Hitesh portfolio


#3141

Understood. As I am on the same boat, although my losses do not pertain to one sector, no connection between them. So I look at them individually, what made me invest, what did I expect, can I afford the capital loss and the opportunity cost. Also I’m coming out of a couple of stocks as I need the capital elsewhere. If we could afford loss, then we can look at all of this as part of learning, which we can hope makes us a better investor in the future. But since you have invested big, be careful, wish you best.


(Rits) #3142


A good analysis of the current crisis…


(Amit Aggarwal) #3143

@hitesh2710 just wondering how could you be so ruthless in exiting most of your financial stocks ? :wink: I would like to understand how you make decisions like this as we have been always taught to stay invested for long for compounding returns if bought quality business (stocks) at right price. And not to time the markets and avoid frequent entry and exits.

I understand one thought where you make exit decisions where you see weak sentiments in the whole sector and it could remain subdued for a long time, but I am still not able to understand / apply in practice.

Any learnings / knowledge would be helpful.


#3144

Pardon my ignorance but when you are certain of the performance of a particular sector, wouldn’t it be lucrative to exit while at the top and perhaps enter while the sector is beaten down?, thereby you are gained and still are invested in the same stocks as before, you have both eaten and still have the cake.

There could be signs visible to seasoned investors who could take such bold calls, as they can tell, as history may not repeat but rhymes.

@hitesh2710 Sorry Hitesh ji for using your thread, started learning, so cannot miss the chance of expressing myself to what I think I can understand.


(pradip) #3145

Sorry, couldn’t understand this comment. Google was of no help either.
I am also feeling curious that if you avoid financial sector overall, what still keeps you interested in them to the extent that you are able to add detailed explanations to the points you want to drive.


(ASPN) #3146

It is exactly the opposite actually…I remember Hiteshbhai exiting all the pharma stocks when the pharma bull was roaring ! Soon after few months, the whole sector went to a very long downward consolidation and still the sector leaders are well below their life highs. Something similar has happened in HFCs.

Sir, how do you predict (well, i couldn’t think of any other word) this? What macro factors you look at to arrive the conclusion that the whole sector is due for correction? Would be glad if you can share your thoughts (rather, thought process) @hitesh2710.


(phreak) #3147

Self-referencing systems have nasty self-reinforcing feedback cycles and it cuts both ways - both positive and negative. Without going into things like invariance, strange loops, recursion, self-similarity etc, essentially there is no difference between the product and the payment for financial institutions (unlike a steel maker who sells steel and gets paid in cash) - this is what I meant by self-reference. A loan can be siphoned off by faking a borrower but you can’t siphon off steel with the same ease.

Similarly, credit and Money are similar but they are not the same but are used interchangeably so often. Then there is the interconnectedness of the financial institutions and systemic risks which again arise out of self-reference and recursion. Then we have things like derivatives. This sort of self-references breeds unpredictable complexity. Where there is self-reference, there is complexity - the human consciousness is a prime example of this. For more on this topic if you are interested, I suggest Godel, Escher, Bach by Douglas Hofstadter

This is the prime cause for boom and bust cycles. I am not saying avoid financial completely but avoid them for the most part. Post a recession these are in the goldilocks zone where there are rate cuts, high growth, low inflation, economic stability - the works. I wouldn’t mind being in during that time but any other time, the systemic risks are always on the rise owing to poor lending standards which invariably creep up after the goldilocks economy - as economy overheats, rate cuts dont spur growth, inflation rises as does bad debt and with it goes down the debt servicing capacity and then the painful deleveraging (which is where we are now). If you are interested in this, do read Ray Dalio’s Big Debt Crises. Hope I managed to convey my thought-process.


Edelweiss Financial Services
Piramal Enterprises Ltd
(Hitesh Patel) #3148

@Advait_6270

I think in any sector leading the bull market or is a market favorite, almost similar things are visible.

All the stocks in the universe start going up and any company that has anything to do with the sector starts going up. As this happens the high and excessively high valuations are justified in the name of very long runway for growth or very high quality business and so on or a combination of few or all of these attributes.

