Portfolio for stable long term growth

Q&A: Questions & Answers Portfolio Q&A
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  1. Companies which operate in good industries. Good industries are the one which keeps growing at decent space. If underlying industries keep growing, it’s very easy for good companies to maintain the growth momentum above industry average. (Many times, business momentum is more important than brilliance of the mgmt)

  2. Huge Market Size: If market size is large it can accommodate number of players. Margin pressures are less. In large markets dominant companies can keep growing even after industry matures at the expense of weak companies.

  3. Companies have track record of past performance; good RoE / RoCE. non cyclical. Moderate MCap.
    Possibly companies have triggers for Revenue , Margin, PE Expansion.

My portfolio is as below.
I am not overly worried on companies being expensive or portfolio being concentrated.

  1. Repco - 25%
  2. Granules - 25%
  3. Page - 20%
  4. PI Industries - 15%
  5. Torrent Pharma - 15% ( new entry to portfolio)

Over a period of time want to add one more company at 10-12% of portfolio by reducing 5% from Granules (weight has gone up due to recent price appreciation) and couple of percentage from others.

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Current Portfolio:

  1. Repco - 25%
  2. Granules - 22%
  3. Page - 15%
  4. PI - 14%
  5. Ujjivan - 14%
  6. Torrent - 10%

Jumped on Microfinance theme couple of weeks back. And still learning, credit goes to excellent thread on this forum. While studying came across below interesting data point from Motilal report

“Strong real agri GDP growth would argu well for rural consumption, as witnessed in strong growth during FY10-12 for tractors (~21% CAGR), motorcycle (~20% CAGR), rural credit (MMFSL’s AUG CAGR of ~37%), cement (~7%) and FMCG.”

And seems market has started already factoring in that and many stocks in those sectors are at 52 week high.

Searching for one non cyclic mid cap for 7-10% allocation which is rural focused with the same three tenants mentioned in the first post.

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investors should be wary of the micro-finance theme. the Religare report
shared elsewhere on this topic is an eye-opener.

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all stocks in my portfolio too except sold page due to high vauations and tapering growth

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@sanjay_agarwal : I agree with following report, “Page has a right to win”.


Page from single category has expanded into multiple categories and market size is huge. I may make less with Page for next 5 years but it will be stable growth company.

@Shivkumar
Suggest you to read again the Microfinance thread on forum. I was also hesitant but more i went through it, more i agreed that it’s time has come.

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Few random thoughts

As per me there exist three phases in investors career

  1. Below 10 lakhs
  2. Below 100 lakhs
  3. Below 1000 lakhs

Learning of each phase is different and so should be strategies. In copying from others we miss on this important fact.

Warren or any other well known investor has long back passed these three stges and their current state, thinking, future outlook, risk taking capabilities are going to be completely different than one in say phase 1 of investing.

Quality of the stock, it’s weight in the portfolio, number of stocks and holding period is all should be function of the stage one in during his investment cycle and end goal of an individual.

It is becoming a fashion to say trading is injurious to portfolio, but then it’s only way to generate cash for investment. I miss 2006 2007 and 2008. Not sure if it returns I will be ready. Days of RNRL, Nagarjuna Construction, RPL, etc… Now Too much a dope of high quality and margin of safety currently.

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Till now I have never sold my portfolio to be in cash because:

With 15% correction and 30% in cash, it makes impact of only 4.5% on portfolio. And one needs to be right at the top and bottom which is toughest job.

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It all depends on which type of stocks you are holding. With the experience of last 3 - 4 corrections, while the main indices fall 15 - 20%, some of the even very good quality midcap counters correct 30 - 50% and the important thing is one would have courage to buy at that time only when one has some amount of cash. Ultimately, there is no right or wrong thing in the market, the best thing is what suits you.

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As per me timing is incredibly tough. If someone have gift of timing, he/she should not waste it on individual stocks. (even for 5 stock portfolio it’s 10 calls to get right top and bottom) He should trade in F&O for index and sky is the limit.

For investors
Charlie Munger - The big money is not in the buying and selling … but in the waiting.

And even traders
Jesse Livermore - “Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money.”

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Got tired of waiting in Torrent Pharma and sold it off; redistributed back in existing portfolio. Currently is stands at:

  1. Granules - 26%
  2. Repco - 24%
  3. PI - 18%
  4. Ujjivan - 17%
  5. Page - 15%

Will wait for Page results to make next level changes. Modinomics is for lower and lower middle class so needs to focus on that. Nothing yet decided.

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Currently portfolio stands as below:

Transferred a bit from Page and PI into Eicher. Portfolio balance is little off needs to work on it.
(Or market may)

Most of the share prices has under performed in the current bull market and Granules the most but dont see a reason to loose a sleep over it as company results were OK. It just that they were very richly valued (or not a current theme) and needed time correction is happening.

