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Should one replicate Rakesh Jhunjhunwala's portfolio?

ICICI Securities 18 Jan 2022

Rakesh Jhunjhunwala needs no introduction. The billionaire investor, India’s largest individual shareholder, is Partner & Chief Executive of Rare Enterprises. For his fans he is India’s Warren Buffett.

Jhunjhunwala’s success story has been well-documented for decades, and his portfolio is keenly tracked among investing enthusiasts. An entry of Jhunjhunwala on a counter sends the stock buzzing, and so does his exits.

Can emulating Jhunjhunwala’s portfolio is a sure-shot way to make money? Not necessary. What Jhunjhunwala buys, at what price, when he exits and at what price, whether his investment is a positional bet or long-term bet, only he knows.

He holds over three dozen stocks with over 1 per cent stake. Does that mean these are the only stocks he holds? No.

Do all his stocks perform well? No. Some of them are certainly duds - history suggests so. Jhunjhunwala himself says people go gaga over his successful investment stories, nobody talks about his failures. Humble, the ace investor is.

Besides, Jhunjhunwala buying a stock worth crore could be just a fraction of his stock portfolio. Only his known stocks are worth over Rs 20,000 crore!

With financial muscle, Jhunjhunwala can take extremely risky bets. It may still not pinch his pockets even if those investments turn zero in value. Of course, risk appetite for investors wary.  Last and not the least: “Nakal ke liye bhi akal ki zarorat hoti hain.”

What’s known, what’s unknown

Jhunjhunwala owns 40-odd stocks that are known. Companies are required to report shareholders who owns over 1 per cent stake in them. There would be many Jhunjhunwala stocks where he would be owning less than 1 per cent stake, not known to investors.

Jhunjhunwala held 1.6 per cent stake in Lupin as of June quarter. His name did not feature among the shareholders of Lupin in September quarter. Does that mean he fully exited the stock? Not necessarily. What should an investor do? Should he sell or trim his stake on the counter? What about the many more stocks where Jhunjhunwala must have invested less than 1 per cent stake? Simply replicating his portfolio is next to impossible.

Has Jhunjhunwala got midas touch?

Not everything he touches turn gold. Data shows 17 among 40 of his portfolio stocks have incurred negative returns over the last 5 years. VA Tech Wabag, Edelweiss Financial Services, Lupin, Karur Vysya Bank, Prozone Intu Properties, Wockhardt and Indiabulls Housing Finance have lost anywhere between 50 and 90 per cent during the said period.

So, if one has invested in some of these Jhunjhunwala’s bets in last five years thinking they were long-term buys, one might be feeling disappointed.

Does that mean these were Jhunjhunwala’s bad investments? Not really. Lupin was one among the Big Bull’s stocks that delivered about 160 times return in the 2000s! The fact remains a retail investor would never know the average price of the stock at which he has bought it. And unless the stocks he sells come under bulk and block deals, nobody would get to know the selling price.

Besides, consider this: Titan accounts for about 40 per cent of Jhunjhunwala portfolio value. Does that mean that one should make 40 per cent of his investible investments in Titan? It is among a number of stocks he owned; some like Titan delivered him multi-bagger returns and that over a very long period; others may or may not have done well. Time horizon thus also mattered.  

Lastly, if Jhunjhunwala is trimming stakes in a company, it doesn’t mean he is bearish on the stock.  Titan fits the bill. The Big Bull has been trimming stake in the Tata Group firm of late, but thanks to its solid returns, the value of his holding in the company has kept on rising.

Jhunjhunwala sold stake in Ion Exchange (India) in March quarter. Yet this stock has gained 158 per cent year-to-date.  He also sold stake in Firstsource Solutions in March quarter. This stock is up 100 per cent year-to-date. There would be many stocks that kept on rising even after Jhunjhunwala sold those.

No harm in tracking Jhunjhunwala portfolio. But, ultimately your own analysis and conviction should play a role in stock selection.

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