When Prof Sanjay Bakshi, the authority on value investing, delivers a lecture, the students listen to him wide-eyed and with rapt attention. Also, the lecture leaves a great impression on them and you can see them excitedly discussing the lessons learnt in the lecture much after the class is over.
However, it appears that the Prof’s students focus more on the academic and the theoretical aspects of what the Prof is teaching rather than on the practical aspects of it.
The students appear to have lost sight of the fact that the Prof is not only an accomplished academician but he is also a master stock picker. In fact, the Prof himself disclosed that his stock picks have heavily outperformed the Nifty. And so, one should not only pay attention to esoteric and arcane issues like the “effect of Bayes’ theorem on investments” (the Prof’s latest lecture), but also keep an eye on what the Prof is up to on the stock-picking front.
The Prof’s latest stock-picking activity with regard to Poddar Developers is a lecture in itself which can be titled “Be a contrarian and aggressively buy more of your top-quality favourite stock when the price is down”.
It is well known that the Prof is bullish about two real estate stocks, Poddar Developers and Ashiana Housing. Both companies boast of top-quality management, debt-free/ low-debt status and a proven business model. The Prof’s Valuequest India Moat Fund holds large quantities of both stocks. Several other marquee investors also hold a stake in both companies.
It is also well known that both stocks are reeling under the effects of the real estate slowdown that the Country is presently witnessing. Both stocks have lost large chunks of their value from the highs that they had touched a few months ago.
In a recent interview, Rohit Poddar, the MD of Poddar Developers, painted a gloomy picture of the real estate sector. “We are extremely worried about low absorption rates, that too at a time when prices of cement, steel and oil have dropped significantly. There is a lot of stress in the system and the boom that everyone spoke of has just not happened” he said in a grim tone.
However, instead of wringing his hands in despair (as novice investors like us are wont to do), the Prof is taking advantage of the situation to aggressively buy more of these stocks at lower prices.
In the period from July 2015 to September 2015, when the real estate sector was at its lowest point, the Prof bought a further lot of 38,572 shares of Poddar Developers. The result is that the holding of the Valuequest India Moat Fund in Poddar Developers has increased from 81,054 shares as of 30.06.2015 to 119,626 shares as of 30.09.2015. The holding is worth about Rs. 15 crore at the CMP of Rs. 1300.
It is not yet known whether the Prof has repeated the exercise with Ashiana Housing as well.
If you want more proof that the time is ripe to buy beaten down realty stocks at distressed valuations, you will find it in the latest talks by Ramesh Damani, Nilesh Shah and Porinju Veliyath. All three stalwarts advised that the realty sector appears to have bottomed out and the time is ripe to gently start tucking into these stocks. Porinju went a step further and identified a few realty stocks which he said would outperform the Index when the tide turns.
Now, the onus is on us to decide whether we want to turn contrarian and buy realty stocks or not. It could be a long wait but the gains can be out-sized appears to be the view of the experts.