Rakesh Jhunjhunwala has an awe-inspiring track record of picking multibaggers which has made his stock portfolio into a billionaire’s portfolio. His multibaggers like Titan Industries, CRISIL, Rallis & Lupin are the stuff that dreams are made of. Just thinking of these multibagger stock picks makes the heart beat faster!
Rakesh Jhunjhunwala, though the one with the golden touch, is not without his flop stock picks.
We chanced upon a transcript of an investor conference held in 2003 & 2007 when master stock pickers like Rakesh Jhunjhunwala, Raamdeo Agarwal, Ramesh Damani and Sanjoy Bhattacharya had laid out their stock picks. What is interesting is that the number of loser stocks outnumbers the number of winner stocks.
Rakesh Jhunjhunwala‘s first stock pick (in 2003) was Geometric Software which he felt was, unlike other small software companies, in a space in which there can be no encroachment. He exuded confidence that the “Product Lifecycle Management” space in which Geometric was involved would be “the biggest element of enterprise software“.
Rakesh Jhunjhunwala showed so much conviction in Geometric that he bought 39.65 lakh shares of Geometric, presently worth about Rs. 25 crores.
Sadly for him, Geometric has gone nowhere. Geometric was quoting at Rs. 47 on 1.1.2003 (adjusted for split). At the CMP of Rs. 56, Rakesh Jhunjhunwala gain for nine years of holding is a measly 16% or 1.77% per year!
What is perplexing is that despite Geometric being such a loser stock, it still continues to attract attention for the crème-de-la crème of stock pickers. Ramesh Damani recently went gaga over Geometric and recommended a BUY at Rs. 71. Ramesh Damani (and the investors who followed his advice) must be ruing their luck.
Rakesh Jhunjhunwala‘s other stock pick (in 2007) was Bilcare which he said was “for a patient investor for three-five years“. He was gung-ho that if Bilcare is successful in doing what it has set out to do, “it will be among the top companies of the world in the pharmaceutical package“. He exuded supreme confidence that “this stock will give mind-boggling returns“.
Rakesh Jhunjhunwala must be very disappointed that the “mind boggling returns” he was confident of seeing from Bilcare are nowhere to be seen. Instead, to add insult to injury, Bilcare which was quoting at Rs. 600 in January 2007, has returned a loss of 38% at the CMP of Rs. 382! To make a loss after 4 years of patient holding must be very frustrating even for the Oracle of Mumbai.
Rakesh Jhunjhunwala‘s third stock pick, Tata Steel, also led to disappointment. He called Tata Steel “an extremely good long term investment over a three-five year horizon” and gave strong logic to support his hypothesis. He called Tata Steel‘s financing of the Corus purchase “perfect” and said that the 750 crore equity that Tata Steel had could produce Rs 25,000 crore EBITDA.
Rakesh Jhunjhunwala knows better than anyone else that while plans look good on paper, they may be far from reality. Tata Steel has had a mediocre performance rising from Rs. 422 in January 2007 to the CMP of Rs. 573 offering a total return of 34% or an annual return of 7.5%.
The moral of the story is that ordinary investors should not get disheartened when their stock picks don’t turn out the way it was expected. Investors must take solace in the fact that even masters occasionally get it wrong. The difference between the master investors like Rakesh Jhunjhunwala and ordinary investors is that the master investors never give it up. And that is why they finally succeed and succeed BIG!