Ah, To be able to go back in time ….
We chanced upon the transcript of an investor’s conference held on 6th November 2003 organized by capitalideasonline.com where the living legends of the Indian stock market – Rakesh Jhunjhunwala, Ramesh Damani, Raamdeo Agawral & Sanjoy Bhattacharyya – were asked to give their best stocks picks – when the index was at 5,000.
Notably, barring the prices of some of the stocks – which have sky-rocketed – the stock conference could very well have been held in 2011 if one goes by the issues discussed by the participants. It is almost nothing has changed. The same concerns which plagued the minds of the stock market participants in 2003 – namely, high inflation, FII flows, low retail participation, governance deficit, monsoon worries, currency woes, etc etc – are playing havoc with their minds in 2011.
Surprisingly, Rakesh Jhunjhunwala was at his cautious best. He said that even he was surprised by the “pace and depth of the ferocious rise” in the stock indices (from the lows of September 2001) and that one had to be “cautious” before committing funds to the stock market with great severity.
Of course, Rakesh Jhunjhunwala quickly clarified that since he came to the stock market in 1985, he had always had “not less than 110 percent” of his wealth in Indian equity and that he would keep it like that for a considerable period of time, regardless of corrections, falls, rises. Only half in jest, he said that the time he would sell was when his sister-in-law told him to buy – meaning thereby that when ordinary folks with no stock market sense start giving tips, it is a sure sign that the stock market had gotten over-heated and become a bubble. Such is the practical wisdom of the Oracle of Mumbai!
Rakesh Jhunjhunwala also let out one of his profound thoughts “In equities, the key lies in predicting what tomorrow is going to be. The tomorrows are going to determine the equity prices. We can’t see tomorrow; but we can anticipate tomorrow“.
Rakesh Jhunjhunwala started off his stock picks by declaring that he was very bullish on PSU and mid-cap pharma stocks and that even if one woke him up in the middle of the night and asked him what to buy, he would blurt out the names of PSU stocks and that of mid-cap pharma.
Though he did not name it, he probably had Lupin in mind, of which he holds 136 lakh shares worth about Rs. 538 crores (see Rakesh Jhunjhunwala Portfolio As Of March 2011). Lupin was then quoting Rs. 49 and at todays CMP of Rs. 450, adjusted for bonus and split, the return is a fabulous 755%.
Rakesh Jhunjhunwala‘s second stock pick was – hold your breath – Titan Industries! He had recommended Titan Industries at the earlier conference when it was quoting at Rs. 60. At the then price of Rs. 120, Titan had already doubled but he was still bullish about Titan. Rakesh Jhunjhunwala gave strong logic to support his stock pick. He pointed out that India would grow at 7 and 8 per cent and that demand for FMCG and consumer durables would grow through the roof. He emphasized that Titan had 55 to 60 per cent of India’s organised watch market and also had a jewelry business. He stated that the size of the Indian jewelry market was roughly Rs 45,000 crore and that there would be an explosion in growth.
Interestingly Rakesh Jhunjhunwala was also a little diffident about Titan pointing out that it had a “very difficult balance sheet” in that it was highly leveraged and that “there was some element of risk“. He emphasized that “One should be very careful when you buy it and one should buy it only if one has a three-five year perspective“.
Apart from Titan which was then quoting at Rs. 120, Rakesh Jhunjhunwala also recommended two other stocks where he more gung-ho than he was about Titan, namely, Tata Infomedia which was then at Rs.160 and Geometric which was then at around Rs.480 and Titan at Rs.120. He was so bullish on Geometric that he called the PLM (product lifecycle management) space in which Geometric was engaged “the biggest element of enterprise software“.
As luck would have it, Tata Infomedia got taken over by an unlisted company while Geometric has languished ever since and returned a “princely” return of 32% for 8 years of sweating-it-out. One would have been so much better with a fixed deposit!
However, Titan has made up for everything by returning, at the CMP of Rs. 4,332, a mind-boggling return of 3538%. In other words, if you had litened to Rakesh Jhunjhunwala and invested Rs. 10 lakhs in Titan, your investment would be worth Rs. 3.53 crores today. How’s that for a multi-bagger!
Raamdeo Agarwal also recommended some stellar stocks. Apart from State Bank of India (SBI) which was then quoting at Rs. 500 (400% return), he recommended Birla Jute (now Birla Corporation) which has given a 600% return and Hero Honda Motors which has given a 427% return.
The Investor’s conference is notable for other reasons as well. The number of duds that came out despite the strong reasons given by the experts to support their stock picks which never materialized. Bharat Shah, then with ASK Raymond James, put his money on Indian Oil Corporation (IOC) and Moser Baer with very persuasive logic. The investment thesis for IOC was frighteningly similar – that there will be de-control of petrol prices – and IOC will be a multi-bagger before you can say oil. Now, where else did we hear that? The reality – No real decontrol – and the stock has continued to languish. Moser Baer fared worse – showing a loss of 75%.
Sanjoy Bhattacharya, the wily stock-picker, took the easy way out, recommending one of Rakesh Jhunjhunwala‘s favourite stocks – Karur Vyasa Bank – as his stock pick. Sanjoy Bhattacharya said that “the fact that Rakesh Jhunjhunwala, India’s most highly regarded investor, owns Karur Vyasa Bank for the last nine years and is its single largest owner is testimony to the quality of the stock“.
A very sensible choice indeed because Karur Vyasa Bank returned 550% since then. You really can’t lose with Rakesh Jhunjhunwala‘s stock picks!