A glimpse into the Jhunjhunwala stocks

SKILLED investors are a rarity. There are not many around in India. And those who are successful are even rarer. Rakesh Jhunjhunwala is one of them. Investors now have a chance to mimic his portfolio of mid-cap and small-cap stocks.

Piggybacking on the strategies of a successful or skilled investor is an age-old strategy. With the shareholding pattern of companies now available every quarter, it is possible to do it in India too.

Claim to fame: Rakesh Jhunjhunwala's claim to fame is his ability to pick under-valued stocks. Some of his renowned calls are Karur Vysya Bank, CRISIL and Bharat Electronics. There are, however, quite a few more.

In an interview to Capital Ideas Online in 2001, he had said that he bought the stock of Shipping Corporation at about Rs 16. He also made the point that stocks of public sector companies would deliver good returns.

He has now said that the bull-run that commenced in 2003 is only the start of an extended rally.
His portfolio: Details of his complete portfolio are impossible to get. What is, however, available is a list of stocks in which he has taken a stake of more than one per cent. His portfolio has more small-cap than mid-cap stocks.

The liquidity in many of the stocks is also quite low. As an investor, he expects liquidity to come into a stock only after it has appreciated significantly. For retail investors, low liquidity is a significant risk.

The stocks he holds are all not necessarily low P/E stocks. In a few, such as CRISIL and Geometric Software, the P/Es are higher than the market average.
By and large, however, they are value stocks — either trading at a lower P/E than that of the market or at a price-to-book ratio of less than one.

Stocks bought: Between October and December 2003, Mr Jhunjhunwala or his wife added to their exposures in stocks such as Agro Tech Foods, Bharat Earth Movers, CRISIL, Geometric Software and Lupin.

Stocks sold: During the same period, he sold part of his holdings in Hawkins Cookers, KPIT Cummins and Prime Textiles. He also appears to have liquidated his entire holdings in stocks such as Odyssey Technologies, Padamalaya Telefilms, Sarda Plywood and Elecon Enginering.
Though Mr Jhunjhunwala holds a number of stocks, it may be better to focus more closely on stocks that he bought during a quarter. This is because such purchases represent continuing faith in the prospects of such stocks.

In addition, he holds stake in several loss-making companies. He may be holding on to such stocks because he is unable to sell. When asked about stocks such as Schlafhorst Engineering, TCI and Integra Hindustan, he said that he is allowed to make mistakes. Investors, too, may need to avoid such stocks.
Investors also need to remember that piggybacking on Mr Jhunjhunwala's portfolio is not a sure-fire prescription to earn above-average returns. Mr Jhunjhunwala himself believes that a strategy to follow in his footsteps may not work.

He suggests that investors need to hold stocks through periods of uncertainty to make money, and investors usually do not have such patience.

Notwithstanding the discouraging view expressed by Mr Jhunjhunwala, such a strategy could still be a useful tool to identify stocks that you are comfortable with for inclusion in your portfolio. ( source - businessline )