Chakri stocks mein na dawa kaam ayegi na Dua!
Basant Maheshwari’s USP is that he is not only an academician but is also a practitioner.
He is the author of a best-selling book called “The Thoughtful Investor” and is also a successful investor and PMS Fund manager with several multibaggers to his credit.
The advantage of the dual role played by Basant is that he not only rewards us from time to time with multibagger stock recommendations but he also tutors us on esoteric investment theories.
“Yaha dawa kaam ayegi na Dua!” Basant fumed all of a sudden when he spotted novices heading towards Dalal Street to buy alleged “chakri stocks”.
Kachra, crap and chakri stocks are are like terminally ill cancer patients having multiple organ failure. Just because you are emotionally connected to your purchase price does not mean that you will get it back. And stocks are NOT family members. Yaha dawa kaam ayegi na Dua !
— Basant Maheshwari (@BMTheEquityDesk) March 6, 2018
Novices normally do not take things at face value. They demanded that he explain what “chakri stocks” are.
Basant obliged and provided a masterful definition:
Someone throws a name; the stock starts to dance; the public joins the party; once everyone’s bought, the music stops; there are no new buyers; the stock, devoid of fundamentals starts to fall; the protagonist disappears temporarily – then appears to throw another Chakri. REPEAT https://t.co/09l07iQfxE
— Basant Maheshwari (@BMTheEquityDesk) March 11, 2018
Basant’s warning was timely and alerted several to falling prey to junkyard stocks.
Good one Sir ji…!! Chakri stocks ma public chakkar Kha rahi h…!!!
— Chinmay R. Shah (@chinmay_vvn) March 11, 2018
Please continue to guide small investors to stick to quality names and avoid "chakri" stocks. 🙂
— Kumar Abhishek (@Kumar_Abh_wrd) February 20, 2018
Page Industries, star of Basant’s Model Portfolio
In the golden days of yore, Basant had prepared a model portfolio of high-quality stocks for investors to buy.
Page Industries was the crown jewel of the Model Portfolio.
Basant explained the virtues of Page Industries in the crispiest possible manner.
“Virtual monopoly in high-margin premium inner-wear segment, strong brand, high ROE, debt-free, low capex, huge scale of opportunity,” he said, implying that opportunities to buy such stocks do not come everyday.
1100% gain since Basant’s first recommendation
It is a matter of record that Basant first recommended Page Industries in July 2011.
The stock was then available at Rs. 1968.
At the CMP of Rs. 24,465, eye-popping gains of 1143% (11-bagger) are on the table.
#PageIndustries , (the world’s largest licensee of #Jockey), name was formed by the initials of Promoter’s Mother Parpati Genomal
— Krunal Mehta (@MrKrunalMehta) May 14, 2018
Basant lost confidence in Page Industries and dumped it
The amusing aspect is that Page Industries’ valuations become so exorbitant at one stage (P/E of 100x) that Basant became jittery and dumped the stock.
@BMTheEquityDesk Do you regret to exit Page industries? When brokers are revising its target for higher valuations
— Jayprakash Shukla (@jayyshukla01) November 10, 2017
No regrets – only happiness. We made our money elsewhere though. https://t.co/dCHvw9kheI
— Basant Maheshwari (@BMTheEquityDesk) November 10, 2017
It was 40x excluding dividends.
— Basant Maheshwari (@BMTheEquityDesk) November 10, 2017
Poster child for warning against “expensive stocks”
Page Industries became the poster child for value investing luminaries like Porinju Veliyath and Shyam Sekhar to warn novices about the perils of investing in so-called “expensive stocks”
Good, reliable numbers from Page. The bulls still have their underwear on them. Thank God for sparing us an ugly sight.
— Shyam Sekhar (@shyamsek) August 14, 2015
Page is over-priced unless govt makes it compulsory to wear 2 underwears, like superman 🙂 https://t.co/OVTovP99Lq
— Porinju Veliyath (@porinju) August 14, 2015
@picker_stock @porinju I heard you say this. And saw a page worshipper get red-faced. Was a funny scene. January 2015.
— Shyam Sekhar (@shyamsek) August 14, 2015
Warning proved to be wrong because Page Industries went on to give 75-bagger gains since IPO
The warning by the value investing luminaries was well-intentioned though misplaced.
