I am posting my portfolio here for feedback from esteemed fellow boarders.
This should also act as one of the transparency measures alluded to by donald and may be considered as my disclosures on my stock picks.
Basic theme of late has been concentration of portfolio and hence many of the smaller holdings had to go. This has been due to the results seen in some of my earlier successes like mayur, ajanta etc where a hefty bet made a huge difference to overall portfolio returns.
sr no
stock
percentage
1
kaveri seeds
15
2
mayur
12
3
unichem
12
4
hawkins
12
5
page
8
6
fdc
8
7
atul auto
8
8
tbz
5
9
guj reclaim
5
10
muthoot capital
5
11
ajanta
5
12
cash
5
recent exits include yes bank, jubilant life (not too comfortable with debt and forex issues) etc. sold some 20% of total mayur holding in the recent run up. thinking of increasing allocation to grp, ajanta at the cost of some cash, muthoot, fdc or something else though not decided yet.
Basic aim is to reduce number of stocks to below 10 and preferably to around 8-9 or so.
1). what do you think of balkrishna tyres? i see that fdc finds a place in your portfolio ahead of that.
2). I see that you are fairly bullish on hawkins. you mentioned in one of other threads that if management gets its act together, the growth could be good. do you know if the labour and environment issues at their plants have been resolved? i don’t see any mention of that in the annual report.
3). I read in one of your TED posts that you had some exposure to astral at some point. could you elaborate on the reasons for the exit there?
4). would it be possible for you to put up the average extry prices for your picks and period you have held them for?
As an admirer of you knack of picking stocks there are very few who have that innate ability.
However I am wondering at your decision on lack of quality financial stocks (sorry no idea on muthoot)
I am a firm believer of holding stocks for long periods of time, to create wealth, however I have noticed that you don’t seem to stick to stocks for more then 3 years, please do correct me if I am wrong. Why not wait for the true benefits of compounding to set in? I have seen enormous wealth built by people holding stock in excess of 20 years.
1). what do you think of balkrishna tyres? i see that fdc finds a place in your portfolio ahead of that.
balkrishna is at the end of the day a cyclical and i dont like the way they have to keep on expanding capacities (maybe the nature of the business). big question is what happens if there is some sort of demand slump and what do you do with all these capacities and the debt that comes with it?
2). I see that you are fairly bullish on hawkins. you mentioned in one of other threads that if management gets its act together, the growth could be good. do you know if the labour and environment issues at their plants have been resolved? i don’t see any mention of that in the annual report.
hawkins is a patient investor’s dream stock. if you have patience there are sureshot returns. buffett in his “essays of warren buffett” is quoted as “We like to buy business with we easily understand, with good economic characteristics with honest and able management at reasonable valuations.” Hawkins fits the bill here.
regarding the settlement of the pollution issue and the issue of labor wage settlement at jaunpur, its only a matter of time when the issue is settled. till then one needs to be patient.
3). I read in one of your TED posts that you had some exposure to astral at some point. could you elaborate on the reasons for the exit there?
i used to own astral but with the forex issues cropping up and sharp run up to around 190 levels from 120, i decided to move out.
4). would it be possible for you to put up the average extry prices for your picks and period you have held them for?
i dont know what purpose it would serve to know my average entry prices. this obsession of keeping a tab on entry prices have often caused me mental blocks. i have stopped thinking about my average purchase price bcos what matters and what decides is what you need to think about your investment at current prices.
regarding no financial stocks i agree about your views. i want to get hold of some solid bank stock. i am glued on to yes bank and indusind bank but still deliberating and question arises what i would sell to buy these.
regarding holding period in stocks, since i dont buy market leaders most of the times, it often makes sense to move out once valuations look stretched. sometimes sticking to one’s long term stocks incurs opportunity costs.
till now i was in habit of looking at a lot of stocks where i often found opportunities which were much more attractive than the stocks i held and hence switched. but of late the theme has been to stay put.
having said all that, i agree with you that enormous wealth can be created by holding on to promising stocks for long period of times. i have been holding on to mayur since almost 3 years. was very tempted to sell it off in recent strong upmove but resisted the temptation and sold only 20% of original holding to fund more kaveri purchase. till date its been an eight bagger not counting dividends.
compounding and its powers are magical and with portfolio concentration i aim to move towards this philosophy. thanks for your views in that direction. makes me think even more on those lines.
Regarding BKT, apart from being an OEM player, it caters to strong replacement demand. The company aims to increase it’s global market share with the augmented capacity coming up (till FY15). As we have seen from management discussions, catering to so many SKUs is pretty difficult and possibility of sudden capacity ramp up from competitor’s resulting in demand slump looks remote.