The management of these companies are frequently in the news and praised for their acumen etc.

After each quarterly numbers the feedback is even more bullish and stocks go up in unison.

After a very strong run in these companies the music starts becoming louder and no one is ready to take a counter argument seriously.

Sometime later at the fag end of the run up most stocks fail to respond positively to what are perceived to be superb results. This is the first warning bell.

A few stocks esp those that are the most coveted among these will run up even after all this and post new highs giving a false sense of all is well within the sectors. Meanwhile the less fancied within the sector keep correcting (or dont respond at all) to what is perceived to be good news.

Finally the sector favorites start correcting and thats endgame. The fall is even more severe than the earlier rise esp when the fall is a few trading sessions old. And thats when concerns to the sector start emerging and prices start adjusting to what is perceived to be the new norm.

This cycle repeats off and on.

Coming specifically to my experience with financial sector, I started getting worried by moves in jm finance. Then when i started seeing similar things in other financial sector stocks I started seeing signs of impending correction in the sector but still was not nimble enough to exit all financial sector stocks.


#3149

Hi Hitesh

Nice summary and I think that’s what happend with HFC sector as well. But if you see companies like HDFC & especially Gruh finance, they didn’t fall much or fall at all? How do we identify such companies which have strong management pedigree but still have very high valuations? (Especially Gruh Finance, which seems to trade at a multiple of its AUM rather than a multiple of book value)


(Milind) #3150

Hi Hitesh,

I am reading book “Trade like stock market wizard” and found it quite interesting. Do you use any paid software for technical analysis of stock?

Just thinking, is it a good ideal to look for stocks in metal or pharma or chemical where strength is good while whole market seems to be in downtrend and unstable kind off.

As with your experience/guidance i learned, once big fall happens and sector goes out of favor, it takes time to come back and more than 15 to 20% fall, i am convinced so earlier i did sell some finance stocks and did more and now out of this sector (kept small quantity so i will not loose track of it and when the time comes back i may be able to utilize it) and did not wait for pull back. time would tell it is correct or not but i feel with my learning i should not be in this sector. (just to get 10% kind of bounce back i though better not to loose more).

now coming to put money in other sector which show emerging sings, do you feel i should wait some more time to let the market more stable than current one. If whole market is in downtrend, ultimately everything would come down or may not move up significantly.

In 2008, First big fall happened in Jan, then march gave false impression that still things are okay and people might have average down their position, and after that market did not gave chance to anyone.

do you feel same may happen with financial sector? in some days, market may give pull back to financial stocks (People will utilize this as opportunity to exit) and after that no one gets chance to come out kind off?

Thanks for your views.

Regards,
Milind


(Hitesh Patel) #3151

@newone

Anyone who has invested for a few years and looked at the markets in general would clearly identify the great companies. These are usually sector leaders and have a great demonstrated track record.

Usually these companies quote at premium valuations and and have withstood the test of times. These dont correct more than 20-25% from their tops during routine corrections. (during major corrections everything corrects so this doesnt apply)

Even after the corrections these companies are the first to bounce back and regain lost ground.


(anurag88) #3152

Hitesh I know few months back you enter Equitas and explained your preference over Ujjivan.

Just wanted to know if you still hold equitas or this recent correction will take time to recover.


(pradip) #3153

Hitesh, in the hindsight, this was a superb post you wrote beginning of the year. The market in the last 8 months has behaved so close to what you wrote in the post!

Will be helpful if you could share what’s on your checklist at the point of time and why.

Below is my checklist. Please do share your thoughts-

  1. Kajaria tiles - The stock has corrected 50% YTD and is reasonably valued on historical valuations. Though the tiles market is very competitive and no player has pricing power, Kajaria has always stood out in terms of branding, new products, vast dealer outreach etc.

  2. Eicher motors - The stock has corrected 20% YTD & looks reasonable too. While there are concerns on workers strike in their Tamil Nadu plant, competition, brand fatigue etc. Eicher has always stayed ahead of the curve by launching new products, entering new domestic & international markets etc

3.Britannia - The 100 Yr old company is up 23% YTD despite market pendulum swinging wildly in recent months. The moat the business has is undoubtedly strong, justified by their 100 Yrs of existence.

