ItosLemma wealth creation portfolio - invite feedback and critique


(ItosLemma) #1

Newbee on this forum looking for critique of my portfolio.
I want to create a portfolio which will multiply my wealth in the next 3-5 years time frame.
Learnt a lot from this forum, so trying to share and record my journey too.
Would need your guidance & suggestion on my investment rationale, plans and how to consolidate, point out stocks which do not make sense and other valuable suggestions:

Investing style - Long only, value+fundamental driven and concentrated portfolio. Special attraction to distressed assets. Not interested in day trading.
Criteria - Every investment idea should atleast have the potential to generate minimum 2x in a 3-5 year time frame.

Current Portolio @ Purchase price - Primary Investment Logic:

  1. IDFC Bank @ 40.5 - Clean promoter + franchise at book value
  2. Piramal Enterprise Limited, PEL @ 2600 - Promoter track record + Cheap on a PE basis, not too bad on a P/B basis + potential for unlocking the holding company discount.
  3. KCP Ltd @ 160 - Undervalued on enterprise value basis + stable business.
  4. GM Breweries @ 900 - Bet on Increasing consumption of alcohol by Indian society, stable earnings, debt free. Promoter quality is a bit of ??
  5. GMR @ 18 - Distress asset. Bet on promoters capability to turn things around + play on airport vertical
  6. Dishman Carbogen @ 255 - Small pharma company with decent track record available at reasonable valuation.

Most of my holdings are in negative and some like KCP have shaved 50%.
The 50% loss in KCP, has taught me that I should plan my entry price better. Though I still have conviction in the company fundamentals. So lets see.

Grateful, if you can critique the portfolio.
Also please suggest ideas that I can look at, given the current downturn in markets.


(1.5cr) #2

Only track KCP and a little bit of PEL. If you are convinced of value unlocking post capex which will on stream soon if im not wrong then why dont you average?
I dont know much about the other cos.


(ItosLemma) #3

@1.5cr Sir, thank you for feedback and valid point on KCP. On a lighter note, waiting for weighted average of 100 instead of current 120’ish. :rofl:

Actually I am keeping some dry powder to account for:

  1. next election results,
  2. finding may be 2-3 more good investment ideas to diversify portfolio. but overall want to keep it less than 10 stocks in portfolio, for sure.

Not sure how wise it is, lets see. Kindly share your stock ideas, if any, please.


(Arun S G) #4

I am curious how you evaluate this potential. I’d really appreciate if you can pick one example from your portfolio and illustrate this.

Thank you!


(ItosLemma) #5

I am sure you know that the question is rhetorical and can have no simple answer.
Based on the same things that the holy books preach - clean promoter, clean balance sheet, profitable business model, cheap valuation, margin of safety, competitive moat etc etc.
Finding all of them in one company, is like searching for the perfect spouse. So we all make compromises that we can live with and hope for the best.

Also it helps to participate in multiple market cycles, with their associated madness.
One such spectacular example is Dana Gas - https://www.thenational.ae/business/where-it-all-went-wrong-for-dana-1.465247
Another is a recently liquidated infra major, where I also lost quite a bit - though not fully cleaned up.
The mistakes we make are an expensive way to develop our evaluation potential.


(Arun S G) #6

Ok, so now I know that this was a statement not to be taken literally. There are members here that have detailed calculations on future projections and I was wondering if you had something similar. It is very likely that these projections are off by a wide mark, but this is a starting point and one can then apply a MOS to the numbers.

Thanks for sharing your pf.


(Hitesh Patel) #7

If you are looking to build a long term.portfolio look for dominant player in a sector.

In your case barring piramal i cant see any dominant player


#8

@hitesh2710 In the age of disruption, how long will the supremacy of one or two dominant players exist? They were the pioneers, only they were available, so people purchased their products, selected them, they had no choice. But with new entrants in many sectors, will the betting on leaders still be profitable?

I am already doing this Hitesh ji, I want to have a long-term portfolio so invested in a few big companies, but it would be helpful to know from you, thank you.


(Hitesh Patel) #9

@ChaitanyaC

I think one has to think about disruption in terms of how it can affect the whole sector. And during what time frame.?

If the disruption is going to occur after 10-15 years or if the timelines are not too certain then I would like to look at my investment with a time frame of 2-3 years and then review the scenario.

I think sectors like FMCG, consumer durables,housing, basic materials like steel and cement etc are less likely to undergo disruption.

My view is instead of worrying about disruption affecting any company and its consequences, I would rather focus more on companies benefitting out of disruption and dig deeper.


#10

I was thinking of holding them for longer periods, did not think of 2-3 year time frame.

Thank you for the reply Hitesh ji, that is helpful.


(Hitesh Patel) #11

The idea is to buy for longer term and review the company periodically


(EL) #12

@hitesh2710
Hi Hitesh
I know how busy you are and you still try to answer all questions
I am sorry to take some of your valuable time but do you maintain or have on the top of your head a list that you consider dominant player in various sectors that cover Indian markets so probably most IT that compete internationally do so on cheap cost and English workforce basis so eventually their advantage might run out

So do you maintain a list of companies with or without sector specifics that you’d keep an eye on and if valuation comes to a good price not hesitate to buy or add your holding


#13

Thank you Hitesh ji.


(Hitesh Patel) #14

I think the best companies that come to mind immediately are hdfc bank, pidlite inds, asian paints, havells, etc.

I dont track valuations of these companies closely but feel that these are likely to remain relevant for a long long time.


(Growth_without Debt) #15

Such bear market no one has courage to take position in great small and micro cap but people always go for well known names which were forgotten during bull market. I.e. most of people do right thing at wrong time!!


#16

I guess, that is what inexperienced or fearful investors do as they want to preserve their capital. Value investors or experienced investors would invest in bear market as stocks are available at fair value or at a discount.

And it takes experience or conviction to invest in falling markets. When you had first invested in a bear market, and a bull market happens later, you get to see all your stocks going up and up. But when you have seen only a bull market, and a bear market starts later, you would be scared in invest seeing stocks go down by 30 or 40%, you are doubtful and scared.

Experience is easy, it comes from being in the market through thick and thin, and conviction comes from knowledge, research, analysis, and vision etc.


(ItosLemma) #17

Valid point Hitesh and something that I will keep in mind in future. Also thanks for elaborating the concept of dominant player with some examples in the posts below.

But the catch is dominant players are well researched and price discovery is already done (mostly). So one has 3 options:

  1. Bet on future growth of an existing dominant player
  2. Identify new dominant players early and enter
  3. Capitalize on any temporary mispricing opportunities in existing dominant players

Are there any other options that can be added to above list ?
also option 2 looks to be the most difficult one. How does one go about option 2 ?