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What gives u the courage to hold on to Granules…
I am thinking of moving out of it.

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Courage !!! Why, where is the big problem? Or i missed anything?

Either one believe in management or doesn’t. As management has executed well for last so many years i don’t see why they can’t do it now. Pharama sector not in great shape but Granules is different story with almost (except one instance) clean record with FDA. It is always CAPEX driven and dilution is part and parcel of it. Real story is 12-18 months away but i am ready to wait.

They are targeting 20% revenue growth this year, margin expansion is anyway continuing and possible P/E expansion in 12-18 months makes it a great investment if all goes well. If all goes wrong i can max loose 20-30% from CMP.

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What is the reasoning behind exiting Granules?

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Equity dilution is the reason.

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Update after a long time on my portfolio:

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PI, Granules are the star performers, Repco fallen hard, Ujjivan still not giving returns, but retained all.
Added few more names in last few months, years likes RITES, PSP, Canara Bank, HDFC AMC, Vedanta, GAIL.

Currently working more on developing portfolio framework than individual stocks. Could not decide yet on correct weight for each segment. Once portfolio sectors and allocation falls in place, filling the stocks, adding new, switching, exiting will be easy.

Current Stock Specific Plan:
If PI, Granules keeps running up and Avanti falls a bit more, plans to shift a bit to it.
Also planning to double on HDFC AMC over next 2 months.

Your views are welcome.

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Your thread is good but not updated for long.

Whats the latest portfolio looking like
whats your view on API cos like Granules n aarti drugs who hv come with soft nos

rgds

vivek

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Portfolio continues to be similar with few reduction and few addition.

Export Focused - Granules, PI and Added a small portion of Laurus.
This is the biggest portfolio allocation and over last many years is the main driver of portfolio. My bet is it will continue to be a main driver in the future as well. Valuations are stretched currently, so will be interesting to see how things unfold.

Govt Spending / Govt Linked - Still hold RITES and removed GAIL. Wanted to get into Gas space but missed. Not much returns.

Private Spending - Still hold PSP while sold off Vedanta. Should have shifted to APL Apollo but missed the bus and it kept running. Not much returns in PSP.

Low Income: Ujjivan still continues but with much reduced weight and stock is down even more.

Lower Mid Income: ITC, Repco still in the portfolio. At similar level as last year.

Mid Income: Page continues. Sold off Eicher at wrong time.

High Income: Along with HDFC AMC added SBI Life. (I think they does not fit into high income. Need to find pure high income, luxury good stock.)

Shifted Canara Bank to SBI and added a bit more to SBI.

New additions are IEX, CDSL & Healthcare Global , overall gave good returns.

Many mistakes continues, missed the bus on Govt Spending theme for PLI, missed commodity stock rally. Stock selection is still an issue. Anchoring bias of old portfolio companies still continues. I think private spending is coming back. Need to study it a bit more.
Theme of digitalization seems doing well. IEX, CDSL, are part of and even Zomato and all others IPO in pipeline indicate the same. ( I stay away from IPO)

Actually my personal big learning is selecting right stock is overrated. Single factor which drives portfolio return is not the stocks selected but the weightage given to the selected stock.

I have seen many experts doing very well with large number of very good stocks and they do well with low concentration risk but I generally have few good and few not so good names so weight becomes important.

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19

It’s 4 months and good time to update performance.

Export Focused - PI Industries, Granules, Laurus (3% of portfolio) struggled and down by 0%-15%-16% from July levels Vs market being up 8%. So close to 15% underperformance against the Index. But it still makes 30% of the portfolio. I thought results of PI was good, Granules was as bad or good as expected and Laurus was bit lower than expectations but too much discussed.

Govt Spending: Shifted out of RITES and moved it to SBI. SBI now makes close to 15% of portfolio and performed slightly better than Index. SBI Results were good and looks SBI will continue to perform a slightly better than Index for some more time.

Private Spending: Shifted out of PSP to India Bulls Real Estate. IBReal is really not a great proxy to private spending but there are more triggers in IBReal and hence made a call. Again performance is slightly better than Index. Given the triggers, narrative on real estate, increased the weight to 10% of portfolio. IBReal will be interesting to see how it unfolds. Biggest real estate player in India (Post merger) going in best decade for a country can not be at the valuations it’s currently at.

Low Income: Ujjivan disaster continues. It is now like 2% of portfolio. Anchoring bias taught a big lesson and paid well for this tuition. But not sure if I have learned still all lessons.

Low Mid Income: Repco at 3% weight continues in portfolio underperforming the index by big margin. Moved out of ITC as it was too much a discussed and analyzed stock by market with no price performance and result performance and hence moved the money to SBI for now.

Mid Income:
Page (12% of portfolio) has outperformed Index very well. Results and commentary is very positive but so are valuations. It will be interesting to see it’s performance over mid term.

