Prof. Sanjay Bakshi preaches value investing to his students at MDI. The good part is that the Prof practices what he preaches and also gives a practical demonstration of what he means.
The Prof. has clearly mastered the art of picking winning stocks. This is evident from his recent stock picks like Thomas Cook, Relaxo Footwears, Ashiana Housing etc. These are top quality companies, run by reputed managements and have delivered stupendous gains to their lucky shareholders.
Ashish Kacholia is no slouch in picking winning stocks either. When you peep into his portfolio, you will be greeted by glittering multi-baggers like Gati, Ashiana Housing, eClerx Services, Neuland Labs, JB Chem etc.
The significant aspect is that both ace stock pickers have shown immense confidence in Kitex Garments. While Ashish Kacholia scooped up a chunk of 500,000 shares in the period from April to June 2014, Prof. Bakshi scooped up an unknown quantity in May 2014. Prof. Bakshi picked up his lot at Rs. 164 per share. Kacholia must have paid close to the same price.
At today’s CMP of Rs. 461, both ace stock pickers are sitting on gains of 181% in just 5 months, which works out to an annualized gain of 434%.
The best part is that Prof. Bakshi has now come out in the open with his reasons for buying Kitex Garments and what its future prospects are. In a note dated 3rd October 2014 and titled “The Importance of Unconventionality” (pdf), the Prof. leaves no room for doubt that he is very bullish about Kitex Garments. He says:
“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.”
The Prof. also makes it clear that he has no intention of cashing in on his profits in the foreseeable future. He says:
“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. Moreover, I feel good that I invested in this pro-social, and yet highly profitable business – a combination I absolutely love.”
At this stage, we must also note that Motilal Oswal has recommended a buy of Kitex Garments with a target price of Rs. 615, which is a 33% upside from the CMP of Rs. 460. Motilal Oswal says that Kitex has an “Unique business model” and that there are “promising times ahead”.
Now what we have to see is whether Kitex Garments becomes the next Page Industries. Any guesses?