ValuePickr Forum

Abhishek's portfolio

Dear Friends,

I have been following this forum and see so many experts who have made some fantastic decisions regarding stocks. I am a relatively new investor and have started only 2 years bad and picked some really horrible stocks in the past. I like to have more stocks in my portfolio as opposed to a concentrated portfolio. This helps me reduce the impact of my mistakes as I am still just learning. I believe as I get more experienced I will concentrate my portfolio more and more.

Would love to learn from you guys. Here is my portfolio. I invite your comments on allocation, individual picks, which ones i should keep and which ones to let go and where I should increase allocation. Thanks in advance for your comments.

STOCK Portfolio Weight
Delta Corp 13.3

Hathway
11.2

Jindal Steel and Power
10.8

MCX
7.9

Reliance Ind.
7.6

Oberoi Realty
6.5

Tata Motors
5.4

NESCO
5.0

Phoenix Mills
4.1

Bharat Forge
4.1

SESA Sterlite
3.9

Mahindra Holidays
3.8

Zydus Wellness
3.6

Gujarat Gas
3.2

Titan Industries
2.4

Sriram Transport Finance
2.3

NMDC
1.6

NTPC
1.4

Eros Ent.
1.1

Petronet LNG
0.7

guys please, any suggestions would be welcome!

abhishek.

you can list down your investment logic behind each of your top few picks…

nesco, stfc, zydus wellness seem okay… You can go through valuepickr portfolio thread and see the recommendations… then you can follow the individual stock thread on valuepickr and make informed decision.

hitesh.

1 Like

Ok. I am going to try to be short. Please do tell me your opinions.

I am going to start with stocks that I am currently and steadily increasing my positions in:

1). Gujarat Gas - virtual monopoly, government gives sole license to operate as a city gas distribution network in areas and anyone consuming less than 50,000 metre cube per day in that area have no choice to buy from anyone but them. This includes anyone from a household to large businesses who have requirement of gas. This allows them unlimited pricing power. I was on the other end of their monopoly when buying gas from a company I used to run! High ROCE, growth growth numbers over last few years and historically low PE’s make this a good choice for me.

2.Tata Motors - Enough has been said about this stock already.

3). Titan - I had a chat with one of RJ’s managers who told me that the curbs on gold import have only made RJ more bullish on Titan since the barriers to entry have only gone up. Removing foreign LC financing makes the business more working capital intensive but Titan is one of the only few companies in this sector that will be able to cope with this because of their already strong balance sheet. We have already seen the impact on companies like Gitangali. Moat of a strong brand which is recognized by people coupled with their past history of bouncing back and low valuations makes this attractive to me

4.Delta Corp - as and when our Governments thinking regarding gambling is liberalized (and this is inevitable) this stock is to stand to gain the most. In the near future, the opening of their Daman casino is going to create 3 times more gaming positions (and hence revenues). The exit from the realty business is a positive signal because it allows them to focus on their core business. This is a long term pick for me.

5). MCX - I still believe in this story despite the scam surrounding its sister company. History suggests that even when a transaction tax was introduced in equity trading, there was a similar dip in volumes but it slowly and steadily creeped back up as people got used to it. Indias volume of commodity trading is abnormally low compared to other countries which presents a huge opportunity. Further 50% volume is in options and 50% in futures and currently options trading is banned in India in commodities. If and when this opens up, this could be a huge jump in volumes. Further with a current market share of approx. 80% this is as close you can get to a monopoly. Upsides from MCX-SX are expected to start coming as their volumes are increasing by the day. I believe that if the government doesnt intefere in an unexpected way the profits should only slowly but steadily rise. Furthermore, there is almost negligible capex required.

6). Oberoi Realty - One of the only few 0 debt realty companies. The reason for this is simple. Unlike other realtors, he believes in JV’s with land owners and focusses on his core skill which is execution. This means far lower committment of cash. He has a strong brand value and is able to command significantly higher prices (i have personally experienced this) because people know that the project is likely to be completed on time. It is operating in a tough Mumbai market but we can see that he is diversifying his portfolio in other cities. His model of late is quite simple. The revenues from his Worli project have not started flowing yet and although sales should be slow over the next 6-8 months, I am expecting it to pick up. Given the huge amounts of cash, it is available at a relatively attractive valuation.

7.JSPL - I am looking for a rally to exit this stock.

8.Hathway - reasoning was the gains that this stock will have because of the digitization. I had a short term goal of approx. 3 years when I bought it in Feb 2011.

