Rakesh Jhunjhunwala, the high profile private investor, is often called “The Warren Buffett of India.” Warren Buffett is a classic example of a buy-and-hold investor. Jhunjhunwala follows the principle, with his “buy right and hold tight” motto. However, unlike Buffett, Jhunjhunwala follows what can be termed as a portfolio-concentration strategy. This means he focuses on large investments in a limited number of companies, rather than opting for small investments in a large number of firms. His top 5 investments account for over half of his portfolio, and the top 10 account for almost 80%. Jhunjhunwala appears to favour small and medium stocks over companies with huge market cap.
Apart from his portfolio being restricted to a few stocks, his investments are concentrated within a few industries. Most of his portfolio comprises of stocks in the energy, infrastructure and luxury/retail sectors. Rakesh Jhunjhunwala has substantial investment in pharma and IT stocks as well. These sectors account for about 80% of his portfolio. There are hardly any cyclical or commodity stocks in his portfolio.
India’s most renowned investor began investing in stocks with a starting capital of Rs5,000 and today has around Rs5,000 crores in various investments. Jhunjhunwala is bullish about the entire India growth story and believes that the country has all the characteristics that investors seek, including efficient capital allocation, stable economic growth, +12% nominal GDP growth, a favourable framework for equity investing and bright projections for corporate earnings. At a meeting with IIT Mumbai students in August last year, Jhunjhunwala pointed out that India’s macroeconomic indicators had improved significantly and that the country had a robust banking system. He added that India has several factors in place for inspiring bullishness, including favourable demographics, highly skilled and educated human resources, downward pressure on interest rates, competitive markets and increased awareness of quality of corporate earnings. The ace investor said that he expects the Sensex to reach 25,000 by 2012. Earnings in the corporate world would grow faster than in the unorganized sector, he added. Jhunjhunwala said that he plans to invest overseas after 2012.
Jhunjhunwala has become cautious of late. His investment principle currently is “short-term caution and longer-term confidence.” A slowdown in the US economy has the potential of adversely impacting India. The US subprime crisis would cause volatility in the global equity markets. Jhunjhunwala believes, however, that the Indian markets would not be as severely impacted by this as other markets, even other Asian markets. “I don't think it's a bubble,” said Jhunjhunwala earlier this month, referring to the recent surge in the Sensex, “But it's time to consolidate holdings: Don't buy - and hold on to what you have.”
We will continue to follow Jhunjhunwala and see how he responds to the latest plummeting of the Sensex.
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Suggested Reading:
- Rakesh Jhunjhunwala Plans Fund Venture With Shinsei Bank, People Say
- 5 Prospective Rakesh Jhunjhunwala Picks
1 comments:
what the hell do u mean that buffett doesnt believe in concentrating his portfolio? though its gone diversified he was a firm believer in philip fisher arguments. do a readup on that before posting fallacious articles. Pl refer to hisshareholders letters. jeez where do u get ur research done from?
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