Hitesh portfolio


(A shah) #3531

Hi Hitesh bhai,
Whats your view on carborundum universal, lakshmi machines and tube investments?
Thanks


(Pragnesh) #3532

Hiteshbhai
I have read your various posts and i think u invest in quality stocks rather than value (cheap)stocks.
I want to know that at how much max PE ,u buy stock if u like company and buisness?


(Hitesh Patel) #3533

@Pragnesh

In the past I had been guilty of buying poor quality and in some I even made decent money but those were times of a mad bull and sooner or later everything flies. e.g kamat hotels, lt foods, electrosteel castings, ekc etc. But these companies have a definite sell time and price.

But in current market scenario and most of the times in market usually, its always better to stick to good (atleast) if not great companies to avoid severe market related burns.

About how much to pay for a business, many a times its not about the PE. Its more about changes taking place in a business and if I find that the earnings growth is going to be ballistic say around 50% cagr, then paying a higher price also would be okay. But while paying high PE we have to be absolutely certain about the growth prospects. In the past I have bought Page at 50-60 PE and recently Grindwell at around 35 PE. One cannot look at PE in isolation.

About buying quality companies, I think some time or other you are going to get your investment thesis wrong or atleast wrong for some time (and you have to wait longer for things to play out) and its going to make you worried.

Its always more comfortable to cry in a BMW than in a Maruti 800. :grinning:


(A shah) #3534

Hi hitesh bhai,
Reading your post, i have learnt a lot changed my view towards buying quality stocks . Had a few queries
1 If the stock is good quality but if growth visibility, (in my limited knowledge), is not great , such as lakshmi machines etc then should one invest or not ? How important is growth visibility?
2 I have seen consumer facing companies like page growing much more than non consumer facing . However such secular companies are mostly discovered . In such cases , can one invest in non consumer facing quality companies ?
3 Request your views on tube investments in view of further value unlocking ( may be due to demerger whenever in future) as its a holding company
4 why more importance is attached to growth over ROCE in our markets ?
5 certain companies are very conservative in accounting while others are aggressive. In such cases how does one make out conservativeness and compare the same ? As many pe ratio of peers differ and does it have to do with such accounting differences ? This i feel in nbfc
6 Is it right to assume that a one product company will always command a premium over diversified conglomerates ?
7 Also how to identify the sector of the next bull run and inspite of companys individual performance being very good, why is it that previous bull run poster boy doesnt continue in next bull run inspite of good financial performance?
Request you to please correct my understanding in case its wrong .
Many thanks Hitesh bhai for always giving clear replies in simple language and apologies for many queries


(chytak) #3536

Hello sir,
Being a Doctor and an investor, what’s your opinion on Apollo Hospital. In my opinion they have established a great reputation for cutting edge treatments and established a reasonable brand name in South India. They are pretty much immune and capable enough to face any online disruption I’m not sure about the valuation and quality of management. Your opinion will be much useful. Also do you consider any other companies in the health care space?
Thanks


(arpitjain512) #3537

Hello Hitesh Ji,

Request our views on Minda Ind and Automotive Axles from Auto Ancillary sector. Looks at attractive valuations currently with top class Management.


(Bharat) #3538

Hi Sir ,

Would like to know your views about " Mas Financial ".

As per my analysis , i find the business Good with honest Management and excellent track record and a decent market to address in coming years. However i see some abnormal movements in the stock prices between 3 pm to 3:30 pm on most of the days. The prices usually go down or remains at same levels throughout the day and then sudden abnormal movement happens around 3 pm (Sometimes even rising 5-6% in few minutes). For once or twice , it would have been neglected but i have been observing it from long. Have seen such thing for the first time in any company. Do you have any idea why this happens. It is somewhat a discouraging thing as of now preventing me from allocating higher allocation.

My query is more about the movements in prices and how one should see them rather than about the business.


(Hitesh Patel) #3539

@chytak

Apollo hospitals remains the leader in the healthcare providr segment. The runway for growth remains very long.

I haven’t tracked the company too closely to offer any company specific views.


