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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
18,921 likes
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Basant Maheshwari
@BMTheEquityDesk
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
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Supermart is our top holding across portfolios
4:36 PM - Apr 30, 2018
Avenue Supermart has been a stunning performer with a YoY return of 72%.
Basant has been periodically indicating his bullishness for the stock.
Basant Maheshwari
@BMTheEquityDesk
Basant Maheshwari
@BMTheEquityDesk
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
BloombergQuint @BloombergQuint
What @udaykotak has to say about the future of Indian
banks.goo.gl/RMER4E
CNBC-TV18 News
@CNBCTV18News
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.
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.
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
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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
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.
Learn more
Basant Maheshwari
@BMTheEquityDesk
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?
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
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Basant Maheshwari
@BMTheEquityDesk
“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
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.
Pros:
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Company has been maintaining a healthy dividend payout of 32.61%
Cons:
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.
Caplin Point Laboratories Ltd also appears to be having all the necessary
attributes according to the data in screener.in.
Pros:
Cons:
Pros:
Cons:
• The company has delivered a poor growth of 9.59% over past five years.
Aurobindo Pharma may come back into fancy if the tide turns in favour of
the Pharma sector:
Pros:
Cons:
Pros:
Cons:
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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