Normally, when novice investors like you and me approach Samir Arora, the whiz-kid fund manager with Helios Capital, for a stock recommendation, he rebuffs us with a gruff “I have no new stock ideas. I am buying the same old stuff”.
However, when Avanne Dubash, the beautiful and charming doe-eyed anchor of ET Now asks the same question, Samir Arora sings like a bird and reveals all of his secrets.
We cannot blame Samir Arora for this because such is Avanne Dubash’s charm that even the best of us would go weak-kneed and mushy in her presence.
In fact, Avanne appears to have strategized it well. She wore a lovely green dress which not only showed off her trim figure but also reminded Samir Arora of the lush greenery in the markets and soothed his nerves and lowered his guard.
“HDFC Bank is the next HDFC Bank” Samir Arora proclaimed to a question from Avanne as to which stock has the credentials to become the next HDFC Bank.
As expected, Samir Arora’s logic is simple and infallible. He explained that the total market share of the private sector banks is presently around 25% to 30% while the rest is with the PSU Banks. The PSU Banks have been steadily losing market share over the past 10 years owing to lack of capital and technology backwardness. This trend is likely to accelerate in the future and strong banks like HDFC Bank will be able to wrest more market share from the PSU Banks as well as from their counterparts in the private space.
Samir Arora’s fascination for HDFC Bank is well understood. In an earlier interview, he revealed that he had homed in on the stock at the time of its IPO in 1995. He reminisced about how the stock had not moved even an inch for more than three years and how several investors had jumped ship in the misconception that the stock would remain an underdog. However, Samir Arora was undeterred because he saw that the earnings were consistently growing at 30% CAGR. He held on to the stock and was well rewarded for his conviction because the stock has since been a 100-bagger and generated incalculable riches for its shareholders.
It is worth noting that Shyam Sekhar, who is an expert in micro-cap stocks, recently revealed that HDFC Bank is the solitary large-cap stock that he has in his portfolio. Shyam explained that apart from its ability to draw customers, predictability of earnings and technological prowess, HDFC Bank’s foray into the rural areas would catapult it to new heights in the years to come. “Such a compounding stock must have anchor place in every portfolio” Shyam Sekhar said.
The rationale of Samir Arora and Shyam Sekhar applies also to smaller private banks which have a management quality similar to that of HDFC Bank.
We also saw that Brahmal Vasudevan’s Creador/ Latinia recently took a large stake in City Union Bank, which is also on the path of growth and profitability.
DCB Bank is yet another private sector bank stock which is on a high trajectory of growth. It may be recalled that DCB Bank, which had fallen from grace after being labeled a potential “100 bagger” stock, has picked itself up from the dust and notched up hefty gains for its shareholders!