Hitesh portfolio


(Hitesh Patel) #2419

@valuestudent,

I have remained almost 100% invested in stocks all through the past few months. I often feel tempted to get into cash off and on but till now have resisted the temptation to do so. Primary reason being that I find conflicting signals coming through while looking at the markets.

There are some segments of markets that seem frothy like the high quality basket consisting of stocks like dmart, bajaj finance, HFCs etc. Even some perennial laggards like GVK, HFCL etc are showing some signs of activity.

But on the other hand some companies keep undergoing corrections based on their results and newsflow. So its not as if markets are frothy and headed only in one direction. e.g PI Inds, Hawkins etc which is testing investors’ patience.

One factor which I find disturbing is complacency even in well informed investors. These investors tend nowadays to take extreme valuations also in their stride. There is this oft repeated logic of domestic deluge of money into markets which will keep supporting the markets during corrections. But the question whether bull markets drive liquidity or the liquidity driving bull markets is tricky and wont have an easy answer.

Globally the macro risk of Korean crisis remains but it has not really affected market sentiment to a large degree till date. Even if US were to attack Korea I think the affair would be short lived as Korea doesnt seem to enjoy too much support from any other global countries. But the thread of the crisis has been used very conveniently to explain the market gyrations when no other logical explanation is visible.

At a portfolio level I am seeing some moves in stocks where technical patterns were indicating upmoves. So the ideal thing remains to keep riding these upmoves till signs of exhaustion in the upmove are clearly visible. I would put up these patterns in the presentation I had done at Goa VP meet to take the presentation forward.

As one of our revered investor friends has coined , “There is no absolute truth.” Similarly investing is about maintaing balance between emotions and not getting carried away on either side. I remain a bull who is scared but not shit scared.


The ART of Valuation
(Kumar Saurabh) #2420

@hitesh2710 Thanks for your views Hitesh Bhai. Having similar discussions with colleagues and similar views. We ve selective over valuations and selective under valuations . Too much importance given to quality (fmcg due to TV,FCF, nbfcs due to growth ) and too less importance given to temporary road blocks (as if world won’t need IT, Pharma though recovery path nay be longer ). So, the way I see there r selective over valuations due to quality in fmcg etc, punter stocks which kedia jee calls bhangar cap and also selective under valuations . But yes, selective over valuations r high n selective under valuations r low. But don’t think we r at juncture of going all cash. I ask myself if market falls by 25 percent will I buy considering generic intrinsic value . Answer would mostly yes n hence is it a big overall bubble , I think no. So, sitting on small 15-20 percent cash n keep deploying by accumulting selective quality which has under performed . Would end with what Howard marks highlighted in latest memo “It’s time for caution, not full scale Exodus”


(Changu Mangu) #2421

Dear Hitesh Sir. Thank you for the wonderful mind map. I think you have nailed it and bought structure to so many thoughts. It would do me and any investor good service to read it 5-10 times to comprehend it well. Thanks again.


(GSApte) #2422

Holding cash is difficult for many of us who believe in buying the stocks which are undervalued and holding for a long period of time.
It requires lot of discipline and mental model where in one should be ready to be patient and wait for undervalued opportunity to present itself.

In earlier days about 8-10 years back, I used to deploy the cash generated by booking profit from one stock into another stock in a hurry and later on realized that, holding cash from time to time is equally important.

Opportunities such as Feb 2016 and Dec 2016 (after demonetization) can present lot of good bargains, and not having cash at that time leave you with a feeling that, when bargains are available you do not have enough cash since you are fully invested all the time.

Though I do not have any formula for holding certain % of cash based on NIFTY PE, but now-a-days I wait for more time than earlier. I am still not sure whether this would help me or markets will keep going up in one direction only. In the later, I am prepared to loose out but in the former, Mr. Market may present some good bargains. Having a process in place and sticking to that is more important than any thing else.


(Parag) #2423

I find the discussion interesting, and I would like to touch upon “cash holding” and add my two cents to it.

Keeping the money, when the bulls are raging- as is the case now in my view- is very counterintuitive and emotionally challenging decision.

I have seen in few discussions above, not able to predict adverse scenarios for the market to correct. I agree, in the current market, it is tough to predict what could cause the market- Indian or global – to crash apart from North Korea(NK). In fact, there is more reason for the market to go up (e.g. flood of liquidity in MF).

