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Prof Sanjay Bakshis Fav Stock Falls From Grace Even As ValuePickr Forums Ominous Warning Rings True
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ProfSanjayBakshisfavouritestockwhichsupposedlyhasanimpenetrablemoat
aroundithasfallenoffthecliff.Worse,theCompanyisbeinglikenedtoSatyamand
questionsarebeingraisedabouttheexistenceofahugeamountofcashonitsbooks.
Whatisthewayoutforitsbeleagueredinvestors?
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ProfSanjayBakshismasteryinstockinvestingtheorycannotbedisputed.
Heisastaunchbelieverinthetheorythatbuyingstockswithamoatora
competitiveedgewillbenefitinvestorsimmenselyinthelongrunevenif
theypayaheftypremiumforsuchstocks.
Sadly,theProfsstockpicksarenotlivinguptothehighexpectations
reposedinthem.AtleastthreeoftheProfsfavouritestocks,Kitex
Garments,VaibhavGlobalandAshianaHousing,arepresentlyreelingunder
poorperformanceandareclosetotheir52weeklows.
KitexGarmentsshockedeveryonetodaybyslumping13%onthebackof
poorQ3FY16results.Thestockhaslost35%injustthelastmonth.The
stocktouchedanalltimehighofRs.1070on6thJuly2015.AttheCMPof
Rs.473,thereisawhoppinglossof56%.
ItisnotablethattheProfwasuncharacteristicallybullishaboutthe
prospectsofKitexGarments.InanotetitledTheImportanceof
Unconventionality,theProfcameoutwithallgunsblazinginfavourof
KitexGarments.Hesaid:
AsgiganticcustomerslikeCarters,ToysRUs,Gerber,andTheChildrens
http://rakesh-jhunjhunwala.in/prof-sanjay-bakshis-fav-stock-falls-from-grace-even-as-valuepickr-forums-ominous-warning-rings-true/?curator=alphaideas&utm
1/7
1/26/2016
Prof Sanjay Bakshis Fav Stock Falls From Grace Even As ValuePickr Forums Ominous Warning Rings True
PlacedivertmoreoftheirsourcingrequirementstoKitex,Iexpectthe
companysrevenuesandearningstogrowmanifoldoverthenextdecade.
..
Despiteitstinysize,thecompanyenjoyssignificantpoweroveritsmuch
largercustomerswhichisreflectedinimprovementinitsprofitabilityand
Presentmarketcrisiswillpassifnotin
daysthaninmonths,butweneedto
focuswhatafterthat?.Weneedtofocus
on1.3BillionIndianconsumersfor
Seculargrowthstories.Onewillbe
BrandedApparelPlay.Whatwillbebest
playinthiscategorytorideonurban
consumers??Canmembershelptofind
[]
workingcapitalsituation.EBITDAmarginshaveimprovedfrom16%in2008
to24%inFY14.Workingcapitalturnshaveimprovedfrom4xto11xover
thesameperiod.InFY14,Kitexdelivereda60%pretaxreturnonequity
withnonetdebt.
TheProfalsomadeitclearthatmorebuckscanbeharvestedfromKitex
Garmentsandthathehasnointentionofcashingout:Hewrote:
SUBSCRIBE TO NEWSLETTER
Enteryouremailaddress:
AsIwritethis,thecurrentmarketpriceisRs492pershare.Ihaveno
targetsellprice,andIhaventsoldasingleshare.Moreover,Ifeelgood
thatIinvestedinthisprosocial,andyethighlyprofitablebusinessa
combinationIabsolutelylove.
SUBSCRIBE
Unfortunately,theProfdidnotvoiceanyconcernsorriskfactorsaboutthe
stock.Instead,heraisedarhetoricalquestioninthenoteWhatcouldprove
mewronginthisinvestment?whichwassupposedtobeansweredbyhis
elitestudentsinclassandtowhichthemembersofthepublicwouldhave
noaccess.
