He has been variously called India’s Warren Buffett or the Big Bull of Dalal Street. Or simply Ace Investor. He has a fan following in the markets that would do some of Bollywood’s actors proud. However, is that a good reason to emulate his investments?
Recent changes in Jhunjhunwala’s portfolio show that every investor must in the end fend for himself. Following anyone blindly is the surest way to losing control of your savings. You may be lucky and gain with your idol, but you could be unlucky with him too.
Consider what would have happened if you had tried to mirror Jhunjhunwala’s portfolio last year. According to a compilation in BusinessLine, of the 10 shares in which he had major investments in September 2011, he got out of five a year later. That’s a 50 percent exit rate in one year. A 50:50 success-failure rate is like tossing a coin.
The newspaper says that Jhunjhunwala completely exited shares such as Karur Vysya Bank, Ion Exchange, Hind Oil Exploration and Reliance Broadcast, and reduced his holdings in VIP Industries (see here).
Instead, he tanked up more in Geometric Software, Autoline Industries, A2Z Maintenance, Delta Corp and Viceroy Hotels.
An earlier Business Standard report gives additional information on other Jhunjhunwala shares. Based on his disclosures to the stock exchange, the newspaper once again found a fairly high churn rate. While he raised his stakes in Titan Industries, Rallis India, and Agro Tech and bought fresh into DB Realty, he cut his exposures to Crisil, Praj Industries and Adinath Exim Resources as on 30 September 2012.
What this churn rate indicates is that Jhunjhunwala is not always a buy-and-hold guy, but is essentially following the principle of running his gains and cutting his losers or duds. Shares that didn’t perform are being pruned.
One share that he has been particularly eager to unload is Aptech, which has caused him more grief than others. Jhunjhunwala and his wife Rekha got into Aptech for the long-term in October 2006 and paid Rs 113 for 27 lakh warrants that were later converted into shares. Over the next year, they accumulated more, when the share prices fell dramatically.
The share hit its apogee in December 2007, when it peaked at Rs 436, but that’s where Jhunjhunwala may be ruing his buy-and-hold predilection of yesteryear. Since then it has been all downhill, and since end-2011, he has been trying to get rid of the Aptech shares. But no one was willing to pay his price.
The share is now trading at around Rs 68. Taking the time value of money, and assuming Jhunjhunwala hasn’t be weaving in and out of the share by trading in it, he has probably lost half his investment in it.
So much for the Midas touch of Jhunjhunwala. It’s there, but not always visible.
Last year, it was even visible in the reverse – when many of the things he touched turned to ashes.
As The Economic Times noted last year, Jhunjhunwala got many of his trading bets wrong in 2011. The newspaper speculated at that time that Jhunjhunwala had placed huge bets in silver futures and the Nifty, but the bets backfired, forcing him to sell a part of his long-term portfolio.
In a CNBC-TV18 interview last Diwali, he was candid enough to admit that he got all his stock calls right, but all his trading calls wrong.
The message is clear: it is good to know what Jhunjhunwala is buying or selling. But following him may not always be rewarding.
This writer believes that when it comes to investing your own money, you should take charge, do the homework, and learn from the pain and gain of it. Following Buffett and Jhunjhunwala is not a sure thing (read here). They themselves are constantly learning.