Rakesh Jhunjhunwala-The Rare(ing) Bull
April 27, 2011 9 Comments
Rakesh Radheysham Jhunjhunwala is a famous Indian stock investor.He lives in Malabar Hills with his wife Rekha ,daughter Nishtha and twin sons Aryaman and Aryaveer and works from his office at Nariman Point in South Mumbai. He regularly appears on various business channels on television to share his ideas and opinions on the Indian markets. He is well-known in investing circles as ‘Rocky’ and among his close associates as ‘Bhaiyya’.He is considered to be India’s Warren Buffett. In 2010, Forbes rated him India’s 51st and the world’s 1062nd richest man with a net worth of $1.0 billion.He is the first dollar billionaire from India to have made his fortune primarily from the stock markets.
He considers Mr Radhakrishnan Damani as his guru (mentor) and best friend.He counts Kamal Babu, Ramesh Damani and Kamal Kabra as friends.He manages his own portfolio as a partner in his asset management firm, Rare Enterprises (Ra-Rakesh Jhunjhunwala, Re- Rekha Jhunjhunwala).“The sheer passion for markets and the ability to do what I enjoy is what inspires me,” says Jhunjhunwala. He has been asked to manage other people’s money, but prefers the freedom of not having to answer to anybody, and has thus turned all offers down.Rakesh does not try to beat the market as opposed to investment managers who have to answer to a lot of people, and hence look at indicators like how much alpha — or returns in excess of the general market — they are generating. “The only person that I have to answer to is my wife, and she just wants to know what the absolute returns are, not whether I am beating the market”. He expects the market to do very well as he believes that India is at the beginning of an unprecedented multi-decade bull run.Obviously he believes in putting his money where his mouth is as he owns only Indian equities.There are 7-8 stocks that make up 80% of his portfolio, and his holding period stretches from 3 years to 10.
Rakesh Jhunjhunwala is the son of an income tax commissioner.He attended Sydenham College and is a qualified Chartered Accountant.His father was also interested in stocks. When Rakesh was a young child, his father and his friends would get together to drink in the evening and discuss the stock market. Rakesh would listen to them and one day he asked his father why stock prices fluctuate. His father made him check to see if there was a news item on Gwalior Rayon in the newspaper, and explained that if there was, Gwalior Rayon’s price would fluctuate the next day.Rakesh found this very interesting and got fascinated by stocks.He taught himself about stocks.Rakesh’s father encouraged him to do whatever he wanted to in life but exhorted him to get professionally qualified first.Rakesh was always a reasonably good student and so he took up chartered accountancy. In January 1985, he completed his CA. He then told his father he wanted to go to the stock market. His father reacted by telling him not to ask him or any of his friends for money. He, however, told him that he could live in the family house in Mumbai and that if he did not do well in the market he could always earn his livelihood as chartered accountant. Rakesh credits this sense of security with really driving him in life.
Rakesh started investing with Rs 5000 in 1985 when the BSE Sensex was at 150. He made his first big profit of Rs 0.5 million in 1986 when he sold 5,000 shares of Tata Tea at a price of Rs 143 which he had purchased for Rs 43 a share just 3 months before. Between 1986 and 1989 he earned Rs 20-25 lakhs. After 1986, the market went into a big depression for two-three years but he put that money in Tata Power and the Tata Power stocks rose to 1100-1200.Now he was worth Rs 50-55 lakhs.His first major successful bet was the iron ore mining company Sesa Goa.Sesa Goa had a big fall because there was a depression in the iron ore industry and then prices for the next year had been considerably raised about 20-25%. The stock was available abysmally cheap around Rs. 25-26. There was a projection of a very good growth in profitability in the next year but nobody seemed to believe it.When he saw the facts, Rakesh wanted to invest but he did not have capital. So he bought 4 lakh shares of Sesa Goa in forward trading, worth Rs 1 crore and sold about 2-2.5 lakh shares at Rs 60-65 and another 1 lakh at Rs 150-175. The prices then went up to Rs 2200 and then he sold a few more shares.He also traded a bit. In this way he increased his net worth to about Rs 2 – 2.5 crore.
A good time to sell a stock, according to Jhunjhunwala, is not based on any ‘price’ targets, but when the ‘earnings’ expectations have peaked or the business model has peaked or the valuations appear ridiculously unreasonable.The walls of his office are dotted with line drawings of legendary investors such as Warren Buffett, George Soros, John Templeton and Peter Lynch.Much like Mr Warren Buffet, he buys into the business model of a company and for judging the longevity and growth potential, he gives top priority to ‘competitive ability’, ‘scalability’ and ‘management quality’ of the enterprise. The ‘entrepreneur’, according to Jhunjhunwala is what makes an invaluable difference to his expected investment returns. According to Jhunjhunwala, believing in the vision and the beliefs of the entrepreneur and validating the risks that may not be perceived by the entrepreneur are the key success factors for an investor.
His investment style may bear some semblance to that of the gurus on his office walls but a lot of top stock traders believe he is simply incomparable. “He is not a copy of anybody. He is Rakesh Jhunjhunwala,” says Raamdeo Agrawal, co-founder and joint managing director at Motilal Oswal Financial Services. “He is intelligent, passionate and an independent thinker. Besides, he has the ability to take measured risks and leverage his portfolio, something very few investors can do successfully.”According to Parag Parikh, founder and chairman of PPFAS, an investment advisory firm, Jhunjhunwala differs from Buffett in some ways: “For example, unlike Buffett, he has made some money from trading and does track market movements actively.”Actually it was ‘trading’ income which helped him built his initial capital base and even today he continues to remain an active trader as he believes it keeps one alert and always on one’s feet.Although he claims to put only a minuscule of his net worth on the table for trading activity, he has often leveraged his own capital and managed to make a fortune from his calls, more often than not.He is the poster boy of the Indian bull run but admits to have been a bear in the Harshad Mehta days and believes that a person in the market should be like a chameleon. He calls the markets ‘temples of capitalism’ and believes that they are the ultimate arbitrators.And though he has no role models as such, he admits to admiring George Soros because of the “kind of success he has achieved, his understanding of the markets and his charitable activities.”
Like Buffett and Soros,Rakesh plans to get more involved in philanthropy. He believes that wealth is a gift from God and has to be used for the good of society.He supports an organization called Agastya in Bangaluru that mounts labs with objects like the solar system on vehicles and takes them to villages to teach science to the villagers.He supports Impact which works for girls’ education in backward districts of Rajasthan and UP and Friends of Tribal Societies which works within tribal areas for education and healthcare.He has also supported the building of a hostel for CA students.
In the past decade Rakesh Jhunjhunwala has managed to identify numerous multi-baggers like Karur Vysya Bank, Praj Industries, Crisil, Titan, Nagarjuna, HOEL and PSUs like BEML and Bharat Electronics, among others.So if you are of a mind to own mid-cap stocks you can consider buying stocks in Rakesh’s portfolio at prices he acquired them at.Here is a link to a list of scripts in his portfolio http://www.moneycontrol.com/bse/shareholding/stocks_hold.php?type=1&name=Rakesh%20Jhunjhunwala&pno=1