Sanjoy Bhattacharyya is an old-school “value investor” preferring to make his stock investments on the basis of a conservative analysis of the fundamentals of the stock. Sanjoy Bhattacharyya has made his millions following this time-tested approach and he encourages all investors to do the same.
Sanjoy Bhattacharyya‘s latest article in the Forbes (“The Trait Of A Successful Investor“) highlights the qualities that investors need to cultivate to become successful “value investors“. He says that investors must have three qualities: (i) emotional discipline, (ii) framework for arriving at investment decisions and (iii) ability to develop rational and detailed insights about how a business prospers and fails.
Sanjoy Bhattacharyya points out that investors get into trouble because their investment decisions are driven by fear, greed and a deep-rooted gambling instinct. Also investors suffer from either over-confidence or self-denial. He also cautions against the lack of conviction in one’s own efforts and analysis and a pathetic blind trust in the so-called “experts” who wax eloquent on TV.
The wily stock picker gives valuable suggestions on how investors can instill emotional discipline in themselves and avoid investment blunders. Broadly, Sanjoy Bhattacharyya says that investors should avoid a short-term approach and take advantage of volatility and market crashes to buy high-quality stocks of companies with pricing power. If investors have a long-tem approach, they have a great investment opportunity emphasizes Sanjoy Bhattacharyya.
The seasoned investor identifies five stocks which according to him provide the “delicate balance between top-drawer businesses, margin of safety and emotional discipline“.
Sanjoy Bhattacharyya‘s first stock pick is Bharat Electronics (Rs. 1,535) which he claims is an “impeccably managed quasi-monopoly” with a “fortress-like balance sheet, swelling order book and metronomic free cash flow“. Bharat Electronics is also inexpensive at a multiple of just over 12 times current earnings. He says that concerns about Bharat Electronics‘ increasing competition are more than compensated by the exceptional down-side protection and growing civilian market related to defense electronics applications.
His second stock pick is FDC (Rs. 91) which he claims is a “veritable cash machine“. What has attracted Sanjoy Bhattacharyya is FDC‘s “impressive net profit margin of 20 percent” and “five-year average return on equity (ROE) north of 25 percent” and a PE ratio of about 11. These compensate FDC‘s “incredibly low profile” and “single digit revenue growth“.
GSFC (Rs. 443) is Sanjoy Bhattacharyya‘s third stock pick owing to its “exceptionally strong growth in profits, a dominant position in the fertilizers and chemicals business, ROE in excess of 30 percent” and a low PE of 4. He blames the valuation anomaly on the Government (majority shareholder)’s “whimsical behaviour” and “lackadaisical dividend pay-out“. A brave-heart patient investor may be handsomely rewarded given the improved outlook for the fertilizer industry feels Sanjoy Bhattacharyya.
Sanjoy Bhattacharyya‘s fourth stock pick is Gujarat State Petronet (Rs. 102). Gujarat State Petronet makes it to the hallowed list because it is an “unregulated utility“, with predictable earnings and impressive capital efficiency. In Gujarat State Petronet, one can own a business that earns a ROE of 30 percent at a PE of 10.
Sanjoy Bhattacharyya‘s last stock pick is IL&FS Investment Managers (Rs. 28) which he claims is a “compelling investment“. What has impressed him so much about IL&FS Investment Managers is the fact that its average ROE for the past five years is 50 percent+ and the valuation is cheap at a PE of 9! IL&FS Investment Managers is the only opportunity to buy an established asset manager with an enviable franchise among international private equity investors.