What turns on Rakesh Jhunjhunwala
Retail, infrastructure, liquor are his favourites; strict no to auto components, realty, sugar
by Sumit Moitra/ FE
Enigmatic equity investor and self-styled India bull Rakesh Jhunjhunwala is a contrarian investor, going by tips handed out by him on Saturday. While the media always closely follows what stocks the ace investor buys into, here’s what he stays away from. And there are a few surprises.
He is keeping away from sectors like auto-ancillary and real estate, the two big growth stories of India. “I am not quite bullish about the auto-component sector. They have no pricing power.” That’s what Jhunjhunwala had to say when members of Millennium Mams, a club of women investors, asked him about what he thinks of the much-talked about global opportunities before the auto-ancillary makers.
There’s another tip: don’t buy the property story that has propelled such stocks like Unitech and Mahindra Gesco to stratospheric heights amply supplemented by the SEZ craze. “Real estate sector is India’s new Internet. Stay away from it,” the chubby investor told another Millennium Mams’ member, comparing the rush for any stock that peddles a real-estate story with the Internet bubble of the ’90s.
And considering current valuation, sugar and cement are also out of favour for Jhunjhunwala. “Cement stocks are fully valued; all positive factors have been discounted. Don’t enter the sugar sector either. From what I have gathered from recent news reports, selling ethanol to oil companies wouldn’t be as profitable as what was thought before,” he said.
So what is he bullish about? Jhunjhunwala is betting big on retail (his pick: Shoppers’ Stop), infrastructure (particularly Punj Lloyd), liquor, financial services and small cap hotels and IT stocks. “Try to identify those small cap hotels and IT companies that can scale up. For scalability and sustaining, growth are the two big challenges before corporate India,” he said.
Jhunjhunwala has already placed his bets on the following sectors: Nagarjuna Construction, Praj Industries, Pantaloon, Punj Lloyd, Geojit Finance and Geojit Software, which now feature in his portfolio that has appeared in bits and pieces in various news reports. “I have made some good money investing in Pantaloon, and if you are convinced that Kishore Biyani will be able to achieve his ambitious dream, you can bet on him,” he said.
The ace investor’s portfolio is not a surefire prescription to earn above average returns and he himself fears that a strategy to follow in his footsteps may not work. “Taking a tip from another investor is injurious to investing, more so if he is a smoker,” Jhunjhunwala told a lady member, lighting up a cigarette.
That's quite deep. So RKJ thinks mid-sized construction co's like Punj Lloyd, NCC, retail co's Pantaloon or small brokerages like Geojit have pricing power?? Last time I checked the net margins for likes of Pantaloon & NCC were around 4-5.5% only and under pressure. The less said about valuations of Praj or Punj Lloyd or small cap hotels he likes(Viceroy Hotels)the better. The only smart thing he said in this article was the last statement. He could have added that investors are bullish about stocks they've entered at lower levels and sceptical about those they've missed.
Posted by
Anonymous |
12:22 PM
When RJ the Great says that he is placing his bets on some stocks (Punj Lyoyd, Shoppers Stop etc) and some sectors (like Retail) he may be actually saying that "I have caught these stocks at their lows and now want to dump them at highest possible prices on Unsuspecting Investors".... or as GreyFool has put it, the only sensible thing in his talk was his last statement.
Posted by
Anonymous |
8:47 PM
I somewhat disagree, Usually such investors never ever tell people to buy what they have bought.
A mere mention of scrip does not mean that scrip should be bought because buying requires a reason supported by thorough analysis.
The purpose of posting such articles is just to learn from them & brush up our investing ways.
It does not matter whether RJ is an investor or an operator...one thing is sure that he is surely sucessful in what he does & there is nothing wrong in learning his style.
Pump & Dump strategy does not apply here because rather than money reputation is at stake!.
Posted by
toughiee |
9:19 PM
RJ said it right..
two imp things are growth and pricing power.
while many things can grow all cannot make profit and go kaput at the top.
his idea of growth + pricing power is right and full of insight. (vah vah sayari ho gaya)..!!
Posted by
Rajeev mundra |
10:28 PM