Mohnish Pabrai’s golden advice is that investors should “clone” other renowned investors i.e. buy the same stocks that the renowned investors are buying. Mohnish Pabrai cited his own practice of cloning the moves of Warren Buffett and other investing legends as an example.
Now, this theory doesn’t always work well in practice though there are examples when you have to kick yourself for not following that advice.
Thomas Cook and Relaxo Footwears are good examples of this theory which ought to have been implemented in practice.
In the case of Thomas Cook, we had not one, but two, accomplished investors, recommending a Buy. The first was the legendary Prem Watsa, who built a fortune worth USD 2 Billion from scratch. When a legend like that looks you in the eye and tells you to buy a stock, should you still hesitate?
Prem Watsa knows that he is dealing with dim-witted investors and so he even spelt out the merits of an investment in Thomas Cook in simple terms:
“You will understand the great growth potential of this company when you realize that currently only one million Indians annually travel outside India for holidays. This compares to some 40 million outbound tourists in China and hundreds of millions of outbound tourists in the western world.”
Prof. Sanjay Bakshi was quick to grab the opportunity. When he learnt that Prem Watsa was buying a massive chunk of Thomas Cook, Prof. Bakshi rushed in and grabbed his own lion’s share of the stock. Prof. Bakshi paid roughly the same price that Prem Watsa paid for the stock, about Rs. 50+
The best part is that thereafter Prof. Bakshi announced this fact to the World and recommended that they too get a slice of Thomas Cook before it was too late.
Prem Watsa made it clear that he would use Thomas Cook as a vehicle to make further investments. He said “Thomas Cook is a free cash flow business. As the cash flow comes and we invest it in India, we might bring some additional money from abroad into India.”
Prem Watsa walked the talk and got Thomas Cook to acquire a Bangalore-based HR solutions firm called “Ikya” in 2013 for about Rs 256 crore. Then, he also got Thomas Cook to take over Sterling Holiday Resorts.
Well, today, when Thomas Cook crossed Rs. 100, you knew that Prem Watsa’s magic was at work again. The stock is on a powerful upward trajectory and the sky seems the limit. All you have to do is sit back, relax and enjoy the ride.
Another example is Relaxo Footwears where Prof. Sanjay Bakshi was uncharacteristically exuberant. “What I love about Relaxo is its growth potential” and “I am confident that Relaxo will continue to grow faster than the market by taking market share from the unorganised players – just as it has been doing over the last several years”.
In hindsight, when an accomplished investor shows such unbridled enthusiasm for a stock, you shouldn’t hold back. You should’ve grabbed whatever you could lay your hands on.
In Relaxo, Prof. Bakshi had the company of Dolly Khanna, an investing legend in her own right. Dolly was already sitting pretty on the stock, with a massive holding worth (then) of Rs. 10 crore.
Relaxo has also given solid gains of 70% (Rs. 290 – Rs. 170) since Prof. Sanjay Bakshi’s recommendation.
Anyway, now the point is that there is no dearth of such opportunities if you are willing to roll up your sleeves, put your ear to the ground and listen in to what the accomplished investors are doing.
Hawkins Cookers is one such stock. It is backed by Basant Maheshwari, R. Srinivasan, Megh Manseta & Dolly Khanna. In fact, Dolly is the single largest individual shareholder with a holding worth Rs. 24 crore. The stock has been subdued for so long that many investors have even forgotten its existence. But, don’t be surprised if this stock just takes off like a rocket without any notice.
Another stock that is subdued at the moment is J. B. Chemicals, which comes highly recommended by Daljeet Kohli of IndiaNivesh. Here, Ashish Dhawan of ChrysCapital fame has cornered shares worth a mammoth Rs. 110 crore. JB Chemicals is being shunned by investors because the Q3FY 14 results were optically bad owing to a one-time write-off of dues. However, a couple of Quarters of good results and the stock will again become the favourite of investors.
There are other examples of such stocks that are on my radar. I will pen them down when I remember. Hope it is not too late by then 😉