Govind's portfolio


(Govindarajan) #1

Hi All,

I believe in diversification and prefer stable, boring companies for my long term investment. I will share my portfolio with Valuepickr for their comments.

Stock % Allocation
Cash 12
Balmer Lawrie & Company Ltd. 6
Bharat Heavy Electricals Ltd. 6
City Union Bank Ltd. 6
Coromandel International Ltd. 6
Infosys Ltd. 6
ITC Ltd. 6
Nesco Ltd. 6
NHPC Ltd. 6
Oil India Ltd. 6
Bosch Ltd. 6
Can Fin Homes Ltd. 4
FDC Ltd. 4
Graphite India Ltd. 4
Grindwell Norton Ltd. 4
Suprajit Engineering Ltd. 4
VST Tillers Tractors Ltd. 4
Gujarat State Petronet 4

My portfolio is diversified across capitalization, sectors, management (PSU,MNC and Indian Private), dividend yield, growth and value.

I prefer to invest for long term with dividend focussed investing.

VST Tillers and Suprajit are from Valuepickr picks.


(Govindarajan) #2

CanFin Homes was languishing below 100 when I read an Ad in newspaper saying canfin is planning to open more branches and looking out for probationary officers. One of my relatives who attended the interview but she was rejected. The reason cited was they were looking for male candidates who was very comfortable with local regional language and will to go that extra miles to reach set targets. Also they were very active in appointing DSAs who will bring in more sales. LICHFL’s service is very bad but it is thriving only because of its DSA’s.So market has not considered all these developments and was giving the same price to the stock when it had operations only in Bangalore. When I could make this out, I grabbed that opporunity. It is a LICHFL in the making. I heard from one of their branch persons that Edelweiss was eyeing for some stake though I am not sure of that development. All in all, a decent stable performer with consistent dividends (hope with growth prospects, dividends will also grow).


(Govindarajan) #3

Pharma is outside my circle of competence but FDC finds a place in my portfolio. It has a great brand ‘Electral’ in ORS segment. I had interacted with a couple of chemists, they said that in ORS segment, Electral is mostly prescribed. So it has FMCG nature of business. in Pharma space. It has also good array of products in other therapeutic areas.bIt fits into my bill as it is a stable boring stock with a clean balance sheet available at attractive valuations (even now).One concern is management is not very aggresive enough and not sure what they are planning to do with excess cash apart from buybacks. Recent news about sell out was also denied by the management. I want the company to be retained by same management for their ethical practices and conservative operations. After all, folks love FDC not for its growth but for its stability and clean balance sheet. Overall a predictable stock in an unpredictable sector (atleast for persons like me :smiley: ). If there is any change in management, I would sell my FDC stocks with heavy heart. Hope that won’t happen as I will have to find another FDC. Only Wyeth comes close to it. Watching closely JB Chemicals on its recent development. Sorry for typo…submitting comments using my phone.


(Govindarajan) #4

NHPC fits perfectly to Buffet’s metaphor of a toll bridge.I feelit has the following characteristics to think that it could be similar to operations of a toll bridge company

1). Initial capital expenditure for putting infrastructure in place

2). Then onwards revenuewillbe generated without anyraw material cost and negligible operational cost

3). Only depreciation and low level of maintenance cost will be incurred

NHPC will be a decent company to hold for long term as it would exist in business for years. Hydel power projects can be even operational beyond 100 years. Good dividend yield will ensure that investors are happy holding it for long.


