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Basant Maheshwari Delights PMS Investors


With Hefty Gains. He Also Reveals Strategy
For Finding Multibagger Stocks
Jul14th Written by Arjun 1 Comment
2018

Basant Maheshwari’s PMS Fund has clocked in an impressive performance despite the
gloomy state of the stock market. He has also revealed top secrets of his investment
strategy. It is certain that if we follow the same strategy, we can also rake in hefty
gains for our own portfolios

Rakesh Jhunjhunwala
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(Click for larger image) Best Fundamental Stock Advisor?


Dear All, Please find below names of
Stock advisers, I often listen to them on
In the period from 1st Jan 2018 to 13th July 2018, Basant’s PMS was able
CNBC channel. They have very good
to churn out a return of 17.55%. stock fundamental knowledge. If anyone
of you are subscribed with them, kindly
In the same period, the Nifty could barely eke out a return of 5.59%. share your experience. 1. Porinju
Veliyath www.equityintelligence.com 2.
SP Tulsian www.sptulsian.com 3. Prakash
The BSE 500 Index fared slightly better with a YoY return of 8.54% though Diwan www.prakashdiwan.in 4. Vijay
it is also heavily overshadowed by Basant’s PMS. Kedia... Best Fundamental Stock
Advisor?
Big or small, SIP works for you Back to Top
The less said about the BSE Small-cap index the better it is. This worthy has Investing in mutual funds is supposed to
be one of the most preferred ways to
lost 15.78% on a YTD basis. On a YoY basis, it is flat. create wealth. Thanks to the option of
investment through Systematic
The BSE Mid-cap Index lost 13.42% on a YTD basis and is also flat on a YoY Investment Plan (SIP), people can build
basis. up a healthy corpus even with a small
investment. The Mutual Fund Industry is
witnessing phenomenal growth of SIP-
35% gain for the year? based investments in the last few […]
Branded Business in Financial Markets
If we extrapolate Basant’s YTD return for the entire year, it means that his The company is a beneficiary of credit
off-take and improving financial markets.
clients may take home a return of close to 35%, which is simply outstanding The sector in which the company
given that all other fund managers are crying in despair at the colossal operates has only few players and entire
losses in their respective portfolios. market is captured only by those few
players. The return rations are
exceptional and company does not need
Performance since inception any capital to grow its business which
leads to high dividend payout. […]
In the 30 months since inception in February 2016, the PMS has delivered
an annualized return of 30.39%.

This compares very favourably with the return of 20.42% delivered by the SUBSCRIBE TO NEWSLETTER
Nifty in the same period.
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According to my rough-and-ready calculations, the BSE Small-Cap Index


has delivered an annualized return of about 23% in the same period.
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Basant Maheshwari Delights PMS
Investors With Hefty Gains. He Also
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Basant Maheshwari
@BMTheEquityDesk

Sharing the Portfolio Management Service returns of Basant


Maheshwari Wealth Advisers LLP to avoid the confusion of the
RECENT COMMENTS
various numbers floating around. Nifty comparison has been
done for regulatory compliance.
Suraj on I Was Depressed About The
7:11 AM - Jul 14, 2018 · Bidhan Nagar, India
Stock Market Headlines. So, I Bought
377 82 people are talking about this More Stocks: Raamdeo Agrawal
foo on I Was Depressed About The Stock
Market Headlines. So, I Bought More
Stocks: Raamdeo Agrawal
Which stocks contributed to the outperformance? kharb on I Was Depressed About The
Stock Market Headlines. So, I Bought
More Stocks: Raamdeo Agrawal
Basant has kept a tight lip over the names of the stocks in his portfolio. shakti khanduri on I Was Depressed
About The Stock Market Headlines. So, I
For obvious reasons, he declined to reveal the names, citing SEBI Bought More Stocks: Raamdeo Agrawal
restrictions. Venky on I Was Depressed About The
Stock Market Headlines. So, I Bought
More Stocks: Raamdeo Agrawal

Basant Maheshwari
@BMTheEquityDesk

Sebi expects us to disclose only on public recommendations.


We own leaders from the high growth sectors with 75% of stocks
and also the portfolio regularly hitting an ‘all time high’. Don’t
want a pandora box of public opinion because we are sure of
our style & stocks - both.

Anil kumar Choudhury @sreeomm


@BMTheEquityDesk Basant sir what are the stock you are holding in
your portfolio till date. I am not asking any recommendations but time
to it has disclosed on public as per SEBI regulations. I am always
confused about your holding stocks. Can you please say

6:41 AM - Jul 13, 2018 · Bidhan Nagar, India


48 See Basant Maheshwari's other Tweets

However, there is no bar on our speculating over the names.

