Abhishek's portfolio

Hello All, the journey over the last few years has been one full of learning. Have gone from investing in what can be described at best as marginal business to companies with a strict filter. Here is the portfolio as of today:

Jubilant Food 9.2%
HDFC Bank 8.5%
Bajaj Finance 8.3%
Avanti Feeds 7.7%
Ajanta Pharma 6.9%
Orient Refract 6.8%
TV TodayNetwork 5.3%
Pidilite Ind 5.1%
MCX India 4.5%
Can Fin Homes 4.0%
NESCO 3.8%
Menon Bearings 3.6%
P and G 3.5%
Wonderla 3.4%
Castrol 3.4%
Cera Sanitary 3.0%
Eicher Motors 2.9%
Stovec Ind 2.8%
HDFC AMC 2.8%
Assoc Alcohol 3.7%
Wim Plast 1.6%

I am currently holding about 25-30% of my portfolio in cash. Between Jan 2017 and June 2018, I have been fortunately disciplined enough to not have a single buy transaction in my portfolio. In the meanwhile, I have gotten ridden of a lot of mediocre/average/below average stocks during this period. At the height of Jan 2018, I was fortunate to be sitting on 50% cash.

I started buying stocks such as Bajaj Finance (2300), HDFC AMC (1300), Eicher (24000), Associated Alcohol (320), Stovec (2400), Castrol (155), can fin (342) and menon bearings during this correction.

My current take on the happenings: and reasons for staying 25-30% in cash (looking to slowly start deploying now)

  1. Small cap index is trading at fair value on P/B and some stocks seem to be attractive - mid and large cap are trading at above long term averages
  2. Oil price correction has already started resulting in falling costs for many companies and particularly manufacturing companies should fair better if prices hold. A lot of friends who own manufacturing businesses are speaking about lower input costs and rising margins.
  3. There seems to be no recovery in corporate earnings with the exception of small caps
  4. Retail investors (direct and through Mutual funds) seem to continue flooding the market despite such intense selling by large foreign investors - generally retail investors have always got it wrong
  5. Indian market is quite liquidity driven and happenings in the US market generally reflect in Indian stocks. Bond sales by Fed have started to the tune of $50B a month together with interest rate tightening. This is likely to have an opposite effect to QE today or tomorrow. Never in the 200 year history of US has interest rates been so low for such a long duration of time. With unemployment at under 4%, unless their economy slows down considerably, the interest rates should keep rising. Debt to GDP is also above 100% and at all time highs so little option of levering to stimulate economy further. It looks like a repeat of 1966-1982 period which started off on a similar note minus the inflated Fed balance sheet! I feel there is going to be continued negative liquidity pressure from the Western economies on the Indian stock market.
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Hello Abhishesk,

Could you please share your rationale while selecting Castrol

It looks as value trap now since the numbers looks cheap but the business growth seems to be tempered as Shell started eating it’s core business.

Disclosure: Invested

Castrol has a tremendous brand and distribution and generates a tremendous amount of free cash flow. Today, it is available cheaper than at any point in history of the last 7-8 years. Thats a starting point. There are lot of questions looming in peoples mind with growth of EV, auto slow down, etc. I feel people have built in a lot of negatives in the price of the stock. I personally believe, there is a long time before adoption of EV’s takes place in India. I believe Castrol will continue to grow for some time. With a 5% dividend yield, I believe downside is limited. Not sure about Shell eating share. Please share insights if you have any. Their sales seem to have grown at rates similar to the past even in the recent quarters. Margins have been a bit more volatile than previous points in history due to the obvious volatility in oil prices. It is a bet to preserve capital as I feel this stock will fall less than the market.

Are you holding menon bearings?