Your argument typically points towards a case what infamously happened to Aban Offshore and the disastrous results for shareholders. But given the nature of business and opportunity of growth for BKT is this a major risk ?
Given the growth projections at this juncture, I strongly feel BKT to be a better pick (over next 5 years) as compared to FDC from your current picks. Your comments please.
Regarding Pharma stocks, I have a higher exposure to Ajanta (13%) as compared to Unichem (9%). Although in the short term Unichem looks to outperform, but for a longer term I believe valuations vis-a-vis growth are more favorable for Ajanta.
1). I disagree with your classification of bkt as a cyclical stock. It has negotiated the downturns well with a consistent growth in revenues and cyclicals. It has managed the margins well in the times when the raw material prices were growing through the roof.
2). I agree that the opportunity size is huge in front of Hawkins but inaction has opportunity costs and with ttk having grown to multiple times hawkins’s revenues it is attaining a critical size to make life difficult for Hawkins once those issues are sorted out.
3). Growth in astral has been amazing and share price has followed suit. Sharp runups are part of a stock’s re-rating and shouldn’t be a reason for exit from a stock. Please correct me if I am wrong. I speak from my limited experience.
Among your holdings, I hold - Atul Auto and Muthoot Capital. I am evaluating Kaveri Seeds.
In the note below your portfolio, you have mentioned that you might reduce Muthoot to increase allocation to GRP, Ajanta. Is it because you are finding the other 2 opportunities better than Muthoot or do you feel Muthoot might take a larger time to realise value?
basically its more a move towards concentration. GRP management is excellent and ajanta from their behaviour till now seems fairly decent.
Muthoot management I dont know what to make about them.
kaveri – I read the AR today – they sent by email – and was pretty impressed by the details provided. Next leg of growth seemingly will come from rice hybrid seeds. Addressable market in rice is huge. plus one of their subsidiaries kexveg is into high quality vegetables – pilot projets are on and if the venture suceeds, that could be another strong revenue and profit stream. Stock seems to be very strong amidst all this correction and pain.
It is like comparing apples and oranges. GRUH is into home finance and muthoot is into vehicle – two and three wheeler finance.
More asset quality concerns are expected in muthoot whereas gruh has not much in terms of such concerns.
valuationwise gruh seems to have reached plateau where I feel it might spend some more time at these or somewhat slightly lower levels to catch up with earnings.
muthoot on the other hand looks quite cheap in terms of valuations and div yield.
Hitesh Bhai do u invest in real estate as well ? I think one should diversify n do invest in RE .
India is one place where parallel economy is very strong and due to very few avenues left of taking this black money out of country RE may be the only option left for them to invest. This is corroborated by the huge price since August 2010 which was the cutoff date agreed by Great Congressi govt allowing inspections in foreign banks.
Also due to rising urbanisations there is huge end user demand. Delhi is the only place in north where due to availability of jobs people are moving in large nos from 12 to 14 states.
I am thinking of investing in Noida and Noida extension area in Delhi.
Any advice from friends who have some knowledge. Which are the better builders n locations in NE? How is RG luxury in NE?
Can you tell me what is the metrics on valuation that you follow while investing as well as selling your holdings ?I understand that it cannot be exact.
When I look at your portfolio, I see companies that are trading at 10-15 PE. Of course growth is there. It is quite possible that you might have entered at lower multiples.
My typical investments have been in companies trading at low multiples ( less than 10) with good return ratios, low debt and growth of ~10%. To be candid my performance needs improvement. ( Companies like Ajanta, PI, hawkins, page are out of my screen)
However, it would be helpful to know from you on your philosophy on buying/ selling.
valuations is a totally personal matter between different investors. And it applies differently to different companies. e.g company like Page which has a dominant brand jockey will never quote at cheap valuations. Similarly for companies like mayur which has all the attributes of a great business and an enviable track record, similar valuations will be considered expensive mainly bcos of lack of what people like to call “pricing power”.
There is no fixed formula i use for determining buy/sell decisions. Regarding buying low PE stocks, an eye must be on some reason or trigger which could cause the stock to quote at higher PE. If one can find that out, then it makes sense to buy low PE stocks in hope of getting some rerating.
Otherwise there are plenty of low PE stocks floating around the markets which will continue to trade at lower PE in the distant future as well.
gold loan companies are facing a lot of music from govt policy decisions. I think muthoot capital with its business focussed on two and three wheelers is likely to show consistent growth. And the way they are increasing dividends this could be a dividend yield stock going forward.
Regarding some earlier comments about BKT not being a cyclical, I think any company which is exposed to raw material price impact on its profits is a cyclical.
