Poor Investment in Stocks, Thinking to Restructure Portfolio


(starpenchal2018) #1

I invested in junk stocks without proper knowledge, I am improving my knowledge in Valupickr, Now I am trying restructure my portfolio, I have invested 3 lacks rupees in the fallowing portfolio, Now current worth is down by 6%, I am thinking to book loss and restructure with valuable stocks. Please add your opinions. Thank you friends

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(starpenchal2018) #3

Thank you for the suggestion.

Actually most of the stocks I invested one year back except Tatamotors, Cyient and Graphite India. I am looking this 6% as one year loss. Anyhow same time, I started mutual funds also and going through SIP mode. Those are SBI Bluechip, L&T India Value fund, and mirae asset India equity fund. Recently added SBI small cap fund and L&T midcap fund. Thinking to take lot of risk, so going for these madcap and small cap funds. This investment is planning for more than 10 years.

Solar invested 40% in mutual funds and 60% on buying shares directly, Last few days I am going though valupickr web and some company documents, I will restructure this PF after gaining some knowledge.

Thank you


(vinay ambekar) #4

Welcome to the world of investing. And like any new joinee, tuition fees must be paid to the market. Call it Guru Dakshina if you please.

Do not let this loss dishearten you. I dont know your background, but it is generally said that investing is a lot of common sense. Having some sense of numbers will definitely help. One does not need PhD in financial analysis however. This is a great time to invest in equities, so do continue through the mutual fund route so that you dont miss out on the opportunities equities present.

But do remember that investing in mutual funds is a science in itself. From your funds, since you have quite of few of them, see the underlying holdings, and check whether they are more of the same. Also please ponder upon what RISK means to you - saying one wants to take more risk and hence wants to invest in small and mid caps is not very rational. Its always best to start out diversified, and then as one gets more experience and knowledge, trim down the one that one does not understand/like, and divert them towards those that one understands better. Its like a buffet - have a survey, take samples, and then for the 2nd round, go for those that one likes more.

Meanwhile, study the threads on this wonderful forum. Select a company that appeals to you. Try that the company is a simple business to begin with. And work your way through.

If I may suggest, NBFC is a sector in doldrums today. However, if you agree that the long term story is intact, select a company from this sector - maybe one of the leaders - and read the thread on it. And try to some sense of the business and the numbers. Some of the NBFC threads are very detailed with lot of contributions from the forum members.

Or you may select any other company/sector.

All the best.


(starpenchal2018) #5

Thank you so much for taking time and adding valuable points. I noted points and take necessary actions. Ok, I will go through MF portfolios and start reading individual company threads here.

I am 38years old. I traded in futures, options and intraday In the period of 2008 and 2011, and lost almost 7lacks, then stopped looking back to market. Now I am coming back to market with caution. So I want to do only investment without any trading.

I will start reading more in this forum, Thanks

Pratap


(devarshi84) #6

What is bluechip for one is a junk for another. I don’t think your portfolio is junk.

But I do wonder why you have invested in Rpower, Suzlon and JP associates?

Additionally, I have no idea on GVK power.

I think your rest of the stock story sounds good. Just reshuffle the portfolio weightage and you should be fine.


(starpenchal2018) #7

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I have update my portfolio in last 4 months slowly, I want to keep following stocks permanently until unless some issue with the management and growth.

  1. ITC- future FMCG stock, good growth
  2. Future consumers- Future FMCG Stock
  3. Mirza international-shoes, International and Domestic business , few concerns with management salaries, growth story is good
  4. Kitex garments- cloths, International business, Looking for 2025 projections in investors presantations, hoping for good growth
  5. Allcargo- Logistics demand
  6. Wonderla - Entertainment, every 3 years one new park will be added, constant cash flow, looking to hold for more than 10 years
  7. Mahindra holidays- At present 58 resorts, slowly improving business, like to hold for more than 10 years
  8. NR Agarwal- reusable paper, Plastic ban
  9. Mothers and semi- good business model for auto industries
  10. JMC projects- construction, large book order, but debit is high but getting good profit margins, improving business

I will look few months following stocks then I will take decisions to keep or sell

  1. Rain Industries
  2. GM breweries
  3. Avanti Feeds
  4. Tv18 Broadcast

At present my portfolio in loss of 10%, I will keep average in regular intervals if I thinkso… Totally I am holding 60% on these stocks and 40% in mutual funds. Mutual funds are monthly SIPs and I will average stocks whenever required.

I need to be more careful since most of my stocks are small and mid cap.

Please add your valuable suggestions here, started learning with VP.


(dumboinvestor) #8

Averaging a 10% fall is naive and pointless. One should average up/down for every 20-25% move. Averaging 5-10% moves is like buying at the same price on a different day, does not make any difference except it makes you content on that trading day.

Looking at your picks

Future consumer is not an fmcg company. They are in a tough business.

Kitex has had mgmt issues and I hope you are aware of all of that. (I dont know the details)

Mirza is trying its level best to get a brand a going. They are struggling. And in this market you can buy better companies. Not the best mgmt. either.