(Hitesh Patel) #3540

@bharat19

I dont know too much about the price movements in mas fin or what to make out of it.

But about the business model of the co it has a very unique model. It has 72 branches in 6-7 states main among them being Gujarat and rajasthan. In latest concall management has stated its aim to take it to 150 or more.

The other interesting source of acquiring assets is by way of working with other smaller nbfc and providing funds to them in lieu of acquiring loan portfolios from these cos. Here mas fin gets to pick and choose the clusters of loans it wants and in case of delinquencies it can ask for change in loan portfolios bcos the delinquency risk remains with the nbfc whose loan portfolios it takes over. Mas fin decides which nbfc it wants to work with based on promoter track record, pedigree, type of loan portfolios etc. The smaller nbfc because of size often find it difficult to go directly to banks or other entities to assign their portfolios and hence players like mas fin can acquire these portfolios if they so desire mainly because of their expertise in doing this kind of stuff for long periods of time.

Coming to liabilities side Mas fin raises funds from banks and other nbfc at reasonable rates because of high ratings with ratings agencies bcos of long track record. Plus they assign part of their portfolios to banks which need to reach their priority sector lending targets. Most of the loan portfolios of mas fin falls within this priority sector lending and hence it sits pretty in that aspect. Here the risk of default goes to banks. But because this kind of relationship is multiyear and recurring Mas fin cannot afford its loans to default because there is a reputation at stake here and it affects subsequent assignments.

Main components of loan book are micro enterprise lending in range of 50-70k to the likes of traders, tailors, barbers and such folks. Besides these it lends to SME segment with ticket size of 50-90 lacs for sheds, WC, machinery etc. Together these 2 segments account for nearly two thirds of loan book.

Among others 2 wheeler loans, C V loans, housing loans make up the rest.

Interesting part is the self sustaining business model where because of high roa induced by off balance sheet loans and assignments of loan portfolios to banks and other nbfc, it doesn’t have to dilute equity often.

Company has an enviable 20 year track record of 40%cagr growth in aum with decent asset quality.

Risk could be any change in govt regulations that can affect its off balance sheet loans and assignments of loan portfolios to banks.

Till now management has done a great job of taking loan book to 5000 crore but taking it up another 5 to 10 times in next 5 to 10 years could be a thing that needs thinking.


(Hitesh Patel) #3541

@arpitjain512

I dont track Minda or auto axles, so no idea about their prospects.

@A_shah, I dont track carborundum, lakshmi machines or tube inv. I own a company comparable to carborundum universal viz. grindwell norton as a techno funda bet.


(Hitesh Patel) #3542

@Divyanshu_Taneja

JK Paper and paper industry stocks in general are posting very good numbers till date. But even with such good numbers being posted the stocks in the sector seem to be quite weak even with respect to general markets. Maybe markets are trying to say something here.

According to Peter Lynch, ideal time to buy cyclicals is when PE is high and to sell them or atleast be careful when PE is low. Currently maybe the sector may be operating at peak margins and if margins take a hit, these companies can be in troubled waters.

I had looked at them earlier but had felt that anything and everything that had to go right had already gone right for the sector and couldnt figure out what further good news can come about for the sector. And if bad news start then stocks can take a real hammering.

This is not to say that this sector cannot provide returns. But I have observed in the past multiple number of times in different companies that when stocks stop reacting as they are supposed to in response to good numbers or extremely positive newsflow, the smart money is already getting out of the stocks/sectors. Something similar happened when I used to own torrent pharma and alembic pharma and that is something which taught me a lesson to (sometimes, though not always ) listen to what markets are saying.


(Jayatu) #3543

Every time I read your post it reminds me wisdom shared in One Up on Wall Street …please do us a favor …write a book for us …it will benefit many new investor for ages to come…


(A shah) #3544

Yes hiteshbhai , i agree with @Jayatu absolutely. It would be a great help as you explain complex things in a very simple manner . Just reading your post gives us so much knowledge, cant imagine how full of investment insights the book will be .