ItisnotablethattheProfsunbridledbullishnessaboutKitexGarments
was/isinsharpcontrastwiththecautionexpressedbytheanalystsof
valuepickrforum.
Thevaluepickrforum,cofoundedbyDonaldFrancisandAyushMittal,
boastsofalargenumberofrazorsharpandknowledgeablemembers,each
ofwhomkeepsaredalerttoensurethatjunkyardstocksdontslipthrough
thetightcordon.
DonaldFrancisraisedthepertinentquestionwhetherKitexGarmentswas
reallythathotaninvestmentopportunitygiventhatWehavemany
businesseswhicharecapableofgrowing2025%CAGRfornext35years
wherewedonothavetheseissuestransparency,consistencyandstrong
visibilityfornext23years.
HealsoaskedWhatremainsinthepuzzleishowcomeKitexisdoing20%
EBITDAmarginswhenthenormis10%?isthissustainable?why?
HealsoexplainedthatThekeytoproperindepthresearchisnottotake
anythingforgranted.Andtoquestionanythingthatprimafaciedoesnot
addup
OthermemberssharedsimilarconcernsaboutKitexGarments.krishere
expressedhisworryaboutKitexsfunnymath.Hepointedoutthatthe
projectionsmadebytheMDdidntquiteaddup.
krisherealsovoicedwhathecalledarehismajorfiveconcernsabout
Kitex.
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kharbonProfSanjayBakshisFavStock
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ValuePickrForumsOminousWarning
RingsTrue
DonaldalsoissuedaclearcutwarningtonoviceinvestorsthatWhat
doesntadduparebiggapsbetweenstatedandwhatseemstobethe
currentpicture.
DhirajDavehomedinonwhathecalledconcernsaboutmanagement
conduct,oneofwhichhadtodowithahugecashbalancewhichwas
mysteriouslynotearningmuchinterest.
http://rakesh-jhunjhunwala.in/prof-sanjay-bakshis-fav-stock-falls-from-grace-even-as-valuepickr-forums-ominous-warning-rings-true/?curator=alphaideas&utm
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1/26/2016
Prof Sanjay Bakshis Fav Stock Falls From Grace Even As ValuePickr Forums Ominous Warning Rings True
TheissueoftheallegedcashbalanceinKitexsbalancesheetcameupfor
frequentdiscussionwithseveralmembersexclaimingthatitisveryodd
thatthecashwasbeingallegedlyheldabroadinapparentcontraventionof
FEMAregulations.sumi00calleditsortofstupidbehaviourwhichledto
blowupofmanymidcapsbalancesheetsduringthelastcrisis.They
shouldhavetransferredtoIndiaandinvestedinmutualfundiftheyreally
wanttogethigherreturnsheopined.
varadharajanrwasalsoskeptical.Hecalleditillogicalthatacompany
wouldkeepRs.199croreinaninterestfreedeposit.Ifeelsomethingdoes
notadduphereheaddedinanominoustone.
PP1wasnotatallimpressedbyKitexGarments.Somebrokers,andothers
havebeenpumpingupthestock,Isuspect.hesaidandlateradded
bluntlyThereisnomoathere,Iamafraid.
varadharajanrpursuedtheissueofthecashbalancelikeabloodhoundI
havebeenonlyfocussedonthisoverthelasttwodaysandIamconvinced
thattheRs.200Cr.cashraisesseveralquestionshesaidandproceededto
raiseseveralredflags.varadharajanrwasboldenoughtolikenKitekwith
thescamtaintedSatyamtheRs.200Cr.cashisaphantomcookiejar.
SeemslikesatyamreduxthroughamergerwithKCL,(solikesatyam
maytasmerger),wipeoutthecashandkeeptheschemegoinghesaid.He
addedthathewasveryverynervousaboutKitexGarments.
