First, we must cast a glance on Prof Sanjay Bakshi’s favourite stocks which are probably held either in his personal account or for the ValueQuest India Moat Fund. The Prof described these stocks as having “very high quality of earnings”, “exceptionally strong balance sheet” and “highly scalable business” in a post written at microcap club.
|Stock||Three Month Performance (%)||YoY Performance (%)|
|Accelya Kale Solutions||(6)||(6)|
As one can see, the performance of the stocks is quite disparate. The Prof’s bet on realty stocks (Ashiana Housing & Poddar Developers) was ill-timed. The slowdown in the realty sector has taken its toll on both stocks.
Vaibhav Global has also turned out to a poor stock pick so far. The Prof wrote an elaborate “case study” on Vaibhav Global titled “62 Bagger And Counting: An E-commerce Business That Actually Makes MONEY But Almost Didn’t” in which he described it as “highly profitable, cash generating, extremely well financed, and dominant business in its space”. He also said Vaibhav Global has an “impenetrable moat” due to its “low cost advantage formula”.
Kitex Garments was also lauded by the Prof in a “lecture note” titled “The Importance of Unconventionality”. The Prof emphasized that Kitex Garments had “gigantic customers” and was/is a “highly profitable business” and that its “revenues and earnings will grow manifold over the next decade”.
Unfortunately, some of that growth has slowed down in the case of Kitex. Also, the Company appears to be mired in a controversy over a sum of Rs. 200 crore and the abrupt resignation of its CFO. All these happenings are being vigilantly tracked by the sleuths at the valuepickr forum.
The intriguing part is that there is no update from the Prof about both stocks. Given that quite some time has elapsed since the original “case study” and “lecture note”, one would like to see an update on whether the original investment thesis still holds good or has changed.
The Prof has also not issued a commentary on the state of the market or on what investors should do now. Such cataclysmic events and Bear markets are once-in-a-lifetime experience and there is much that one can learn from it, both from a theoretical and practical perspective.
In his latest piece titled “The Eventual Consequences of Risk Seeking or Risk Blind Behavior”, the Prof has laboured hard to drive home the point that investors should avoid risk to the extent possible. The Prof states that in his illustrious career of 21 years, he has “peed on many electric fences” and has “plenty of scars” on his body.
The Prof has cited several day-to-examples such as overtaking, jumping at red lights, bull fights, etc to emphasize that people go crazy with over-confidence when they want to avoid risk. In other words, the prospect of a loss turns normal people into dare-devil risk-takers is the Prof’s point.
At the end of the dissertation, the Prof advises that investors should:
(i) Avoid leverage (borrowing money) to buy shares;
(ii) Avoid trading in derivatives;
(iii) Avoid highly-leveraged companies;
(iv) Avoid commodity stocks such as those dealing with crude oil;
(v) Avoid companies that promote themselves excessively;
(vi) Avoid IPOs as they are excessively promoted.
Some of these points are known to us. However, the Prof does put it in a persuasive manner and we would do well to pay close attention to the points.