My Portfolio - Pkumar


(PKumar) #1

Hi,

I am both new to investing and valuepickr forum. I would like to get my holdings reviewed - the idea is get feedback from esteemed members and learn from their experiences. Pls take a look and let me know if I am making any obvious mistakes

The basic motivation of investing is to generate wealth over long term (10 years or more). I have kept a mix of both mid caps & large caps - My reasoning is both financial and growth story coming with it. Pls review. Thnx :slight_smile:

Large Caps -

  1. Lupin 10%
    Largecap Pharma with little debt - it has ROE of > 30% - so keeping it for compounding purposes.

  2. Infosys 8%
    Largecap IT with little debt - it has ROE of > 25% - so keeping it for compounding purposes. Still feel there is enough juice left in Indian IT story - there are few non-Indian IT professionals left in US/UK (at least the bulk is Indian). So this should play for next decade

  3. ITC/HUL 12%
    Play on growing Indian middle class and consumerism. HUL hires the most from IIMs and still has awesome marketing network. ITC is almost monoply in Indian Cigarette market + increasing commodities presence.

  4. HDFC Bank 5%
    Good Banking Network with great past performance

All large caps kept for compounding purposes only - I hope to retain them without any trading for long term

Mid/Small Caps - Plan to hold them for 5 years at least

  1. Atul Auto 5%
    Growing urbanisation, no debt comp with good growth, great past performance, Impressed with management’s fairplay etc

  2. Vinati Organics 10%
    Indian Monopoly in specialised chemicals, Promoter with long history in chemicals,
    They increased their stake recently - so another plus

  3. Kaveri Seeds 12%
    Promoter with long history in agrobased products, no debts, good growth, recently entered after price correction

  4. Avanti Feeds 5%
    Growing population and consumerism should help marine based food products.

  5. TV Today 5%
    Brought more as RK Damani (famous investor) brought a major stake :wink:
    The Indian media (esp TV news) still has quite scope of growth - they dont need major capex to run - so hopefully should do well.

  6. AIA Engineering 10%
    Experienced Indian company in heavy industry, little debt, good growth & ROE

  7. Ajanta Pharma/Alembic Pharma 10%
    Wanted to target growthing Indian Pharma companies with less debt, good ROE/ROCE, good topline & bottomline growth
    Both of them are at pricey valuations - however, buying them at dips.


(Hitesh Patel) #2

Excellent portfolio pkumar. And good logic to your stock picks.

all the best.


(PKumar) #3

Thank you sir. Still learning the ropes. The kind of analysis I see in this forum is awesome. So hope to keep learning and become better in time


(Ritz) #4

Hi PKumar,
Great portfolio, My portfolio strategy and picks is quite similar to yours.
However I am not convinced about kaveri seeds - there has been a lot of negativity with corporate governance so do consider that.
Can you tell us the valuation methods used by you and the average entry price?

Thanks


(PKumar) #5

To be honest, I dont have much understanding of any corporate governance issues in Kaveri. I read some news of Kaveri having subjected to Forensic Audit by SEBI (which by the looks of it is not something great news).

My logic of investing in Kaveri are the following -
1). Promoter with long experience in Agro industry (around 30 years)
2). Debt free with good ROE for past 4-5 years.
3). Good top line growth
4). Modi govt has given impetus to Agriculture in last budget including crop insurance. This will embolden both banks to provide more agricultural loans & farmers to incorporate high quality fertilizers/seeds etc. Kaveri, hopefully, will be one of the major beneficiaries.
5) There is not many close rivals to Kaveri - it has a wide economic moat in terms of seeds germ bank ( the input to high quality seeds). I am no agricultural expert, but from what I read - creating a seeds germ bank takes years of effort. The expertise is not something anyone can buy or build overnight.
6). Two years of bad monsoon has driven down the revenues of Agro-based industry. India, never had three bad monsoon consecutively. Hopefully 2016 will buck the trend.
7). Finally, the most important, the seeds industry is very fragmented in India - so there is still scope for consolidation and expansion. India - for all IT & other growth stories - is still agriculture driven economy. Given the rising population/food costs & government focus, this sector should do well in next 3-5 years.

Cons -
There are issues in any sector/industry and Kaveri is no different.

  1. Corporate Governance issues (like u mentioned). I frankly have no clue.
    I will definitely keep an eye on this.
  2. Monsoon dependent
  3. Since this affects farmers, large chances of government intervention.

All said and done, will stay invested in Kaveri. Some issues look temporary and hopefully should correct itself. Due to multiple issues, Kaveri is trading at very reasonable level and provides margin of safety in my view. Have bought this at dips and will keep buying if the price corrects more. This counter, in my view, is for patient investors - someone with 3-5 years horizon at least.

Disc: Invested and will stay invested for sometime.


(PKumar) #6

Exited out of TV today and Atul Auto completely.
TV today gave decent profit over 2 years but its management seems to be lost over the next growth areas. There seems to be no immediate triggers.
Suzlon has been added over last 6 months as the debt reduction vai Senvion sale and India focus seems to be working for the company.