High Income: Sold out HDFC AMC and SBI Life and moved the proceed to SBI and India Bull Real estate. HDFC AMC seems doing right things but results are still few qtr away. I am still looking for a stock in this area but not getting a luxury brand or a play.

IEX is the key performer of the portfolio and single handedly took care of all other mistakes and more. 70% up in 4 months with portfolio weight now at 15%. IEX has become a very highly discussed, momentum play stock but results are good so is the commentary around it and price performance. For me IEX is the bull market stock of this rally, as long as rally continues IEX will continue to perform. IEX reminds me of Page, it went from 4K when I started buying till 35K when the story peaked. (I continued from 4K to 16K to 9K to 35K back to 18K now at 40K)

CDSL stock performance is in line with Index but I liked results and it is another stock of this bull run similar to IEX.

Increased allocation to HCG to 8%. Results were good of HCG and I think management is taking right steps. So will be interesting play for next 18-24 months.

Missed Borosil Renewable was ready to pull trigger and reliance news came resulting into upper circuits. So another missed opportunity.

Future Plan: Planning to move out of Repco, Ujjivan and even Laurus (either Laurus will double in portfolio weight or will be replaced) . In watchlist is SAIL, Adani Port, Guj Gas, Power Grid, Syngene.

Over last four months, learning got reiterated that portfolio weight is most important thing.

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All results are out so good time to look at portfolio again.
Overall things has worked out well.

I score the companies from future growth in Revenue, Growth in Margins and Improvements in valuations. It does not reflect the quality of business or it’s current valuations. This score is my keep it simple approach to manage stock performance expectations and track results against expectations.

(Harsh rightly pointed out that PI is better business than Granules which I fully agree. But I think Granules will give better returns than PI in medium term and hence rated higher.)

Stock Dec 2022 Sept 2022 % Change (QoQ) Dec 2021 % Change (YOY) Comments
SBIN Revenue 73,376 73029 0.48% 70100 4.67% Revenue, Profit and valuations have upside. Score (3/3)
Net Profit 9555 8890 7.48% 6258 52.68%
Granules Revenue 997 888 12.27% 845 17.99% Worst is behind.
Revenue, Profit and valuations have upside. Score (3/3)
Net Profit 101 81 24.69% 147 -31.29%
OPM 17% 17% 25%
HCG Revenue 358 352 1.70% 274 30.66% Revenue Growth continues. Margins maintained.
Future: Revenue will continue to increase, upside on Valuations and upside on margins. (Score: 3/3)
Net Profit -46 106 -143.40% -29 -58.62%
OPM 17% 17% 14%
PI Industries Revenue 1356 1354 0.15% 1162 16.70% 15-18% (YoY) Growth continues. Margins maintained.
Future: Limited increase in margins, revenue will continue to increase, marginal upside on P/E. (Score: 1.5/3)
Net Profit 223 230 -3.04% 195 14.36%
OPM 22% 22% 24%
Page Revenue 1190 1084 9.78% 927 28.37% 15-18% Growth continues. Margins maintained.
Future: Limited increase in margins, revenue will continue to increase, limited/no upside on P/E. (Score: 1.5/3)
Net Profit 251 233 7.73% 226 11.06%
OPM 21% 22% 24%
CDSL Revenue 152 146 4.11% 86 76.74% Growth continues. Margins maintained.
Future: Revenue will continue to increase, limited/no upside on Valuations and margins. (Score: 1.5/3)
Net Profit 84 86 -2.33% 54 55.56%
OPM 68% 68% 65%
IEX Revenue 114 109 4.59% 85 34.12% Growth continues. Margins maintained.
Future: Revenue will continue to increase, limited/no upside on Valuations and margins. (Score: 1.5/3)
Net Profit 80 78 2.56% 60 33.33%
OPM 86% 88% 85%
Adani Port Revenue 3797 3621 4.86% 3746 1.36% Revenue Growth continues. Margins maintained.
Future: Revenue will continue to increase, limited upside on Valuations and margins. (Score: 1.5/3)
Net Profit 1472 954 54.30% 1561 -5.70%
OPM 64% 64% 72%
IBREAL Revenue 323 349 -7.45% 722 -55.26% Bet on Special Situation
Net Profit -87 6 -1550.00% 81 -207.41%
OPM -17% 6% 18%
Laurus Revenue 933 1176 -20.66% 1272 -26.65% Worst may be behind, OPM will increase from here, so is revenue, Valuations may take time to come back. Score (1.5/3)
Net Profit 215 334 -35.63% 415 -48.19%
OPM 23% 28% 33%

Moved out of Repco, Ujjivan and shifted to Adani Port. I like monopoly / duopoly business with high OPM. May move out of Laurus. Watchlist: Power Grid, Syngene, SAIL/ NALCO. Gujarat Gas.