Investment tips by Rakesh Jhunjhunwala: These 3 stocks lost some love of the ace investor - Should you buy?

It was a busy December 2018 (Q3FY19) quarter for Rakesh Jhunjhunwala, as he made many sellings in stock markets. The investor is known as the key player of Dalal Street and has been referred to as a big bull by many investors. Jhunjhunwala has made billions from scratch by just investing in equities, hence, when he talks people listen. It needs to be noted that, Jhunjhunwala’s majority holdings gave him sleepless nights in 2018, however, by end of this year he made only one buying against removing money in three stocks. These three stocks which lost some love of the ace investor are - Autoline Industries, Firstsource Solutions, and Rallis India. 

It was Autoline and Rallis India that saw most selling by Jhunjhunwala. He reduced his holding by 0.16% each in these two companies. 

Now, his holding stands at 9.25% with 17,980,820 equity shares which are worth Rs 301.5 crore in Rallis. Meanwhile, he has now 8.18% stake in Autoline with 1,751,233 equity shares valuing up to Rs 11.6 crore. 

On the other hand, Jhunjhunwala trimmed his holding in Firstsource by 0.01%, taking his overall holding now to 2.89% with 20,000,000 equity shares, which are worth Rs 93.7 crore. 

In 2018, Autoline has given 40.22% drop in its share price, which means Jhunjhunwala took no gains home that year. Similar was the case of Rallis who plunged by nearly 38% once again disappointing the investor. 

Interestingly, Jhunjhunwala removed his money in Firstsource, despite the company gave a single-digit return in the year. The company was among few stocks which were on a positive note for Jhunjhunwala in 2018. The RP-Sanjiv Goenka led company rose by 7.89% on exchanges. 

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Should you invest?

There are no investment calls given on Autoline Industries. However, few analysts have spoken on Rallis and Firstsource. 

Analysts at ICICI Securities said, “We revise our EPS CAGR for FY18-20E downwards to 10.3% factoring in concerns in the payer segment and macro uncertainty. However, a revival in top client spend, a healthy deal pipeline in BFSI, new deal wins and margin expansion remain key positive triggers, going forward.”

ICICI Sec reiterates saying, “ We believe the recent price correction factors in most negatives. Hence, we maintain our BUY rating with revised our target price of | 75 (13 x FY20E EPS).”

Interestingly, Rallis India is one of the best 2019 picks of investors. 

Religare Broking firm said, “In Indian agriculture, utilization of crop protection and agrochemicals in improving farm productivity is still low. This provides immense scope for market expansion for Rallis. In addition, the government has set an ambitious target of doubling farmers’ income by 2022, which could lead to an increase in demand for agri inputs. We believe Rallis’ growth in value-added products, increasing distribution reach and farmer connect makes it a viable play in the agrochemicals space.”

Further, Religare added, “ Improvement in returns (ROE and ROCE) and efficient working capital management are the other key positives. We expect sales and PAT to grow at a CAGR of 13.2% and 16.3% respectively over FY18-21E. Further, the concerns over poor monsoon leading to muted numbers in FY19E are factored in the current valuation. Hence, we recommend Buy with a target price of Rs216 (16xFY21E).”