Although he started as a trader — nearly tripling his initial investment in Tata Tea (now Tata Consumer) in 1985 within three months — his investment philosophies were based on fundamental research and talking to the management. And looking at his nearly four-decade investing life, one could clearly relate to the adage ‘today’s small cap is tomorrow’s large cap’.
Jhunjhunwala considered several parameters before investing in a company. First was to look at the opportunity the company offered. Then came the competitive advantages like capital, branding and location. The factor he considered was the ability to scale up a business. Because for a small cap to become a large cap, scalability is the key, Jhunjhunwala had told TOI in the past.
The quality of people and the business’s ability to generate cash were the other considerations for him. He also believed in buying a quality company at a good price.
He preferred to invest in small cap stocks which will become a large cap in the future. In the past two decades, he repeated this process in several such companies as Titan, Crisil, Praj Industries and Aptech.
In recent times, at the peak of the Covid-induced countrywide lockdown, he invested in Indian Hotels. Between March and June of 2020, the stock was hovering in the Rs 75-80 range.
Jhunjhunwala bought 1.25 crore shares of the hospitality major, translating into a little over 1% of the company. Over these months, he further doubled his investment in the company to about 3 crore shares (2.1%) and the stock has gone up more than three-and-half times to its Friday close of Rs 272 on the BSE.
“Rakeshbhai (as he was popularly called) was a good judge of people. He trusted those promoters who were truthful and had a strong positive attitude,” said one of his close associates. “Also, he was a risk taker with a long-term vision. For him the long term was 5, 10, 15 years. He would invest and was ready to wait for the company to show results.”
Jhunjhunwala was also a strong believer in the India story. In late 1980s and 1990s, when several of his friends left India for greener pastures, he refused to shift abroad. Be it a bull market or a bear market, during interviews and also while talking to friends, he would say that the biggest bull market in India was yet to arrive.
“He was the biggest India bull I’ve come across in my 40 years in the market,” said a broker-turned-wealth manager who knew Jhunjhunwala for more than three decades. “He was an eternal optimist. He always believed he would make more money tomorrow than how much he made today.”