In term of probability, I doubt the war will ever happen. If the USA attack North Korea (NK), and NK then use nuclear weapons- even if these weapons are directed to specific countries- like Japan, South Korea or the US for that matter- will cause irrecoverable damages. The effect of a nuclear catastrophe would not be limited to specific countries, but the whole region has a potential to get wiped out. Remember Chernobyl in 1986- when the nuclear reactor caught fire, the smoke and effects were not limited to Russia. They were felt across Europe, but due to timely action – if I can say so- prevented further damages at least to other countries at least. However, the same cannot be said with confidence when it comes to a nuclear war with NK.

When a person or an animal for that matter is pushed to the edges, he is likely to take an extreme action to defend himself (Behavioral Science). In the event of war with NK, the NK dictator will be pushed to the edges very soon, which has the potential to make the situation worse. I think this is an open secret, so in my view, there will be a lot of “Fast and Furious” talks, threat, scare mongering- but eventually they will settle- as happens for so many decades.

In fact, apart from NK, it is challenging to imagine any reason for the market to crash, and this lack of reason is fuelling rallies in the global market. Howard Market’s recent memo has few points, which I find fascinating and apt related to this:

But on the third hand, most people can’t think of what might cause trouble anytime soon. But it’s precisely when people can’t see what it is that could make things turn down that risk is highest, since they tend not to price in risks they can’t see. With the negative catalyst so elusive and the return on cash at punitive levels, people worry more about being underinvested or bearing too little risk (and thus earning too low a return in good markets) than they do about losing money.

Again, it is very difficult to predict the crash or correction in the market, but being prepared for the correction/crash – by having some cash- looks conservative now, but may well turn out to be remunerative in future (for some in my view), who knows!


(jstocks) #2424

My personal opinion is that Kim Jong is a fat and lazy guy who will never sacrifice his luxurious lifestyle for a nuclear catastrophe. Donald trump is a business man. Businessmen rarely pursue their grudges till the end.


(subbaraogorrepati) #2425

Hitesh sir,
would like to hear your comments on prospects of Jewelry sector from 1-2 year perspective


(vivekvikramsingh) #2426

Hi Hitesh,

I have a query about Insurance sector.
As we are aware that many insurance companies are lined up with their IPO in coming days. But I am confused which IPO should we take. Shall we invest in companies which are working in Life Insurance or shall we take companies operating in General Insurance.

Any view on “what should be our investment criteria in insurance companies”

Vivek Vikram Singh


(Hitesh Patel) #2427

@subbarao,

I am invested in TBZ . Most of the stocks in the sector viz. titan, pc jewellers, thangamayil, tbz etc are either making new all time highs or are making fresh 52 week highs. Even q4 fy 17 and q1 fy 18 results have been quite good for most companies. Over the longer term because of GST and the demonetisation, there could be a shift towards organised players in the segment which could augur well for the listed organised players.

TBZ in specific is doing the right things, trying to expand their business through the franchise route which should be an asset light model and which would not stretch the balance sheet.


(Hitesh Patel) #2428

vivekvikram singh,

I dont track insurance companies in details so not much idea about which sector to go for in the sector. I would prefer life insurance and health insurance companies personally. But I guess there are other better guys like dhwanil to comment upon the subject.


(SSK) #2429

Dear Hitesh ji,

Quite a few pharma companies have corrected handsomely from their peaks. There are multiple factors like rising research expenditure, USFDA warnings and possibility of currency fluctuations.

  1. What would be your guidance to someone looking to invest in pharmaceutical companies.

  2. Any particular companies worth considering to invest with a 2-3year perspective


(Jose) #2430

Sir,can u give me an opinion on Mahindra lifespace charts


(ASPN) #2431

@hitesh2710, Hiteshbhai, over the years I have become a big fan of your clear thought process. Looking at your recent portfolio changes, I think you are owning some of the old economy, commodity and/or cyclical stocks. Just wanted to know your thinking on this if you are comfortable.

Do you see the economic growth cycle is reviving? If yes, which sectors could be the beneficiary? Or it is just that you are positive on these stocks because of increased Govt thrust on infrastructure?


(Hitesh Patel) #2432

@jose, Mahindra life spaces seems to be coming out of a long term downtrend and bears watching. To me it seems a good buy on declines if one is convinced about the story.

@SSK, Pharma sector remains in a consolidation phase. IF one has a longer term view and is convinced about the bull run resuming then there are ample stocks to choose from, namely lupin, sun, glenmark, drl, cadila, torrent, alembic, ajanta etc. I personally like lupin, drl and glenmark considering companies from different angles. But I still feel one should be patient while buying pharma companies. With other sectors like financials and cyclicals in flavour, its better to focus on them. Just to give u an example, real estate companies had a big bull run from 2004-2008 and underwent severe correction then. It is only now in 2017 or say late 2016 that they have started making a comeback.


