Two stocks you can accumulate for long term: Deven Choksey

Talking to ET Now, Deven Choksey, MD, KR Choksey Investment Managers, says he has been acquiring Solar Industries and Sterlite Technologies silently for some time.

Edited excerpts:


After the farm loan waivers got announced, even though the finance minister clarified that all the dues would have to be borne by the state governments, it still did not spell good news for the PSU banking pack. Is it time to remain cautious? Is it time to profit take, relook at our investments in PSBs?


It is not a good news at all. The problem is going to be severe if this kind of trend continues in the country. State after state is announcing farm loan waivers. To start with, they are not in great financial conditions so that they can bear such kind of losses and if they do attempt to waive off such kind of farm loans which are largely driven by politicians, it would be quite a dangerous trend and definitely is going to hurt more than otherwise. Whether it is PSBs or state governments or tax payers in general, this is not going to go well. This is going to create negative impact in the minds of global investors as well . Also, the problem could get passed on to the banks because finally the banks will have to make sure that their books are clean.


This government has indicated that it would be moving against austerity. BJP ruled states have introduced a farm loan waiver and for me that is it is slightly draconian.

Yes, that doesn’t sound good. Definitely we want to see that such kind of austerity measures are not taken. But the fact is it has happened in two BJP ruled states and that does not augur well. I would remain quite watchful on this particular aspect, the emerging trends and the kind of feedback the government has to give and actions the government has to take would matter a lot. Just passing on the buck to the state or to the PSBs is not going to solve the problem for sure.

Just a quick comment on the prospects of Reliance Capital and do you think the management is taking a wise decision by listing each and every of their arms and would that bring about a fair amount of value unlocking?


Yes it would mean the recognition of the value which they have built in different verticals within the RCap’s businesses. Yes it would mean the recognition of the value which they have built in different verticals within the RCap’s businesses. At the same time, wherever possible, the group will definitely have to monetise the different assets in order to ride over this particular situation of management of debt at the group level.

Plus, most of the business ventures that the company has gotten into are highly capital intensive businesses and they would be capital hungry businesses at the same time. So the group probably would require a self sustainable kind of cash generation mechanism.
In the near future, they may want to cash out by way of selling part stakes in different businesses they have built. That is where I see the monetisation happening and it may ultimately help RCap shareholders. I do not know how much of the sum of the part of valuation we can calculate but certainly as a theory this particular subject should go up well for the group for monetising their assets in whichever way you can look at it.

Three stocks which you bought aggressively in last one month and why.

We have been silently and quietly accumulating a few companies which we have been liking for some time. One among them is the Solar Industries. This is one company which we believe has long term potential for the investment because that defence part of the supply has already begun in this year and it is likely to accelerate and probably grow to a bigger size. As we understand, for the defence part of the supply, they have got some large contracts in place. Obviously the company could perform relatively better going forward.

With mining activities and other infrastructure projects picking up, the explosive related industrial supply are also showing a steady growth of between 15% and 20%. We believe this is one company one can add to the portfolio with a target of two years and more.

There are other companies where we feel relatively more confident and one among them remains long time favourite which is Sterlite Technologies. Once again the company is being growing at 30% plus CAGR rate of growth. Smart cities related developments, integrations which are happening into the various what you call I think in the smart cities with various technologies which are coming up under one roof. So all of that is basically helping Sterlite Technologies plus they are expanding the capacity of fibre and fibre optics so that gives you the visibility of next three to five years and with the requirement of the fibre optic cables coming up because of the data bandwidth creation, according to me this business offers fairly good visibility of around four to five years from now. We have been steadily accumulating this company but I must say that both these companies have remained in our investment list for long and we have been only steadily accumulating over last few months with the correction in the price whenever it came during the course of the market corrections.