(HIMSHAH) #3545

Hitesh bhai , do u track linde ind . Can u give any input especially after global merger and open offer failure …


(rahgrov) #3546

Hello @hitesh2710 Bhai, first I would like to thank you for all your insightful comments and your ability to break down complex businesses into simple terms so that novice like me can also grasp somethings.
I wanted to know your opinion of textile sector, most of the companies have corrected a lot in past few months and in particular do you have any views on IndoCount the stock have fallen around 80% from its all time highs. And even though the falling rupee should have helped them as an export oriented business still they are taking losses due to currency swaps. It makes about 15% of my portfolio but I am not sure now whether I should just book losses or keep on holding it. Any views would be much appreciated. Thanks a lot!


(SOHAN) #3548

Hello hitesh bhai.are you tracking Apollo sindhoori.this company is offering food catering services to hospitals.


(csteja) #3549

@hitesh2710, how do you accumulate when you feel it could be a market bottom. Suppose for eg, if you feel NIFTY has bottomed at 10k during October 2018, do you deploy all the CASH you hold at once in your favorite stocks at 10k or do you go after individual stock bottoms?

I see INDEX bottom need not necessarily be a stock bottom. I always struggle here.

Please throw some light on this.


(Hitesh Patel) #3550

@A_shah

Coming to your queries, I would provide my views as follows:

  1. If stock is of a good quality but growth visibility is poor, then its better left alone. Since it is percieved to be of a good quality it will not be cheap in the first place. So stock price can remain sideways for long periods of time. I can give you an even better example of such stock besides LMW… Hawkins… :grinning:

  2. Most consumer facing companies as you say are discovered and valued nearly fairly. But sometimes because of market corrections or company specific reasons (if they are temporary in nature) these stocks do correct. e.g godrej consumer recently. If after doing some work on the company like listening to concall, doing a bit of scuttlebutt in supermarkets etc to see how products fare, if we get confidence about the company it makes sense to buy into these companies.

  3. I dont track tube inv recently.

  4. Only high ROCE in absence of growth will merely serve to provide a floor to stock price. It will not induce too much price appreciation until and unless growth comes back. Again example is of hawkins. And then one has to think about opportunity costs. If in place of such company if you had even bought a no brainer like hdfc bank, returns would be much higher.

  5. Regarding conservative vs aggressive accounting, there can be no generalised answer. One has to go case by case. e.g some companies in pharma and IT dont expense out r&d costs fully and instead capitalise it. this is aggressive accounting. Other companies like suven expense fully which is good conservative accounting.

  6. One product company or preferably one business segment company (even with many products) will always fetch better valuations than a conglomerate. e.g DCM Shriram, HSIL etc fetch poor valuations compared to peers.

  7. Sector of the next bull run … Here just as markets start moving up from deep corretions, stocks from that particular sector start making new 52 week or all time highs and keep going higher. This is often the first tell tale sign. Fundamentally also one can figure out a lot of tailwinds if proper research is done.

About why previous bull run poster boy doesnt run in next bull run, I think it has a lot to do with over ownership by market participants. The strong run up in previous bull run has lured a lot of weak hands into buying into the stock near peak prices and these stuck positions keep offering supply on every rally in the stock once the bull run is over. Plus the bull run usually ends with some kind of negative newsflow for the sector as a whole and it takes a long time for tailwinds to re emerge.


(ankitchandra) #3551

Sir,
Your views on Gujarat Alkalies. Is it likely to sustain growth and increase roe?


(Investor_No_1) #3552

Hiteshji, is healthcare services as a sector worth investing by minority investors? Apollo has had a good bull run in some period from 2009 till 2016 (7.5 times) and earlier as well. Somehow, this industry has only Apollo as a company with decent numbers/balance sheet. Others all are struggling meaning it is a very difficult sector to operate. There are many PE deals, strategic changes to companies, plus depreciation cost is high on flip side and on positive side operating leverage can be good for mature hospitals. Government policies/regulations is a big variable.

My question is that is this sector good for long term investment by minority shareholders? I have burnt my fingers in Max India. I do not want that bad experience to cloud my judgement hence asking the experts. Thanks!