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30 Jul 2021

What did superstar investors buy in Q1FY22?

By Parth Mansinghka

The portfolios of marquee investors tell retail investors what they are bullish on in the market. The superstars with large portfolios recently bought stakes in some interesting companies. Some of their biggest buys can be seen in the chart below.

Superstar buys

Rakesh Jhunjhunwala buys into financial services space

Ace investor Rakesh Jhunjhunwala bought a 2.17% stake in Indiabulls Housing Finance, a 0.42% stake in Edelweiss Financial Services, and a 0.38% stake in Federal Bank in Q1FY22. Federal Bank recently announced its Q1FY22 results and recorded its highest-ever operating profit of Rs 1,135 crore, and Jhunjhunwala seems bullish on this Kerala headquartered bank.

The ‘Big Bull’ also bought a 1.39% stake in the steelmaker Steel Authority of India (SAIL) during Q1FY22. The company cut its net debt by Rs 16,200 crore in FY21 and the expectation is that SAIL will further reduce it by another Rs 6,800 crore by FY23E. Also, the sales volumes increased by 5% in FY21.

Dolly Khanna buys stakes in yarn and fertilizer companies

Dolly Khanna bought stakes in many companies in Q1FY22, including three yarn spinning companies - Deepak Spinners (2.07% stake), Nitin Spinners (1.24% stake), and RSWM (1.05% stake). This can be because the economy is opening up and demand for textile and hence yarn is expected to rise in the market. The stocks of Deepak Spinners, Nitin Spinners, and RSWM rose by 84.7%, 67.7%, and 49%, respectively, so far in July 2021.

Khanna also bought stakes in two fertilizer companies - Rama Phosphates (1.77% stake) and Aries Agro (1.49% stake). This comes ahead of the Kharif sowing season when the demand for fertilizers from the agriculture industry is expected to rise. The stocks of Rama Phosphates and Aries Agro are up 59.3% and 29%, respectively, so far in July 2021.

Sunil Singhania’s Abakkus Fund diversifies its portfolio

Sunil Singhania’s Abakkus Fund bought a 2.98% stake in DCM Shriram Industries in Q1FY22. The company operates in sectors like sugar, alcohol, organic and inorganic chemicals, drug intermediates, shipping containers, processed cotton yarn, etc. The company is likely to benefit as the economy slowly opens up, and as a result, the demand for its products grows.

Singhania added two technology stocks to the Abakkus portfolio as he bought a 0.6% stake in Xchanging Solutions and a 0.08% stake in Technocraft Industries in Q1FY22. The stock of Xchanging Solutions and Technocraft Industries rose 43.8% and 23%, respectively, so far in July 2021. He also bought a 0.5% stake in Rupa & Company, a knitwear brand, and a 0.24% stake in Siyaram Silk Mills, a blended fabric and garment manufacturer. The demand for textile-related products is expected to grow in the upcoming months as people head out from their homes.

Ashish Kacholia buys stakes in welding, pharma, and technology stocks

Ashish Kacholia bought a 1.13% stake in Ador Welding in Q1FY22, a welding consumables and equipment manufacturing company. The company aims to reduce legacy costs and improve profitability in FY22-23. Its stock has made a new 52-week high of Rs 880.2 per share this month.

The superstar bought a 0.37% stake in IOL Chemicals and Pharmaceuticals and a 0.25% stake in Beta Drugs in the quarter. IOL Chemicals and Pharma is a bulk drug, intermediates, and specialty chemical manufacturer Beta Drugs makes a wide variety of anti-cancer drugs in India.

Kacholia also bought a 0.55% stake in Garware Hi-Tech Film, the largest exporter of polyester films in India, which he also added via a bulk deal purchase on July 29. The demand for polyester films is expected to grow worldwide as the manufacturing of automobiles and construction of buildings start at full pace once economies globally recover.

Vijay Kedia adds large stakes in Elecon Engineering and Mahindra Holidays

Vijay Kedia bought a 1.19% stake in Elecon Engineering Company in Q1FY22. This comes when the demand for industrial gear systems and mining equipment is expected to increase as the industries and mining operations run at full pace all over the world. He also bought a 1.02% stake in Mahindra Holidays & Resorts India at a time when people are craving to go on vacations as soon as possible.

