Ramesh Damani and Porinju Veliyath are as different from each other as chalk is from cheese. While Ramesh Damani is an old school sort of investor, paying due emphasis to factors like ROE, management quality, debt status, dividend yield etc, Porinju holds such niceties in healthy contempt. He has no qualms in buying stocks of companies run by so-called “chor” managements if he feels that there is a chance to make money from them.
So, it is no surprise that the paths of these stalwarts have rarely crossed and there are not many stocks that can boast of having attracted both stock pickers simultaneously.
Linc Pen is an exception to this rule. It has the privilege of having attracted both stalwarts to its ranks. As of 31.03.2015, Ramesh Damani holds 30,061 shares of Linc Pen worth Rs. 49.60 lakhs at the CMP of Rs. 164. Porinju holds 50,000 shares worth Rs. 82 lakhs.
Ramesh Damani is possibly one of the oldest shareholders of Linc Pen. As far back as in the year 2004-2005, Damani recommended Linc Pen on the basis that it is a “niche bet”. He repeated the advice several times including in Feb 2010 when he advised long-term investors to buy the stock on the basis that it is “building a credible brand and this business is valued by foreign majors”.
Porinju appears to have got interested in Linc Pen in August 2014. He bought a chunk of 85,000 shares on 25.08.2014 at Rs. 88.23 per share. He tweeted about the stock in September 2014 “Linc Pen @ 100 | MktCap 140 Cr – to post 550 Cr revenue in 2 yrs with higher margins; could be valued at 1.5 times sales – not for traders”.
Porinju’s timing was masterful. The stock rocketed soon thereafter and Porinju couldn’t hide his joy. “Linc Pen up 44% in two days:” he tweeted.
Interestingly, both stalwarts got jittery about the steep surge that Linc Pen saw and pruned their holdings.
Ramesh Damani started the year with 64,370 shares. He sold the stock on four occasions during the year and ended up with only 30,061 shares as of 31.03.2015.
Porinju, out of the 85,000 shares that he bought, added only 70,000 shares to his name. He sold a chunk of 20,000 shares on 19.09.2014. He was left with 50,000 shares as of 31.03.2015.
One other interesting bit of information is that both stalwarts were at the Linc Pen counter on 19.09.2014. While Porinju sold 50,000 shares, Ramesh Damani sold 2500 shares.
The reason both stalwarts got jittery is because there was a dramatic rise in the stock price. From a low of 65 on 13.08.2014, the stock surged almost vertically and more than doubled to a high of Rs. 144 on 19.09.2014.
Of course, both stalwarts would have regretted their decision to sell the stock because while they could collect Rs. 144 per share, the stock price continued to surge even thereafter till it reached an all-time high of Rs. 219 on 04.12.2014. Even the CMP of Rs. 165 is higher than what the stalwarts got for their shares.
Linc Pen’s future appears to be bright when you consider that it is still a micro-cap with a market capitalisation of only Rs. 243 crore. It also reported decent results for FY 2014-15. The net profit for the year increased by over 24% to Rs.14.32 crore against Rs.11.51 crore during FY 2013-14. However, the net revenue increased marginally by just over one percent at Rs.318.3 crore compared to Rs.314.1 crore during FY 2013-14. Deepak Jalan, MD, explained that the performance could have been better had it not been for “political turmoil, socio-economic crisis and currency devaluation”. He promised better performance in the future.