“Don’t Lose The Forest For The Trees”: Varinder Bansal
“Lagta hai Varinder Bansal kuch hidden message de raha hai,” Jigneshbhai mumbled.
Jigneshbhai is the intelligence officer in the RJ Fan Club.
One of his onerous responsibilities is to track encrypted transmissions to and from expert investors and to decode them.
Holding cos are not only about the discount rates but more imp it’s about the underlying asset. Just think about BBTC, Bajaj Holding, Tata Investments, Vindhya Telelinks etc. Discount rates doesn’t capture underlying growth. Don’t lose the forest for the trees. https://t.co/7pZrMcYxO1
— Varinder Bansal (@varinder_bansal) August 17, 2018
A careful study of Varinder’s tweet reveals that he is advising novices not to obsess over the discount at which the holding companies are quoting vis-à-vis the underlying values of their operating companies but instead to focus on the potential growth prospects of the underlying businesses.
It is obvious that even if the so-called discount remains unchanged, an increase in the business value of the underlying companies will automatically result in an increase in the value of the holding company stock.
Of course, if the discount narrows for some reason, it is a case of ‘Sone pe suhaaga’, he is implying.
BBTC, 15x multibagger gains and counting
Bombay Burmah Trading Corp alias BBTC is a stellar example of the riches that one can effortlessly reap from holding companies.
Today, the stock surged like a rocket and breached the upper circuit trigger of 20%.
On a YoY basis, the stock is up a fabulous 116%.
Over 24 months, the gain is a magnificent 300%.
The stock was first discovered by Ashish Chugh of Hidden Gems fame in November 2011.
“There is great value in Bombay Burmah. Investors should accumulate it at every decline,” he had advised.
The gains since 2011 are in excess of 1,500%.
In fact, the stock has heavily outperformed Britannia and Bombay Dyeing, clearly suggesting that the theory of discount narrowing is coming into play.
Porinju Veliyath recommended BBTC in May 2015 and called it the “simplest stock idea”.
— Porinju Veliyath (@porinju) May 25, 2015
Varinder Bansal was next in line. He recommended a buy of the stock in August 2016 on compelling logic.
BBTC (M-cap 2925 cr)
Holds 50.75% stake (direct + indirect) in Britannia valued at 18000 cr
Also owns 14.35% stake in Bombay Dyeing
— Varinder Bansal (@varinder_bansal) August 8, 2016
BBTC covered on "Did You Know" when its m-cap was 1000 cr and now 5600 cr…..https://t.co/Xa3Qqpc8og
— Varinder Bansal (@varinder_bansal) March 6, 2017
The latest recommendation to buy BBTC is by Sunil Singhania at the famous Sohn India Conference 2018.
His logic is similar to that canvassed earlier by Ashish Chugh, Porinju Veliyath and Varinder Bansal.
BRITANNIA at 6070
Stock Hits Yet Another Record High
MCAP at 73000 Cr
Also Watch for Bombay Burmah: Holds 50.7% Stake in Co
Bombay Burmah MCap at 10850 Cr
BBTC Holdings in Britannia worth 37000 Cr#FMCGisLife@CNBCTV18Live@BritanniaIndLtd https://t.co/fLRzk3hLcY
— Mangalam Maloo (@blitzkreigm) June 13, 2018
Why did BBTC surge today?
A punter at MMB correctly pointed out that the reason for the excitement in the BBTC counter is because the Tamil Nadu Government plans to take over 8,373 acres of leased forest land from the Company.
Prima facie, it appears that if the Government has to buy the land from BBTC at market rates, it would have to pay compensation which may run into a large sum of money.
Which are the other holding companies worth buying now?
Varinder Bansal’s tweet reveals that blue-chip holding companies like Bajaj Holding, Tata Investments, Vindhya Telelinks etc are excellent investment candidates because they have strong operating businesses which will grow from strength to strength in time to come.
Some other holding companies that can be added to the list include Godrej Industries, Maharashtra Scooters, Summit Securities, STEL Holdings, BF Investments etc.
Godrej Industries is a blue-chip that one cannot go wrong with given that it has a standalone business in addition to holdings in Godrej Consumer, Godrej Properties and Godrej Agrovet.
QTD performance of
Godrej consumer +8%
Godrej properties +12%
Godrej agrovet +8%
Above 3 contributes 95% of Value to Godrej Industries, whose QTD perf is -10% .
Implies discount has widened by 20%
QTD : Quarter to day
— Iqbal (@MohamedIqbal_s) March 2, 2018
Way2Wealth has conducted an in-depth analysis of Godrej Industries’ affairs and explained why it is a compelling buy.
Summit Securities and STEL Holdings are also fail-proof powerhouses belonging to the reputed RPG Goenka group.
Nigel D’Souza has explained that both holding companies are quoting at rock-bottom valuations compared to their investments in blue-chip mid-cap stocks like Ceat Ltd, KEC International, CESC, Saregama, Philip Carbon, KEC International, RPG Life Sciences etc.
— CNBC-TV18 (@CNBCTV18Live) June 11, 2018
Today on #midcapmania we explain to u 'SUMMIT SECURITIES'
Which is the holding co of the Harsh Goenka cos
Holding in various listed entities=4500cr
Has 40.83% in Spencer & Co ltd as well (not Spencer's Retail) https://t.co/ESNhYNRZlm
— Nigel D'Souza (@Nigel__DSouza) June 11, 2018
Stel Holding in CESC valued more dan its MCap
*Holds 1.88% in CESC valued at 234cr
— Nigel D'Souza (@Nigel__DSouza) August 28, 2017
BF Investment also appears to be a good bet given that it is the holding company of the reputed Kalyani group and holds big chunks of powerhouse stocks like Bharat Forge, Kalyani Steels, Automotive Axles, Hikal, BF Utilities etc.
Stock for Long Term: Contra Investment
One good stock for long term investment: BF Investment.
Corrected more than 50% from 52 week high, has good fundamentals.
— P R Sundar (@PRSundar64) July 20, 2018
BF Investment:~80% disc to investments (Direct+Indirect: Holds 7% eq in Bharat forge, 39% in Kalyani Steel, 36% in Automotive Axle + others) https://t.co/iZU35RC9nV
— Varinder Bansal (@varinder_bansal) June 20, 2017
Prima facie, it appears that riches are lying in wait for us in the form of holding companies. We have to make the most of the opportunity and grab the best ones when they are still quoting at steep discounts to their intrinsic values!