Rakesh Jhunjhunwala‘s stock picks never cease to amaze. How does he manage to make the right investments? His recent stock recommendation is VIP Industries. He officially announced that upto June 20, 2010, he was holding 12,68,000 shares of VIP Industries Ltd. On June 21, 2010, he acquired 375,000 shares of VIP Industries Ltd, which took his total shareholding to 16,43,000 shares of VIP Industries Ltd. He holds 5.8132% of the total issued and paid up capital of VIP Industries Ltd of 2,82,63,463 shares.
When he bought the shares of VIP Industries in June 2010, the CMP was (only) Rs. 335. VIP Industries: (See Rakesh Jhunjhunwala is buying these shares! Should We?) We thought he had bought a very expensive share because VIP Industries was already quoting at a PE ratio of 17 on the basis of an EPS of 19. In fact, VIP Industries‘ shares had already quintupled (5 times!) in just 12 months.
Rakesh Jhunjhunwala showed his wizardy in stock-picking and left all of us agog when by August 2010, VIP Industries had sprinted 50% to touch Rs. 507! That means that even if you had mindlessly bought VIP Industries after Rakesh Jhunjhunwala bought it, you would have taken home a whopping 50% return in just a few weeks. (See When Rakesh Jhunjhunwala Buys … Just Buy, Don’t Think!!)
Well, the master stock investor, is not done surprising us folks. Because, even after reaching stratospheric heights, VIP Industries continued its’ steady climb and on Monday, 4th October, 2010, shocked every investor by spurting an incredible 20% to settle at a lifetime high of 747!
Rakesh Jhunjhunwala‘s master stock pick in VIP Industries has left all other stock pickers agape. Nobody quite knows how he homed in on VIP Industries and why VIP Industries is behaving the way it is. A lot of stock market analysts and stock pickers were forced to admit that they had no clue as to what was going on. Sandeep Wagle, otherwise an astute stock market analyst, candidly admitted in the Economic Times
“Sandeep Wagle: Very honestly, I have no clue the way it is moving, there is no clear pattern. It is just moving up one way. Every decline, the bulls are lapping it up and very frankly at around 500-520, we had recommended booking off profits in this stock. I have absolutely no clue, so let me not give a guess, till it goes, it goes, you can only be in with a trailing stop loss of somewhere around 580 or so and I have no pattern that suggests a very clear target, so let me say that I am absolutely non plussed as far as VIP Industries is concerned.”
One reason for VIP Industries spectacular performance could be Dilip Piramal‘s optimistic statement in CNBC TV-18 that VIP Industries had wiped clean the traces of recession and was raring to go and get better. Dilip Piramal said that VIP Industries was having a really good run at the moment. VIP Industries was growing at about 25%.
Dilip Piramal also said that VIP Industries had done around Rs 669 crore in FY10 and seen a strong growth vis-à-vis FY09, around 70% and that the position would continue to be robust in FY11 and FY12.
Dilip Piramal also said that VIP Industries had a strong cash flow generation and that its debt was just about Rs 30 crore-Rs 35 crore. Dilip Piramal said that VIP Industries would become a debt free company by the end of the year.