The late Rakesh Jhunjhunwala, known as the Big Bull of the Indian stock market, was recognized for his ability in picking winners and holding onto them through market cycles. Since his passing in August 2022, his portfolio has been managed by his wife Rekha Jhunjhunwala and the team at RARE Enterprises, headed by Utpal Sheth and Rajiv Agarwal.
Utpal Sheth, CEO of RARE Enterprises, whom Jhunjhunwala called his ‘1+1=11 partner’, follows an investment philosophy known as Terminal Value Investing (TVI), which focuses on the real value of businesses in the long term, beyond conventional analysis and with a focus on megatrends. Sheth looks for companies that are benefiting from positive trends, good leadership, and intangibles like brand name recognition.
Jhunjhunawala’s portfolio publicly holds 26 stocks with a net worth exceeding Rs 47,422.5 crore. (You can now invest in a shadow basket based on Jhunjhunawala’s portfolio, available on Starfolio, which is updated and rebalanced as per the Superstar portfolio).
Escorts Kubota, Titan among top performers in RARE’s portfolio
The best-performing companies in RARE Enterprises’ portfolio include Escorts Kubota, Titan, Indian Hotels, Tata Motors, and Va Tech Wabag.
Escorts Kubota has been a standout gainer for RARE, surging by 2,244.8% since the time of purchase in Q3FY16. As of Q4FY24, RARE holds a 1.6% stake in the commercial vehicles maker.
The portfolio added stakes in Titan in Q3FY16 and Indian Hotels in Q1FY21. The share prices of the gems & jewellery and hotels companies have risen by 884.2% and 652.2%, respectively since the time of purchase. RARE Enterprises also booked profits on cars & utility vehicles maker Tata Motors, and utilities firm Va Tech Wabag, since purchasing them in Q2FY21. These companies have risen by 633.3% and 485.9%, respectively.
Other top performers in the portfolio are Aptech, NCC, Federal Bank, Canara Bank, and Valor Estate, all rising over 200% since the time of purchase.
Star Health currently the only loser in RARE portfolio
Most companies in RARE Enterprises’ portfolio have witnessed a share price rise since the time of purchase. The portfolio typically sells off losers quickly. The exception here is general insurance company, Star Health and Applied Insurance, which is currently the worst performer in the portfolio, with a fall of 35.4%, since the time of purchase in Q3FY22. Over the past year, the firm has underperformed its industry by 62.1 percentage points. RARE holds a 17.2% stake in the company.
Wockhardt outperforms its industry, Tata Communications underperforms
RARE Enterprises' portfolio includes several companies that have outperformed their industries over the past year. Top outperformers include Wockhardt, Va Tech Wabag, and NCC, outperforming the pharmaceuticals, non-electrical utilities, and construction & engineering industries by 176.6%, 73.7%, and 69.6%, respectively.
This is followed by bank stocks - Canara Bank and Karur Vysya Bank, which also surged in the past year. These companies outperformed their respective industries by 59.7% and 55.6%.
Meanwhile, Tata Communications, Star Health & Allied Insurance, Nazara Technologies, Crisil Ltd, and Aptech significantly underperformed the other telecom services, general insurance, internet software & services, other financial services, and IT training service industries by 62.4%, 62.1%, 58.7%, 57.8%, and 49.2%, respectively, in the past year.
Textiles, apparels and accessories, and banking and finance are among RARE’s preferred sectors
As much as 34.2% or Rs 15,772.3 crore of Jhunjhunwala’s total portfolio value is concentrated in the textiles, apparels and accessories sector – in part because it holds a 5.4% stake in Titan, whose market cap is Rs 3 lakh crore.
RARE prefers textiles, banking, pharma sectors
Similarly, Jhunjhunwala holds 2.6% of the bank stock Federal Bank, taking the banking and finance sector to 19.2% of the total portfolio. The pharma & biotech sector constitutes 10.3% of the portfolio. Auto & auto components take up 10.3% of the total holdings, while the rest constitute less than 7% each.
RARE adds one new company to its portfolio in FY24
Throughout FY24, RARE Enterprises added just one new company to its portfolio. The investment firm diversified its portfolio with the addition of Concord Biotech (a biotech company). It currently holds a 24.1% stake in the company.
New additions to the portfolio in FY24
Most companies in the RARE portfolio saw revenue growth last quarter
Most companies in Junjunwala’s portfolio that announced Q4FY24 results recorded profits in the quarter. Among them, twenty companies reported YoY growth in net profit, while six saw a smaller profit compared to the previous year’s quarter. Among the best performers were car & utility vehicles player Tata Motors, whose profit grew 221.9% YoY to Rs 17,407.2 crore while its revenue improved 13.3%. Internet software company Nazara Technologies’ profit increased by 221.2% YoY to Rs 8.4 crore during the quarter. Metro Brands saw a 126.6% YoY growth in profit to Rs 155.2 crore.
Most RARE holdings record revenue growth in Q4FY24
Tata Communications (telecom services company) and Crisil Ltd ( financial services company) reported a fall in net profit despite a rise in revenue. Agro Tech Foods (edible oils manufacturer), Aptech (IT training services company), Jubilant Ingrevia (speciality chemicals manufacturer) and Sun Pharma Advanced Research Co ( pharmaceuticals company) reported revenue declines as well.
Escorts Kubota, Tata Motors, Crisil have high EPS TTM
Among the companies in the portfolio, Escorts Kubota (commercial vehicles company) had the highest basic EPS TTM of Rs 94.9, followed by Tata Motors (Rs 94.5), Crisil Ltd (Rs 89), Va Tech Wabag (Rs 39.5), Titan (Rs 39.3) and Tata Communications ( Rs 34).
More than half of the companies in the ace investor’s portfolio trade in the PE Neutral Zone, and 29.2% in the Sell Zone, suggesting a run-up in PE. Only 16.7% are in the PE Buy Zone.
Metro Brands, Canara Bank, Indian Hotels Co, Geojit Financial Services, and Concord Biotech are among the companies trading in the Neutral Zone. Stocks in the PE Buy Zone include Nazara Technologies, Valor Estate, and Tata Motors.
16.7% of stocks from the portfolio trade in the Buy Zone, 29.2% trade in the Sell Zone
Meanwhile, Aptech, Escorts Kubota, Jubilant Ingrevia, Singer India, and Jubilant Pharmova are some of the companies that are trading in the Sell Zone.
How volatile is RARE’s portfolio?
Over the past year, the beta for 19 stocks in RARE’s portfolio has been below 1 (signifying lower volatility), and for six stocks, it has been higher than 1. The average beta over the year for the portfolio is 0.8. However, the portfolio was marginally more volatile than the benchmark index recently, as the portfolio’s beta over the past quarter is 1.1. On the valuation side, the firm holds stocks in both the PE Buy and Sell Zones.
We can conclude that RARE prefers to make safer bets and hold stocks for the long term. Sheth says, “It is time that gives the long-term investor an advantage.” He prefers companies with strong leadership attributes that can steadily capture value, over businesses that are a flash in the pan.
