Prof Sanjay Bakshi, the authority on value investing, imposes very high demands on his stocks. He expects them to have a solid business model with a deep and impenetrable “moat”. He also expects the management to have utmost integrity and excellent managerial skills. In addition, because the Prof is allergic to debt, he wants the companies to be debt-free. Another non-negotiable criterion that the Prof stipulates is that the companies must have high ROE and profit margins.
It is obvious that very few companies pass through the Prof’s stringent filters. The few that do are meant to be grabbed with both hands and cherished for a life-time.
There are several examples to prove that we cannot ignore the Prof’s stock picks or stay aloof from them.
Relaxo Footwears is a classic example. The Prof released a lecture note on 20.09.2013 in which he waxed lyrical about Relaxo’s future prospects. Before our very eyes, the stock has effortlessly turned into a mind-boggling seven-bagger!
Thomas Cook is another example. Since the Prof’s “lecture note” of 01.12.2013, the stock is up a magnificent 168%.
There are other examples which I will not go into for want of time.
Now, lets take a quick look at the Prof’s other stocks that have been pounded out of shape:
Ashiana Housing & Poddar Developers:
Both stocks have been pummeled over poor Q1FY16 results as well as the savage slowdown in the realty sector. Ashiana lost 10% yesterday and also today. Poddar Developers lost 11% today. Ashiana had touched a high of Rs. 327 on 24.02.2015. At the CMP of Rs. 171, there is a loss of 47%. Similarly, Poddar had touched a high of Rs. 1710 on 07.07.2015. At the CMP of Rs. 1325, there is a loss of 22%. In just the last month, Ashiana has lost 26% while Poddar has lost 14%.
There is no doubting the quality of both stocks. A slight change in the sentiment towards realty stocks, caused by say, a drop in interest rates, can send both stocks surging back to their upward trajectory.
|Stock||Correction in last month (%)|
Ambika Cotton Mills:
The stock touched a high of Rs. 1148 on 07.08.2015. However, because it reported poor Q1FY16 results, it has corrected 28% in just the past few days.
Here again, one cannot doubt the pedigree of the stock. Also, according to some leading experts, the tailwinds are in favour of the textile sector.
Vaibhav Global is lauded as the only e-com company to be making a profit. However, the paradox is that while its loss making peers are commanding sky-high valuations, Vaibhav is going a-begging.
According to Runjhun Jain of Nirmal Bang, Vaibhav Global’s asset-light model with high ROCE and free cash means that it is only a question of time before the Sun shines again on the stock.
Kitex, Symphony Coolers & Wim Plast:
Each one of these stocks is a text book example of what a top-quality stock looks like. However, each one of them has faced a sound drubbing in the correction that the markets are currently undergoing.
In my view, each one of us needs to carefully evaluate the prospects of each stock. If we are convinced about the long-term prospects of the stocks, then the present correction is a blessing in disguise and an opportunity for us to give these stocks pride of place in our respective portfolios.