Rakesh Jhunjhunwala is a master contrarian stock picker. Unfortunately, his wizardry in stock picking is not appreciated by the hoi polloi and the reason for this is because the Badshah keeps a low profile and does not tom-tom his achievements.
Three recent examples of Rakesh Jhunjhunwala’s brilliant contrarian stock picks are Aurobindo Pharma, Dewan Housing and Spice Jet. At the time that the Badshah scooped up these stocks, they were languishing in the garbage dump and were available at throwaway valuations. Today, all three stocks are much coveted multibaggers and are on everyone’s buy list!
The Badshah has now turned his attention to the beaten down realty sector where stocks are available at throwaway valuations. He has bought a chunk of 50,00,000 shares of Indiabulls Real Estate in the period from July to September 2015.
To understand why Rakesh Jhunjhunwala preferred Indiabulls, we have to turn to the brilliant dissertation by Utpal Sheth a few days ago. Utpal Sheth explained that “return on capital employed and scalability are two big mantras for long-term valuation creation for the company and wealth creation for the investors”.
Indiabulls Real Estate scores well on these parameters especially having regard to the size of the opportunity that is available to it.
According to livemint, Indiabulls Real Estate is all set to launch three projects in Gurgaon, Thane and Alibaug this year.
ET reported that Indiabulls Real Estate is looking for a strategic partner for the London property it acquired last year. It is in talks with private equity firms, sovereign funds and family offices to sell a 40% stake in the project in the Mayfair locality of central London for around Rs 1,000 crore. The monetisation of London asset is aimed at debt reduction and achieving appropriate capital structure for this property, ET said.
So, the calculation by Rakesh Jhunjhunwala and Utpal Sheth appears to be that Indiabulls is ideally placed to give mega returns as and when the real estate market turns.
At this stage, we must note that several super-savvy investors are taking advantage of the crises in the real estate sector to tuck into quality stocks at distress valuations.
Ramesh Damani was among the first to send out the clarion call. He pointed out that if we want jumbo returns from our portfolio, we have to move away from the Pharma and IT stocks and buy realty stocks.
Prof Sanjay Bakshi, the authority on value investing, implemented this advice. His Valuequest India Moat Fund bought an additional 38,572 shares of Poddar Developers in the July – September 2015 quarter.
Nilesh Shah of Envision Capital revealed that he is bullish about the prospects of Kolte-Patil Developers. “The demand for realty cannot remain sluggish forever” he reminded us.
Porinju Veliyath went to the extent of recommending several quality realty stocks. He assured us that the realty stocks would heavily outperform the Nifty.
So, the chorus amongst the super-savvy investors is getting so loud that we cannot afford to ignore it any longer. The time has come for each of us to research the realty stocks and tuck into the ones that appeal to us in a slow and steady manner.