JHUNJHUNWALA AND DAMANI - FOLLOW THEM BLINDFOLDED?

By Ruma Dubey

“NCC surges as Rakesh Jhunjhunwala increases stake to 12.78%.”

“TV Today is up over 6% after Radhakishan Damani buys1.3 million shares or 2.18%.”

Both, Jhunjhunwala and Damani are said to have the ‘Midas’ touch. Jhunjhunwala has often referred to Damani as “guru” and the market says that the duo always hunts in pair.

Stock price of CRISIL, Lupin, Titan, Dewan Housing, Geometric, Rallis India, Federal Bank soared high as the market soared – Jhunjhunwala and his family owns more than Rs.100 crore worth of shares in each of these companies. He holds stake in Indian Hotels, Suzlon, Dish TV, Muthoot Finance, Unitech, MCX, Edelweiss, Prakash Inds, Orient Cement, Polaris, McNally Bharat amongst others. On the other hand, he reduced stake in A2Z Maintenance, Titan, Lupin, Karur Vysya and sold his entire 8.45% stake in Praj Industries.

RK Damani, who is often known as “Mr.White and White” as he wears a complete white outfit, has often been vocal on his views for logistic companies. His picking up stake in Gati sent the stock price soaring through the roof and he also picked up a 2.6% stake in Snowman Logistics, a company promoted by Gateway Distriparks. Damani’s top holdings are in VST Inds, Sundaram Finance, Blue Dart, Trent, Nestle India, Crisil, Gillette India, HDFC Bank, BPCL, Century Textiles, Snowman Logistics, Gati, TCI, TV18 Broadcast, 3M India, United Breweries, Agrotech Foods, United Spirits and HPCL amongst many more.

Whatever these two big investors touch, the stock price zooms up and investor frenzy whips up. Many call them the “Warren Buffett” of Indian markets. There is no doubt that both discerning and extremely intelligent investors have built up an enviable net worth and because almost all their investments have turned into goldmines, people feel that, that would rub-off onto them too if they buy the same stocks. But then is it right to follow them, buy what they buy?

There is no doubt that they buy stocks after a lot of research; it is rarely an impulsive buy as they put huge amounts of money. But remember, they get the shares before we even know about it and by the time, the bulk deal is announced, the price is high, leaving very little for us on the table.

Also we may have given them the stature of demi-gods of the market but they are humans, prone to mistakes. Take the case of A2Z Maintenance. This company, when it went for an IPO, the only attraction, where people blindly invested was the fact that Rakesh Jhunjhunwala had invested in the company. He held 21.03% stake pre IPO, and was an investor in the company since 2006 but he was amongst the group of investors who sold part of their holding when the firm floated its public issue. He had earlier made around 2 times on his part exit. In Oct’12, he had resigned from the board but he now holds 4.04%stake in the company. It’s a different story that the stock is today quoted at Rs.19 levels while the IPO was made at Rs.400/share. And what about Radico Khaitan? Jhunjhunwala bought some 6.85 lakh shares in Jan’14 when the price was high at Rs.167/share. Today, the stock is at Rs.80.

What this means is that when these big guys buy, just on the momentum, the price rises but it is not that the price rise is always sustained just because they have a stake. Thus as a trader you could probably make some “news based” money but buying for long term just because they have a stake, makes no sense at all.

What we have to learn here is that like every individual is different, his investment needs and strategies should also necessarily be different. What works for Damani or Jhunjhunwala need not work for you. They are like a lion on the prowl in the jungle; when they move, the entire jungle knows but can a monkey eat the lion’s hunt; it is only the hyena or the vulture, both scavengers who eat the leftovers after the lion has eaten. Is it a good idea to be a scavenger? Best to be a hunter but one can take lessons from the best. The basic purpose, to eat, is the same but methods and requirements are different. That’s the same logic when it comes to following these legends or Warren Buffett. You can take lessons from the king of the investing jungle but it defeats his teachings if you only follow him blindly.

Remember, Jhunjhunwala and Damani made millions by staying invested for a long term. They are not day traders. And that is probably something we all should follow them blindly for. Invest wisely using your own mind and intellect and maybe, you could emerge as the new Jhunjhunwala, Damani or even the Buffett of India.