(Hitesh Patel) #2433

advait,

I have recently picked up some stocks like KCP, TBZ, PTC India, JM Financials etc based on their techno funda picture. Only technical picture for me doesnt suffice. I have to be able to figure out what could be the triggers for investment in these technically strong looking stocks. In each of the above I could find either undervaluation, resumption of growth, or continuation of growth which could act as a trigger for investing in these companies.

TBZ I think will be among the jewellery companies likely to benefit from GST and a shift towards organised players. KCP already has been discussed in details in a new thread created on VP. I echo the investment arguments put forward. PTC India is an interesting pick where first I saw a nice rounding bottom formation and subsequent breakout. On looking at the fundamentals I found it to be undervalued with conso EPS of around Rs 14, div of Rs 3 and concall mentioning likely growth in next couple of years because of higher volumes of power traded.

JM Financial is a good flag pattern breakout. On comparing similar companies like IIFL, MOSL etc one gets a feel that this is a sector in fancy. I think till now we had a strong bull run in NBFCs and good banks who did lending and showed good growth. Next might be the sector which handles financial assets and among these the noteworthy cos include IIFL, MOSL, Edelweiss and JM. JM could post earnings growth of 20-25% cagr over next 2-3 years atleast and Nimesh Kampani is a well respected guy in the investment circles. I did not want to spread my bets too much in the sector and found JM to be fitting the bill for me and hence latched on to it at around current levels.

Regarding economic cycle reviving, I have no idea when this is going to happen. But with a good monsoon behind us, and a proactive govt trying to revive (till now unsuccessfully) growth, economic growth cycle should revive. I see stock market participants much more confident about growth revival than economists themselves.:grinning:.

Initial signs of euphoria are visible in markets like the deluge of IPOs and huge listing gains in fancied companies. Strong run up in fancied listed companies also has been going on for quite some time. I see some signs of complacency in market participants and market experts. Now since past few days a lot of important voices like reputed foreign investment firms like CLSA etc have started to sing the bullish songs. I still remain fully invested but am observing the froth closely for any definitive signs of trouble.


(rknshah) #2434

I too bought IIFL and JM . I think financialization of savings will benefit brokerages,wealth managers,IPO financiers. Both of them have NBFC like Edelweiss and MOSL and and all 4 are promoted by 1st gen entrepreneurs with domain knowledge and advantage. ARC biz of JM can be dark horse and can provide spike in earnings though such earnings will be lumpy.


(ramanhp) #2435

Did anyone check Aditya Birla Capital? Its broking business up 24% in the past quarter and asset management up 32 %. I am not sure if they into retain broking. Never heard anyone using the Aditya Birla platform for trading.


(gautham1) #2436

Hi @hitesh2710, I am surprised by the sudden rally in pharma. Do you think a) its a dead cat bounce b) people buying because other sectors are way overvalued c) something changed in the sector?. Just a few a days ago, everyone talking about the price erosion, competition, govt regulations, r&d expense etc. If it is c) what are signals that indicate a turnaround? ( i am not talking about technical turnaround. but fundamentals).
One thing I have observed is that market prices in an event way before it happens. The recent example is the nbfc recovery after the demonetization.


(jayesh265) #2437

Hi Hitesh,

I also wanted to ask the question on the similar lines as whether it will be a good time to relook at the pharma sector as the reasons mentioned by Gautham. Also recently, many Indian Pharma Companies have received clean chit from USFDA after inspection…

Look at this:

Dr Reddy’s Labs jumps 6% as Andhra formulation unit receives EIR

Biocon rallies 3% as USFDA gives all clear to Andhra unit
http://economictimes.indiatimes.com/markets/stocks/news/biocon-rallies-3-as-usfda-gives-all-clear-to-andhra-unit/articleshow/60746503.cms

Aurobindo Pharma gains 2% as USFDA grants VAI to Hyderabad Unit IV; ends flat

Zydus Cadila shares rise 3.41% after USFDA clears Moraiya plant
http://economictimes.indiatimes.com/markets/stocks/news/zydus-cadila-shares-rise-341-after-usfda-clears-moraiya-plant/articleshow/60410233.cms

Cadila Healthcare gains after Zydus receives EIR from USFDA
http://economictimes.indiatimes.com/markets/stocks/news/cadila-healthcare-gains-after-zydus-receives-eir-from-usfda/articleshow/60287422.cms

Orchid Pharma gets EIR from USFDA for its Alathur facility

What’s your views on this??

Regards,
Jayesh


(sanmam) #2438

Hitesh ji, do you track SML Isuzu ? please share your views on prospects