Kedia also bought a 0.65% stake in Lykis, probably betting that demand for personal and home care products will go up. He also added a software and services company to his portfolio as he bought a 0.19% stake in Ramco Systems.

Porinju V Veliyath buys stake in IRIS Business Services

Porinju V Veliyath bought a 1.33% stake in IRIS Business Services in Q1FY22, a software services company that provides training, testing, research, data conversion, e-filing, and consulting services to their customers. The stock of IRIS Business Services rose nearly 48.3% so far in July 2021 and made a new 52-week high as well.

Veliyath also bought a 0.15% stake each in Ashok Alco-Chem and Shalimar Paints during the quarter. The demand for Ashok Alco-Chem’s products like industrial alcohol, acetic acid, and Ethyl Acetate is expected to go up as demand from pharma, paints, resin, among others, is expected to rise once the pandemic subsides.

Many superstars bought stakes in companies from textile and chemical industries where the demand is likely to pick up in the upcoming quarters, as the economy opens up post the Covid-19 pandemic. The marquee investors investing their money in these sectors could be a positive sign for retail investors.

The Baseline

30 Jul 2021

Five Interesting Stocks Today

JSW Energy: This electricity utility company is the most overbought stock according to technical indicators RSI and MFI. The company’s stock is up nearly 54% over the past month and touched a 52-week high of Rs 258.30 on Wednesday. The stock is trading above all its simple moving averages.
Mindtree: This IT services company saw eight brokerages increase their target price over the past one month. Even after this, the company has an average target price of Rs 2,439.91, and is currently trading at a TTM PE of around 37 times. Over the past year, the stock has risen nearly 2.5 times. The company’s revenues in dollars in Q1FY22 rose 7.7% QoQ to $311 million, with most verticals seeing robust growth. At this run rate, the company is set up to post another year of over $1 billion revenues. It also recorded all-time high bookings in Q1FY22
Indo Count Industries: This textile maker is the best performing stock among Nifty 500 companies, rising nearly 31% over the past week. The stock is trading above all its simple moving averages. Over the past one year, the company saw a remarkable recovery in its fortunes after suffering a debilitating blow due to the first wave of the pandemic when its revenues dipped to Rs 336 crore in Q1FY21 (vs Rs 425 crore QoQ) and profits were at Rs 18 crore. Since then, pent-up demand led to revenues doubling to over Rs 700 crore for the first time and remaining above that level. It will be interesting to see how the company fared with the second wave of the pandemic when its results are out on Tuesday.
Swan Energy: This diversified company’s stock was the highest gainer during trade on Thursday and also clocked its highest volumes in a week. As a result, the company’s stock touched a 52-week high of Rs 175.85 during trade. The stock traded with nearly 4.6 times its weekly average volumes as 70 lakh shares exchanged hands on Thursday.
Johnson Controls-Hitachi Air Conditioning India: This air conditioning solutions company saw the highest rise in promoter pledge in Q1FY22 when its promoter JHCAC India Holdco pledged 32.3% of its shareholding in the company on May 28, 2021. This amounts to 24% of the company’s outstanding shares. The shares were pledged to secure the loan given by promoter group entities in Taiwan--Johnson Controls-Hitachi Air Conditioning Sales Taiwan Co and Johnson Controls-Hitachi Air Conditioning Taiwan Co. Essentially, the company’s promoter pledged shares to secure revolving credit facilities for two other promoter group companies that don’t hold shares in Johnson Controls-Hitachi Air Conditioning India.

The Baseline

28 Jul 2021

Chart of the week - Airlines passenger load factor recovers

In May 2021, with lockdowns in full effect, air traffic fell by 72% against March levels when the country was open. During this time, domestic airlines' capacity utilization suffered. Airlines' passenger load factor (the passenger load factor measures the capacity utilization of an airline based on the passengers it carries) was 52.7% in May against nearly 70% two months prior.