But BKT is better placed due to its replacement market demand. I agree its a good stock to own but since I prefer other ideas, I have given it a conscious miss.
About FDC, it is a stock I have bought with a specific theory in mind. The theory is to do with the current pharma bull run. In almost all sectoral bull runs, you always see the laggards also run at some time or other. I expect the same out of fdc.
**Plus I find the use of cash to keep on doing buybacks very good on part of managment of fdc. First quarter results for fdc have been quite good. I have seen them doing some good marketing in dermatology segment and expect that they are doing that in other segments as well. They have a very good range of products in ophthalmology as well. **
At end of it all, I dont see too much downside for fdc from current levels. will give it some more time and then decide.
Coming to rudra chaudhary’s views on ajanta and unichem, I am bullish on both of them.
I have been increasing the allocation to ajanta recently (grp is under wait mode with allocation limited to around 5% ) and expect to take the allocation to around 15% of portfolio. Quite agree that growth prospects are excellent. Although I would not like to compare it with Unichem.
Logic in unichem is that the exports have been doing phenomenally well since past few quarters. And now with domestic segment also looking up I think Unichem will be having the best of both worlds. And I am a big fan of companies with low leverage.
gold loan companies are facing a lot of music from govt policy decisions. I think muthoot capital with its business focussed on two and three wheelers is likely to show consistent growth. And the way they are increasing dividends this could be a dividend yield stock going forward.
Regarding some earlier comments about BKT not being a cyclical, I think any company which is exposed to raw material price impact on its profits is a cyclical.
But BKT is better placed due to its replacement market demand. I agree its a good stock to own but since I prefer other ideas, I have given it a conscious miss.
About FDC, it is a stock I have bought with a specific theory in mind. The theory is to do with the current pharma bull run. In almost all sectoral bull runs, you always see the laggards also run at some time or other. I expect the same out of fdc.
**Plus I find the use of cash to keep on doing buybacks very good on part of managment of fdc. First quarter results for fdc have been quite good. I have seen them doing some good marketing in dermatology segment and expect that they are doing that in other segments as well. They have a very good range of products in ophthalmology as well. **
At end of it all, I dont see too much downside for fdc from current levels. will give it some more time and then decide.
Coming to rudra chaudhary’s views on ajanta and unichem, I am bullish on both of them.
I have been increasing the allocation to ajanta recently (grp is under wait mode with allocation limited to around 5% ) and expect to take the allocation to around 15% of portfolio. Quite agree that growth prospects are excellent. Although I would not like to compare it with Unichem.
Logic in unichem is that the exports have been doing phenomenally well since past few quarters. And now with domestic segment also looking up I think Unichem will be having the best of both worlds. And I am a big fan of companies with low leverage.
would appreciate if you could answer few queries i have:
1.why is GRP on wait and watch mode for you? are you concerned on the short-term growth prospects and profitability?
2). It seems like you are more bullish on unichem compared to ajanta? do you see better growth prospects in unichem? i see that unichem trades at a higher PE compared to ajanta. wouldn’t ajanta bemore likely to get a PE re-rating if it can continue showing the growth momentum it has shown till now?
3). Any reasons for not increasing weightage to ajanta at the cost of fdc? or is this something that has crossed your mind?
1.why is GRP on wait and watch mode for you? are you concerned on the short-term growth prospects and profitability?
GRP comes later down in my priority list and hence wait and watch mode. Company wise its a great company with probably the best promoters one can hope for. But business wise I think with the generalised slowdown, they might face some demand slowdown and hence in no hurry to increase the holding there.
2). It seems like you are more bullish on unichem compared to ajanta? do you see better growth prospects in unichem? i see that unichem trades at a higher PE compared to ajanta. wouldn’t ajanta bemore likely to get a PE re-rating if it can continue showing the growth momentum it has shown till now?
I am equally bullish on both Unichem and ajanta. Regarding PE Unichem is optically trading at a high PE because u might be looking at trailing PE. I expect them to post EPS of close to 14-15 and for a company with negligible debt and whose best time is yet to come, it seems attractive. I think if it can utilise its expanded capacities fully in fy 14, we can be looking at eps of around 18-20.
**Regarding ajanta rerating is underway and we just have to see how long it goes on.**I have projections of them doing eps of around 40-42 for fy 13 and if PE rerating goes up to around 15, it can go up to around 600 from hereon. This could be likely as there is a strong sectoral tailwind.
3). Any reasons for not increasing weightage to ajanta at the cost of fdc? or is this something that has crossed your mind?
I mentioned earlier that I am putting in the cash component into ajanta.
About fdc I want to give it more time to see how it goes and then decide.