Allcargo are a poor company and have not on average managed to even make cost of capital over the last 10 years. If a business cannot generate its cost of capital (take 15%) then that is an issue. TCI twins are a better bet.

Wonderla is struggling to get closure on its chennai plans. It has been a long long time. You are much better off holding an asian paints for 10 years at these valuations I think. Take some time out to really understand Wonderlas model and how they can increase bottom line and expand. It takes a long time to set up a park let alone the time taken to aquire land and permits.

Good call on gong with MFs. I would say go 80% MFs 20% in high conviction bets. Buy only a few cos 5-6 max and split the 20% among them.


#9

What was your rationale for getting out of a gem like HDFC.


(starpenchal2018) #10

No questions asked those are winners, but If you take any mutual funds (Not sector biased), It gives 12 to 25% CAGR if you hold for 10 years, Then no point selecting winner stock, Those already won the race, and keeping going with 10 to 20 % CAGR, Anyhow All my mutual funds are covering HDFC :slight_smile:

So I want to experiment to beat this CAGR with limited stocks, I may be looser but i want to keep learning from it.


(starpenchal2018) #11

Thank you for you suggestions. Yeah sure, I will not average in hurry.

Future Consumers: It has so may FMCG products and avilable at different stores. Please see two pictures.


But I am not sure when This company will come to profitability, But sales growth is good, keep expanding products

Kitex: Yes, but i am watching closely QoQ, I am checking weather management is holding their promises or not.

Mirza : I attended today’s con call, They are expanding so many outlet stores with cost of debit, But looks like it takes some more time to get more brand name, now focusing on domestic business.

I will look into allcargo, This is bottom out pick.

I will consider to increase mutual fund holdings slowly.


(Hitesh Patel) #12

I think its a big credit to you that even with initial duds like suzlon, rel power, gvk etc you have managed to lose only 10% of PF value.

If as you say you dont want to sell the stocks you now own, be very very sure of the staying power of these businesses.

Kitex, Mirza etc look optically cheap but these things can get cheaper. In the current market mood any whiff of promoter shenanigans would take the wind out of most stocks. Both kitex and mirza suffer from the same.

Try to find out dominant stocks in sectors which are likely to be evergreen. This should include fmcg, consumer durables, financials and banks (here also be very careful about integrity of management and promoters),

I have seen a lot of people go gung ho on avanti only because it created so much wealth in the past. Just because it has corrected so much doesnt make it a no brainer. Even the management itself in its previous concall reiterated that FY 18 was a one off year where shrimp prices were going through the roof and raw material prices were going through the floor. And hence the company had a bumper year. FY 17 was a more near normal year and comparisions in terms of normalised margins etc should preferably be done based on that year or preferably 2-3 years leading up to FY 17.

I see some cyclicals like NR agarwal in your PF. It seems paper rally is over before it really took off. Even if these companies look optically cheap at 4 and 6 PE there could be severe earnings de growth and sometimes markets are much ahead of investors.

These days I feel a lot of companies a lot of them cyclicals are quoting at PE in single digits. Along with these some small caps with good future prospects also would be hit hard and if one can differentiate between the two classes there would be disproportionate rewards.


(Vijay) #13

I feel you could start with 90% diversified mutual fund (avoid small cap/midap/sector funds like pharma). You can experiment with remaining 10% for few years (I would suggest 5 to 10. Years).
For a first time investor, return of capital is more important than return from capital.

Following may be useful to start:

  1. Management quality (Avoid new stocks that have no history. Prefer companies listed for over 10 years)
  2. Pick companies that have good consistent ROE and ROCE
  3. avoid companies with huge variance in topline and bottom line. Roller coasters are best enjoyed at theme park!
  4. Pick companies which you can track and feel. If you are a consumer or even related to the industry, you know more than the average Joe. You can exit at the first sign of trouble while average Joe will keep holding until the bubble explodes.
  5. Ask yourself if the company is worth holding for a decade. Of course we can sell if initial thesis changes. But we need to be confident that we did enough research before buying.
  6. Last but not least, buy at right price. If a good stock is expensive, wait for it to come down. It may take a year or 2, but it will eventually fall. If PE is 100 and if the stock grows at 20% and then slows down, you are in trouble. Past growth may not continue forever. Similarly past dullness may not last forever.

CASH is also part of our portfolio. No shame holding cash. If we don’t have a stock to invest, cash is safest bet
6) Use these forums to get information but don’t take it at face value. Verify all the facts and don’t get influenced. Remember that 90% of stocks discussed in forums might be momentum picks.


(starpenchal2018) #14

I sold that old portfolio few months backs…so saved lot of money . Thank you for your suggestions. I will look into Mirza, kitex and Avanti one more time.

I am more interested in wonderla and Mahindra holidays . It is easy to understand these kind of business… I am seriously looking for consumer goods like food, cloths, shoes, entertainment, resorts, construction, logistics , etc.

I will try to reduce individual stock positions and increase in mutual funds. Thank you


(starpenchal2018) #15

Thank you …yeah slowly I will change mutual fund allocation. I understand your notes well.


