Meet Makadia's portfolio


(Meet Makadia) #1

Hi,

I am Meet Makadia from Mumbai. I have been investing in stocks since 2006. Earlier it was more of a part time activity. Now I spend 80% of my time in this work. I am grateful to Hitesh sir (Dr. Hitesh Patel) and Manish Sir (Mr. Manish Vachhani) for all the valuable time they have devoted (and keep devoting) in nurturing my stock picking skills.

Please find below my portfolio. I want you fellow boarders to critically examine my portfolio and thought process (if you can see some :slight_smile: ) behind building the portfolio.

Stocks in my portfolio

  1. Whirlpool bought @ 38 in 2007
    CMP: 900
    Portfolio weightage: 34%
    Logic: Bet on turnaround - Well known brand @ market cap of Rs. 350 cr (when bought). Nothing to lose stock. Consumer durables penetration still low in India. Rising incomes, 7th Pay, nuclear families,
    normal monsoons to stoke demand.

  2. Zensar Tech bought @ 165 in Sept 2010
    CMP: 1050
    Portfolio weightage: 7%
    Logic: 30% RONW IT business (application management, RIM etc) with high free cash flow generation which could be used for inorganic growth. Cross selling opportunities (acquisition of Akibia). Recent entry of Apax Partners as 23.1% shareholders (known to generate acquisitions and clientelle for the companies they invest in). Improving margins.

  3. Gruh Finance bought @ 190 in Sept 2010
    CMP: 310
    Portfolio weightage: 9%
    Logic: A high pedigree bet on semi-urban / rural housing demand.

  4. Hester Bio bought @ 350 in Jan 2015
    CMP: 770
    Portfolio weightage: 6%
    Logic: A bet on the niche area of animal/poultry vaccination business.

  5. Take Solutions bought @ 110 in Sept 2015
    CMP: 175
    Portfolio weightage: 6%
    Logic: IT Specialisation in pharma processes like clinical data management (Competitive advantage). Typical niche business enabling them to focus all resources towards their pharma solutions business.
    Focus (focussing its Supply Chain Management activities on profitable segments and going all out after life science business). Love businesses that say no (refusing not-so-profitable SCM business).

  6. Indusind Bank bought @ 850 in Feb 2016
    CMP: 1170
    Portfolio weightage: 9%
    Logic: Well run bank with good return ratios. Can easily grow NII at 25% over next 2-3-4 years apart from fee income. Love the asset quality management (gross NPAs below 1% despite a loan book which
    comprises 58% corporate loans and 16% commercial vehicles loans). Company is increasing focus on retail.

  7. Sonata Software bought @ 160 in July 2016
    CMP: 150
    Portfolio weightage: 4%
    Logic: Enterprise value (as on 31/03/2016) is Rs.1400 cr. Generated free cash of Rs. 850cr cash in last 3 years. Extrapolating this, even if company doesn’t grow, entire EV can be recovered in 5 years.
    International IT services business (mainly company’s focus on IP led products) could provide growth kicker.

  8. Cash: 25% of portfolio
    Logic: Exited Whirlpool partially to reduce its weightage in the portfolio and hence the disproportionately high weightage of cash in the portfolio.

Recent exits:

  1. Pidilite bought @ 230 In Sept 2013
    Sold @ 570 in Jan 2015
    Logic: Wanted fund to invest in Hester. Sold overvalued stock.

  2. Hawkins bought @ 1500 In July 2012
    Sold @ 4400 in Feb 2015
    Logic: The good exit price made me lose patience with laggard management :slight_smile:

  3. Canfin Homes bought @ 150 in March 2013
    Sold @ 1150 in March-April 2016
    Logic: Needed funds, lightened housing finance weight

  4. Whirlpool bought @ 38 in 2007
    Sold @ 800 in June-July 2016
    Logic: Reduce weightage in portfolio.


(indrajeet100) #2

Well if this is your real portfolio, congrats and you are wasting time seeking seeking any advice. You should be giving advice to all the world.


(smehta) #3

Both are the most humble persons I have ever met. True GEMS:slight_smile:


(Meet Makadia) #4

P.S.- recent exits dont include BHEL and Bharti Airtel that I exited in 2013-14 after holding for more than 3 years.


(Manish Vachhani) #5

Thanks Meet for kind words which I do not deserve.
Coming to your portfolio, I still think high allocation to a single stock is not advisable as Prof. Bakshi says “Shit Happens”. Contrary to that our own Prof. Donald says(not the exact words but the essence) “If you know your stock well, then you can allocate higher percentage or Allocation should be proportional to your convictions/understanding of the business.” For me anything above 15-20% allocation is a simple NO.
Your stock selection is excellent backed by a good thought process but I think you should consider slightly lower allocation to tech stocks which at 17% is high considering high cash holding and add a pharma stock to keep the balance.