As lockdowns eased in June, airlines' passenger load factor improved. InterGlobe Aviation, the operator of IndiGo Airlines, recorded an 11.5 percentage points growth in passenger load factor in June. SpiceJet's passenger load factor improved to 71% in June (from 65% in May), the highest passenger load factor among domestic airlines.

The Baseline

28 Jul 2021

Five Interesting Stocks Today

Info Edge (India): This internet services company’s stock is up by 7% in the month and yet remains cheaply priced per historic valuations. This month, it received Rs 375 crore by selling a 3.5% stake in Zomato, through the food delivery company’s IPO. Its trailing 12-month price to earnings (PE) ratio is 46.6 against a median PE of 72.6 putting it in the buy zone in terms of its historical performance.
Just Dial: This local search engine’s management and promoters are selling shares in large numbers, days after Reliance Industries acquired the company. In the past week, insiders disposed of over 4 crore shares. On July 17, Reliance Industries’ retail subsidiary Reliance Retail Ventures (RRVL) acquired a 41% stake in the company for Rs 3,497 crore. RRVL also made an open offer to take an additional 26% stake.
Persistent Systems: This IT consulting company’s stock jumped by nearly 7% on July 26 to a new all-time high following its strong performance in Q1FY22. Revenues grew by 10% QoQ with net profits up by 9.6%. The company’s EBITDA margins rose by 90 basis points to 14.1% despite higher employee costs due to fresh recruitment. The company also recorded a total contract value of deal wins in Q1FY22 at $245 million (Rs 1,823 crore).
PVR: Brokers think Q2FY22 is when this cinema operator will bounce back. ICICI Direct upgraded its rating on the stock to “Buy” from “Hold” expecting discretionary spending on movies to rise in Q2 as the economy unlocks. Geojit BNP Paribas maintained a “Hold” rating on the stock, expecting footfalls to recover to March 2021 levels (pre second Covid-19 wave) in Q3FY22 with a full recovery due in FY23. The average broker target price is at an upside of 13% against the cinema operator’s current price.
KPIT Technologies: This software company’s stock is trading with high momentum having hit its 52-week high earlier this week. Its relative strength index jumped to 81.3 (an RSI over 70 is considered overbought), its money flow index rose to 83.4 (an MFI over 80 is considered overbought), and it’s trading above all moving averages. The stock’s trailing 12-month PE is 44.8 compared to the Nifty IT’s PE of 31.3.

The Baseline

25 Jul 2021

Five analyst stock picks this week

JSW Steel: ICICI Securities continues to be bullish on this steel company post strong Q1FY21 results, with an 18.5% upside and a target price of Rs. 850. JSW reported ITS highest ever quarterly revenue, operating EBITDA and net profit after tax. "The 5 MTPA Dolvi expansion will commence operations by September 2021, providing healthy revenue visibility," Analyst Dewang Sanghavi writes. Key risks, they note, include "a steep decline in steel prices, and higher than expected rise in operating costs."
Hindustan Unilever: This FMCG giant is a pick for Axis Securities with an upside of 13%+ on a target price of Rs. 2,670. "The topline was in line with our expectations though on all other key bottom-line numbers, the performance was below our expectations," analysts Gaurav Uttrani and Suvarna Joshi write. But they note, "Q1FY22 performance displayed resilience with improving trajectory across the portfolio, especially in the discretionary products. The management indicated that rural growth will continue."
HCL Technologies: This software company is among the players riding the IT demand recovery globally, and Geojit is a buy on this stock, giving it an upside of 15.4% on a target of Rs. 1147. "Despite the second wave of the pandemic, the company has shown high resilience," analyst Sheen G writes, "With continued investments in digital engineering and geography expansion, HCL is positive about scaling up its margins in upcoming years apart from winning large deals, with healthy renewal rates."
Can Fin Homes: Edelweiss is a buy on this finance company, with a target price of 660 and an upside of 24%."Credit costs continued to moderate with provisions declining 85% YoY and 15% QoQ, resulting in PAT growth of 16% YoY and 6% QoQ," analyst Vinay Khattar notes. "Management expects growth to return from Q2FY22 while NIMs/spreads should increase with loans getting repriced at higher yields." The key risks here include another round of lockdowns driven by an third wave of infections and the company's current significant AUM concentration in Bangalore (~37% of AUM).
Indian Bank: Chola Wealth Direct is a buy on this bank, noting the improvement in NIM and lower opex boosted operating performance while tax reversal propped up PAT, says analyst Arjun Pasumarthi. "The bank’s improving collection efficiencies and less than expected restructuring have improved credit cost outlook. In addition, the anticipated recovery in corporate demand should support the credit off take in 2HFY22E," he writes. Risks include fresh slippages in stressed sectors, and delayed recoveries in loans.

