In an interview to Business Line, Porinju Veliyath extolled the virtues of a concentrated portfolio. He said:
“I love a 10-stock portfolio. We have around 650 clients and the average number in a portfolio will be 10 stocks – you can say it is a concentrated portfolio.”
He repeated this in an interview to NDTV.
However, the intriguing aspect is that Porinju is not following this principle in his personal investment portfolio. In fact, on most days, Porinju’s name crops up in the list of bulk deals for buying some random micro-cap stock or the other.
|Abc India Ltd (@)||Buy||06/Jun/2014||27356||102.2|
|Linc Pen & Plastics Ltd||Buy||25/Aug/2014||85000||88.23|
|Samtex Fashions Ltd||Buy||18/Sep/2014||77527||42.95|
|Harrisons Malayalam Ltd||Buy||30/Sep/2014||100000||72.19|
|Stylam Industries Ltd||Buy||13/Oct/2014||50000||89.49|
|Bdh Industries Ltd||Buy||25/Mar/2015||45942||42.84|
|Simran Farms Ltd||Sell||08/Apr/2015||60000||41.1|
|Jubilant Industries Ltd||Buy||05/May/2015||60000||100.96|
|Jubilant Industries Ltd||Buy||13/May/2015||60000||169.97|
|Palred Technologies Ltd||Buy||27/May/2015||200000||23.55|
|Samtex Fashions Ltd||Buy||08/Jun/2015||77473||70.32|
|V2 Retail Ltd (#)||Buy||22/Jun/2015||126459||39.54|
|Sahyadri Industries Ltd||Buy||09/Jul/2015||50000||86.42|
|Izmo Ltd (@)||Buy||13/Jul/2015||70000||54.21|
|Archies Ltd (#)||Buy||20/Jul/2015||200000||28.23|
|Gokaldas Exports Ltd (@)||Buy||22/Jul/2015||200000||67.81|
|Arvind Infrastructure Ltd (#)||Buy||11/Sep/2015||160000||35.59|
|Alpa Laboratories Ltd (@)||Buy||06/Nov/2015||110000||31.3|
|Globus Spirits Ltd (@)||Buy||24/Nov/2015||155000||66.3|
|Tera Software Ltd||Buy||08/Dec/2015||65000||75.27|
|Tara Jewels Ltd||Buy||15/Dec/2015||150000||52.64|
@: Shilpa Porinju Veliyath, #: Sunny Porinju Veliyath
You can see that in the period of 18 months from June 2014 to December 2015, Porinju has bought stocks in 18 companies, being ABC India, Linc Pen, Samtex Fashions, Harrisons Malayalam, Stylam Industries, IZMO, BDH Industries, Jubilant Industries, Palred Technologies, V2 Retail, Sahyadri Industries, Archies, Gokaldas Exports, Arvind Infrastructure, Alpa Labs, Globus Spirits, Tera Software and Tara Jewels. There is only one bulk deal sale during this period, namely, that of Simran Farms.
The total funds invested during the period, after deducting the sale, are in excess of Rs. 12 crore.
Whether Porinju is still holding all of the aforementioned stocks is not known.
Prima facie, one explanation for Porinju’s ‘shotgun’ approach of spraying his funds across a number of bulk deals is to take advantage of the excitement that the bulk deal purchase generates amongst retail investors. In the wake of the news of Porinju’s buy, investors throng the counter and send the micro-cap stock rocketing to the upper circuit for a couple of days. Porinju may be taking advantage of the higher prices to gently offload his holding and pocket a tidy profit.
There is nothing wrong in this modus operandi if it is indeed being followed by Porinju. Porinju has not recommended anyone to buy the stock nor has he given any assurance that he will hold the stock for any period of time. It is perfectly legitimate for him to buy the stock in a bulk deal on day one and sell it quietly on day two in a regular sale.
In fact, this modus operandi (if being followed) is a highly profitable way to leverage the huge popularity that Porinju enjoys amongst the masses.
The problem is that novice investors associate Porinju’s purchase as the discovery of a stock with great fundamentals and cheap valuations. They buy the stock for the long-term and may get saddled with a junk stock once the excitement peters out.
The other explanation is that Porinju is indeed a believer in the fundamentals of each stock and that he does intend to hold them for the long-term. The ‘concentrated portfolio’ theory may not work with such stocks given their inherent low quality.
A third explanation is that Porinju does both i.e. he buys some stocks because he believes in their fundamentals and he buys other stocks to take advantage of the resultant excitement.
The third explanation appears to be the most rationale one for Porinju contradicting his own assertion of being a concentrated investor!