Hitesh portfolio


(Binu) #2913

Hello Hiteshji, @hitesh2710,

Thank you for the ideas, shall take a closer look and try to read up on these companies.

What is your opinion on JM Financials? The stock has been corrected quite severely during the recent midcap correction. I couldn’t find anything fundamentally going wrong with the company, if not anything the price has become favorable to average down. Do you still hold it?


(Hitesh Patel) #2914

@binu

Jm fin has been in a correction mode from its high of around 190 to current levels of 110-120. Fundamentally the margins for the company have been declining gradually and that is probably responsible for the slide in price.

While it may look very attractive on valuation basis, I think one needs to do a bit of homework by listening to concall and going through the annual report and try to figure out how the company plans to grow its business going forward. I had exited jm some time back post q3 fy 18 results.

All companies in the sector namely jm, motilal, iifl have been correcting. Edelweiss seems to be showing some relative strength by correcting less as compared to others.i think the stocks in the sector may remain sideways/down for some more time.

The way these stocks have corrected has come as a bit of surprise to me too but a lot of other small/midcaps also have been hit hard despite good results and optimistic outlook. I guess the market preference has shifted to large cap and there is no strength in small/midcap space.

Stocks considered to be high quality like page inds, fmcg cos, bajaj fin etc are fancied and are quoting at rich valuations.

These kind of market moods and preferences keep changing every few months as can be seen from the market fancy in january and now.


(ishikaghose) #2915

Good afternoon. Would it be possible for top contributors and moderators in this forum to make a list of companies/sectors which novices could start analysing at this time. I ask because the current volatility, seems to be a good time to buy and yet I find myself floundering - not knowing what sectors to look at. Everything seems to be swinging so wildly. Would be very helpful. if I have missed the post would be grateful if someone could point me in the right direction. Have read the one by Mr Yogesh Sane with his thoughts. Thank you.


(Investor_No_1) #2916

Hiteshji

I see you are recently buying into NBFC. I am a long term investor in L&T Finance almost since IPO. I am tracking results, management commentry etc…all seem to improve but stock is down. Is this a buying opportunity or market seems to know something more?

I am a little thoughtful because last 2 quarters even after excellent results and vision ahead, stock is down 30-40% from highs. Compare it o Bajaj Finance which is making new highs every week in this market mayhem. Agree that it is in sweet spot because of retail exposure and L&T Fin still have significant wholesale exposure…but look at the valuation P/B difference already…L&T is around 2 - 2.5 times whereas bajaj finance is at 8 times…

I was a little concerned when I saw in resuts 2 qtr back that developer loans were significant part of L&T Fin housing loan book but did not sell as I could see management focus on improving things…

Should I have sold or should I sell or keep holding? What should be a sell trigger for this NBFC company? Things to look for to sell? I am unable to figure out when to sell…

Thanks!!


(Wolf) #2917

Dear Hitesh,
I would like to hear your views on these two stocks-

  1. KIRI INDUSTRIES -
    Firstly i must admit the bulk of my portfolio is Kiri. I have been bullish for over a year, since the china pollution issues started, and since kiri case started singappore hearing. Now with victory in sing court, the valuation of dystar and kiri stake is said to run into thousands of crores. Would love to hear your views for this stock over thje long term (2-3 year view).

  2. STRIDES SHASUN
    A darling of the previous pharma bull run which ended in 2015, now stands with a huge debt pile. Promoter gave a one time divident when he sold mylan which was generous at the time. Can he bring it back to old glory? Professor Mankekar had a good holding in strides, and sequent. However he offlaoded recently at very low prices, incurring huge losses. Very important to stress here that readers make their own decisions, and not copy other marquee investors. Professor Mankekar other investments also turned out to be duds in the last few years- including laxmi vilas bank, MT educare, Talwalkars, Galaxy Entertainment.


(Hitesh Patel) #2918

@Investor_No_1,

Valuation is largely a function of market perception (often may be right or wrong) about a company. If a company like a Bajaj Finance has grown its profits at a CAGR of 40% consistently for many years then markets tend to develop an unshakeable faith in the company’s ability to deliver and the future prospects. And this translates into much higher valuations as compared to other peers. Plus valuation also depends upon other parameters like ROA, ROE, NPA etc esp in financial companies. And esp in the lending business, promoter and management. These companies have very few variables affecting their businesses. For Bajaj finance all boxes are ticked and hence the high valuations.

