Porinju Veliyath’s USP is that he does not hesitate to stick his neck out and to go where no man has gone before. On an earlier occasion, we saw how Porinju nominated himself for the Red & White Bravery Award by venturing out to Dalal Street on a gory day of carnage and buying a huge truckload of his all-time favourite stock.
This time, Porinju has outdone himself. Today, when people were waking up to a day of Monday blues and going through their morning ablutions, they were shocked to see Porinju, his eyes wide with excitement, proclaiming that “A well-picked Real Estate Stocks Portfolio should give over 200% return than NIFTY in 1-2 years. I hold 3 of them…”.
A well-picked Real Estate Stocks Portfolio should give over 200% return than NIFTY in 1-2 years. I hold 3 of them… pic.twitter.com/Q6TWLWf7xs
— Porinju Veliyath (@porinju) September 7, 2015
What provoked or prompted Porinju to suddenly make such a dramatic prophecy is not known. However, it did cause great excitement amongst his vast legion of nearly 14,000 followers.
A close study of the chart reveals that Porinju has neatly divided the eight realty stocks into three classes. Class A comprises of three ‘top-quality blue chip’ stocks being Godrej Properties, Oberoi Realty and Sobha Developers. Class B comprises of three ‘good’ stocks being DLF, Anant Raj and DB Realty. Class C comprises of two ‘junkyard’ stocks being Unitech and Ansal API.
The reason Porinju classified the realty stocks into three classes is not clear because he did not indicate whether the realty stocks have to be bought in a combination of the three classes and if so what the proportion should be.
Porinju indicated that he owns three of the eight stocks but he did not indicate which ones these are. The other surprising aspect is that Porinju’s all-time favourite realty stock, Ansal Buildwell, is missing from the list. It may be recalled that Porinju has repeatedly professed his love for Ansal Buildwell on the ground that its’ land bank is worth several thousands of crore.
A further study of the chart reveals that Porinju has been quite clever with his words. Porinju is not promising 200% absolute returns but 200% “more than Nifty”. This means that if the Nifty gives a 10% return, realty stocks can be expected to give 200% more, i.e. a 30% return. In other words, the realty stocks will heavily outperform the Nifty in the course of time.
Porinju’s “200%” has to be taken as a metaphor for meaning that the realty stocks have bottomed out now and the time is ripe to aggressively buy these stocks.
The same advice was offered earlier by Ramesh Damani (see If You Want Mega Bucks, Forget Pharma & IT. Buy Realty Stocks Now). Ramesh Damani’s theory is that the fact that the woes of the realty sector are making headlines in the newspapers is an indication that the pessimism is at the maximum and the sector is close to bottoming out.
Ramesh Damani also pointed out that the fact that “smart money” (i.e. the Piramals, Warburg Pincus and Goldman Sachs) is slowly but steadily scooping up premium properties at distress valuations is an indication that we should also make our move.
To Porinju’s list of eight stocks, we have to add Ashiana Housing and Poddar Developers for the simple reason that these are Grade A, small cap, stocks which are backed by whiz-kids like Prof Sanjay Bakshi, Ashish Kacholia, Brahmal Vasudevan and Goldman Sachs. If the realty sector does start flying as predicted by Porinju and Ramesh Damani, these stocks will be at the forefront.