Porinju’s pet theory is that NAMO’s crusade against black money means that realty companies will have to sell their inventory of flats etc through accounted sources and this will result in a surge in earnings for these companies.
Porinju outlined this theory in his tweet.
Look at deep value, 'low quality promoter' real estate stocks; declining trend in black money transactions to benefit minority shareholders!
— Porinju Veliyath (@porinju) April 19, 2015
(Look at deep value, ‘low quality promoter’ real estate stocks; declining trend in black money transactions to benefit minority shareholders!)
Pursuant to this theory, Porinju has been loading up on all sorts of realty stocks. From behemoths like DLF to minnows like Ansal Buildwell and Anant Raj, Porinju has them all in his portfolio.
Yet another low profile realty stock has caught Porinju’s eye. On Friday, 15th May, his fund, Equity Intelligence Pvt. Ltd, bought 16,880 shares of Eldeco Housing at Rs. 260 each, laying out an investment of Rs. 43.88 lakhs.
Eldeco Housing is an ultra micro-cap with a market capitalisation of only 51 crore. According to its website, Eldeco has held “an uninterrupted market leadership position in most major towns of UP, most notably Lucknow and Kanpur”. It is also claimed that the company has an uninterrupted dividend paying record since inception.
Now, it is worth noting that Porinju’s theory with regard to real estate stocks is at sharp variance with that of other gurus. Samir Arora, whiz-kid with Helios Capital, for instance, dramatically declared that real estate stocks would get “killed” in NAMO’s crusade against black money. He advocated getting rid of all realty stocks as soon as possible.
So far, real estate stocks have borne the brunt of the (anticipated) crackdown on black money. The BSE Realty Index is down 11.30% in three months and 12.40% in one month. It has severely under-performed the Sensex.
Will this trend change and will investors in realty stocks have reason to cheer require to be watched carefully.