Sanjoy Bhattacharyya, the doyen amongst value investors, is a difficult man to please. He has a very skeptical approach and treats every new stock idea with suspicion. Sanjoy makes a stock goes through several checks and filters before he gives it the green signal. Only a handful of stocks make the cut.
We got a glimpse of Sanjoy’s awesome screening process when he designed a Model Portfolio for us, his fans.
When I last checked, the Model Portfolio had given a gain of 121% in just 9 months. At that time, I had correctly stated that when Sanjoy Bhattacharyya recommends a stock, we should act on it instead of just standing around and gaping.
In his latest interview to CNBC TV18, Sanjoy pointed out that “smart money is made by having good temperament” and he gave the example of IPCA Labs to prove his point.
Sanjoy pointed out that IPCA is a “wonderfully run company, with a tremendous track record over the years and that it has evolved in a way that is almost copy-book”. Yet, today, when you have a great chance – the stock is down 20-25% from a recent one month high owing to the FDA concerns – suddenly everyone has fled, Sanjoy lamented.
Sanjoy explained that people are very poor processors of information. They use all the wrong cues to make investment decisions. They think short-term and get affected by what they have been exposed to most recently. “That is why people don’t make as much money as they should” Sanjoy added in a grim tone.
Sanjoy emphasized that the reason he is bullish on IPCA is because it has “high quality” management. He explained that the FDA issues at the Ratlam plant was an “adversity” and what distinguishes a “high quality” management with a “not so high” quality management is how they deal with adversity.
“The IPCA management is high quality and they will fix the adversity soon” Sanjoy said. “That is why IPCA is such a good idea” he added with a gentle smile.
Personally, I think the chorus amongst savvy investors to buy IPCA is getting so loud that we just cannot ignore it. Apart from Sanjoy Bhattacharyya, the same advice has come from Saurabh Mukherjea of Ambit. He formulated three reasons why IPCA should be bought. There are also a number of brokerages which are giving the same advice. I have distilled their salutary advice in my piece “Why we need to grab a chunk of IPCA Labs now”.