Cloning Rakesh Jhunjhunwala

Copying from the Rank student is as old as the system of education. Students who are lazy enough not to put in their own efforts would love if they can get their hands on the answer sheet of the Rank Student and enable them to pass the exam without having to deal with the nitty gritties of studying for the same.

While copying in exams is illegal, copying the strategy or even better off, the portfolio of acclaimed investors is a process that has been well documented by Mohnish Pabrai who even wrote a book which deals with some aspects of the same – “The Dhandho Investor: The Low – Risk Value Method to High Returns” and “Mosaic: Perspectives on Investing”.

At Portfolio Yoga, one of our aims is to simplify the complexities of investing in the stock markets and what better than to create portfolio’s which mimic the great investing legends of India. By buying the top picks / holdings of these people, we believe can provide for excellent returns though even the best of guys can make bad picks and hence one needs to do a bit of studying rather than blindly copy.

“Be a cloner… but clone the best” says Mohnish Pabrai and who better to start of this series than India’s best known Investor – Rakesh Radheshyam Jhunjhunwala. I do not think that I can say anything about the guy which is not known by the reader.

So, how does one clone any others portfolio?

Rakesh Radheshyam Jhunjhunwala may invest into hundreds of companies, but we as cloners are concerned only about his holdings where he holds more than 1% of the company’s total stock. This is because by having a investment > 1%, he not only shows his confidence in the said company but also enables us to track his holding via the updaets company makes to the stock exchanges.

The secondary aspect of investing would be to determine how much of money one devotes to each company of the investor we intend to clone. A simple formula would be to make equal investments into each such ideas. But if a investor has huge holding (in value terms) in one company and a mearage holding in other, why should we give equal weight to both of them.

The better way would be to invest in the same proportion as he has. Maximum investment in his biggest shareholding and smallest in one where he has the least amount invested. When I say “invested”, I mean the current value since we are not privy to the prices at which he purchased and even if we knew, it makes not much of a sense at the current juncture owing to the appreciation or the depreciation seen by the said stock.

So, if you were investing say a sum of 1 Million based on the picks by Rakesh, what should your investment be in each of his holding stocks?

The answer is provided in the pic below. Do note that the value has been taken as on date while the holding is as on 31-12-2014 for which data has been last updated.

Remember that while cloning is no guarantee for success, it at the very least provides us with a list of stocks one can look deeper.