D-Mart

Basant has earlier revealed that D-Mart, alias Avenue Supermart, is his “top
holding across portfolios”.

CNBC-TV18
@CNBCTV18Live

Replying to @CNBCTV18Live
Basant Maheshwari, @BMTheEquityDesk , says Avenue
Back to Top
Supermart is our top holding across portfolios
4:36 PM - Apr 30, 2018

23 See CNBC-TV18's other Tweets

Avenue Supermart has been a stunning performer with a YoY return of 72%.

The YTD return is 35%.

Basant has been periodically indicating his bullishness for the stock.

Basant Maheshwari
@BMTheEquityDesk

QUALITY helps you in bad times even as KACHRA sucks. The


D-Mart stock is much like the D-Mart store. People who are in
don't want to come out and the ones who are out can't get in.
You can keep protesting but the stock is up 116% over listing
price.

Disclaimer: We OWN it.


9:35 PM - Feb 23, 2018 · Bidhan Nagar, India
472 110 people are talking about this

Basant Maheshwari
@BMTheEquityDesk

The favourite pastime for critics and commentators who missed


D-Mart is to - calculate the Company’s market cap. The luxury of
calculating profits though lie only with the ones who bought it.

Disclosure: We OWN it. No recommendations.


#TheThoughtfulInvestor
9:10 PM - Apr 11, 2018 · Bidhan Nagar, India
157 39 people are talking about this

Private Banks

Basant has been sensibly bullish about private banks on the basis that they
are snatching market share from junkyard PSU Banks.

He has formulated the theory that assuming a 15% industry credit growth
and that the market share of the private banks increases from 50% to 70%,
it means that private banks will show a growth rate of 27% CAGR.

Basant Maheshwari
@BMTheEquityDesk

Reading between the lines from this @udaykotak interview. A


30:70 ratio between private and public moving to a 50:50 ratio in
5 years assuming a 15% industry credit growth means a 27%
CAGR for private financiers. Smaller companies in niche
segments can grow faster !

BloombergQuint @BloombergQuint
What @udaykotak has to say about the future of Indian
banks.goo.gl/RMER4E

3:00 PM - Mar 21, 2018 · Bidhan Nagar, India


153 54 people are talking about this

He has also described HDFC Bank and Kotak Bank as “no-brainer


investments”.

CNBC-TV18 News
@CNBCTV18News

#OnCNBCTV18| Basant Maheshwari, @BMTheEquityDesk says


Back to Top
stocks like @HDFC_Bank & @KotakBankLtd are no-brainer
investments@_anujsinghal @SurabhiUpadhyay
3:36 PM - Apr 30, 2018
87 29 people are talking about this

From this, we can safely assume that Basant has either HDFC Bank and/or
Kotak Bank in his portfolio and/or their smaller counterparts being RBL
Bank, AU Small Finance Bank, Bandhan Bank etc.

It is worth recalling at this stage that Raamdeo Agrawal has recommended


at the Sohn India 2018 conference that we buy RBL Bank on the logic that it
can blossom into a magnificent 10-bagger if all goes as per plan.

Buy High RoE stocks with predictable growth


prospects
Prima facie, Basant’s investment strategy is quite simple to understand.

He has advised that we buy companies with high RoE and with a long
predictable growth runway ahead of them.

These stocks are usually easy to spot because they are already leaders in
the stock market and are quoting at “All time highs”.

“We own leaders from the high growth sectors with 75% of stocks and also
the portfolio regularly hitting an ‘all time high’,” Basant said in the tweet
quoted above.

“My objective is to search for high growth companies with predictability,


surety and certainty,” he added.

Basant Maheshwari
@BMTheEquityDesk

Replying to @BMTheEquityDesk
There are several high RoE companies. A high RoE is generally
an outcome of brands - pricing power - profit margins and if you
can outsource your process the RoE jumps up even more. Read
about Du-Pont analysis and it’s decomposition in ‘The
Thoughtful Investor’’.
8:45 AM - Jul 8, 2018 · Bidhan Nagar, India
34 See Basant Maheshwari's other Tweets

Basant Maheshwari
@BMTheEquityDesk

Replying to @BMTheEquityDesk
With high margin and low capex the profit margin and asset
turnover goes up. But companies are like kangaroos they like to
sit on cash. However, as the foreign parents have no avenue to
take money off they force distribution of dividends which
removes the cash off balance sheet.
8:48 AM - Jul 8, 2018 · Bidhan Nagar, India
28 See Basant Maheshwari's other Tweets