(Govindarajan) #5

Current Portfolio

Stock Weightage
Infosys 20.04
NHPC 11.5
Can Fin Homes 9.79
ITC 8.09
Oil India 7.95
CUB 7.87
Balmer Lawrie 6.84
VST Tillers 6.34
BHEL 5.38
Coromandel Intl 4.59
FDC 2.97
GSPL 2.97
Bajaj Holdings 2.35
Graphite India 1.91
GAIL 0.87
Suprajit 0.57

Allocation is dependent on opporunities thrown by market except for ITC (which is a captain in my portfolio)
Today I tried evaluating my performance against benchmarks. This is how I fared.
Returns Year To Date
My PF Top Fund (G) CNX500 Fund TRI-Nifty
-6.73 -13.62 -11.37 -6.64
I have under performed Tri-Nifty but outperformed funds (which I track). Year to date is a very short period to see if one is performing decently.
The idea of checking this is to see if at all my effort is translating into an alpha or still under performing indices or funds. If I under perform funds and indices then it is better to invest in them and relax else I will happy to make increased contribution to my portfolio from my investments marked for investing in Funds.
One thing which I can take consolation is, I have some contra bets and value stocks which cannot be compared with index constituents in shorter term. Same as the case with Fund Managers also who have their own picks which might give results in longer run :).
I have set my mind to be focused in my investing process irrespective of the market situation and as long as I am convinced about my picks, I hope it would give a fruitful result .
I am letting market decide my portfolio weightage and currently remain full invested.

(Govindarajan) #6

It is almost 10 months since I started off with my portfolio version 2.0. PF is doing better than MF but not Tri-Nifty as rally which we see now is only on a few selected stocks as most of the stocks are still around 52 week lows.

Stock % Alloc
Infosys 17.86
Can Fin Homes 10.96
NHPC 10.93
ITC 8.62
City Union Bank 8.01
Oil India 7.43
VST Tillers 6.67
Balmer Lawrie 6.21
BHEL 5.45
Coromandel Intl 4.38
GSPL 3.53
FDC 3.42
Bajaj Holdings 1.97
Graphite India 1.67
GAIL 0.82
Suprajit 0.5
Intl Travel House 0.43
SJVN 0.43
Ador Fontech 0.38
Pidilite 0.34

Initiated small positions in ITH, Ador, Pidilite and SJVN.
Except for Pidilite rest of those stocks appear attractive from valuation point of view with good dividend yield.
Colgate, Page and Torrent are in my radar but valuations are on the higher side. Waiting for suitable entry points.
Stovec Industries and Benares Hotels seem to be nice picks but need to study them a lot before making a confident entry into them.
Year To Date Performance

PF Top Fund CNX 500 Tri-Nifty
6.678389 3.191576 3.117644 9.273662

(Strong Brick) #7

IMHO, you could replace relative non-performers like NHPC and also BHEL with growth stocks like Ajanta/Mayur/Manjushree.


(Govindarajan) #8

Thanks Strong Brick for your suggestion. NHPC and BHEL are contra picks and are there for dividend yield qualities. The stocks you mentioned are good but only problem is I am SIP guy so these stocks moves a lot and I am not able to add them comfortably. So stocks like VST Tillers, Can Fin Homes are giving me opporunities every month :smiley: to add them to my portfolio.

Another point is, to have real benefits from these stocks, I need to have a concentrated portfolio. Since I have diversified portfolio, growth in these stocks will not have much impact on my overall portfolio.


(Govindarajan) #9

It is now one year after I have started off with NAV based tracking of my portfolio's performance.

One Year Performance

Portfolio Top Fund CNX 500 TRI-Nifty
10.0007 3.9103 2.7105 7.937

Current Portfolio

Stock Symbol % Alloc
Infosys 16.87
Can Fin Homes 11.41
NHPC 9.88
ITC 8.06
VST Tillers 7.68
City Union Bank 7.64
Oil India 6.59
Balmer Lawrie 6.35
BHEL 5.6
Coromandel 4.54
FDC 3.95
GSPL 3.29
Bajaj Holdings 1.86
Graphite India 1.63
Colgate 0.91
Pidilite 0.74
GAIL 0.74
Suprajit 0.57
Torrent Pharma 0.54
SJVN 0.41
Travel House 0.38
Ador Fontech 0.37