AyushMittal,thecofounderoftheforumalsosentoutaclearwarning:
giventhepointsraisedandshortcomingsinthecompany,thisinvestment
callcangowrongsoeveryonepleasebecarefulanddoyourhomework
hesaid.
vivekbothraalsosoundedawarning:Cautionhere:Managmenthasnot
alwayswalkedthetalk,youcangothroughlastfiveyearsARtoverify
that.
Thespecterofthehugecashcausedsomuchconcernthatoneintrepid
memberevencalleduptheauditortodigmoreintothetruthofthe200
crorecash.Ofcourse,theauditorassuredhimthateverythingwashunky
dorythoughhewasdescribedasbeingverynervous.
ThecashissueraiseditsuglyheadagainduringtheQ2FY16results.The
managementsassertionthatitwaswaitingfortherupeetotouchRs.67to
adollarwasmockedandtermedasaredflag.Mgmtiscrazyoverthecash
issueIdoubttheCorporategovernanceofthecompanyabhishek90said
whilechiragjain1976calleditatotallyfoolishthingtodo.richdreamzwas
alsosuspiciousofthemanagementsreluctancetocomecleanontheissue
ofthecashbalance.
TherumorsthatsomethingisamisswithregardtothecashbalanceofRs.
200croregotsomecredencewhenBobyMichael,KiteksGeneralManager
(Finance)andChiefFinancialOfficerresignedwithimmediateeffecton7th
January2016.Rajesh_RvoicedtheconcernofeveryoneontheforumCFO
resignationeffectiveimmediatelydoesntseemright.Couldthisbemoreof
anonperformanceorpersonalityclashorsomefinancialmessupesp.
relatedto200crorescash?hepondered.
Meanwhile,beforethemanagementcouldofferanyclarificationonwhythe
CFOresignedintheabruptmanner,theQ3FY16resultshavebeen
announcedwhichcausedthestockpricetotank13%.
Somemembersatthevaluepickrforumwereopenlydistraughtattheirloss
whileotherskeptabraveface.KS16mournedthehugelossthathehad
http://rakesh-jhunjhunwala.in/prof-sanjay-bakshis-fav-stock-falls-from-grace-even-as-valuepickr-forums-ominous-warning-rings-true/?curator=alphaideas&utm
3/7
1/26/2016
Prof Sanjay Bakshis Fav Stock Falls From Grace Even As ValuePickr Forums Ominous Warning Rings True
sufferedAllIcansayisthatfromhere,Iwillnevertakeanyconcallupdate
orguidanceinfacevalue.InIndia,anythinggoesandpeoplecantalk
anything,pullwooloveroneseyes,washtheirmouthandmoveon.he
wept.
ThepuntersatMMBwereequallydistraughtatthehugelossfacingthem.
Mrjacobcannotbetrustedanymoreperiod.Wearetakenforaride.
UnfortunatelyMrJacobtalkstoomuch.Heclaimedfullyearrevenueis
securedINR600cr.NowGODknowswhatwillhappen.Q4cannotbe
magicaltohaveINR250crrev.SothequestioningisDidhebullshitin
CNBCafterQ1resultsmossaddemandedtoknow.
Man111smeltaratinKitexGarmentsResignationofCFOandGMFinance
smellfoulinthecompany.Mostimportantisthecashflowisverymuch
interestinghesaid.
Now,thereisanimportantinvestinglessonembeddedintheKitex
Garmentsepisode.WehavetoseewhetherProfSanjayBakshiunravelsthe
lessonforussoonerorlater!
