In an interview to CNBC-TV18's Latha Venkatesh, Sonia Shenoy, and Anuj Singhal, Basant Maheshwari, Author & Independent Market Expert shared his readings and outlook on specific stocks and sectors.
Below is the verbatim transcript of the interview.
Sonia: Before I ask you about your market view, I need to know what you are advising on Avenue Supermarts (D-Mart) because I understand you bought truckloads of D-Mart during the IPO, so, you are a very rich man right now. However, what do you do in case you missed out on this big rally, does it still portend a buy?
A: We bought on the first day first show; it is like a child, we picked it right from the maternity ward. We have been doing this for the last one year. So, Ujjivan, PNB Housing Finance, and now D-Mart. The rational about D-Mart is price to equity (P/E) ratio is just one way to look at it. It is like looking at the horse and the cart. So, if you are looking at the FY17 P/E, it is like looking at the cart, but if you are looking at the FY19 P/E, it is looking like the horse.
If I can tell you two-three things, on FY19 basis D-Mart is still at a valuation almost equal to Blue Dart, or an Aditya Birla Fashion, or any of those and plus, this company is growing at 30-40 percent. You might have half a dozen or a dozen retailers in India, but the best part about D-Mart is, this is the only company which has got its strategy right. If you follow Walmart, they started from Arkansas in southeastern US and then they started. The other retailers, they open one store in Chandigarh, the other in Calicut, the third in Kolkata, and the fourth in Coimbatore. So, that is not the way to go about it. The concentric circle model which D-Mart employs and retailing is a very tough business, so, as long as you can get your cost low, you stay in the game.
Apart from the NBFCs, I don’t think there are any other stocks which are growing at 30-40 percent and we love growth. We are intoxicated with growth and we are drugged with growth. So, that is one part to it. We have bought for our clients, and for ourselves and this is not a recommendation, we are just sharing an idea just like that. So, do your own diligence, own disclaimer that runs with it.
Latha: I want to speak about your first love or your perineal love, housing finance. Repco Home Finance was your discovery. Now, is it still a buy? We have seen a lot of gains in the Indiabulls Housing Finance and other housing finance companies as well, you still like it and if yes, why?
A: Repco we don’t own; it has been more than a year now. We have shifted our focus on Can Fin Homes, and PNB Housing. As you know, we have always discussed, we love growth, so Repco was 20-22 percent grower and Can Fin is growing at 30 percent and PNB Housing is growing at 40 percent. So, it made all the sense to move out of Repco and grow into these companies. Of course I can’t recommend a buy or sell, but we own Can Fin and PNB Housing in good quantity for ourselves and for clients and we are super bullish on the space.
I think the housing finance space over the next five years would move into a trajectory which it has never ever seen in India. I think in US, when you read those books, you look at Freddie Mac and Fannie Mae and of course for some bad reason one of them went bankrupt and belly-up in 2008, but not before it went several 100 billion dollars of market cap. So, I think one of these can become something like that.
So, over the next three to five years, if you just analyse the arithmetic, the cost of owning an home through EMI is now cheaper than paying ent in many of the places assuming you are buying at Rs 20-25 lakh home. So, people would move from rented property to owned property and all the time this government did was the ‘garibi hatao’ program if you could call it, it was a three ‘G’ program I always thought – ghar, garib, and the gaon. However, now the first time the middle class is getting that break, so, I think that should be huge because whenever it was the low ticket guys, you just had okay Gruh Finance falls into that space, but now it is the 15-18 lakh people also who are taking loans, so, those guys would also benefit. So, I think this is on a different trajectory altogether.
Sonia: These are themes that are well discovered, the market knows about this – housing finance, retailers, tell us something new, because there are so many spaces where money is still being made whether it is ancillary steel makers, whether it is white good makers, whether it is auto ancillaries, refractories, etc. Any new themes that you have identified, any stocks that look interesting to you?
A: No, for a change I don’t think we have got any new theme as now. Diagnostic is a good space, but the stocks are fairly valued. So, you can buy them and keep them. However, you buy expensive stock only because it is growing at 30-35 percent, so, if the diagnostic space is growing at 20-25 percent, you can look at them, but it is not such a screaming buy as the other ones.
When your existing stocks are doing well, there is very little need to look at new themes. The ones which you talked about, the refractories, auto ancillaries and all of them, you can put 2-5 percent allocation of your portfolio, but we prefer putting 15 percent of our money into these stocks. So, they are not fit for 15 percent allocation.
For full interview, watch accompanying video.
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