(starpenchal2018) #16

Now I have 50% mutual funds and 50% direct equity. I have reduced stocks to 12Nos. At present 5.5% loss, I will review these stocks after every quarter results. Thanks

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(paresh.sarjani1) #17

Is this designed on consumption theme? 40% is consumption names (future consumer, gm brew, itc, Mirza and kitex)

Also no Pharma/Chemicals and Bank/NBFCs?


(aruncph) #18

@starpenchal2018
Some of your current stocks, I really find it hard to see myself investing -

Rain industries- Cyclical business, which has issues on raw material side, ban & is not a environment friendly business. Has lost so much investor wealth. Debt to equity is sky rocketing. First time loss. I would not touch this with a barge pole at the moment.

Future Consumer - very poor choice IMHO. Zero cash on books, has debts. One look at screener.com says company has been in loss atleast since Mar 2009. I really find it hard why should anyone invest long term in such businesses.

Mirza International - Sometimes, its better to go with industry leaders than looking for the next big thing. I mean Bata, has gone up 90% this 1 year alone. While Mirza is down 173% in last year. I am not saying its a bad company, but personally wouldnt invest it. The company is going from a B2B model to a B2C model. Growth is there but profitability is currently shaky.

There are few you can persist with like Mahindra Holidays & Wonderla which has proven parent group. But still , I find it hard to see consistent growth in entertainment sectors, simply because this is highly disruptive sectors.

Motherson Sumi is probably your best long term story. Proved pedigree management. Also your investment price is very reasonable.


(paresh.sarjani1) #19

Agree with Motherson Sumi


(Bharat) #20

There is a very good strategy to test our portfolio companies. Given today , you are told to buy stocks from start , would you build the same portfolio which you have now. If yes , good but if no , sell out those stocks which you won’t buy.
Coming to the portfolio stocks , there are lot of companies which are cyclic or commodity business.

  • Rain is a debt laden company with very complex Business.
  • NR Agrawal again is a commodity business with high debt and margins at peak. It is having good time but it is beyond guess when the cycle turns. Unless you have very good knowledge of the sector and are good at playing cycles , the company can be avoided.
  • Future Consumer has a very pathetic record of capital allocation and is not a great business. They have to build the brands of the products. I have seen huge discounts on their products and which are reflected in very poor OPMs. Only Tasty Treat , Sunkist have made some impact. People prefer ITC for Atta , Britannia for biscuits , Bikaner/Haldiram for Namkeens etc. It will take a long time to build their brands and it comes with huge risks. It can be a good company but does not look great as an investment.
  • Mirzaint has some issues with respect to corporate governance. Though their products are very much visible but still does not attract crowd. Allocating such a large percentage will be a risky bet.
  • Kitex has issues with respect to over promise and under deliver. There were some governance issues too.
  • Motherson Sumi : Though some members have called it a best long term story but numbers look totally different. Reading the balancesheet is quite a tough task. It is growing with huge acquisitions which are very difficult to understand. balance Sheet has been stretched heavily both on account of equity dilutions and debts. Dividends are being paid from debt. In my honest opinion , it looks a pile of cards which can fall any day. I have not been able to understand the acquisitions in any meaningful way and have not studied the business in depth. Possible i have missed what you all have been seeing here .

Never studied rest of the stocks except ITC which is a good long term play


(starpenchal2018) #21

Thank you all for your suggestions, I want learn investing in next few years and improve my investing methods.

I am trying to buy most understandable business, in this category, I opted for Mahindra holidays, wonder, ITC, Kitex, Mirza. I am looking following parameters for some business

  1. High promoter holdings, good management
  2. Less debit (Except Rain Industries)
  3. Even growth is less at this moment, large scalable business over time, some value for the business like acquiring huge land for parks in the case of wonderla, acquiring hotels in the case of Mahindra holidays, I am guessing slowly business will improve over time if debit is less, we can’t catch the stock that time, I am keep adding in bad phase of the companies.

Rain Industries : At this moment company is running bad phase, I want to monitor this in long run, if business is improving over 1 to 2 years, then I will add more. I am seeing many stocks which are not moving for 5 to 10 years, then suddenly opportunity come for that, then it will raise multiple time, It has many productions plants, due to less aluminium demand, and ban in coke import, tough time for the business, I can add the stock in the tough phase of the business, and keeping it for 2 to 3 years, Management so aggressive, So I am ready to wait for 2 to 3 years even longer if business is slowly improving. I am trying to understand more on this stock.

Future consumers: I agree all of your points, Already I am in profit, I will exit this stock.

Mirza and Kitex : Mirza has come to B2C , started expanding outlets, I will monitor next 4 quarters and see business improvement. Similar for kitex garments also.

Nr Agarwal : This is using recycle business in the paper industries, I want to go through all the cycle of the business, if it goes down then I will keep adding, when time comes in 5 years time it will raise, Since plastic is ban, and this company is doing paper bags for many food companies

I am not sure about motherson and semi business much, it is supply of electrical systems for electrical cars(future) or oil cars., I will take decision after knowing more about company.

Thank you Paresh, Arun, and Bharat for good suggestions.