Prof. Sanjay Bakshi, the authority on value investing, loves talking about investment theory. You can ask him any esoteric question about investing and he will regale you for hours with his wit and wisdom.
However, if you ask Prof. Bakshi about a particular stock, he clams up. He hates talking about specific stocks and making buy/ sell recommendations.
However, if you are patient and attentive, the Prof does let his guard down and blurts out a reference to a stock that he is bullish about to illustrate an investment theory that he is propounding.
Kitex Garments is a classic example of this. The Prof wrote a lecture called “The Importance of Unconventionality” (pdf) to tutor his students about an investing principle of how one should go off the beaten path and look for hidden nuggets in unconventional places.
However, buried in all that theoretical discussion was the explosive revelation that the Prof is bullish about Kitex Garments.
Prof. Bakshi said in the note:
“As gigantic customers like Carter’s, Toys “R” Us, Gerber, and The Children’s Place divert more of their sourcing requirements to Kitex, I expect the company’s revenues and earnings to grow manifold over the next decade.
Despite its tiny size, the company enjoys significant power over its much larger customers which is reflected in improvement in its profitability and working capital situation. EBITDA margins have improved from 16% in 2008 to 24% in FY14. Working capital turns have improved from 4x to 11x over the same period. In FY14, Kitex delivered a 60% pre-tax return on equity with no net debt.”
In a moment of remarkable candour, Prof. Bakshi added that “As I write this, the current market price is Rs 492 per share. I have no target sell price, and I haven’t sold a single share.”
Well, we have to compliment Prof. Bakshi for his brilliant stock picking because today Kitex Garments reported block-buster Q4FY15 results which caused it to surge 20% to touch Rs. 653.
Prof. Bakshi also revealed in the note that he bought Kitex Garments in May 2014. Assuming he paid about Rs. 164 per share, the Prof is basking in gains of nearly 300% in less than a year.
Ashish Kacholia is another ace stock picker who deserves to be complimented. Kacholia bought 500,000 shares of Kitex Garments at about the same time that Prof. Bakshi bought his lot.
Interestingly, Prof. Bakshi and Ashish Kacholia are also jointly bullish about Ashiana Housing.
Vaibhav Global is another stock that Prof. Bakshi is bullish about. In a detailed note, the Prof gushed that Vaibhav Global is a “highly profitable, cash generating, extremely well financed, and dominant business in its space”. He also disclosed that he has bought the stocks “after spending a lot of time thinking about the business, and the man who is running it”.
Whether Vaibhav Global give the same spectacular results that Kitex Garments has given is the million dollar question on everybody’s mind!