Over the years we have been searching for unusual themes and frameworks for looking out for investment ideas with triggers.
We have earlier looked into – Chor Bane Mor - http://www.nooreshtech.co.in/2016/11/chor-bane-mor-can-now-change-to-chor-zabardasti-mane-mor.html A few years back when used to be little scared to talk about it and now it has become an investment strategy and a well known phrase.
A particular frame work which we have been using for spotting interesting ideas has been Buying when P-E, Co Promoter, Related Parties, Institutional Investors wants to Sell and Go Away.
Some profitable investments for us.
- Welspun Enteprises for example around buyback in which promoter did not tender cash was close to 70-100% of the market cap.
- Lancor Holdings saw an entry of a known investor.
- Sinclairs Hotels promoters bought.
We missed out on Bhansali Engineering and Ashapura Mines even after tracking because of being biased about their past.
One needs to follow bulk deals/insider trading disclosures on BSE/NSE and do a further research too. But we have found this to be profitable. Another reason to look at such situations is that even in smallcaps one can get enough liquidity also.
1) P-E Selling and Promoter buying.
A lot of P-E investment in India was in 2005-2010. Generally the investment horizon of the P-E funds is 7-10 years. Its not necessary they may sell after 7-10 years but if the fund is closing there could be some selling purely because of the mandate.
It gets interesting when Promoter buys the stake from the P-E as the promoter can have a horizon forever ( or till the next QIP / Dilution ). Its not often we see promoters would trade for a quick bounce back There are high chances that particular price could be an interesting price point to evaluate for an investment.
Examples – Jamna Auto, Sinclairs Hotels, Welspun Enterprises,
2) Joint Venture/Co-Promoter/P-E Selling and Institutional Investor Buying.
There are many times a family member not part of the core business or a Co-Promoter or Technology Partner who wishes to sell out for various reasons not necessarily dependent on the fundamentals of the company. In some cases a few years back it was due to the 75% rule. Entry of an institutional investor with a strong track record of catching winners could also be a way to clone the investment.
Examples – Lancor Holdings , Ashapura Minechem, Bhansali Engineering , Minda Corporation, Adi Fine Chem ( FairChem Speciality Limited ) etc.
Not covered - Gufic Biosciences ( Promoter sold to a Mutual Fund stock up 100% in last few months ) , KPIT Technologies jump after a fund selling and HNI Buying.
Disclosure – We have recommended and author has had investments in some of the names from above. The author holds positions Sinclairs Hotels. None of the above are recommendations !! – Please read disclaimer
There can be further permutations and combinations of some selling which at times is more due to fund time frame getting over, divorce, partner selling etc.
Some of the particular cases which are going similar
- LT Foods – ( Daawat Limited ) – India Agri Business Fund has been selling and stake is now down closer to 5% from 15% in last 2 years. Recent announcement of QIP.
- Kabra Extrusion – The foreign collaborator has sold 10-12% stake but no details of the buyer.
We have only covered a few cases of past and present which we have tracked. There could be more. Do share with us – firstname.lastname@example.org .
Disclosure – Author has exposure in LT Foods and is a biased view.
Next we may try to cover Insider Trading / Bulk Deals for filtering interesting ideas. Have written a bit about it in Chor Bane Mor presentation.
DISCLOSURE Nooresh Merani
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