9). Eros Entertainment - Idea of buying stocks is to own companies that deliver profits even in a slowdown. Well, Bollywood is an industry which doesnt understand the meaning of the word slowdown. Despite 10 year low GDP growth rates in India, Bollywood films have only gotten bigger. This is one of the largest publisher which good track record. I have personally met one of the owners on a couple of occasions and know that they eat, sleep, drink and breathe movies. They have a good name that they have created in the industry and are able to attract the best of talent (be it actors, directors, etc.) to produce movies. They have some super hits in the past (Grand Masti did 100 crore+) and besides their old movies give them a constant stream of income which is only going to increase going down in the future. Available at 10 times PE and growing at 15-20%+ I think this is an attractive buy.

10). Petronet LNG - cheap valuation. Historically low PE’s. Everyone knows the natural gas story in India. The demand supply gap is almost alarming and worrying. This happens in very few industries. Until someone makes a huge discovery, imports are the only solution. Petronet being one of the largest doing so with firm sourcing contracts with governments in the middle east, it is well poised to grow in the future. There will be immediete pressure on profitability in the near future because they are not able to evacuate gas from their new Kochi terminal but this should be resolved in 2014. Good stable growth in profits, good ROCE, no shortage of demand for the next 10 years - a good long term pick according to me.

Hitesh and everyone else, any comments?

Eros entertainment: I was into this stock with similar ideas as you have. I got out when it rallied last time to around 180. I think it is a good company and they have a reasonable pipeline of movies all the time. The most important reason I got out of this stock was the uncertainty around each movie release and the presence of better and more compounding businesses available (look at valuepickr’s scorecard). It is not a bad investment per se but I found it risky.Other things which looked negative were

a) From a business perspective I did not understand totally the difference in business of the parent company and this company.

b) Company is majorly into two sectors, film financing and film distribution. I would be interested in knowing the margins of each. For example there was no way for me to find out the margins company made in Grand Masti.

c)The state of Indian film industry and the way it is controlled by actors/directors who end up producing and/or distributing most of their own films (Shahrukh, Saif etc.)

d) Saw the trailer of Kochadiyan (Rajnikanth starrer) and found the animation below par. This is a big budget film and the company seemed to be betting huge on this. This was just a subjective decision.

e) Last year growth numbers were low and this year too I do not see them improving.

One great positive which I thought and looked for more information (but did not get any) is how much did the company make from youtube advertising. This is currently ignored in balance sheet but is a cash cow still not accounted for.

Delta Corp: I was tracking this company 2 years back and also made investments and came out of it. Not to say anything about the promoters (I do not know anything about them) but it was one of the highest manipulated stocks around two years back. Some of the stock brokers who I knew personally would keep manipulating by circular trading. I would advice you to take due caution here.

Titan: I think this is a great pick. I too am looking to get into this stock but at lower levels. The company’s performance this year has been below par compared to previous year’s. Other than the general positives around Titan the bad news surrounding competitors like Gitanjali and Shree Ganesh Jewellery will help Titan further.

Anyone has any views as to why there is such a hugediscord between valuations of Gruh finance and companies like LICHF, Dewan Housing Finance and Can Fin Homes? Is there an opportunity in companies like Can Fin Homes and Dewan Housing which are trading at less than 5 times earnings?

Thanks for your valuable comments anant. It is really something to analyse. In the meanwhile, regarding Titan, I feel that gold curbs have had a huge impact on Titans performance becuase of short term supply constraint. However, if you read the papers today it is expected that this will start easing soon. Also at current levels and PE of 23-25, it is trading at 5 year low valuations as its PE generally hovers at around 30. Further, withsome of the large competition near bankcruptcy, thisshould open upmarket even more.

Besides even though their watch segment is only 10% of sales (and not growing currently), the kind of R&D and new models they are launching, I feel they are poised to really capture this nascent yet a huge potential opportunity. Local watch brands like Sea Gull (look it up on web) are really examples of how companies making simple quartz watches worth a few thousand ruppees like Titanhave slowly and steadilymigrated to making high end watches. Recently they launched atri-axis tourbillons which cost 30 lakhs per piece (a Swiss made tri axis tourbillon costs in excess of a crore per piece). Down the road, I see a similar trajectory that Titan can take. It might take more than10 years though!

One more thing that is interesting is their focus to concentrate on multibrand retail and licensing other watch brands. Watches are one of the best items to retail because of their high prices and ticket sizes and low volume that they take up to display! I think this too will serve them well in the future.