(PKumar) #7

Trimmed portfolio by 30-40% as most of the midcaps seems to be heated esp Vinati Organics and Avanti Feeds. I am sitting on 60-70% cash as there does not seem to be immediate triggers to upside while probability of market going south seems higher,
This market run seems to be fuelled by cheap liquidity pumped by central banks. As mentioned by Nilesh Shah (http://www.moneycontrol.com/news/business/mutual-funds-business/easy-liquidity-has-made-market-co) there is an increasing tendency by markets to expect central bank to bail them out. However, in the current scenario, with cheap liquidity flooding the market, sentiments seems to be overruling logic and counters like Avanti feeds are looking extremely pricy. Just want to play safe - and as Ray Dalio says ‘our responsibility now is to keep dancing but closer to the exit and with a sharp eye on the tea leaves’

Not sure how many agree with me but I would definitely like to go for safety first :slight_smile:

From Warren Buffett’s 2001 letter
"The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities - that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future - will eventually bring on pumpkins and mice.

But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands." - Warren Buffett, Berkshire Hathaway 2000 shareholder letter


(PKumar) #8

those interested in reading Ray Dalio’s article : https://www.linkedin.com/pulse/central-banks-reversals-signal-end-one-era-beginning-another-dalio?published=t


(PKumar) #9

Another good article - for those interested in current global macro economics https://www.linkedin.com/pulse/big-picture-ray-dalio
Tend to buy by looking bottom up for selected companies but for selling check the global macro economic trends. Its been very diffcult to come to a selling decision for me as I find getting emotionally connected to specific stocks.
If anyone has good selling methodology/framework, pls share.


(PKumar) #10

I have been reorganising my portfolio over last 2 months as wanted to prune largecaps in view of their runs and increasing exposure to some midcaps. Over the past 3 years, portfolio has generated 27-30% returns YoY for last 3 years…primarily due to runup of companies like Kaveri Seeds, Vinati, Avanti, HUL, HDFC and TV today. On the other hand, laggards have been Suzlon and Infosys.

I am fairly new to investing (<3 years experience) and majority of my picks has been based on ET and valuepickr reading. Pls provide your updates if I can make the below portfolio better. Thanks for your help.
I am unable to change portfolio allocation too frequently due to day job constraints. So looking for stable companies at reasonable valuations with decent growth prospects:

The rejigged portfolio has been:
Large Caps (30%): primarily for portfolio stability and compounding - too much volatility scares me :slight_smile:

  1. HDFC Bank (7%) - Blue chip of Indian Banking
  2. ITC/HUL (13%) - Growing urbanisation and extensive marketing network, no-brainer for new entrants like me
  3. Asian Paints (5%) - Biggest player in Painting with extensive coverage. Feel this is a proxy for Indian real-estate market. Given the size of opportunity, this company is here to stay.

Mid/Small Cap (70%) - primarily for growth

  1. Equitas Holdings (5%)
    Pain of demonitisation almost over and good CASA ratios, management is conservative - so another plus. The only drawback is extensive TN dependency - so has high regional risk. Management is trying to spread to other states so looks like plus.

  2. MAS Financial (5%): Play on consumption story in tier II/III cities in North/west India. Good ROE and consistent performances over last 2 years.

  3. NGL Fine-Chem/Multibase (10%): Play on Indian chem industry - looks to have good prospects due to China clampdown

  4. Indigo (10%) : Large bet on Indian aviation industry - getting impacted due to high oil prices. This is largely due to external factors like Trump banning Iran oil. Once these temporary constraints are removed, company should show good returns. Its service is pretty well recognised across the world - has been rated as among the best economy class airline.

  5. Parag Milk (10%): Commodity business migrating to FMCG - the current industry is being valued as commodity by market. Large player in Cheese and Whey - these ‘luxury’ food is like become ‘regular’ grocery item for indian households.

  6. Rupa & Co (5%) : Announced a tie-up with Berkshire Hathaway ‘Fruit of the Loom’. Having used ‘Fruit of the Loom’ products in US, confident that it will give competition to Jockey once these are available in large scale.

  7. Ambika Cotton (10%) : Conservative and focussed management, delivering great value in dull and commodity business like yarn. Their ‘moat’ is likely to stay for next 3-5 years - primarily due to expansion on high margin business.

  8. Gruh/Avanti/TV Today (15%) : old favorites - giving good dividend and consistent returns. Feel opportunity size and execution is good for all three and are leaders in their respective industries.

I am also holding some cash - primarily from selling Infosys. Pls review the above and let me know if there are any obvious mistakes that I am making. The precentage are approx and varies due to price changes. Thanks


(saumya) #11

While making a portfolio its always good to improve the weakest link.
I would suggest you could have waited couple of qtr before buying indigo as with combination of depreciating RS & High Oil next two qtr could be real bad & as they say don’t try to catch falling knife let the dust settle.


(PKumar) #12

Thanks @saumya2010 for your inputs. I agree with your suggestion - its just that I buy in small quantities on dips hoping to bring the average down. Regarding Indigo, noticing that there is strong support level of 900 - hence buying Indigo whenever prices dips below that. Hope Indigo turns out of aviation what Maruti is for automobiles in India :smiley:


(PKumar) #13

Buying basket of NBFCs in dips- given their sharp dropdown.
Gruh, Bajaj Finance, Equitas and MAS Financials have decent operating models, risk averse management and seems to have moat in their respective fields. Buying basket so as to reduce concentration risk. IL&FS default has over shadowned inherent advantages in Indian growing consumption theme. Plan to hold them for 3-5 year period