Waiting for opportunities and time (stocks have to be attractive every month ) to increase allocation to the stocks in lower half of my portfolio.
Balmer Lawrie, BHEL and NHPC dragged the performance but I keep them for their dividend yields. BHEL is a pure contra play.
Colgate is at 52 week low. I am not able to buy KMCH, ITH and Ador Fontech easily as they are in PCAS. Suprajit is on steroids and not able to add to my initial position.
There is also one thread in Valuepickr which talks about betting on PSUs if BJP comes to power. My portfolio has lots of PSUs. Let me see if I am lucky or not, though I bought them only based on their valuations.

(Kunal shah) #10

i see ITC & NHPC under performing markets in next couple of years. would strongly recommend private sector bank (HDFC , AXIS or yes) . b’cos they are thecompoundernone of two (ITC or NHPC) cancompoundfor next 5 years at their rate .

By Kunal Shah


(Govindarajan) #11

Thanks Kunal for your points.

I agree. The below is the rationale behind my investment in ITC and NHPC.

ITC:

  • Professionally managed FMCG company with zero promoter holding
  • Cigarette business is a cash-cow which would feed ITC’s aspiration in its other FMCG ventures
  • Distribution network is its moat and they are planning to use their network to push their sales
  • I don’t think even current markcap is a hindrance to its growth and dominance. There are tons of products which are yet to be branded in India. FMCG companies always innovate and find ways to come with something new. Classmate notebooks and school items are in reat demand. I personally spoke with several shopkeepers in KA and TN and they agreed that of late people started demanding branded notebook particularly Classmate.
  • Growing dividends every year is icing on the cake.
  • With all these positives, I can surely say this is the cheapest FMCG stock available in the market. If it is stagnant, I would be happy to add every month in SIP at almost constant rate.
  • It is a retirement stock and can emerge as one of the biggest FMCG company in the world.

NHPC:

  • This is a beaten down stock in a sector which is also beaten down.
  • You can relate this stock to a toll bridge (metaphor). There will be a huge initial cost incurred upfront to put the structure in place and once that is done, you will keep gettingcash flowsfrom it forever.
  • NHPC sets up hydel power plants which is a capital intensive with long gestation periods. Once a plant becomes operational, it will keep generating lots of cash flows forever. There would be no raw material cost and NHPC has to take care of only normal wear and tear.
  • Here I am getting NHPC at a price less than book value and markets have not factored in the translation of CWIP to meaningful revenue in future. All the negatives that one can point to, are already factored into the price.
  • It is like buying a real estate which would appreciate and also yield regular cash flow in the form of rent (dividend).
  • NHPC is also a kind of stock which you would know when to sell in case if it moves ahead of its fundamentals. I mean profit booking is easy in such stocks where as growth stocks you can’t be sure of when to exit.

Won’t you feel ING Vysya Bank,CUB won’t also be good picks like HDFC,AXIS and YES. Why I am saying this is, these banks focus on MSME segment while HDFC,AXIS and YES bank focus more on retail market. With slowing of new employmentopportunities, won’t these banks be affected? Also I see HDFC Bank has becomeaggressivethese days to push their credit cards and personal loans.


(HG) #12

Hi Govind,

I have similar views on ITC and am accumulating it at every drop.

Btw, they have introduced a nicotine chewing gm. Talk about hedging bets :slight_smile:


(Sunil Bakshi) #13

ITC’s earnings have grown by 18.5% in the last 9-10 years and price CAGR has been around 25%. In the best years of GDP growth, if the earnings growth has not touched 20%, it is fair to assume that it will be around 18% or lower in the next 5-10 years ( considering the size).So price CAGR should be close to 18% or lower. It is a good 17-18% CAGR bet but I doubt it can be 25% + bet that we generally aim to achieve.

Views invited.