4.Relaxo - It has one of the simplest business models. The business is immune to rupee depreciation, oil prices, trade wars, Trump etc etc.

5.Balkrishna tyres - Despite 20% correction YTD, the stock is still expensive on historic valuations. The recent decision to set-up a manufacturing facility in US has raised a few eyebrows. Nonetheless, Balkrishna has stood the test of time. It has clean balances-sheet, geographically diversified customer base & great growth plans for future.

Gruh Finance, IndusInd Bank, Bajaj Finance & TV Today are also on my check-list. Any further 10-15% fall in current price makes them good buy, in my understanding.

I am more a data-excel guy like @Yogesh_s! I have looked at the Cash Flow, P&L and Balance Sheet of these companies and haven’t found any major concern.

I am all ears now to hear from you :slight_smile:


Yogesh's blue chip 10 Portfolio
#3154

Hi Hitesh

In the case of HFCs, there are many companies which had better growth record than Gruh (ex. PNB HFL, IBULLS Housing etc). But they fell so bad in the last 1 week. Is it just because of the HDFC group parentage that Gruh finance share prices are holding up?


(Hitesh Patel) #3155

@newone

If u analyse the business model of all these HFCs and track their records over the really long term then gruh stands out tall above everything else.

First they operate in a space where others dont venture out. Just have a look at their average loan book size as compared to peers. Plus their NPA ratios over all these years. And their ROA and ROEs over these years.

I feel Gruh is a self propelling growth machine. The growth can be slowish fast to fastish slow but markets have acknowledged that it will continue to grow in a profitable way for many years in future also as has been in the past.


(Hitesh Patel) #3156

@pradip

Coming to my checklist, I track some companies with tailwinds in near to medium term like aarti inds, aarti drugs, jb chem, torrent pharma and other pharma stocks, polyplex etc. Besides the usual pull back candidates like bajaj finance etc which could provide a decent upmove once this current correction ends.

Regarding the stocks you mention,

Kajaria Inds has been a dominant player in the tiles industry and it also seems to have ventured out into related things like kerovit products (I see anushka sharma ad on tv a lot these days- how much traction it is getting needs to be checked). Problem with this sector is that it is facing some input price rise plus fuel price rise which seems to be taking a long time to pass on to customers.

Eicher motors I dont track too closely.

Britannia remains a very strong play on the snacks/biscuits etc space.

Relaxo is a great play on the footwear segment but I feel a new look Bata also needs to be looked at closely. It seems to be in the process of changing its image and product range.

Balkrishna Inds — Any company doing capex is likely to face atleast some teething or other problems. They need to be kept in watchlist specifically with a view to load up if price corrects in response to a couple of poor quarters during or post capex. I have seen it play out very well in NGL fine chem. The stock corrected for a couple of quarters due to lacklustre quarters mainly in terms of profitability and now seems to be on track. If something similar were to happen in Balkrishna it would be a great opportunity. In the past too during their initial phase of Kutch expansion the stock price offered a great chance to load up and then once the results of capex came through it took off.


(Hitesh Patel) #3157

@anurag88, Regarding equitas I did prefer it over Ujjivan and had taken a position but looking at the loss of momentum in financial space had exited it some time back.


(ramanhp) #3158

Very specifically to Equitas, would you keep it in your watch list. What sort of ratios would you like improving before looking to buy it? I saw that their CASA buildup is good.


(Growth_without Debt) #3159

Great…can u please share excel sheet of analysis u did


(pradip) #3160

Kajaria Ceramics_VU.xlsx (283.2 KB)
Relaxo_VU.xlsx (281.3 KB)
Britannia_VU.xlsx (281.7 KB)
Eicher Motors_VU.xlsx (281.7 KB)
Balkrishna Ind_VU.xlsx (291.0 KB)

Here you go. The excel takes 10 min to get updated using data from Screener & NSE. Will be happy to guide further if you find it useful to use :slight_smile: