Hitesh portfolio


(Pragnesh) #3462

Hiteshbhai
What is your opinion on Grauer and weil?


(abhishkjain2626) #3463

Hitesh sir, i am very keen to know your opinion on Bandhan Bank in light of the Gruh merger… what do you make of the management? Results have consistently been fantastic, with CASA levels on par with HDFCBank… could there be something fishy?


(HarshSomani) #3464

Sir, first of all very thankful to you for the knowledge shared by you on this platform! It helps new investors learn from your experiences…
What is your view on FDC LTD at the current levels? It has been a safe stock with the management distributing surplus cash to the shareholders…What is your view given the recent Drug Pricing Regulations ?


(A shah) #3465

Hi Hitesh bhai,
1 What to do if a diversified portfolio becomes skewed due to corrections in one sector or price rally in another sector . Should the portfolio composition be changed to reflect changes in market value due to the huge correction or rally in a particular stock and the sector ?
2 My portfolio currently consists of portfolio with sectors like as below

Finance 17%
Auto 17%
Auto comp 10%
Software 13.00%
FMCG 15.00%
Auto ancillary 15.00%
Commodity 13%

Should there be more concentration in certain sectors like finance considering there growth drivers ?

3 Have observed that you have gained expertise in many stock sectors totally unrelated to your field. Would love to know your suggestions on how to gain knowledge and increase circle of competence for new and niche fields as fields like fmcg etc are already very well discovered . i am currently researching engineering sector and specialty chemicals but find many things difficult to grasp. As an example, i found researching gmm pfaudler quite complicated due to lack of knowledge. Another reason i am asking this is i find there are fewer and fewer oppurtunities in easily understandable sectors as mostly all stocks in such sectors are already well discovered.

4 Is there any importance of owning stable compounders in a portfolio as they are growing very less as compared to fast growers ? What i mean to say is is it ok to have a reduced portfolio with only fast growers or have a increased total portfolio thereby including stable compounders also?

5 I always tend to predict future growth basis past growth performance ,and most of the times i have got it wrong. how to predict future growth of a company or a sector ?

6 What little i observed, i found that Certain stocks being market leaders always command higher valuations and premium inspite of other stocks in the same sector not having much difference in the growths . So does it always make sense to invest in market leaders inspite of other companies having similar if not better management pedigree in the same sector (considering other factors similar) and are relatively undervalued due to market perception . Mostly such perception seems very hard to change . Please let me know as to what i am missing here ? But then appreciation chances also become limited due to the higher valuation of market leaders in the sector.

Many thanks


(Hitesh Patel) #3466

@A_shah

Too many questions. :slight_smile:

  1. We have a portfolio allocation thread on VP which was a blockbuster thread and you can go through it. Besides these there are books on investing I mentioned earlier which you can read a few times and most of the answers lie in there. I cant give a generic answer to this question because each investor’s mindset is different.

  2. About higher concentration in any particular sector we have to set our own benchmarks as to where we want to draw the line in terms of percentage allocation. If PF allocation becomes skewed due to price rise in a particular stock/sector some leeway may be given. Its a good problem to have…

  3. About gaining expertise in analysing companies in different sectors it comes with experience and interaction with other investors. And reading through annual reports, on the sector in question and research reports if available. Nowadays it has become very easy to research a company because VP can be used as a good starting point.

  4. Stable compounders merit a definite place in the PF esp if PF is a big one. They lend a stability to PF. If someone is starting with a smaller amount and wants to build capital quickly in a few years, small caps could be a the place to be. But it requires a specific mindset and loads of luck.

  5. Predicting future growth is possible only in predictable companies. If I want to predict earnings in cyclical sectors like cement or steel or PVC films etc I would err often. So prediction should be attempted only in consistent predictable businesses.

  6. Market leaders will obviously command premium valuations in any sector. Even in cyclicals most often. But maximum money is made where there is a huge amount of perception reality mismatch and thats where betting on slighly unknown companies or misunderstood companies is rewarding. Change of perception is a slow process and takes time. Till the market changes its perception one has to be patient. You can read the threads of some multibagger companies from beginning to get an idea about what I am talking.

@Pragnesh I dont track grauer and weil. @rskothari I dont track pricol. @Rohit_b I dont track Andhra petro.


(A shah) #3467

Thanks so much @hitesh2710 Hitesh bhai for taking time out and replying to long questions of novices like me and my apologies for the long questions . But your simple , practical and easily understandable replies make me come back to you whenever i have queries . Will read and reread (as many a times i find the second reading helps gain more insights ) the books you mentioned and as always, your crystal clear replies have always cleared my queries which no book could . Thanks so much once again sir.


(HIMSHAH) #3468

SIR have u thought on no deal brexit ? how bad it can be to indian company and world economy ? please share ur idea .recently tata motor gave some serious warning on it…


(Hitesh Patel) #3469

@abhishkjain2626

Bandhan Gruh merger could be good for Bandhan Bank. They get a high quality business in housing finance whose expertise they can use in growing the HFC business by cross selling the HFC business to their own customers. Besides by itself Bandhan has till now been doing quite well and has been reporting consistent good numbers.

What valuation is ideal to pay for such a business is an individual call. I am currently in observation mode as far as Bandhan bank is concerned.


(Hitesh Patel) #3470

@HarshSomani

FDC is all about betting on domestic pharma sector. The company and its management has been sleepy till now and there has hardly been any noteworthy growth. It is a company with good balance sheet and healthy cash flows. But it can provide decent returns only if it can manage to show sustainable growth. The other possibility and rumour doing the rounds since many years is of the company being sold off but nothing of the sort has happened till now.


(Hitesh Patel) #3471

@HIMSHAH

All this stuff about what would happen to macros once brexit happens or doesnt happen is beyond my comprehension.

Peter Lynch had this to say about macros.

*** Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.**

I think that says it all.


(Investor_No_1) #3473

Sir these quotes in books from legends made me concentrate on individual companies…but still good companies fall terribly in bad macros is what i have seen. We don’t know what will happen to interest rates but we know the mood…i feel my big mistake in investing has been on only concentrating in individual stocks…what do you think? For eg. Bad macros also results in defaults which may or may not be systemic…it can affect our otherwise good companies…i feel macros are as important as my good stocks if i have any chance to beat mutual funds over long run…what are your thoughts and advice? Also, I wanted to thank you for once simply presenting existence of good and great companies…in 2018 learning …your wisdom and my experience…this line of yours is engraved in my mind and shall remain with me just like those of the legends like peter lynch…“there are good companies and there are great companies…and only great ones are worth holding for long”


(SOHAN) #3474

Hello hitesh bhai are you tracking idfc first bank how are prospects looking


(Hitesh Patel) #3475

@Investor_No_1

I myself was nervous about investing in small-midcap space since Jan 2018 when I felt that there was a lot of froth in the space. Subsequently there has been a meltdown in the space and even if index has posted all time highs the small midcaps space has never really recovered.

Inspite of this if you watch closely quite a few companies like aarti inds, gmm pfaudler, alkyl amines, vinati organics, iol chemicals, etc have posted all time highs. This was based on the improvments in fundamentals playing out.

Currently the mood of the markets is such that not many investors have the guts or conviction to buy even companies posting superb numbers. There is the odd one or two days bounce which largely fizzles out within a few days and stock price becomes range bound.

Agreed that the index is at elevated levels but if one has the courage and conviction to buy fundamentally sound companies at extremely attractive valuations, I feel risk reward can be very favourable. Not all companies are still available at extremely attractive levels but some definitely are. In these companies atleast some nibbling can be done and gradually over next few weeks and months positions can be built. If the stock prices of these companies too fall in line with market corrections then so be it and maybe we can get a chance to load up some more. Trick is to keep some dry gunpowder ready and buy in a calibrated disciplined manner.

If one sees the results of these investments after 2-3 years it would be really satisfying. Atleast thats my view. I feel there was a similar situation somewhere in 2013-14 when a lot of very good companies were available at throwaway valuations. Currently we are not in exactly similar situation but some companies do look in that kind of valuation zone.

Another thing to note is that market cycles have turned very short over the years because of excessive dissemination of information. Hence bulls and bear cycles tend to be over within short periods of time. This small and midcap correction has been going on since more than 12 months now and I think it may get over once the outcome of the elections are out of the way. Lets see how it plays out.


(vishaltuniki) #3476

Hi @hitesh2710 sir, can you please help me out with your views on Galaxy Surfactants


(Hitesh Patel) #3477

@vishaltuniki

No idea about galaxy surfectants.

@SOHAN We have a very well populated thread on idfc bank on VP where you can get a lot of views. I like what Vaidyanathan did with CAPF but how he performs at IDFC bank needs to be seen. Growth would be easy but controlling an disposing off NPA would be difficult. Plus how much garbage in terms of NPA and toxic assets he inherits from the erstwhile IDFC bank into IDFC First bank also needs to be seen.


(AM648) #3478

Dear Hitesh Bhai,

I know it is hard to do but I hope to have your view on the general market valuation.
What I am finding is that although there is no doubt the market is cheaper now as compared to a year back, however, good companies with strong ROEs, which are non cyclical which continue to post strong results are not correcting by big margins be it mid or small cap. On the other hand, any company whether mid or small with the slightest sign of degrowth is getting hammered.

In summary, the high quality secular names which continue to show bottom line growth be it mid or small or large are still not available at below long term average valuations despite the carnage in the market as people are just fleeing to safety more or more.

