WHY SAURABH MUKHERJEA DOESN’T REGRET
SWITCHING TO TITAN FROM ITC TWO YEARS AGO
When Saurabh Mukherjea sold ITC about two years ago, the stock wasn’t a meme, share prices were on the lower side, and there were a lot of options to value investors. The top stock picker on Dalal Street chose the well-known Titan over a hidden gem. But in 2022, things started to change. While Titan has had a year-to-date value loss of 16%, ITC stock is up a third.
Does Mukherjea, who oversees assets worth Rs 12,000 crore, regret buying up Titan so late and skipping ITC, given that Rakesh Jhunjhunwala has achieved multi-bagger returns?
WHAT SAURABH MUKHERJEA HAS TO SAY?
“Share price action has no bearing on what we do. Whether it is ITC, Titan, or HDFC Bank NSE -0.50 %, the share price tells you nothing about the company. If the share price has gone up, you should not be happy. If the share price has gone down, you should not be depressed,” told Saurabh Mukherjea in an ETMarkets interview.
He compared stock prices with a drunk man swaying his way through the street at night, and said: “If he turns left, it does not mean his house is on the left. If he turns right, it does not mean he is looking for a taxi on the right. He is just a drunk man swaying his way through the night. Our focus is on accounts, capital allocation, and the franchise.”
“ITC’s franchise in cigarettes remains as dominant as it was 20 years ago. They are a powerhouse franchise in cigarettes, one of the greatest free cash flow generators ever in Indian history but the capital allocation of that free cash flow is not the greatest,” said Mukherjea while telling the reason behind his exit.
ITC, a significant player in the cigarette to hotels market, is a fine company, according to him, and will continue to compound by about 15%, but it falls short of the 20% figure that his PMS company Marcellus is aiming for.
Titan is currently one of Team Mukherjea’s most valuable holdings. The fund manager, on asking if he was late in investing in the Tata Group company said that Titan only holds a 6% market share in India’s thriving jewellery industry, which is dominated by small, family-run jewellers.
‘Coffee Can Investing’, ‘Unusual Billionaires’ and ‘Diamonds in the Dust’ book’s author said “Titan’s competitive advantages are unparalleled. Free cash flows have grown for Titan at 30 percent over the last 20 years. It has become almost impossible for the local jeweler to compete with Titan,”
“One of the reasons we held off was because we wanted to see how good the succession planning is after the CEO Bhaskar Bhatt goes,” he expressed.
Jhunjhunwala’s largest holding,Titan has increased over 300 percent during the past five years.
