Penchant for making predictions
It is well known that Porinju Veliyath has a penchant for making predictions, both with regard to the state of the market as well as individual stocks.
One recent example is of when the stock markets sank like a stone in the wake of the demonetisation announcement.
While novice investors like you and me were running around like scared rabbits, Porinju comforted us by making the confident prediction that the markets would be back to normal before we know it and that we should take advantage of the crises to aggressively buy stocks (see NAMO’s Surgical Strike Is A “Game Changer” & Will Lead To Mega Gains For Investors: Experts).
Rare opportunity to value invest in Indian equities, with long term earnings visibility and identifiable near-term set-back!
— Porinju Veliyath (@porinju) November 18, 2016
"OMG, I missed it" – will be the expression of many people after 2-3 months, looking back at today's prices of many small & mid-caps!
— Porinju Veliyath (@porinju) November 22, 2016
Needless to say, demonetisation is now a distant memory and the markets are surging like there is no tomorrow.
2 months: while best of economic developments happening, ignorants went on a selling spree, mislead by bad journalists & archaic economists? https://t.co/asDFW40NrM
— Porinju Veliyath (@porinju) January 18, 2017
Porinju has also distinguished himself by making stock specific predictions which have yielded enormous gains. Stocks like KRBL, Orient Paper, Balaji Amines, Biocon, Kalyani Steel etc readily come to mind with some of them having given mind-boggling 10-bagger returns.
Balaji Telefilms@31, Orient Paper@5, Orient Cement@32, KRBL@23, Mirza Intl@20 – all looking penny stocks, but not penny business. BUY
— Porinju Veliyath (@porinju) August 29, 2013
|Stock||Reco price (Rs)||CMP (Rs)||Gains (%)|
What about the dud stocks?
Of course, Porinju has his share of dud stocks which have sank like a stone. However, on average, it is clear that the winners have outnumbered the losers.
Porinju’s latest prediction – Holding companies will give 100% gain in 2017
Porinju has now made the confident prediction that holding companies are at an “inflection” point and that they will deliver 100% gains in the foreseeable future.
I see few solid holding companies with over 75% discount. They will double in 2017 as the discount would narrow down to 50%, explore!
— Porinju Veliyath (@porinju) January 26, 2017
He also articulated on the issue in his latest interview:
“I feel in the year 2017, some holding companies will go up by 100 percent because of the deep discounts they are trading at. Some of them are from good corporate houses and in many cases the companies which they are holding, those companies are also on a high growth path and they are doing well. I have talked about Bombay Burmah Trading Corporation (BBTC), Bengal and Assam Company, Vindhya Telelink, Kalyani Investment Company etc. So investors can look at these companies and sometime when market goes into panic and such companies are trading at 70-80 percent or 90 percent discount to the net asset value (NAV), it will be a good opportunity. Those discounts are going to shrink and reward investors in this year.”
Some of Porinju’s followers, who are astute investors in their own right, chipped in with recommendations:
— senthil kumar R (@rsenthildpm) January 26, 2017
— Darshit Sheth (@dmsheth84) January 26, 2017
— Definate (@Definate_) January 26, 2017
— Darshan Shah (@Darshan_shah) January 27, 2017
List of holding company stocks
|Name||Stocks held in||CMP (Rs)||YOY Gain (%)|
|Bengal and Assam Company||JK Lakshmi, JK Tyre||1179||165|
|STEL Holdings||CESC, Philip Carbon, RPG Life Sciences, Saregama||65||138|
|Florence Investech||JK Lakshmi Cement, JK Tyre, JK Paper, Bengal & Assam, Umang Dairies||670||91|
|Rajapalayam Mills||Ramco Cements, Ramco Industries||629||77|
|McDowell Holding||United Breweries, Mangalore Chem||44||74|
|Balmer Lawrie Investment||Balmer Lawrie||414||47|
|Maharashtra Scooters||Bajaj Auto, Bajaj Finservce, Bajaj Finance||1665||43|
|Summit Securities||Ceat, KEC Intl, Zensar||419||42|
|Bombay Burmah Trading Corporation (BBTC)||Britannia,||565||39|
|Kalyani Investment||Bharat Forge, BF Utilities||1324||35|
|Bajaj Holdings||Bajaj Auto, Bajaj Finserv||1930||32|
|Godrej Industries||Godrej Agrovet, Astec Lifescieces||431||24|
|Nalwa Sons Investment||JSW Steel, Jindal Saw, Jindal Energy||791||23|
|Tata Investment Corp||All Tata Cos + Blue Chips from all sectors||576||15|
|Vindhya Telelink||Birla Corp, Birla Cable, Universal Cable||680||(6)|
|Williamson Magor||Everready Industries, McLeod Russel, McNally Bharat Engg, Kilburn Engg||58||(11)|
|Alembic Ltd||Alembic Pharma||36||(11)|
As can be seen, holding companies cannot be taken lightly. They have put up a spirited performance on a YoY basis and given hefty returns. If the discount narrows further, more hefty gains will be on the table.