This is my view.

Btw, anant, I must complement you on your analytical skills. I hope I can grasp the same in the years to come. Regarding Eros and your point about risk, I too thought about how a bad film can completely ruin a quarter/year but then I went back to their performance in the last 8 quarters and didnt find a single quarter where their performance has slipped by more than 10% YOY which made me believe that they can continue this performance.

I also thought about what you said that the biggest actors like SRK produce their own films but I had a counter arguement. As long as big films by these actors dont release at the same time, there is no question about competition. It is not like buying an FMCG item where you only need for example 12 soaps a year or drink 30 cans of pepsi a year. In the same way an audience never decides that it is September and I have already watched 15 movies this year and thus I dont want to watch any more. If they see a big film they come to watch it. Which is why I felt that this industry is different from others in that producers are not really competing in a strong sense.

Regarding your point on Rajnikant, I dont think animation is what is going to draw the audience. What is going to draw the audience is Rajnikant! I used totravel to Chennai frequently and had the opportunity to talk to taxi drivers who used to tell me that they were willing to spend half a months salary on tickets sold in black just to watch a Rajnikant movie. There were others who mentioned how they watched the same movie in the cinema more than 10 times! Its a risk but it may pay off in a big way too! Also, coming

This is my opinion.

Also, the watch company I mentioned Sea Gull is a chinese company based in China and HK.

abhishek,

coming to your logic for some of the investment picks…

I have been avoiding govt or state govt owned companies since a long time and with good results. guj gas may have a monopoly but at the end of day will dance to the tune set by the govt of gujarat.

Same logic applies to titan. govt may tighten the noose further in a bid to lessen CAD.

Petronet LNG is again a govt company.

Coming to the cyclicals like JSPL, Tata Motors etc for me to get them right with a high degree of accuracy has been difficult.

Eros has shown blockbuster hit after hit but that doesnt seem to be reflected in the numbers… entertainment industry suffers from poor disclosure and maybe even under reporting of profits.

Hathaway has been the flavor of guys coming on tv citing the change in business dynamics due to digitisation… But I would like to first see what kind of normalised earnings they report once the full impact of digitisation plays out before taking a call. Better to buy maybe 20-30% higher from current market price with a higher degree of certainty rather than being punished for being too jumpy.

Personally I dont own any of the companies you discussed so I would not know the full merits or de merits of investing in them. But given a choice I would stick to the well established themes and higher certainty rather than pursue companies where there may/may not be tailwinds.

@Abhishek,

I track petronet closely and have been invested since 2009.

I have exited some 3-4 months back at abt 145…

Be careful at this moment because they have huge bottleneck in their kochi terminal.

Their pipeline is incomplete by Gail and expect it to be ready in another year or 2. Hence the capacity utilization will be very less. Meanwhile interest and depreciation will eat in to profits big time from this quarter ending December itself. You could have noted signs in September quarter. I have a hunch of sub 100Rs. levels in coming year…

Just a caution but take your own decisions…

Hi Abhishek,
PSUs are generally pretty poorly managed.Moreover,they are run with little regard for shareholders,since they are obviously owned by the Government.I think buying a PSU with a monopoly kind of biz is the only apt idea(if someone really wants to be with PSUs) So,maybe Power Grid,NTPC,Coal India maybe OK.But there are a lot of good companies available.Since you don’t own ANY Pharma,IT,Agrochem names,you can certainly shift funds to them: PI Industries/UPL/Dhanuka,Ipca/Alembic Pharma/JB Chem./Lupin,TechM/Persistent/Mindtree/TCS/Tata Elxsi.Then there are companies like Amara Raja,Page,VST Tillers,Swaraj Engines…all well managed,growing companies,with low headwinds.
Regarding Eros,I too was disappointed last year.I am pretty sure they are under-reporting profits(for whatever reason) NESCO should do well,Oberoi Realty is a pretty unique realty co.,but the growth may take longer to seep in.Though if you have high personal conviction,then stay put.

Avanti Feeds 2,48,880
Delta Corp 3,02,100
Den Networks 38,521
Dewan Housing 1,46,340
Eros Entertainment 84,081
Granules India 1,07,185
Mayur Uniquoters 1,75,959
MCX India 1,90,093
NESCO 1,27,330
P&G 1,69,233
Selan Oil 1,43,178
Tata Motors 2,44,639
Tree House 1,68,787
TV Today 1,63,150
Wim Plast 1,19,880
Zydus Wellness 95,543

Friends I have rejigged my portfolio completely after reading this forum and learning about how to pick stocks better. I would really appreciate comments from senior boarders like Hitesh, Ayush, Donald, Rudra, Vinod, Prasanna, Hemant and all other people who have a view!

