Basant Maheshwari Portfolio 2017 (Interview)

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Ravi
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Basant Maheshwari Portfolio 2017 (Interview)

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We can get an idea of Basant Maheshwari portfolio and details of the stocks that he bought and sold in 2017 from the latest interview.

We can know that Basant Maheshwari is bullish about housing finance and NBFC stocks:

In a chat with ET Now, Basant Maheshwari, Basant Maheshwari Wealth Advisers, says selectively the sectors that were fancied before demonetisation, continue to be fancied and that is the way it should be.

Edited excerpts:

The strength of this market is remarkable. Be it Brexit, be it the Trump victory or for that matter demonetisation, budget or surprised non-move from the RBI governor - -the market continues from strength to strength with a whole lot of inertia. How soon before we actually manage to cruise past a fresh high or do you think maybe the market is in for a bit of a pause?

The credit of this big move goes to the social media, the electronic media because they made such a song and dance about the world coming to an end after demonetisation that we priced it in as if several companies are going bankrupt and the others would not have money to pay salaries. So the only question that remained was when is the money going to come into the system? Once that happened, everything was back to square one and looking at the results of the companies, we are saying that is like a bad dream and moving on.

But on an overall scale, the market is still selective. Most of the results are looking good because we expected them to be far worse. Had there been no demonetisation, we would have said results are okay, they are no big shakes. But we spent two-four years doing nothing. Now, we should head higher but still it is not a bull rally. Actually, bull markets are created when people speculate, they gamble, put on leverage the animal spirits as the economists call it and every two-three months we have a global thing coming.

If you assume that I would take 50% leverage on my portfolio, every three months there is a Trump who is blowing his trumpet and a Putin who wants to do everything in the world all on his own. The ability of people to bet aggressively just does not materialise because three months mein apko jab bar, bar jhatka lagega, (when you are shocked again and again), you will always say I cannot handle this. So, over commitment would take time. In fact, over commitment would happen once we go into an all-time high and that is what has happened. It is going to happen this time. If the Nifty is at 9300, let me tell you people are going to pour in money. With Nifty at 7000, 8000, at 8000, nobody wanted to put in money. But as the Nifty came to 8680, we get people who says we want to put in money. So, we will do well but selectively. It is not overall market-led bull run but selectively the sectors that were fancied before demonetisation, continue to be fancied and that is the way it should be.

Somehow I may be completely wrong here. Something tells me that the next nine months until Diwali will not be about the Nifty making headlines. If the momentum stays alright, then wealth will be created in the non-Nifty names. There are a bunch of stocks in the top 100 which could make a dash to be a part of the index at some point of time in the next 10 years as well. Do you sense that the broader market rally will continue and if so, what are the sectors that you think will have a fabulous year in 2017?

I agree with you because software and pharma sectors are under cloud. You need a tailwind for companies to do well. Even if the company reports good earnings, there will always be this fear of what Trump would do in the senate tomorrow. It is because of that the Nifty hides more than it reveals.

Second, coming to the second line stocks, they are doing well because those are the domestic facing companies like auto and consumer discretionary. Now we have to switch from looking at outward facing companies with US businesses to companies with Indian operations. We always like to date one at a time and so we are just blind on NBFCs. Within that, we have found our own segments here and there but overall NBFCs would do well.

As for sectors, the auto biggies, the four wheeler names would do well. As for consumer discretionary companies, you can postpone say a buy like a washing machine from November to February. But if you did not have Cadbury in November, you would not have two packs right now. You will just have one. So January, February, March should be very good for the consumer discretionary companies and that should continue. People have more money to spend as white now as the black money has been forcibly converted into white.

All the money is now channelised into the system and that is all going to spur consumption. But on general, the consumer discretionary, the autos, the NBFCs --anything that is domestic facing should do well.

That brings me to HFCs. Given the thrust by the government post the budget when it comes to HFCs and when one talks about HFCs in particular, it is PNB Housing Finance and Can Fin Homes which seem to stand out. What is your own view on this particular pocket and, of course, these two names which seemed to be leaders in the pack?

It is not a recommendation at all and since you have spoken about these two name, we own both of them. Can Fin, we own since 2015 and that has kind of saved our Titanic from sinking whenever we hit an iceberg over the last one-and-a-half years.

As for PNB Housing, it was the first day first show stock. Even when I was on the Diwali show, I said there are a flurry of IPOs coming and we have to just look at them. So when the world was crumbling under demonetisation, we were buying PNB. It is not a recommendation. I am not asking anybody to buy. We can sell it tomorrow itself. I am just telling you. In housing finance, you have a 20% grower, you have a 30% grower, you have a 40% grower. So the difference between 20 and 40 is like a distance from earth to the moon. The 20% growers are good, 25% growers are very good, 30% ones are brilliant and 40% growers are extraordinarily wonderful. We like to be with the 30-40% growers. Just do the basic back of the envelop calculation on PNB Housing just for academic interest. 18-19% ROE for FY18 on their book value. Look at the kind of profit it generates, look at the kind of geographical diversification it has made and all that cost to income can come down and things can happen. So it is going to beat most of the analysts for their estimates whatever they have made and it should do phenomenally well and that is liquid stock.

The large institutions might get interested at some point. Suppose you have a two-three-four quarter history of delivering good returns. So these are the two names which we own so that is what I can say, not a recommendation at all, please do not buy anybody just by looking at what I am saying.

What is the kind of returns that people can expect? From what I gather you guys have finished one year too under this new thing. What is the kind of return that you have made and that will give an idea of what kind of returns people can expect to make over the course of the next 12 months? Is it too much to hope for a 20-22% return over the next one year or the next couple of years and couple that with the one theme which is anti-consensus but which you believe has the scope for really large returns?

First, we cannot give any future guidance but we have just completed about one year right now. So, post fee returns on the AUM weighted thing which our custodians do for us that is 35%, we were sinking at 10,000 feet below the sea on December but right now are fluttering up in the sky. This is because of the stocks that we own and we go with little aggressive bets. We do not do these standard normal stocks because that is the way it should be.

Coming back to the anti-consensus view, we believe fortune lies at the bottom of the pyramid. One the small sized banks for example, has the power to become a $10-15 billion market cap company over the next five, seven, ten years. So, we bet heavily there.

Second, the MFI space. There is a lot of flurry going about whether one large private bank would buy a one large MFI. So in the corporate world, the shikar (the hunted) is always more valuable than the shikari (the hunters). If we just see what the private equity deals were happening in November and December, at least three to four private equity guys bought in stakes in microfinance institutes right from Uttar Pradesh to Bangalore to Bengal and all across.

Three-four deals happened even when the world was crumbling and people said the MFIs would go bankrupt. You do not have the smart PE money coming in when there is so much cloud there. The space is there and you see how the setup has happened. There is Mudra Bank. Think about it from the HFC side. There is an RBI which controls and there is a huge demand at the bottom of the pyramid. So I do not know whether it can go the HFC way. It is too early but the model has been set for it to move on that direction. How it happens is a wait and watch for us. We would rather lose 30-40% on a stock which gives us the potential or the hope of 30-40 times. So if you lose 30-40% that is okay as long as you stand to make more than 20-20 times. Even in December, we were completely invested and the money did came in. We used to put it to work immediately but deep inside the fear was obviously there and anybody who says he was not fearful in December means he was not adequately invested in the markets and that means he still has the cash. He has not put it to use. Once Nifty goes to the new level, that money is going to come back in.


http://economictimes.indiatimes.com/mar ... 056100.cms
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