Top five investment mantras by ace-investor Rakesh Jhunjhunwala

Big bull Rakesh Jhunjhunwala, who expects a strong market boom in coming years, sees tremendous opportunity in retail as a sector which he says can grow up to five times its current size in the next five years.

Jhunjhunwala of Rare Enterprise is of the view that India is a country where people save $600 billion a year, but market investment is not even $6 billion. This $600 billion is going to be $1 trillion by 2020-2021. In 1993, 17% of savings came to the stock market but in 2007, only 11% did so.

So if 10 per cent of the savings is to come, stock markets are going to get $100 billion of local money a year. And there is no reason why it can’t happen. The relevant framework is in place, he says.

Jhunjhunwala, who is extremely bullish on growth prospects of the Indian economy, believes that the country is entering a new phase of economic growth. He sees India growing by 9% by 2017-2018 and 10% by 2018-2019.

Commenting on the ongoing stock market rally at a CII conference on Tuesday, Jhunjhunwala said, “Buy companies which have strong managements and good corporate governance. Always look at opportunities with tremendous growth potential.”

“Retail is one of the best sectors. It offers most opportunity. I recommend looking at companies which have a high chance to scale up,” he added.

We have collated a list of top five investment mantras from Rakesh Jhunjhunwala:

Investors should look at opportunity:

The first thing which investors should look at is ‘opportunity’. Without opportunity, there can be no economic activity and without economic activity, there can be no profitability. For example, if we look at Colgate Palmolive, I look at the present demand for toothpaste in India and the potential for growth in demand for toothpaste in future.

“I made a lot of money in a company called Praj Industries (up 50% YTD). Why? Because they used to make ethanol plants,” says Jhunjhunwala. The opportunity for ethanol just went through the roof.

So the first thing he looks for is opportunity and retail is one industry which has one of the highest opportunities in this country. “I call it external,” Jhunjhunwala says. You can do internal things to create demand, but it is too taxing and that is not the favourite place where investors want to invest.

Retail is next big thing for India, winners will emerge in 5 to 10 years:

Retailing is a great opportunity and the winners will emerge in 5 to 10 years. It may be better to invest more when the winners emerge.

For retail, the opportunity is unbelievable and expects it to go by five times its size in the next five, six, seven years. So that is the opportunity. “I do not know $500 billion is the size of the retail market in India and organised is about 8 per cent. There are going to be a lot of most specialised retailers and do not forget one thing that if you look at the billionaires list of any country, two people are always from real estate and retail. So retail has got many more billionaires to come,” explains Jhunjhunwala.
I would like to speak about Titan. Titan has been successful first because of Mr. Desai who was the founder of Titan because he imbibed in Titan a culture of excellence and a culture of quality and a culture of interpretation. It is a branded lifestyle retailer and the best is yet to come for Titan. The learnings are that you got to have good leadership, you got to think differently, and you got to have good culture.

Competitive Edge/Culture:

The next factor to look at is competitiveness. In a capitalist society, in a free society, you cannot make profits, just want opportunity, one has to become more competitive and profitable at the same time.

Another important factor is the ‘culture of the company’. The company is more often than usual can be driven by its culture. They can be driven by barriers which could arrive because of maybe taxes, location, capital etc. So investors should try and understand the company in its competitive ability or what it already has in relation to the opportunity and the price.

Demand for the product:

I want to invest where demand naturally exists, says Jhunjhunwala. Then these are very important part of my investment. I invested in Rallis India (up 26% YTD). I made a large investment because there is no question that the usage of pesticides and seeds and all other agriculture inputs has to go through the roof, clarifies Jhunjhunwala.

The logic is that you cannot increase food production without increasing productivity and this is one of the only means of increasing productivity, one of the main means. So because of the same reason, Rallis is going to go through the roof.

Small cap which can become large cap:

Investors should look at companies which have the potential to become large caps. What you need for that, you need scalability. When I invested in Titan at Rs 500 crore, I made a lot of money partly because Titan today is Rs 11000 crore company, explains Jhunjhunwala.

http://articles.economictimes.indiatimes.com/2014-06-24/news/50825961_1_rare-enterprise-rakesh-jhunjhunwala-opportunity