There are still a few more changes I would like to make.

Sell - Eros, Den Networks and 50% of holding Delta Corp

Allocate those funds towards buying - RS Software and Muthoot Capital

The focus was to buy stocks with the following characteristics

1). High ROCE

2). Low Debt

3). Low Institutional Holding

4). Market Cap lower than 3000 crores

5). PE less than 15

6). Possibility of Profit growth > 20% for the next 3 odd years

7). Possibility of Revenue growth > 20% for the next 3 odd years

Tata motors is a stock that breaks atleast 4 of the above 7 rules but my thinking here was a little different. In short, JLR has been contributing more than 80% of Tata’s profits for the last couple of years. I believe this is going to be the growth engine taking this company forward. If you look at Mercedes, BMW or Audi - their respective C class, 3 series and A4 forms more than 40% of each of the company’s sales. However, Jaguar does not have a car developed to compete in that segment. However, this is slated to be launched in Dec 2014/Jan 2015. This along with a slew of other new product launches over the next 4 years is expected to increase their sales 4 fold over this time frame. In the short term, the start of the plant in China which forms more than 25% of their sales should add to margins (due to savings of duty).

Look forward to comments on current portfolio and the planned changes!

Abhishek

Abhishek,

You are very right about Tata Motors. Its Jaguar that adds the zing factor to Tata Motors. Jaguar fulfills what I call the Aspirational value to the company’s products. This enables a premium pricing, and lesser synchronism with overall economic downturns since these cars are bought by the relatively moneyed folks.

I still kick myself for missing out on Eicher motors where their flagship product Royal Enfield Bullet become an aspirational product.

Stock Allocation
Avanti Feeds (2) 17.56996876
Ajanta Pharma (2) 9.0
Adi Finechem (2) 8.8
TV TodayNetwork 5.6
P and G 5.6
Wim Plast 5.2
Tata Motors (4) 5.1
Mayur Uniquoter (4) 5.0
Dewan Housing 4.9
MCX India (5) 4.2
Tree House 4.1
RS Software 4.0
PC Jeweller 3.8
Kesar Terminals 3.5
PTC India Fin 3.3
MPS 3.2
Shilpa 2.9
Selan Explore 2.2
Tata Motors (D) 2.1

An updated look at the portfolio for comments please

I currently hold about 30% of my portfolio in cash

Hi guys, a quick update on my portfolio. Hope to get some comments.

Stock Allocation
Ajanta Pharma 8
MCX India 8
PC Jeweller 7
Hindustan Media 7
Adi Finechem 7
Avanti Feeds 7
Mayur Uniquoter 6
NESCO 5
Wim Plast 4
Dewan Housing 4
TV TodayNetwork 4
Shilpa 4
Tata Motors 4
PTC India Fin 4
Tree House 4
P and G 4
Kovai Medical 4
Selan Explore 3
MPS 3
Kesar Terminals 2
RS Software 2
Tata Motors (D) 1

Few changes:

1. Avanti was having an uncomfortably high allocation and I trimmed the position in half

2. Have added fair chunks of NESCO and Hindustan Media Ventures (HMVL). These are what I would call steady low risk stocks with what I feel is low downside risk. The moats in both businesses are tremendously powerful and at this stage I would be comfortable holding these stocks for a very long time to come. Given that risk is low, I would be happy to see an 18% appreciation in them over the next 5 odd years which I feel even without PE expansion is very much possible. I also feel that in both cases, with the high quality of the stocks, there is further room for PE's to expansion even though they are already at elevated levels as compared to the past.

3. Added to MCX and PC Jeweller. I just dont understand why PC jeweller is trading at 15 times earnings. I think it is not the highest quality but at these prices, it is definitely worth having in the portfolio.

4. A bit controversial, but I have started to add to my position in Selan. I am sitting in heavy 30% losses in this stock but with the 150 crore cash in balance sheet and the fact that the company is available for 350 crore (including cash), it makes it lucrative for me, even though oil prices are at all time low. I believe that oil companies are good cash cows and according to my calculations, selan shouldnt lose cash even at $40 per barrel including maintenance capex. I will wait for Q4 results to confirm my hypothesis before slowly adding more.