To get good quality stocks cheap (cheap defined as being available at PE ratio below its own 10 year average as opposed to cheaper than jan 2018) one might need to invest in a company that historically has great ROEs and continues to have good ROEs but might be going through a period of minor degrowth hoping growth will bounce back. This is very much unlike 2013 when good quality companies were available cheap even when they were showing good consistent growth.

It’s not like good companies which are growing are not available at reasonable valuations but it’s still not that easy if you are not willing, in simple terms, to pay PE’s more than 8-10 year average. There are examples such as HDFC bank but not that many as was the case in 2013.

Great example is Page, which seems to have slowed down (temporarily or permanently is anyone’s guess) and corrected by 35 percent but still available well above average at 65 times trailing PE. Granted the ROEs are better today than 5 years back but despite the correction still doesn’t seem “cheap”

What is your view on this overall observation?


(HIMSHAH) #3479

Sir,
You are right in investing in small cap. I am in market since more then 30 yrs and made all my wealth in small cap and mid cap company only. But since last year I don’t know structure of market looks completely changed , previous in 2013 or before buying was from many diff diff players of market and not just domestic mutual fund. So support was coming from many quarters and prices had gone up. Now their buying is just one sided. All money chasing few stocks only. So valuation going up and up in few stocks. And slightest degrowth big selling starts.
My worries will the perception of mutual fund change . ? And how and when . . ? One market guy used to say us “ Jaha shadi hoti hei Wahi khana milta hei and Udhar hi dance karna chahiye “
So I some times think this time I am totally wrong in my investment in small and mid cap.
so I Just have hope “ APNA TIME AAYEGA “


(Bharat) #3480

Very Interesting discussion and very insightful thoughts by Hitesh Sir !

Currently , small Caps / Mid Caps are still under pressure while the large caps indices are near highs or very less affected. I think Markets want to make people move towards Large Caps and want to portray large caps as safe heaven in volatile times. There is also a lot of consensus building towards ICICI , Axis bank & few large cap stocks which are not correcting and trading at extremely high valuations. I personally believe that if this shift happens and people start bending towards Large Caps as a safe bets , these large caps will go under price or time correction. In that time , very much possible of Mid/Small Caps showing up moves. Majority who have shifted towards Large Caps will again see Correction in their stocks (Large Caps) and appreciation in Small/Mid Caps and they will again try to shift towards Mid/Small Caps and i think the cycle will repeat !
It may sound weird but this is what i think of current situation. My experience is less than a year in markets and thus above point may sound immature too !

I too believe that lots of good companies in Mid/Small Caps are available at attractive valuations and showing decent growths. It is better to build position in SIP Manner over next 4-5 Months till election Outcomes. If outcomes are favorable , markets may see a rally and if outcomes does not look favorable , markets may correct for some more additional time before bounce giving ample opportunities to add businesses one likes.

In the long run , no matter which government is there at Center , it is the company fundamentals that drive the share prices. It is better to focus on finding Good companies and building a diversified portfolio rather than worrying on election outcomes. Buying in a staggered manner is also necessary as it is extremely tough to find a bottom. Equally important is to have a deep conviction on the companies which one is buying so that one can welcome the corrections with open heart and smile.


(HIMSHAH) #3481

What u said about cycle shifting from large cap to small and mid cap was true before . But since more then year it’s totally not happening. More small and mid cap going down and down even after good result.
For shares to go down selling in shares not only instrumental.mere lack of buying in any script also can take air out of any script and script goes down.

When we have seen small and mid cap not performing why we should invest in it ? Either big large cap goes down very much Then ? But then also people will think why not to buy page at very distressed rate then some mid cap .? Just an example.
So I am just waiting how and when this changes and big investor and mutual fund comes back to small and mid cap

I don’t know I am right or wrong but this is my observation from trading screen…


(Bharat) #3482

A majority of stocks i track in Mid/Small Cap space have not corrected more than 30% from highs of 2018 which i think is normal. We should understand the discretion between Cyclic/Commodity stocks and secular growth stocks. Anyway such fall should be welcomed as it provides good opportunity to add more at lower levels.

It is all on the individual to choose between Mid and Large Cap at distressed rates. It is all a risk reward game. Even after huge corrections , Some Large Caps remains expensive. I would like to buy a HDFC Bank somewhere around 1350-1400 per share , Bajaj Finance around 1500 or a page around 17000 per share. If the prices comes near those levels , i would like to add otherwise i think there are plenty of good businesses available at decent valuations.

The best times to buy stocks in my view is when majority is bearish on it or very few are interested. Once it starts gaining traction , prices rises and we end up paying higher prices. It is not possible to catch up then. Though everyone has their own strategies. Some like momentum stocks , some like to play with cyclical

I will restrict this discussions here as i don’t want to pollute this thread with my immature understandings and inexperienced views !