Basant Maheshwari
@BMTheEquityDesk

Replying to @BMTheEquityDesk
As the companies become cash light the RoE stays at elevated
levels. Generally, RoE gets depressed with companies having
cash on balance sheet because cash earns only FD rates (pre-
tax). If cash is paid off as dividends it also implies that capex
requirement or growth is low.
8:51 AM - Jul 8, 2018 · Bidhan Nagar, India
30 See Basant Maheshwari's other Tweets

Basant Maheshwari
@BMTheEquityDesk

Replying to @BMTheEquityDesk
Markets like RoE with growth. High RoE is like intelligence .&
growth the big vision. If you have intelligence but no vision you’ll
Back to Top
just be self sufficient. If you have vision but no intelligence you’ll
finish off soon. Most are like that and do well only till the going is
good.
8:57 AM - Jul 8, 2018 · Bidhan Nagar, India
115 25 people are talking about this

Basant Maheshwari
@BMTheEquityDesk

Replying to @BMTheEquityDesk
But if you have big vision (Growth) with intelligence (RoE) you
become a Page or an Eicher! These are rare companies that
change lives and set the future. They need special glasses
to analyse.Not everyone understands them because everybody
cannot be rich at the same time.
9:01 AM - Jul 8, 2018 · Bidhan Nagar, India
170 47 people are talking about this

But high RoE with low growth will lead to stagnation


Basant also made it clear that mere high RoE is not enough if it is not
accompanied with high growth.

He cited the example of HUL, which has an exceptional RoE of 77x but a
poor growth rate of 4%, as a stock which is not investment worthy.

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As there is no “predictability, surety and certainty” of HUL’s (high) growth, it


is unlikely to stay in the fancy of the market for long, Basant opined.

Basant Maheshwari
@BMTheEquityDesk

No recommendation. I wouldn’t invest because my objective is


to search for high growth companies with predictability, surety
and certainty and the moment you have these three attributes in
a stock markets start to discount ahead. More the predictability
longer the discounting.

Anand @ananddesh9
@BMTheEquityDesk I have question regarding HUL. Would any
investor think to invest in this stock as ROE is exceptional 77 with
sales growth only 4% and CAGR 13%. Have you seen this kind of
ROE before in any stock? Would you think it will sustain without sales
and profit growth?

8:41 AM - Jul 8, 2018 · Bidhan Nagar, India


110 33 people are talking about this

Of course, it is a fact that HUL has been a stellar performer in the recent
past with a 24-month gain of 88% and a 12-month gain of 54%.

Suraj Nair
@SurajNairMoat

India is a land of contradictions.The ever boring HUL’s of the


world multiplied you wealth nearly 6 times in the last 8 years.
Where as, the much popular real estate-infra ones’ destroyed
wealth to tune of 80%. And still HUL is called ‘a defensive’ and
others ‘aggressive’. pic.twitter.com/3z2Uz0M61V
12:47 PM - Jul 12, 2018
20 See Suraj Nair's other Tweets

Avoid ‘kachra’ & ‘chakri’ stocks like the plague


Basant also reiterated his earlier stern warning that we should stay afar
from alleged ‘kachra’ and ‘chakri’ stocks.

Back to Top
Basant Maheshwari
@BMTheEquityDesk

We don’t participate in kachra, chakri & crap not because we


don’t like making money but because we don’t want to lose it ‘all’
back. Our style is different. Like fire, markets demand respect.
We need fire to cook food but if used carelessly it also burns
the whole house down !
2:17 PM - Jul 1, 2018 · Bidhan Nagar, India
202 46 people are talking about this

Don’t obsess over the price while buying quality


companies
Basant advised that we should not pass over high quality stocks on the
basis that the asking price is too high.

“Mehenga roye ek bar Sasta (kachra) roye bar bar” he said, implying that it
is better to buy a high-quality stock at nose-bleed valuations rather than a
junkyard stock at dirt-cheap valuations.

Basant Maheshwari
@BMTheEquityDesk

I know what you’re saying.But without recommendations be


mindful that ‘Mehenga roye ek bar Sasta (kachra) roye bar
bar’.But it’s not easy & takes a lot of effort for individual investors
to read/understand the ‘fine print’ on what a kachra portfolio has/
has not done. Be careful.

Jagadeesh Kumar @jagkumar86


Replying to @BMTheEquityDesk
The reason y asked I entered in page around 13k . Despite being
quality it fell down to sub 10 k then I got rid of it as other kachra strtd
running. Now on seeing AT 28K . Feeling like missed. Had I know
that pg would bounce back. Wouldn't have sold and stuck in kachra

8:05 PM - Jul 5, 2018 · Bidhan Nagar, India


73 21 people are talking about this

In fact, the 7500% gain delivered by Page Industries despite its “expensive”
tag proves Basant’s point.