Page Industries has since then notched up hefty gains of nearly 80%.
In fact, the total gains since listing 11 years ago are a mind-boggling 7,500%.
This sensational revelation was made by the charming Sonia Shenoy.
PAGE industries- stellar quarter, highest margins in the last 8 quarters
what a wealth creator this one!
listed at 329 rupees 11 years back
today at 24900, stock is a 75 bagger in 11 years!— Sonia Shenoy (@_soniashenoy) May 25, 2018
Investors missed out Page Industries while trying to find the next Page Industries
— Sleepytrader (@sleeepyinvestor) May 25, 2018
| PAGE INDUSTRIES LTD – FINANCIAL RESULTS | |||
| PARTICULARS (Rs CR) | MAR 2018 | MAR 2017 | % CHG |
| NET SALES | 608.4 | 497.32 | 22.34 |
| OTHER INCOME | 7.25 | 10.26 | -29.34 |
| TOTAL INCOME | 615.65 | 507.57 | 21.29 |
| TOTAL EXPENSES | 461.56 | 399.92 | 15.41 |
| OPERATING PROFIT | 154.09 | 107.65 | 43.14 |
| NET PROFIT | 94.22 | 66.79 | 41.07 |
| EQUITY CAPITAL | 11.15 | 11.15 | – |
.@blitzkreigm takes you through Page Industries' incredible journey pic.twitter.com/pyPjWWVvUQ
— CNBC-TV18 News (@CNBCTV18News) October 24, 2017
Massive growth opportunity available to sustain premium valuations: Motilal Oswal
At this stage, we have to compliment the wizards of Motilal Oswal because while everyone else was jittery about Page Industries, they stuck their neck out and recommended a buy on the basis that there is “massive growth opportunity available to sustain premium valuations”.
The logic was brilliant:
“Valuation view: We believe PAG offers a compelling, capital-efficient long-term lifestyle play on the premiumizing innerwear category. A widening branded product portfolio, coupled with distribution expansion, will aid market share expansion and drive multiple years of growth, in our view. Unlike retail peers, PAG has shown a remarkable ability to maintain strong double-digit volume growth and high RoEs, making it fully deserving of high valuations. Continued impressive performance leads us to upgrade forecasts for FY19/20 by 4%/7%. Maintain Buy with a TP of INR25,580 (50x December 2019E EPS, a 10% discount to three-year average P/E).”
Later, the target price was enhanced to Rs. 27,350 on similar logic.
If earnings are growing, the stock price will follow sooner or later
Basant explained that we have to keep an eye on the earnings and not the stock price. If the earnings are increasing year after year, it is inevitable that the stock price will eventually catch up and make up for the defecit.
If your stocks are driven by earnings and growth you won’t have to try too hard to drive them up. Occasionally, companies do nothing for a few months and that is okay as long as the earnings keep going up quarter after quarter. https://t.co/E00lWNOVLb
— Basant Maheshwari (@BMTheEquityDesk) May 26, 2018
Conclusion
It is ironical that while so-called “cheap” and “value” stocks are languishing at the bottom of the barrel, a so-called “expensive” stock is soaring high and showering multibagger gains. Prima facie, this proves that holding on to high-quality and high RoE stocks despite their “expensive” valuations is a prudent strategy in the long run!
it maybe a one off case .. what about suzlon.. rpower etc….
I am not very bullish on textiles sector, but still if some body want to look into textiles sector, Vardhman textiles (Back feeder side of textiles like spg and wvg) and Arvind (front finishing side like wvg of denim, garments and retail) are better bets, and still I agree with comment made by Porinju ( which I rarely do).
Basant’s book The thoughtful investor is a book which is timeless…he is a man with brains. Equity desk was so good…wish we had something like that now…
Are there no other companies manufacturing inner wear in the country? Even TCS is not having a PE of 50. (It is 27). It all appears sheer madness.
I wonder whether somebody actually bought Page Ind at Rs. 329 eleven years back and held it for next 11 years and still holding it. There can a very few exception to this, but, who bought at 329 and held it for next 11 years out of sheer analysis, profitability growth and conviction. Similarly the case of HDFC Ltd. or HDFC Bank for that matter.
Are we not becoming wiser in the hindsight which every body is.
What about KITEX garments. It is having a terrible time
And that gives you reason why you should read Basant Maheshwari’s book.