Sanjoy Bhattacharya’s latest stock portfolio picks

Sanjoy Bhattacharya, the master stock-picker, can be relied upon to put some sense of perspective into the irrational ways of the stock market. Till December 2010, every stock picker from Rakesh Jhunjhunwala to Ramesh Damani & even self-styled dooms-day sayer Shankar Sharma and his better half Devina Mehra were gung-ho about how the market was going to touch new heights in the foreseeable future and how one should stay invested. All of a sudden, in January 2011, the mood has changed and every Tom, Dick and Harry is desperate to sell and get out. Even Ramesh Damani, renowned stock picker and veteran market watcher, was forced to admit in his chat at moneycontrol.com that "the fall has really perplexed me…surprised by its severity" though he quickly covered himself by saying "…but as i have always said timing the market is fraught with danger" and added some words of solace "…you can certainly buy in the market where u find value".

So what happened? What went wrong? Is it a case of over-reaction?

Sanjoy Bhattacharya, in his recent article in Forbes India, puts it candidly "Few things are as predictable as over-reaction in the stock markets" and points out that "In February 2009, the smartest investors seemed like rabbits caught in front of the headlights just before one of the most stupendous market rallies in history". Sanjoy Bhattacharya also adds with a trace of contempt in his tone “Investors are predictably irrational”.

In difficult times like the present one, one is reminded of his prophetic words about the perils of forecasting. Sanjoy Bhattacharya quotes Mario Gabelli who said “Buy what is, not what will be” and adds that "Relying on worthless forecasts of an essentially unpredictable future is akin to gambling on events outside your control. Nothing adds more risk to an otherwise prudent investment approach".

Sanjoy Bhattacharya‘s previous stock picks were not so well received by the market. He suggested Tata Sponge Iron and Taj GVK Hotels as "meriting serious consideration" and gave solid logic to back his investment hypothesis. He pointed out that both companies were backed by managements of stellar & impeccable quality and that the growth prospects of the stocks were good and their valuations were reasonable. Unfortunately for Sanjoy Bhattacharya, Tata Sponge plunged 11% while Taj GVK sank 32% owing to the bearish market conditions.

Sanjoy Bhattacharya quotes from the infinite wisdom of Warren Buffet "Risk does not reside in price changes, but in miscalculations of intrinsic value". From that perspective, one has little to worry about the future of Sanjoy Bhattacharya‘s stock picks Tata Sponge & Taj GVK.

It is important to remember that the merits of his stock recommendations can never be determined in the time-span of a couple of months.  Sanjoy Bhattacharya‘s stock picks are of fundamentally strong companies which keep growing from strength to strength over the years and compound the investor’s wealth.

Sanjoy Bhattacharya has now added to his list of stellar stock picks. He says that Sundram Fasteners and Union Bank of India “keep flashing on my radar screen”.

As always, he gives solid logic to support his stock recommendations. He points out that Sundram Fasteners is the undisputed leader in market share and cost advantage and that the credentials of its senior management and work ethic are stellar. He also emphasizes that Sundram Fasteners has an impressive track record of generating cash flow from operation and that it trades at just over 9 times March 2011 earnings.

Sanjoy Bhattacharya is also optimistic about Union Bank which he calls “one of the best managed banks in the country”. It is easy to see what it is about Union Bank that has impressed him. Union Bank has a 10 year average ROE in excess of 23 percent, a steady improving trend in cost control and asset quality combined with stable operating margins. Sanjoy Bhattacharya emphasizes that Union Bank is out of favour at the moment due to “exaggerated fears” about rising credit provisions, a reversal in credit growth and net interest margins. He emphasizes that Union Bank‘s valuations at 1.2 times FY2012 book value and 8 times current year earnings is quite reasonable.

Union Bank of India reported strong results for the Quarter ended December 2010. Union Bank of India’s Interest earned was Rs. 419946 lacs for the quarter ending in December 2010 against Rs. 329355 lacs for the quarter ending in December 2009. Union Bank of India’s Interest expended was Rs. 258364 lacs for the quarter ending in December 2010 against Rs. 222888 lacs for the quarter ending in December 2009. Union Bank of India’s Net Profit / (Loss) was Rs. 57957 lacs for the quarter ending in December 2010 against Rs. 53413 lacs for the quarter ending in December 2009

So, once again, one has to compliment Sanjoy Bhattacharya for his stellar stock portfolio picks.