Amid all the festive cheer, many market experts are recommending various Diwali stock picks and some of them are very well known names. Ambit Capital says that investors must invest in those stocks which nobody is picking up, as there is opportunity in those sectors. As John Templeton once said, “If you want to have a better performance than the crowd, you must do things differently from the crowd.”
In an interview to ET Now, Saurabh Mukherjea of Ambit Capital said, “What we’re telling clients is look at the sectors where nobody wants to invest. Look at IT and Pharma, there are very high quality franchises, which are trading at 14, 15-16 times earnings, with solid cash generation, high 20’s Return on Equity, both in the large-cap IT stocks, and mid-cap pharma stocks. There’s plenty of value there, but investors currently don’t want to look there.” In the same interview, the expert observed that investors are picking up overvalued stocks from other sectors. Investors are obsessed about buying overvalued financials,” he told the channel.
Yesterday, investment maestro Rakesh Jhunjhunwala too concurred that the pharma sector woes are a thing of the past now. “Everything that could go wrong for the pharma sector, has gone wrong. The US market got very competitive. Rupee depreciated, and the pharma companies had very bad sales domestically due to GST. I would say the worst in behind us. The rebound will depend a lot on the individual companies,” Rakesh Jhunjhunwala told the channel.
According to India’s Warren Buffett, investors need not be over-bearish on the sector. “As the prices have crashed, as lot of companies will drop out and invest into generics. People are so bearish these days. So what if say, Amazon sells medicines? I think it’s a positive. Indian pharma companies will have one more buyer. The more the buyers, the better it is. Just because Amazon is selling medicines, prices won’t come crashing down.”
Which companies are likely to do well? “I think companies which have very large business in India are going to do well, regardless of what happens in America. In America, those who can move to complex, who have got a good pipeline, whose research costs are not very high, they will do very well.”
At a time when many other top experts have advised investors to stay away from pharma sector, the investing icon has actually increased stake in the sector. In Lupin Ltd, he has increased stake to 1.89% as on 30th September 2017, as against 1.76% in the previous quarter, even though the drugmaker had actually posted a 60% slump in profits for the first quarter. Similarly, in August this year, Rakesh Jhunjhunwala’s wife picked up 0.9% stake in Fortis Healthcare for an estimated Rs 60 crores, through an open market transaction.