Rakesh Jhunjhunwala's favorite stock to take him to mount Rs 6,000 crore? Should you invest? It's a multibagger

Want to be successful like Rakesh Jhunjhunwala? Well, when it comes to building up an appetite for equity, buying a stock after proper research about what the company itself does and how strong and credible its management is and that too at the right time, can be the wisest investment decision an investor can make. This will ensure success and the building of confidence in the investor.

Markets are booming over the last couple of days and majority of sectors like auto, banking, realty, IT, healthcare and consumer durables are seeing buying sentiment. So, much so, that even Sensex has retained its level at over 36,000-mark today. While many are busy tracking and placing bets in equities, ace investor Rakesh Jhunjhunwala is in a wait-and-watch mode over his holdings and letting his stocks play the game out as the year draws to an end.

Everyone is aware that Jhujhunwala has high love for one stock namely Titan Company which dominates its sector. In fact, almost half of Jhunjhunwala's wealth is the outcome of Titan's glorious performance.

As we wait with excitement to welcome the new year 2019, one should pay an attention to what Titan will bring to Jhunjhunwala by end of December 2018. 

It needs to be noted that, Jhunjhunwala had reduced his stake in Titan between April - June 2018 quarter. However, the big bull of Dalal Street reiterated that he never lost faith in Titan, even though he reduced his holding to between Rs 5,000 to Rs 5,500 crore. Now many would question whether Jhunjhunwala lost his faith in Titan during that quarter and had to reduce his holding. But no! Jhunjhunwala confirmed saying he still has faith in Titan and is very optimistic in the company’s performance ahead. 

According to Jhunjhunwala, buying and selling a stock is part of equity life. One needs to make adjustment in his investment to not let opportunities pass by, and this was the reason behind the reduction in Titan shareholding. 

But that was then. Titan started to play its game in a negative way from second half of September 2018. The beating Titan shares received at the hands of investors was such that it even touched an all-time low of Rs 731.70 per piece on October 09, 2018, compared to its all-time high of Rs 1,006 per piece in April 2018 month. With this, Titan gave away 27% of its gains within 7 months time.

While this does bring a panic situation in Titan, but both Jhunjhunwala and analysts saw the greater game ahead in this company. 

 Amazingly, much to your surprise, surely, Jhunjhunwala, who removed his money in Titan by end of June quarter, made purchases between July - September 2018 quarter, when the company’s price was correcting! 

बाज़ार में कमाना हो मुनाफा तो सिर्फ देखिए #ZeeBusiness @AnilSinghviZEE @dkalra81 pic.twitter.com/IoCzRik1fD

— Zee Business (@ZeeBusiness) December 13, 2018

What Jhunjhunwala did in Titan reminds a saying of his idol and world’s equity king Warren Buffett, who says, it is best to make an investment in a wonderful company at fair value rather than investing in  a fair company at a wonderful value. 

During those times, Jhunjhunwala’s wealth in Titan had come down to Rs 5,500, according to TrendLyne.com who tracks the ace investor’s portfolio. 

Now that everything is said and done, let’s see how Titan has been performing. As the data shows, Titan has given nearly 14% return so far this year to Jhunjhunwala. But what is interesting to see is that Jhunjhunwala’s wealth as on today in Titan has reached to Rs 5,882 crore - which means the company is making hefty money for the investor. 

Coming to today’s trading session, Titan is trading at Rs 944.80 per piece up by Rs 15 or 1.61% at around 1401 hours on Sensex. It is just few rupees away and looking straight in the eye of its all-time high level. 

This makes us wonder will Titan make it Rs 6,000 crore wealth alone for Jhujhunwala by end of December 2018? 

On Tuesday, a rating agency CRISIL revised  its rating outlook on the long-term bank facilities of Titan Company Limited (Titan) to 'Positive' from 'Stable', and reaffirmed the 'CRISIL AA+' rating and has reaffirmed its 'CRISIL A1+' on the company's short term bank facilities and commercial paper programme.

Outlook revision reflects improving business profile over the medium term on account of improving business performance in the retail jewelry segment, supported by healthy annual store additions and better diversity in terms of revenues and profitability.

According to CRISIL, Titan will continue to benefit from shift of demand in jewelry retail from unorganized to organized segment post demonetization and implementation of Goods and Services Tax (GST) as seen from strong year-on-year revenue growth for eight straight quarters ending September 2018 leading to market share gains. 

Titan has outpaced most of its large peers in the organised jewelry sector, with its revenues registering a compound annual growth (CAGR) of ~20% during fiscal 2016 to 2018  from Rs 11,278 crores to Rs 16,156 crores. Strong brand image and trust coupled with ability to provide range of designs and robust business model aided Titan's growth. Going forward, CRISIL expects company to register a growth of over 12% CAGR over medium term.

CRISIL is not alone in showing optimism in Titan, recently even Motilal Oswal  maintained Buy rating on the stock with a target price of INR1,105, based on 47x Dec’20 EPS (~10% premium to three-year average P/E).  

Krishnan Sambamoorthy and Krishnan Sambamoorthy, Research Analysts at Motilal Oswal said, “Jewelry business growth prospects remain robust, and now Watches and even Eyewear segments have raised their hands to contribute to growth.”

The duo explains saying, “We believe that premium valuations are fully deserved for a business that has perhaps the best revenue growth potential in the large cap FMCG/retail space (20% CAGR in Jewelry business over the next five years) and also operating leverage-led margins support.”

If we take Titan’s all time low and Motilal’s target price, then the company is set to rise by over 51%. Imagine what that will do to Jhunjhunwala’s wealth! Now that Jhunjhunwala’s wealth is just  few crores away from Rs 6,000 crore mark in Titan alone, one can expect that amazing figure to turn into reality soon  - might be as soon as the end of 2018.

And, those investors who, just like Jhunjhunwala have faith in Titan, are concerned, then what they should do is hold on tight, do not panic and let the company do all the talking ahead.