.
“It is not a big thing to take credit. A lot of fund managers and investors have perhaps done better,” he stated in a humble manner about the gains of 153% raked in.
“We have tweaked our strategy and approach to value investing but without compromising on the basic principles of value investing,” he added.
The biggest theme today is to buy the proven winners – the blue chips
Porinju, who was a die-hard fan of buying ‘Chor’ stocks during the heady Bull market of 2017-18, has come to the realisation that it is difficult, if not impossible, to win against the Chors.
“We all know that the culture and DNA of companies are very difficult to change. That is where I went wrong, to some extent, in hindsight. Some of those promoters did not change. Instead of changing and creating a better company, they took out all the money. Our legal system is not designed to give protection from such kind of criminal activities,” he lamented.
He has now become a strong advocate of buying fail-safe Blue-Chip stocks.
“The biggest theme today is to buy the proven winners – the bluechips. A lot of them have been great compounders,” he said.
“The real opportunity is in the broader market. The formalisation of the economy is the real theme to be played out,” he added.
Tata Cos were being run like PSUs before N. Chandra
Rakesh Jhunjhunwala was amongst the first of the visionaries to recognize that N. Chandra’s dynamic leadership would transform the fortunes of the Tata group.
He rightly described Chandra as “God’s gift to the Tatas”.
— Chandra R. Srikanth (@chandrarsrikant) July 24, 2018
“I remember clearly that before N Chandrasekaran took over the Tata Group of companies, they were being managed like PSU companies. There is a huge change happening, which is evident in the numbers, their attitude and in their vision for the future. Tata Consumer is up 200% in two years. And even Tata Chemicals has done very well. Tata companies have the capability and the brand when it comes to consumers. E-commerce is going to create significantly bigger wealth going forward. There is no doubt,” Porinju said.
— ET NOW (@ETNOWlive) February 19, 2021
There is a huge global opportunity in digital solutions. Tata Communications is underpriced
Rakesh Jhunjhunwala was, once again, amongst the first to recognize the multibagger potential of Tata Communications.
In November 2019, when Akash Prakash’s Amansa Capital had dumped the stock in an ill-advised move at the throwaway price of Rs. 370, the Badshah had rushed in to scoop up all the supply (See Rakesh Jhunjhunwala’s Latest Blue-Chip Small-Cap Stock Pick Is On Verge Of “Multiple Year Break Out”: Experts).
Tata Communications is now standing tall at Rs. 1290, resulting in multibagger gains for the Oracle of Mumbai.
Porinju opined that Tata Communications is still “underpriced” and has a long way to go.
“I would strongly look at Tata Communications when we play the digital transformation theme. It is a huge global opportunity in digital solutions. It has traditionally been a company providing data and voice infrastructure and is getting transformed into a global solutions company. Now with the new leadership of Chandra and a new CEO and CFO, I have got more confidence on them. It is a Rs 2,500 crore free cash flow company today and we are talking about big growth ahead. The company has guided for 15-20% growth for the next few years,” he said.
He sensibly advised that we wait patiently and scoop up the stock whenever there is a significant correction.
“After its recent concall, I find Tata Communications underpriced. I do not want investors to go and buy it in a hurry. It can go back to Rs 1,000 or below into three-digits. The market is not in that kind of a comfort zone,” he recommended.