NAMO’s reforms will bring prosperity to the economy
Raamdeo Agrawal‘s advice has to be listened to with rapt attention by us because he has single-handed raked in a massive fortune of Rs. 1,000+ crore from Dalal Street.
It is obvious that the wily stock picker knows what he is saying and doing.
In his latest interview, Raamdeo has clearly stated that NAMO‘s second term signals the beginnings of the golden period for the Country.
“Government is meant to act. They are not going to sleep. In fact the work starts now. They have taken upon themselves to work. If you read the manifesto, the opening letter by Mr Narendra Modi is that we have taken a lot of tough actions and now the path is cleared for very swift action ahead,” he said.
Raamdeo pointed that the mega reforms initiated by NAMO five years ago would bear fruit now.
“Continuity of the current regime is not only asserted but also with little more weight …
We are going to see a lot of incomplete projects to be taken up ….
They always prepare for a little longer term. The goods and services tax was implemented just two years before when a lot of governments would have not done it keeping election in mind ..
All the junk in public sector lenders has been cleared and now this is the time for growth and the economy should do distinctly different“, the market veteran said.
He also warned the “bad guys” that they are in for trouble.
“The life of bad guys will become worse,” he said in an ominous tone.
“In the next five years, the commitment to be clean and no tolerance for big-ticket corruption will continue,” he added.
Buying high P/E stocks is akin to doing speculation
Raamdeo has always been a votary of buying stocks which are quoting at reasonable valuations.
He equates buying high P/E stocks as equivalent to speculating.
“When you buy at significantly three to four times of the growth rate, say growth is at 15-16%. Till about 30-35 PE, it is fine but the moment you start crossing 60, you are actually speculating,” he cautioned in a stern tone.
He cited the bitter experience that Warren Buffett had with Heinz Kraft to prove his point.
Buffett had bought Heinz Kraft without a care in the World.
However, when the stock was unable to hold on to its lofty valuations and crashed, Warren Buffett suffered a loss of $10 Billion ($3 Billion in one day).
Warren Buffett's Berkshire Hathaway loses more than $3 billion in single day on Kraft Heinz plunge https://t.co/JT6ip5Awg3
— CNBC (@CNBC) February 22, 2019
In the wake of that crippling loss, Warren Buffett candidly admitted that he had overpaid for Heinz Kraft.
“I was wrong in a couple ways on Kraft Heinz … We overpaid for Kraft,” the World’s greatest investor conceded with his trademark humility.
"I was wrong in a couple ways on Kraft Heinz," Warren Buffett said after last week's stock plunge. “We overpaid for Kraft.” https://t.co/nYGaRB1eqT pic.twitter.com/CTTk74sBq6
— CNBC (@CNBC) February 26, 2019
Warren Buffett said he overpaid for Kraft-Heinz. A little tip, Warren: If you just go into a McDonald's, they can’t stop you from pumping all the ketchup you want into those tiny cups for free.
— MAD Magazine (@MADmagazine) February 26, 2019
State Bank of India – big beneficiary of reforms
Raamdeo has recommended that we aggressively tuck into State Bank of India (SBI), the blue-chip PSU behemoth.
“Next year, the earnings growth for Nifty could be more than 20% and one of the sources of earnings growth is going to be the corporate bankers like SBI. So there is confidence and if you read the commentary of the quarterly results, there is a high probability that those numbers will come. If not in the first half, in the second half of this year we must see very determined recovery in corporate profits,” he advised.
Next 5 years will be great for earnings and it will be the best for SBI, which will be the leader of the pack, says @MotilalOswalLtd's @Raamdeo Agrawal.
Read: https://t.co/cy3bUZlHoJ pic.twitter.com/1fAcO2YbcN
— BloombergQuint (@BloombergQuint) May 24, 2019
#IndiaDecides2019 | Markets will value companies which are more compliant, says @MotilalOswalLtd's @Raamdeo Agrawal. #ElectionResults2019
Read: https://t.co/cy3bUZlHoJ pic.twitter.com/aIUA83494K
— BloombergQuint (@BloombergQuint) May 23, 2019
#SBI reporting net profit of Rs3955 cr for Dec'19 qtr,highest in 7yrs,is HUGE!
Domestic loan growth,up 15.65%&corporate loan book up 20.67%
NPAs fell by a solid 24641Cr,with recoveries up 56%,due to write back of accounts under #NCLT#IBC,helping banks,big time?#Modinomics
— Sanju Verma (@Sanju_Verma_) February 4, 2019
What about PSU Bank Bees?
A viable alternative to avoid messing around with individual PSU Bank stocks is to buy the ‘PSU Bank Bees ETF“.
The latest portfolio of the ‘Reliance ETF PSU Bank BeES’ is as follows:
| Name of the Instrument | % to NAV |
| State Bank of India | 31.96% |
| Bank of Baroda | 19.12% |
| Punjab National Bank | 12.32% |
| Canara Bank | 9.69% |
| Union Bank of India | 5.88% |
| Bank of India | 4.90% |
| Indian Bank | 3.99% |
| Oriental Bank of Commerce | 2.67% |
| Syndicate Bank | 2.59% |
| The Jammu & Kashmir Bank Limited | 2.54% |
| Allahabad Bank | 2.16% |
| Central Bank of India | 2.10% |
| Subtotal | 99.92% |
As one can see, we can tuck into the choicest of PSU Bank stocks through the ETF.
Poor performance so far
The ‘Reliance ETF PSU Bank BeES’ has reported a poor performance so far.
The five year CAGR is a pathetic 0.78% while the 1 year CAGR is 6.08%.
However, this is a positive factor from the perspective of astute investors because it implies that there is valuation comfort.
Bank Bees is also a viable alternative
Assuming one does not want to risk buying PSU Bank stocks (given their notorious reputation so far), the alternative is to buy the ‘Reliance ETF Bank BeES‘.
This gives us a combo of the best private sector banks like HDFC Bank, ICICI Bank, etc together with the best PSU Banks like SBI, PNB etc.
We get the best of both Worlds.
| Name of the Instrument | % to NAV |
| HDFC Bank Limited | 33.26% |
| ICICI Bank Limited | 18.13% |
| Kotak Mahindra Bank Limited | 12.78% |
| Axis Bank Limited | 11.69% |
| State Bank of India | 9.06% |
| IndusInd Bank Limited | 6.42% |
| Yes Bank Limited | 2.43% |
| RBL Bank Limited | 2.19% |
| The Federal Bank Limited | 1.44% |
| Bank of Baroda | 1.09% |
| IDFC First Bank Limited | 0.73% |
| Punjab National Bank | 0.70% |
| Subtotal | 99.92% |
Scorching performance of Bank ETF
The Bank BeES ETF has reported a scorching performance with a 5 year CAGR return of 18.76%.
The one year CAGR is 16.90%.
In fact, the Bank Nifty is close to its ATHs.
#CNBCTV18Market | Nifty Bank at record high, crosses earlier high of 30,669 points#BREAKING pic.twitter.com/Uql71wfpS8
— CNBC-TV18 (@CNBCTV18Live) May 20, 2019
Upper circuit in NIfty.
Date:18th May 2009. pic.twitter.com/7uDbjS9FdG— A Banknifty Trader (@bankniftytrade) May 18, 2019
And what about manpasand beverages that he has also recommended?
Why starlite technology became so bullies before an hour of closing market?
Everybody knows what happened to P C Jewellers and Vakranjee. Better to stay away from fancy dream creators and market fixers.