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Prof Sanjay Bakshis Fav Stock Falls From Grace Even As ValuePickr Forums Ominous Warning Rings True
8 Comments
kharb
January26,2016at8:36am|Permalink
WhlatiswrittenbyProfBakshthathepreachesvalue
investing,butmostoftimeIseehimasinvesterof
Duds.Anybodycangothroughmycommentsivariousarticlesand
stocktalktoseethat.Moreovermanyofsocalledexpertshavebeen
inagreementorhasbeenfatheroftheirDuds.Whichcanalsobeen
seeninvariouscomments.Withoutnaminganystockorexperts,many
ofthemsuddenlystartbuyingadudclaimingthattheyhavefounda
gem.PublicalsofollowedwithoutknowingthatmanyoftheseDudsare
rollingstonetillyesterday,whatvalueadditionmagiccanexpertputin
oldDudswhichhavebeenlyingdorment.Thereissimplegameplayed
withpermoters,buydudcheap,makeabeautifulandsexygriwthstory
anddumpittoinexperiencedandthosetypeinvesterswhoarein
searchofquickmoney.Stockmarketcannotgivequickmoneybut
seriouslongtermplayofaprox20%returninQualityfundamentaly
strongsectorleaderswithsomegrowthandpricingpower.Tome
manyofthenewmagiciansinStockmarketareFatherofDuds.
Reply
kharb
January26,2016at9:03am|Permalink
LatestmagicsectorfoundbyGuruwasrealestate,a
sectorknownfornotoriousfordestroyingandfooling
investersdirectlyinstockmarketandaswellinrealestate
investment,althoughasalwaysallbuildersarenotsameand
maybegood,butadiifcultgametofindoutamongmost.Kitex
garmentfutureperformancehasbeenquestionedbymein
variousformsincludingstocktalk.
Reply
Suvendu
January26,2016at10:00am|Permalink
DearKharb
IdontthinkProfBakshineedstobecalledas
fatherorinvestorofduds.Ibeenthroughseveralofhis
seminars,wontcallhimoutpartoftraditionalvalue
investingclub.Heisentitledtohiscontrarianviewwhile
tryingtodefinecompetitiveadvantage.
SayingthisIdoagree,eventodayIfeeluncomfortableto
someofstockpickingssuchasrealestate,overhyped
garmentscompany.Withsuchpoorbalancesheet
management,littleprotectioniwasntconvincedhow
valuationcancreateasustainablegrowthalone!
Reply
kharb
January26,2016at10:30am|Permalink
IdidnotsaidProfasfatherofDudsand
hasgreatrespecttoourProfGuru..But
simplysaidthatheadvocatedvalueinvesting,but
stunnedtoseehimasinvesterofDuds.Imaybe
wrongbutsorrytosaymanyofhisrecommendations
madetobelievemeso.Ishallbehappytobewrong
andwithGreatrespecttoProfsahebwishGoodluck
toinvestersinhisrecommendation.IwishProfSaheb
alsolookintosomebiggerMidcapsorlargecap
compnieswithauthenticmanagementsandtrust
worthynumbersforbenefitofinvesterslikeme.Any
waysorryforharshcomments.
Reply
http://rakesh-jhunjhunwala.in/prof-sanjay-bakshis-fav-stock-falls-from-grace-even-as-valuepickr-forums-ominous-warning-rings-true/?curator=alphaideas&utm
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Prof Sanjay Bakshis Fav Stock Falls From Grace Even As ValuePickr Forums Ominous Warning Rings True
Reply
god
January26,2016at9:59am|Permalink
yes.bakshiisdkbose
Reply
Anitha
January26,2016at10:57am|Permalink
TodayitisKitex.Tomorrow!!!!Ashapuraintimate????
Reply
Harshad
January26,2016at12:11pm|Permalink
Mistakeskeepushuman
everyonehassomefailuresininvestinglife.
BMfaceditwithHawkins,nowProffacingitwithKitexandVaibhav
global.DamaniwithGati,
Onehastotakealladvisewithpinchofsalt,studyyourown,taken
whateverisgoodforyourfinancialhealth,leaveouttherest.
Someideasclick,somedont,itsindividualsstudyandopinion.
Investmentisajourney,makeprofits,makemistakesbutkeep
movingon..
Reply
kharb
January26,2016at12:17pm|Permalink
BacktoTop
AlthoughIamnofanofBM.Butheatleastdiscuss
qualitynames,butrecommendingevenatanycostis
hisfault.
Reply
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