Rakesh Jhunjhunwala is truly the master stock picker investor because he has the uncanny ability to home in on multi-baggers with some consummate ease that he makes all other stock pickers look like amateur investors.
Rakesh Jhunjhunwala has millions of devoted followers in India who are tuned into every stock that the master stock picker is looking at. This is a well known fact. And rightly so because it is now established with proof that if an investor had simply bought the shares that the Oracle of Mumbai had bought, the investor would have reaped a fortune (see Rakesh Jhunjhunwala’s Latest Portfolio, Holdings & Best Buys). What is now emerging as the truth is that even the mighty FIIs have started following the living legend. Now it is established that when the master investor buys, the FIIs buy. The only difference is: Rakesh Jhunjhunwala buys at Rs. 65. The FIIs buy at Rs. 650.
VIP Industries is a good case in point. Rakesh Jhunjhunwala bought 12,68,000 shares of VIP Industries several months ago when it was languishing at Rs. 65. At that time nobody cared about VIP Industries. But India’s greatest investor had the vision and the skill to see the potential multi-bagger. (See Rakesh Jhunjhunwala is buying these shares! Should We?)
Later, on 21st June 2010, when VIP Industries had soared to Rs. 335 (a five-bagger!), Rakesh Jhunjhunwala showed the mettle that he is made of and bought an additional 375,000 shares of VIP Industries even though every other stock picker was writing off VIP Industries as too expensive. Rakesh Jhunjhunwala now holds a mammoth 16,43,000 shares of VIP Industries constituting 5.8132% of VIP Industries‘ capital. These shares are worth about Rs. 112 crores at the CMP of Rs. 682.
|Rs in Cr.||Mar 2010||Mar 2009||Mar 2008|
|Total Shareholder’s Funds||146.45||111.32||127.02|
|Earning Per Share ( Rs )||16.27||0.00||7.12|
Now it is no surprise that Blackstone, a global private equity fund, has decided to follow Rakesh Jhunjhunwala and buy the shares of VIP Industries. Better late than never. Blackstone acquired a 2% stake in VIP Industries by purchasing the shares from the open market. This sent the stock price spiralling up nearly 20% making Rakesh Jhunjhunwala richer. Blackstone also announced that it wanted to acquire upto 5% of VIP Industries‘ equity (to match Rakesh Jhunjhunwala?) and this has kept the price of VIP Industries very firm at Rs. 682.
At the CMP of Rs. 682, VIP Industries is a very expensive share indeed. Though VIP Industries posted good December quarter numbers (its Q3 revenue was up 19.6% at Rs 200.8 crore versus Rs 167.9 crore YoY while its PAT was up by 1 time at Rs 30 crore versus Rs 14.8 crore YoY), its PE ratio on the basis of the trailing 12-month (TTM) EPS of Rs 20.03 per share is an eye-popping 34.00 while the book value is only Rs 60.91 per share. The price-to-book is 11.18. The dividend yield is only 0.73%. In retrospect, the right time to have loaded up on VIP Industries was in June 2010 when Rakesh Jhunjhunwala showed immense confidence in the scrip and announced that he was increasing his stake (but we just couldn’t muster the courage then). Today, it is too late and so, it may be best to stay on the sidelines and watch the Big Boys play the game.