The Baseline

23 Jul 2021

Chart of the week - Production Drop: Steel production falls in Q1FY22

The steel production momentum of FY21 failed to carry over in the first quarter of FY22. In Q4FY21, top domestic producers - Tata Steel, JSW Steel, and Jindal Steel and Power's steel production rose above pre-Covid levels. This was in response to the rising demand for steel from infrastructure and realty companies, and the soaring price of finished steel and steel products. However, in Q1FY22 operations were disrupted due to state-wide lockdowns. This lowered steel production volumes sequentially.

The Baseline

23 Jul 2021

What did Superstar Investors Jhunjhunwala, Pabrai, and Veliyath sell in Q1FY22?

By Parth Mansinghka

Many investors look at superstar investors’ portfolios for cues as to which stocks might do well. Of course, this comes with its own risks, as some investors with their sizeable portfolios and long investment horizons have the wherewithal to withstand a market downturn, while some others may not. We took a look at the portfolios of some superstar investors to understand which companies or sectors they are cashing out of or trimming their stakes. This is especially relevant considering the elevated levels of the Indian benchmark indices.

Superstar Sells

Mohnish Pabrai’s portfolio saw a lot of selling

Pabrai’s portfolio was one of the Superstar investors whose portfolio saw a lot of selling in Q1FY22. There were four companies that saw stake cuts in Q1FY22. Pabrai sold a 4.7% stake in Kolte-Patil Developers, 4.37% stake in Rain Industries, 2.31% stake in Sunteck Realty, and 1.11% stake in Edelweiss Financial Services. He has reduced his stake in Kolte-Patil Developers, Sunteck Realty, and Edelweiss Financial Services for the second consecutive quarter now. In the first six months of 2021, Kolte-Patil Developers’ stock fell 10%, Sunteck Realty fell 17.2% and Edelweiss Financial Services rose 4.5%. However, the stock of Rain Industries rose 35% in the same period, and it looks like he booked some decent profits in this stock.

Mohnish Pabrai Sells

Porinju V Veliyath cuts stake in many companies

Porinju V Veliyath had been cutting his stake in Archies for the last three quarters and at the end of June 2021, his stake in the company dropped to below 1% from 3.6%. With the Covid-19 pandemic, Porinju might have sold the gift and home decor company because these products are not amongst people’s priorities right now. The company reported a loss of Rs 1.1 crore in Q4FY21 against a profit of Rs 2.6 crore in the year-ago period.

Veliyath sold a 1.1% stake in Som Distilleries & Breweries, a 0.19% stake in Emkay Global Financial Services, and a 0.09% stake in Kaya in Q1FY22. In the first six months of 2021, the stocks of Som Distilleries & Breweries, Emkay Global Financial Services, and Kaya rose 45%, 17%, and 21.6% respectively, and Veliyath seems to have booked decent profits here. In the past two quarters, Veliyath also reduced his stake in Orient Bell to 3.83% from 4.25%. Over the past six months, Orient Bell rose around 62% and also touched a 52-week high of Rs 359 per share.

Porinju V Veliyath sells

Rakesh Jhunjhunwala trims stake in Titan

Ace investor Rakesh Jhunjhunwala sold a 0.25% stake in his favourite company and largest portfolio holding, Titan in Q1FY22. He had been reducing his stake in the company over the last three quarters now. Jhujhunwala’s stake in Titan is now trimmed down to 4.8% from 5.5% at the end of Q2FY21. The fall in the Big Bull’s stake in Titan coincided with the shutdown of retail stores due to the first and second wave of the pandemic. This is likely to impact the company’s Q1FY22 revenues and earnings. He sold a 0.15% stake in Tata Motors and a 0.56% stake in TV18 Broadcast in Q1FY22. The stock of Tata Motors and TV18 Broadcast rose around 82% and 38% in the first half of 2021, so Jhunjhunwala booked some decent profits here.

