Radhakishan Damani, like most old-school ace investors, follows a simple strategy while buying stocks. He buys stocks that are not in favour amongst the hoi polloi and whose valuations are beaten down.
Having bought the stock, Radhakishan Damani plays the waiting game, knowing for certain that a day will come, sooner or later, when the tide will turn and his stocks will shine in the sun.
It is this simple buy effective strategy that has secured Radhakishan Damani a permanent seat in the elite Forbes Billionaires’ list along with his “disciple”, Rakesh Jhunjhunwala, the Badshah of Dalal Street.
There are two contemporary examples to prove that Radhakishan Damani is a contrarian to the core. The first is Radhakishan’s purchase of TCI and Gati when the economy was in the doldrums and infra stocks were out of favour. The second is his purchase of media stocks like TV Today in the anticipation that the digitization fever will set in and send these stocks soaring.
Radhakishan Damani’s is presently fascinated with cement stocks and he is using every opportunity to load up on these stocks.
On 26th June 2015, Radhakishan’s investment arm, Derive Investments, invested Rs. 18 crore in buying 20,71,580 shares of India Cements at Rs. 86.61 each.
He repeated the exercise today by getting Derive Investments to buy a further 20,00,000 shares at Rs. 72.66 each for an investment of Rs. 14.53 crore.
My guess is that Radhakishan Damani is anticipating huge traction for cement companies from the impending infrastructure and road projects, the ambitious 100-cities project and the on-going urbanization. Also, India Cements has a stranglehold in the southern markets and will be able to capitalize on the building spree expected in Andhra Pradesh and Telengana.
Another indication of Radhakishan’s bullishness for the infra and the realty sector comes from his recent investment in Uniply Industries, the micro-cap manufacturer of plywood. It is noteworthy that Radhakishan Damani is joined by other ace investors like Ramesh Damani and Vallabh Bhanshali in Uniply Industries.
If you want more proof that the realty sector may be close to bottoming out, evidence is provided by the fact that Ajay Piramal, who is also highly regarded for his contrarian instincts, persuaded marquee investors like Goldman Sachs and Warbug Pincus to invest large sums of money (Rs. 1800 crore + Rs. 900 crore) into Piramal Realty. The logic of these ace investors is that the depressed sentiment in the realty sector is the perfect opportunity for investors with holding power to buy top-quality assets at low valuations.
If you are interested in taking a look at the stocks in the realty sector, you can consider Ashiana Housing. It is backed by ace investors of impeccable credentials such as Prof. Sanjay Bakshi, Ashish Kacholia, Brahmal Vasudevan, Jwalamukhi/ Westbridge, Goldman Sachs etc. The stock has been beaten down severely and is available at a valuation that is 25% less that what Brahmal Vasudevan and Goldman Sachs paid for the stock in the QIP. Two analysts, Daljeet Kohli and Balaji Sridharan, have expressed the view that the time is now opportune to buy Ashiana Housing. Another top-quality stock worthy of consideration is Poddar Developers, which is backed by Prof. Sanjay Bakshi and Kenneth Andrade. If you are willing to compromise on quality, you can consider Ansal Buildwell, in which Porinju Veliyath has a large holding. Ansal claims to have a large land bank with a development potential of hundreds of crores.