[Follow-up] Monster Stock Correlation: Bajaj Finance

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Bajaj Finance has been most loved & most hated stock on Indian bourses. Those who invested in May 2020 love the stock, and those who anticipated it to go into 3-dgitis or even 2, hate it the most. I wrote a post back on 18th June 2020 and the post was to present my study of Bajaj and its characteristics as a Monster Stock. It was also an attempt to show that Bajaj has made the bottom and there is no chance stock is going to fall into abyss.

Here we are in December 2020, mere 6 months apart, and stock is already at its lifetime high level. From 1784 on 27th May 2020 to 5286 on 17th of December 2020

So what did people miss back in May 2020?

I think people relied on social media gurus and TAs more than they should have. Let us accept this for the fact that BAF has deeply rooted into Indian economy & baseline buyer’s psyche. People looked at BAF from a very restrictive POV, i.e. too bookish POV rather than using common sense and it got them in.

One question I asked myself – Who if not BAF? and I could not find the answer.

I then listened to Rajeev Jain who was very proactive in conducting concalls for investors. This is where it gets interesting. Many investors take easy way out and prefer reading concall notes in some WhatsApp group than spending some genuine time and listen to the management. It has a great impact on your investing methods. In the concall Rajeev Jain said – We can survive shocks! – The statement seems normal but it was not the statement but how it was said. The strong emphasized way of saying this gave immense confidence and I knew that forget 3-digitis, we are not even going to 1600 levels.

It was as simple as that. There is no other player strong enough to replace BAF. Without BAF’s retail financing how are we aiming for a $6trn economy? And why is that every bearphase gives birth to new leaders? This narrow and old thinking got people in and they missed buying this gem of a business at throwaway rate of 1800.

Conclusion:

  1. Keep investing simple
  2. Listen to fewer people
  3. Connect only necessary dots
  4. Do not believe in narratives
  5. Ignore Twitter Gurus/TAs
  6. Do not take shortcuts – do original research, take time to listen to management etc

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