Rakesh Jhunjhunwala Sells

Ashish Kacholia books some profits

Ashish Kacholia sold a 0.63% stake in Birlasoft, a 0.26% stake in NIIT, a 0.1% stake in Poly Medicure, and a 0.09% stake in Vaibhav Global in Q1FY22. He now holds a 1.4% stake in Vaibhav Global, a 2.26% stake in NIIT, a 1.67% stake in Poly Medicure, and a 1.2% stake in Birlasoft. All of these companies gave good returns over the last two quarters and posted a new 52-week high during the period. Hence, here also there might be some profit booking done by the Superstar.

Ashish Kacholia sells

Vijay Kedia trims stake in Neuland Labs and Cheviot

Vijay Kishanlal Kedia sold a 0.55% stake in Neuland Laboratories and a 0.25% stake in Cheviot. He now holds a 1% stake in Neuland Laboratories and a 1.3% stake in Cheviot. During the first six months of 2021, Cheviot and Neuland Laboratories rose 176% and 98% respectively. This rise could be the reason for booking profits by Kedia in these two stocks as both touched new 52-week highs in Q1FY22.

Ashish Dhawan trims stake in Birlasoft and Max Healthcare

Ashish Dhawan sold a 0.73% stake in Birlasoft and a 0.25% stake in Max Healthcare in Q1FY22. He now holds a 2.9% stake in Birlasoft and a 1.4% stake in Max Healthcare. Both Birlasoft and Max Healthcare stocks rose by 60% and 79% from January-June 2021 and touched their 52-week highs. It appears that Dhawan booked some profits in these stocks.

It appears that some of the sale transactions by the Superstar investors were triggered by stocks touching their 52-week highs. With markets at their peaks, it is the ideal time to book some profits. It will be interesting to see whether some of these companies continue to find favour over the next three months in some superstar portfolios.

The Baseline

23 Jul 2021

Five Interesting Stocks Today

Jindal Stainless (Hisar): This steel company jumped to an all-time high in share price, capping an already strong three month period for the stock's shares. The stock rose by double digits in one trading session on Thursday after it announced that it had signed an MOU with Tata Steel to jointly explore chrome ore near Orissa. The company has a strong momentum score, but is overbought on the MFI, suggesting a potential pullback soon.
Firstsource Solutions: Speaking of momentum, one of the strongest momentum stocks in the midcap IT sector is FSL, which has seen both FIIs and MFs increase their shareholding in the June quarter. The company has made recent strong gains in the export markets of US and UK, leading to a robust growth guidance of 15-18% in CC terms. It is seeing traction in healthcare (especially in the provider business) and growth in its banking vertical, led by growth in collections, fintech and UK banking.
Bajaj Finance: A star of 2019 for investors delivered a muted performance in Q1FY22, hard hit by a spike in provisioning and NPAs. Bajaj Finance reported a spike in GNPA as well as NNPA of 2.96% and 1.46%, up from 1.79% and 0.75% QoQ. The worst-hit sector for the company was the auto financing business, where the GNPA jumping to an astonishing 19.15% from 9.31% in the Q4FY21, led by the 3W segment which accounts for 30% of auto loans.
Wipro: A consistently strong performance for this IT major, typically a laggard among the giants, has boosted its standing among analysts who have given the company multiple buy calls since its June quarter results. The company has developed a healthy deal pipeline that should help it drive growth over the next two financial years, giving it long-term visibility. Its technicals put it in the moderately strong momentum range. Its current PE is high compared to historical level, putting it in the sell zone.
Jyothy Labs: This FMCG company is trading lower in its TTM PE compared to its 3 year, 5 year and ten year PEs (screener), but is gaining ahead of its June quarter results due on July 29. The company's focus on cleaning and maintenance home products gives it an opportunity in this space as focus on hygiene increases, but its short-term results may have been hit by the state lockdowns linked to the second Covid19 wave.

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