In contrast, the junkyard PSU Banks, which were always “cheap”, are
notorious for the colossal wealth destruction caused to investors.

Which are the high RoE stocks with high predictable


growth rates?
According to my rudimentary research, there are a few stocks which fulfil
the requirement of high RoE and high growth.

(i) Rane (Madras)

Rane (Madras) has the following salient features according to screener.in.

• Market Cap: Rs. 785.77 Cr.


• Current Price: Rs. 676.95
• 52 weeks High / Low 1050.00 / 457.00
• Book Value: 229.53
• Stock P/E: 18.79
• Dividend Yield: 1.77 %
• ROCE: 18.72 %
• ROE: 19.03 %
• Sales Growth (3Yrs): 16.68 %

Pros:
Back to Top
Company has been maintaining a healthy dividend payout of 32.61%

Cons:

Stock is trading at 2.95 times its book value

Prima facie, the high RoE/ RoCE coupled with 3 year sales CAGR of 16% and
the reasonable P/E of 18.79x makes it a candidate eligible for consideration.

(ii) Caplin Point Laboratories Ltd

Caplin Point Laboratories Ltd also appears to be having all the necessary
attributes according to the data in screener.in.

• Market Cap: 3,016 Cr.


• Current Price: 399.05
• 52 weeks High / Low 784.80/ 336.05
• Book Value: 48.30
• Stock P/E: 20.85
• Dividend Yield: 0.38 %
• ROCE: 69.54 %
• ROE: 55.93 %
• Sales Growth (3Yrs): 32.39 %

Pros:

Company has reduced debt.


Company is virtually debt free.
Company is expected to give good quarter
Company has good consistent profit growth of 64.49% over 5 years
Company has a good return on equity (ROE) track record: 3 Years ROE
51.81%

Cons:

Stock is trading at 8.26 times its book value

(iii) Lumax Industries Ltd

Lumax Industries Ltd also appears to be a powerhouse stock.

• Market Cap: 1,886 Cr.


• Current Price: 2,017
• 52 weeks High / Low 2580.00 / 1175.25
• Book Value: 313.23
• Stock P/E: 29.73
• Dividend Yield: 1.14 %
• ROCE: 24.66 %
• ROE: 23.40 %
• Sales Growth (3Yrs): 13.98 %

Pros:

• Company has good consistent profit growth of 35.92% over 5 years


• Company has been maintaining a healthy dividend payout of 31.54%

Cons:

• The company has delivered a poor growth of 9.59% over past five years.

(iv) Aurobindo Pharma Ltd

Aurobindo Pharma may come back into fancy if the tide turns in favour of
the Pharma sector:

• Market Cap: 35,280 Cr.


• Current Price: 602.15
• 52 weeks High / Low 809.45/ 527.00
• Book Value: 201.32
• Stock P/E: 14.56
• Dividend Yield: 0.42 %
• ROCE: 27.60 %
• ROE: 27.69 %
• Sales Growth (3Yrs): 22.55 %

Pros:

Company has reduced debt.


Company has good consistent profit growth of 65.36% over 5 years
Company has a good return on equity (ROE) track record: 3 Years ROE
31.21%

Cons:

Promoter’s stake has decreased


Company might be capitalizing the interest cost

(v) P I Industries Ltd

• Market Cap: 10,892 Cr.


• Current Price: 789.85 Back to Top
• 52 weeks High / Low 1034.00 / 675.00
• Book Value: 143.24
• Stock P/E: 29.72
• Dividend Yield: 0.51 %
• ROCE: 34.40 %
• ROE: 33.08 %
• Sales Growth (3Yrs): 12.59 %

Pros:

Company has reduced debt.


Company is virtually debt free.
Company has good consistent profit growth of 41.85% over 5 years
Company has a good return on equity (ROE) track record: 3 Years ROE
31.94%

Cons:

Promoter’s stake has decreased

Conclusion
Inspired by Basant Maheshwari’s stellar performance, we will have to take a
vow to never invest in ‘kachra’ and ‘chakri’ stocks again. At the same time,
we will have launch a manhunt for stocks with high RoE and high predictable
growth prospects and tuck into them ASAP!

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1 Comment

Kharb July 14, 2018 at 9:15 pm | Permalink

I am in complete agreement with Basant , forget Kachra


patti stocks, just buy Top grade stocks and sit tight , Indian
large cap are like mid cap of developed world , just enjoy Indian
growth through leaders .

Reply

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