(Hitesh Patel) #6

Great to see your portfolio Meet.

I have had the pleasure of interacting with Meet many times and am highly impressed with his execution skills. I have seen people analyse companies ad nauseum and lack the courage to buy them when the opportunity presents itself. Thats no so with Meet. He acts decisively when things are loaded in his favour. And he has a reasonably simple, lucid understandable logic to his decisions. I am a witness to his logic to sell Hawkins at 4400 amid a lot of hoopla surrounding the stock at that point of time.

But for him to do that he always does a lot of homework and interacts off and on. And after these things he has a mind of his own which I admire in a guy so young.

Coming to your portfolio, I think its an example of a successful concentrated portfolio. I also like the idea of balancing portfolio weights due to excessive run ups in individual stock prices.

I just hope you participate actively on VP and spread the knowledge.

regards
hitesh.


(Meet Makadia) #7

The 40% plus weightage to a single stock started giving me sleepless nights in May-June and hence started selling Whirlpool. I intend to bring it down further to less than 15%. Thanks for the reminder.
The tech weightage @ 17% is also something I am not comfortable with.
I will work on these points. Thanks a lot for contributing once again.


(Growth_without Debt) #8

@mvmakadia …I really amazed at how you pick great stock at good price. Requesting to share process or method you follow.


(Mahesh M P) #9

Hi Meet,

Can you please educate me on this : “entire EV can be recovered in 5 years”, also how you calculated EV. Would be glad if you could help me in this regard in your free time.

Thanks


(Meet Makadia) #10

Thanks a lot sir for writing. I remember meeting you in 2012 for the first time. I had more than 20 stocks in my portfolio then. An hour long interaction with you was enough for me to start building a concentrated portfolio. Thanks for being my mentor.

And yes, VP is a massive resource for learning investors like me and I will visit VP more often and contribute meaningfully.


(Meet Makadia) #11

EV is the enterprise value. EV= company’s market cap + debt - cash in bank (If one buys a company, one will have to purchase all shares at current market price, pay off the debt and encash the cash the company possesses in bank).

In Sonata’s case, EV comes to Rs. 1280 cr (@ CMP of Rs. 150 per share). Company has generated yearly free cash of Rs. 120 cr (avg of last 3 years). So, entire EV can be captured in 10 years

please ignore the calculation in my first post against Sonata; I copy-pasted some other calculation; just saw the error


(Irshad Farrukh) #12

Hi Meet
Congratulations on your portfolio which is an exemplary one. I concur with you that Hitesh Bhai is a mentor to many of lesser mortal like me. Although I’ve never met him but he always gave me honest advice whenever I requested. I hope one day I shall meet him in person :slight_smile:


(Mahesh M P) #13

Thank you Meet, Now EV Capturing part i got it. in 2016 they generated FCF around 240cr if i am not wrong. may be within 5-6 years entire EV can be captured if such FCF % rise YoY.


(Meet Makadia) #14

Yes, so the idea behind checking cash flows is to see the sustainability of payment of dividends in the case of Sonata as the stock was bought with the assumption that dividends will provide cushioning on the lower side.


(Meet Makadia) #15

No specific process. I can patiently hold cash and / or stocks for long periods of time.

Downside of holding cash for long periods - loads of errors of omission
Downside of holding stocks for long periods - miss out on opportunities to buy in market corrections.


(kiran) #16

How did you calculate the yearly cash flow of 240 cr for Sonata.
The cash flow from operations is around 80 cr for 2016…


(ishandutta2007) #17

If you are spending 80% of time on investing, is there any reason you are not much active on valuepickr.
I was surprised to find you hardly use valuepickr(12 days visited , 16 posts created)


(Meet Makadia) #18

I share my work with Hitesh sir and Manish sir and exchange notes with them regularly. So, I never felt the need to be part of the Forum. However, I will start learning and contributing on Valuepickr now. Thanks for bringing this up.


(Vijay Dosapati) #19

Sir, it may not be necessary for you to actively post updates on this site. But valuable inputs and suggestions of experts like you would be very helpful for lesser mortals like me.


(ASPN) #20

@mvmakadia, I would endorse the above view.

Imho, you are just being modest :slight_smile:. But eager to know how you identify the stocks.

Number crunching is a different thing. But, say for ex. Whirlpool…did you visualize that there could be so much market potential for the products that the stock will be a multi-multibagger ? This vision is very important. IMHO, this “vision+periodic stock taking+patience” must have done the trick for you. Just guessing…:wink:

Can you pls provide your inputs/thoughts/logic on which sectors are likely to see multifold growth in next ten years? @hitesh2710, Hiteshbhai, same question to you as well pls.