Porinju recommended Bombay Burmah in May 2015
Porinju first recommended Bombay Burmah in May 2015 on the logic that it is quoting at a discount to its investment in Britannia. The recommendation has worked out well with the stock notching up gains of 35% since then.
Balmer Lawrie is a “fool proof” Investment: Ramesh Damani
Ramesh Damani has famously described Balmer Lawrie, a PSU, as a “fool proof” investment implying that its business model is so robust that even the utmost buffoonery by the Government will not adversely affect it.
“Balmer Lawrie makes sense to me. It is looking good on charts. I own it,” Ramesh Damani opined in one of his famous chat sessions.
Maharashtra Scooters: “Golden Goose” stock of Raamdeo Agrawal & Motilal Oswal
I have conducted a detailed analysis of Maharashtra Scooters in which I have pointed out that the outcome of the dispute between WMDC and Bajaj Holdings/ Auto may lead to a merger of Maharashtra Scooters with Bajaj Auto/ Bajaj Finserv, which will result in immense “value unlocking” for the shareholders.
Varinder Bansal Explains fundamentals of holding companies
At this stage, we have to compliment Varinder Bansal, the ace investigative journalist with CNBC TV18, for doing pioneering research on the subject.
Varinder has conducted a meticulous study of various holding companies and identified their salient points:
Tata Investment Corp – 70% discount to NAV
Varinder rightly pointed out that Tata Investment Corp, where the discount is still around 70% to its investment value, is like a “diversified mutual fund trading at a huge discount” and that it is fail-safe as it belongs to the Country’s biggest conglomerate.
Summit Securities – Blue chip of the RPG group
Varinder homed in on Summit Securities in May 2014 when it was languishing at a market cap of around Rs 150-160 crore and the total value of investment was nearly Rs 1200 crore. It was then trading at around 85-90 percent discount compared to the value of investment.
Summit Securities is today quoting at a market capitalisation of Rs. 450 crore which means that hefty gains of 162% are on the table.
Kalyani Investment – 90% discount to investment book
Varinder’s eagle eye took notice of Kalyani Investment and its blue chip holdings in Bharat Forge and BF Utilities.
He explained that liquidity leads to discovery of the market price and that no transparent price discovery can happen without liquidity. Most investment companies are trading at huge discounts owing to a lack of liquidity, he opined.
STEL Holdings – Total Investment Value Is 11x Market Cap
STEL Holdings holds a massive chunk of shares of CESC, Philip Carbon, RPG Life Sciences, Saregama etc and it is quoting at a steep discount to the market value of the investments, Varinder explained.
The investments that this company holds in United Breweries where we have been hearing a lot about Heineken hiking its stake, the company holds nearly 1.07 crore shares at the current market price, the value of that alone is over Rs 800 crore. You have Mangalore Chemicals where the company holds nearly 358 lakh shares, the value of that is nearly Rs 35 crore. The debt of the company, which is nearly Rs 80 crore (even if we shave off that), the company’s investment value will be nearly Rs 750 crore.
Kamalakshi Finance Corp
Nalwa Sons Investment
DYK: Bajaj Holdings trades at ~60% discount to value of investments…this co holds 31.5% stake in Bajaj Auto; 39.2% stake in Bajaj Finserv
— Varinder Bansal (@varinder_bansal) August 25, 2016
Bajaj Holdings is a “dividends darling”
The dividend that Bajaj Holdings pays is more than that offered by Fixed Deposits (after tax). There is also the added advantage of capital appreciation, a leading expert has pointed out.
Sharekhan Stock Idea: Bajaj Holdings
Sharekhan has recommended a buy of Bajaj Holding on succinct and convincing logic:
Pro’s and cons of investing in holding companies
Eminent experts have explained that investing in investment holding companies comes with many pros and cons. It has been emphasized that investors need to have complete confidence in the capital allocation skills of the executives in charge.
The experts cited the example of Berkshire Hathaway as a textbook example of a holding company whose managers, Warren Buffett and Charlie Munger, have exceptional investment skills.
How Investors Should Think About Holding Companies: Amit Wadhwaney explains
Amit Wadhwaney of Third Avenue Management, an authority on the subject, has explained how investors should look at passive investment companies and determine whether they are good investments.
Prima facie, it appears that an investment in a holding company may be a fail-safe investment. The high dividend yields that these companies offer protects the downside from the vagaries of market fluctuations. At the same time, the growth in the businesses of the underlying companies augers well for the prospects of capital appreciation. Of course, if the steep discount at which these companies are presently quoting does narrow, as predicted by Porinju, we will be able to bask in great riches!