L&T finance has had a checkered past which doesnt inspire same confidence as in a Bajaj Finance. You can compare the above mentioned factors in case of both companies in question and therein probably you will find the answer.

Besides the above, valuations will also depend upon largely on market phase. In the current phase, the valuations of sureshots are elevated because investors have more than normal faith in these companies and this often induces people to overpay. Besides since prices of these companeis dont fall even in the face of nervous markets investors tend to flock to these companies, till (if and when ) these too start correcting.

When large caps also start correcting these sureshots also crack to some extent and thats the time to look at them. Feb was a great time to latch on to Bajaj Finance.


(Hitesh Patel) #2919

@Wolf

I havent studied either Kiri or Strides. But a look at the charts of the two companies provides opposite picture. Just saw that Kiri has been more than a 100 bagger since 2013.


(Investor_No_1) #2921

Thanks Hitesh for your thoughts. Can you also let me know how to evaluate when to sell L&T finance?
Its ROE is constantly increasing, almost doubled in last 1 year from 7% to 15% now and management target to take it to 20% in an year. Also, they are targetting to increase their retail part of portfolio. All past mistakes are being worked upon and they are now focussing on selected areas. Point what I want to convey is that management is doing right things and results are showing…on what aspect should i keep tap of or focus that should give me signs that its time to sell?

Why I ask this is because I feel in NBFC, the loss can be huge if we miss such triggers. I can understand triggers to buy but unable to understand triggers to sell. Can you pls let us know when to sell…


(manishpatidar) #2922

dear @hitesh2710

Please provide your views on Manpasand beverages. Stock is down by 40 odd % recently.
thanks
manish


(Hitesh Patel) #2923

@Investor_No_1, Selling is a difficult decision to make while investing.

For me selling is induced if I get my thesis wrong and I have to cut my losses and exit. In other scenarios, if I feel that the current valuations has reached frothy levels and is difficult to sustain then I exit. The latter is especially applicable to companies which are good but not great. For the truly great companies sometimes it makes sense to ride through periods of overvaluations and hope growth helps to cushion the valuations.

In case of LT finance I dont track the company closely but as for all financials its important to monitor the growth in loan book, quality of loan book, NPA, ROA and so on. Besides its important to see if management walks the talk. If all things fall in place it might make sense to hold or even buy more if valuations are attractive.


(Hitesh Patel) #2924

@Agarmalwa,

Manpasand currently remains a stock either in upper or lower circuit. Fundamentally a lot has been discussed on the relevant thread. I usually dont bother with these stocks as I am more concerned with peaceful sleep rather than risky returns.


(Investor_No_1) #2925

Indeed words of wisdom, difficult to practice as we get carried away. Good companies are meant to be sold and not held for very long term is what I have slowly started to feel. Earlier I used to be a big believer of very long term hold. But in this one line you have validated what I was thinking!


(Deepen) #2926

Hiteshbhai,

Still tracking Jagran Prakashan ?
Newspaper / media stocks tend to do well in election year. Growths in 2014 as compared to 2013 atleast supports that. Any views on the same ?


(Hitesh Patel) #2927

Most of these newspaper companies have belied investor expectations. Topline growth has been tepid while bottomline has often suffered from.margin pressures. This sector doesnt seem to be a great long term wealth creator. If bought and sold at the right price it can offer returns but it doesnt seem to throw up long term winners.

I think there are better options in other sectors like financials, agrochem, manufacturing and other sectors.


(Whipsaw) #2928

Hi Hitesh,
Are you tracking Deepak Fertilizers in agrochem space? They have a big capex going on which will boost their #s starting next few quarters.

Thanks.


(tbhavesh) #2929

Thanks Hitesh Bhai. Very useful.

I am a long term investor and am holding Avanti from a long time.

I saw this fall from 3000 to 2500…and from there am seeing this one fall to the current levels…with each fall was hopeful that now this will consolidate or reverse…but that does not happen.

How do we decide whether to continue holding or move out?