(Govindarajan) #14

Yes Sunil. Exactly that is my view. Please note here I am not expecting 25% CAGR at all. This is evident if you see my list of stocks. If ITC’s earnings growth is say 18% and 2% dividend yield will add to overall CAGR and it would be 20% CAGR which is very good as you can have good sleep and there will be lesser effort from our side.

What I mean to say here is if you are planning to invest small sums every month for your goals like retirement etc, then stocks like ITC are good. On the other hand, if you have sufficient sum for investment at go or a very small portfolio and look for an aggressive growth, then you can go for 25% growers with 2 to 3 years visibility.

Please remember steady compounders make sense only in a concentrated portfolio. If you plan for a concentrated portfolio, you have to be a very active investor and keep churning based on attractiveness and opportunities available.

Even Sensex had HDFC Bank, ITC etc but see what happened to the overall returns because of diversification. Since I am a diversified guy, I will be happy to grab 20% growing blue chips where there will be stability in growth.

Also a stock which doubles in 5 years time frame is a 20% compounder and should we need to worry whether it is because of fundamentals (growth in earnings like Page) or re-rating (beaten down and then recovery like SRF)

P.S: Since you are concerned about 25% you can think a stock doubling in 4 years.


(Govindarajan) #15

@ Sunil

A small correction in PS to make it clear

Since you are concerned about 25% you can assume a stock doubling in 4 years in my above example instead of 5 years.


(Govindarajan) #16

@HG,

Great. Thanks for sharing. I don’t know how I missed that news.


(Subbu) #17

Govindarajan:A stock which doubles in 5 years is 14.4% CAGR and one which doubles in 4 years is approx 18% CAGR.


(Govindarajan) #18

@subbu

Please correct me if i am wrong

Assume Rs 100 is invested in 01 Jan 2014 and CAGR is 20

At 01 Jan 2015 it will become 120

At 01 Jan 2016 - 144

At 01 Jan 2017 - 172.8

At 01 Jan 2018 - 207.36

At the start of fifth year, if the price of stock doubles then it is 20 CAGR.

My earlier statement has to be corrected as follows.

A stock which doubles at the end of 4 investment years is a 20% compounder and which doubles in 3 investment years is a 25% compounder.


(Hitesh Patel) #19

A formula for easy calculation of cagr in case of doublers is as follows

You divide 72 by the number of years stock took to double and the answer is usually your cagr.

e.g a stock doubles in 3 years… then 72 divided by 3 is 24 which is your cagr.

if it doubles in 4 years then it is 72 divided by 4 which is 18% cagr.

and so on.

this may not be very accurate but is easy to calculate without complicated formula and you get very near to exact answer.


(Kunal shah) #20

hi Govindrajan

I appreciate your views on both ITC & NHPC and still i think pvt. bank can provide better opp. here are my reasons

  1. ITC’s val. are already factoring that kind of growth .

  2. tobacco business which is cash cow can be hurt badly (till now they are having pricing power but small unorganized players will eat their market share . if tax keep going like this)

  3. ITC if you are looking as FMCG play there are better bets (its FMCg is not making any money )

  4. if we are looking at bull market that will be there for next 2-3 years (due growth coming back, & int. rate going down by next year) FMCG kind of stock will not outperform market in that scenario.)

now abut NHPC

  1. govt. sector company that has to deal with state govt., center gov. and people & environment ministry. very less chance of re rating

  2. what about business growth can they grow at 15% sales at CAGR.

  3. as it has happened with coal india , minister & employees will have the fruits and we will be holding lemon.

according to me itc is 50-50 case but NHPC is clear no-no.

Now coming to Banks they are also paying div. and div. is growing yoy.

i think HDFC , AXIS & YES have good retail business that will be able to garner good business as young indians will be looking for home & auto loans.

and there NPAs are very low and they have shown good growth since last how many quarters and int. rate decline & economy pick will benefit them more.

But last word,we both have very rational arguments and have right to be wrong. anything can happen lets see what happens.

happy investing

By Kunal Shah