When you study Rakesh Jhunjhunwala portfolio strategy in detail, the first thing that strikes is the ruthlessness manner he treats his non-performing stocks. While in his personal life, the Badshah is very gentle and generous, he cuts no slack when it comes to the soldiers in the battlefield. Rakesh Jhunjhunwala does not tolerate any stock just hanging around without earning its keep by enriching the portfolio.
It was long believed that some stocks in the hallowed portfolio were immune from shock treatment. However, this time, the Badshah shocked everyone by hauling up his crown jewel stock Titan Industries and putting it in the dock. To be fair, Titan Industries is not guilty of any slackness. Its underperformance is entirely due to the spiraling up of gold prices and other external factors. But Rakesh Jhunjhunwala was unforgiving. In his books, Titan was an underperformer and it paid the steep price by having its position in the hallowed portfolio slashed to 6.77% from 8.05%.
However, the important point is that there is no need to despair because this is not a sign that the Badshah has lost confidence in Titan. Rakesh Jhunjhunwala often uses the ‘shock and awe‘ treatment to get his stocks to toe the line. We have seen this strategy on a number of occasions in the past. The stocks get the message, toe the line and begin to perform. Titan continues to be the crown jewel in the portfolio and it wont be long before it comes back into the Badhshah’s good books.
The other stocks that faced the ignominy of being dumped by Rakesh Jhunjhunwala were Geometric, A2Z Maintenance, Delta Corp and Sterling Holiday. Despite repeated opportunities, these stocks have just not lived up to the Badshah’s expectations and they have been given a stern warning that they have to either perform or perish. There is no space in the portfolio for free-loaders.
If Rakesh Jhunjhunwala is strict with non-performers, he is lavish with praise and rewards for the performers. This time, the apple of his eye was Lupin which contributed with a healthy 25% YOY return. It got rewarded with a 2.10% stake from the earlier 1.94%. The others in the Hall of Fame were McNally and Anant Raj which also got a significant boost in their holdings.
The message from Rakesh Jhunjhunwala is loud and clear that investors must never rest on their haunches even when it comes to their favourite and trusted stocks. They must be on the alert all the time to weed out the non-performers and reward the performers. This winning strategy of Rakesh Jhunjhunwala is called “Water the Flowers and Cut the Weeds” and it must be religiously followed by all investors.