My experience in taking decisions in such situations has been bad. In the past, I had similar thing in Yes Bank when the family feud was at peak and Yes Bank fell from 900 to 600…I moved out and the stock took a U turn…in Avanti I did not want the same thing to happen and kept on holding and this one keeps on falling…may be waiting for me to move out for it to take a U turn…

So repeating my question for your guidance on
How do we decide whether to continue holding or move out?


(Milind) #2930

Hi Hitesh,

How do see this incident impact of JB Chemical?

Not sure as API revenue is around 9% of revenue but it might be used to supply products for world wide revenue that is approximately 40% of revenue.

Not sure how to analyze impact of this incident on JB Chemical revenue

Regards,
Milind


(Hitesh Patel) #2931

@whipsaw, I dont track deepak fertilisers.

@malthankar, The explosion at JB Chem is an unfortunate event. I dont know the impact it will have on the company’s financials but as you mentioned it contributed around 9% to overall revenues. I think the management will come out with further details once they assess the expected damage caused by the event. After the fall from 300 odd to 250 levels the news of the explosion seems to have been priced in at current price. I remain invested but would monitor situation as and when we get clarification from management regarding the damage and what they intend to do about it.


(Hitesh Patel) #2932

@tbhavesh,

I think first of all while holding a company we have to slot it into what kind of business it is based on the expected opportunity size, variables affecting the business, sectoral tailwinds/headwinds, and the kind of predictability and sustainibility in earnings expected with the company. Besides other parameters we use ourselves in slotting businesses.

If we feel that the business we hold falls into top class i.e A plus kind of business it might make sense to keep holding through minor price drawdowns of 20-25%. Unless there is a major market meltdown these top class companies wont correct more than the above levels from the top. In case of major market drawdowns usually all hell breaks loose and even these correct to a large extent and in that case we cannot do much. When markets recover these make lost ground very quickly.

If we find that the business in question is not top class then it has a definite sell price and that is what we have to decide based on our assessment of business. In my own mind I had fixed an exit multiple of 25-30 PE for avanti as I felt that some or other variable would ultimately come back to haunt the business. These are businesses which one buys at a certain valuations and sells at certain valuations.

We have a whole thread about slotting businesses into different categories. Again from time to time these lists would have to revised based on the sectoral tailwinds/headwinds. Case in point being pharma space where Ajanta was once considered invincible and in A plus category but now with the meltdown in the pharma space has lost its place.

I think in the Indian market context as of now, consumer durables, , B2C good quality businesses, solid private banks, good quality NBFCs, FMCG etc could be considered as A+ businesses.

What happens is that when prices in a not so great business start going up investors and the market as a whole start believing that its a great business and lulls the investor into complacency.


(Milind) #2933

Thanks Hitesh for your views on JB chemical.
I was just going through the charts of magma (last 1 year only) and at a glance i can see roughly its major support level for last 6 months is around 145 to 155 and QIP on 155 for 500cr may give more confidence for support level.
Just wondering if i try to search MAS support level 555 to 570 kind off. But it does not reflect support level like magma. Now just thinking.

  1. How do we decide support level in the absence of 50 day or 200 DMA? (as case of MAS) (460 could be major support as it is IPO price)
  2. let say if stock ranges say 100 to 115 for 6 months then we say its support level is in this range?
  3. let say this stock goes to 90 for 2 days and comes back … do we say now support level is 90 or we can just ignore this 2 days blip (how the volumes are seen for this 2 day blip)
  4. What could be a minimum days stock should be in that range so we say it is support level i.e. equitas is honoring support level of 135 to 140 for last say 2 weeks around so do we say 2 weeks stock prices in the same range tells us this is good support level? just wondering what minimum time frame decides good support level for stocks.
  5. Do you first find out support level of stocks (say first level, second level support) and then start making position in that stock?
  6. Could you please your experience where support level is absence? how someome should deal with such scenario. like KNR came from around 290 to 200 as we can see there is no support level? just thinking how someone should act if say purchase KNR at 300 and (after earning call they say next 3 quarter there would not be growth and you don’t see support level of KNR)?
    should sell at it between say 270 to 290 (as there is no support level) or should just ignore as company is good and after 3 quarter things would change?

Thanks for your help

Regards,
Milind