Prasad portfolio


(Rakesh) #61


(PRASAD V. K.) #62

Bought international travel house.

Stock looking attractively valued now.As I had posted on hiteshbhai thread sooner or later ITC would provide this business major thrust.When they ventured in FMCG they took might of HUL,NESTLE & P&G head on and that too simultaniously. Here in travel business there is no major player to take on and fragmented nature of market would just make it easy for them.Patience looks key here and this is more of a setting a trap and wait for prey to land in it kind of play rather than taking a gun and go for actual hunting.

International travel house is less than 1% of the portfolio and a bet taken to extend the ongoing consumption theme. Sooner or later hotels,restos,travel ,taxi companies will catch fancy of markets and we should be ready for that.International travel house qualifies all the criteria set by me .ROE would increase in comming years.When I bought gruh finanace first nobody was talking about that and infra/ttks were talk of town now after a ten bagger everybody wants to buy it.Markets are dynamic hence while keeping firmly rooted in existing themes we always need to take baby steps in new themes atleast we should not be dismissive about them.

I see a bright future for cox/travel house type companies going forward.


(PRASAD V. K.) #63

Hi rakesh

BASF and BAYER ARE good bets all other stocks I really do not have much knowledge hence cannot comentt


(PRASAD V. K.) #64

Hi rakesh

BASF and BAYER ARE good bets all other stocks I really do not have much knowledge hence cannot comentt


(sandeep) #65

Hi Prasad,

“I do not see here any company capable of posting 30% CAGR in top and bottom line for next ten years.”

I strongly believe it is very hard to find a company that does 25-30% CAGR for next 10yrs… I am not able to narrow down any except for something like Gruh finance many be… Do you have anything in your mind that can be placed under this 30% CAGR for 10yrs category??? Would be glad to know as it canstabilizeour portfolios in this volatile environment.

regards,
Sandeep .


(Safir Anand) #66

Baring paper products and banco, your stocks are good picks.


(Ayush Mittal) #67

Hi Prasad,

Tough International travel house has consistent nos and operates in an interesting and growing industry, but I think they are majorly limited to just corporate travel (that also for ITC group and affiliate as of now). I may be wrong but this is the impression I have. And if so, then I think it does not have the business model you are looking for :).

Ayush


(PRASAD V. K.) #68

:)).

Ayush

Ayush really sorry for late??? reply.But before replying I wanted to test my own conviction if the stock falls further.Stock is down 20% from my buying price and still

I am holding it and waiting for further some kind of side wise movement before adding any further.Stock is still 0.8% of my portfolio.(gruh and hawkins trade at same levels and this one fell 20%).This atleast give me a good case to put up some write up.

1)Most countries when they pass through active economic positive growth of 20plus years travel and tourism (business and leisure) represents appro. 4 to 5% of their GDP.This gives a huge scale of opportunity and scalabilityfor this sector.

2)Presently most of the companies operating in this sector have huge debts and highly leveraged balance sheets.Limiting their chances of capturing the opportunity.

3)Having cash rich ITC as parent and a debt free status gives this company huge advantage over other companies.

4)About business model

It is true that presently they are mostly catering to ITC needs but slowly they are shifting to inbound/outbound tourism,domestic taxi services.Private bus

and train operating will be next big game changer. Definately something may happen on this front.I even heard gossip that ITC is watching TATA foray in lowcost airtravel very keenly and plan to operate affordable air services in secondary metros like

pune,indore,jaipur,nagpur,baroda,goa,cochin,kanpur etc…Frankly speaking we have replicated most of bisinesses from west in our country and they carry sufficient weightage in indices.But in this sector so far we are not able to replicate businesses in the first place leave alone representation in indices.Hence this is a relatively virgin territory.We have to hope that a compelling opportunity will force management to develope a business model.

5)Serious money can be made from harvesting long term compounders like gruh,capturing near term opportunities like hawkins, rotating money in stalwarts like HDFC or picking a out of favour, contra bet rookie like int. trvl house. But as peter lynch has said strong balance sheets with consistent performance gets rewarded eventually and real 10 to 15 baggers come from this category.(I am a big fan of his bet on -AGENCY RENT A CAB and trying to find something like this here)

Hence planing to stay put and give this company a good three to four years before I flip .


(PRASAD V. K.) #69

Good performance by gruh finanace once again.(NP UP 26%)This remains a solid 25% grower for next decade.Expected EPS for next year in the range of 8 to 9.Given a PE of 27 to 28 stock is fairly valued at present.Unless bought in extreme panic market situations this stock generally do not offer too many buying opportunities.


(Hitesh Patel) #70

opportunities

prasad,

fy 13 eps is already 8.2 per share.

If you put in 25% growth for fy 14, then eps for fy 14 will come in at 10…

Your estimates seem to be too conservative.

I think the optimistic PE range remains at 28-30 so stock can reach 280-300 on upside.

Downside seems to be capped at 20 times forward PE which comes to around 200.

Now all that remains is to buy gruh nearer to 200 and sell nearer to 300 during the year…

INVESTING THOUGH IS NEVER SO SIMPLE.


(PRASAD V. K.) #71

Recent run up in price of REPCO home finance is very scary.Feel that a bubble is getting formed in micro housing finance sector. That is why selling gruh at 300 levels can be a wise option as indicated by hitesh bhai.Very hard to digest argument of valuation catch up with gruh in case of govt owned,single state operating company like repco. Price rise in secondary players like REPCO clearly indicates a formation of bubble in this sector.


(Raj) #72

Prasadjee,

Please have a look at

http://www.repcohome.com/php/Q4FY13%20Earnings.pdf

It may give some clarity on what and why?

Regards,

Raj


(PRASAD V. K.) #73

Thanks Rajjee for the link.

I know that REPCO is growing at about 40% for last few years and has a fancy PE fund onboard. In microfinance growth is not an issue at all the issue is ability to maintain quality

assets while growing.This factor worries me a lot. Repco is operating in states where govt

backed financial institutions are utilised to dole out charity for votes,old NPAS are closed by issuing new loans and so on. Still it has not proven itself in adverse economic conditions.(even stronger company like gruh landed in red in 1998 and took almost decade to come out.) Hence I feel that rise in stock price is speculative and may create a vanila bubble across this sector,which in turn is not good.I just wanted to caution our fellow investors in this forum so that they do not land up in a sucker rally. More informed decision can always be taken once things settle down and reality strikes back.


(ashaggarwal) #74

I agree with you Raj.

Infact, I sold my gruh and consolidated into repco at around 235.

I think repco should outperform gruh - like we saw gruh outperforming hdfc, tbz vz titan, cera vz hsil, amara raja vz. exide…

Repco combines growth and asset quality of gruh with undervaluation of canfin home !

With eps of 22 for 2014, and p/E of even 18, we should be around 400…

Even in the longer term, repco should be up 15 times over a decade vz. 5-6 times for gruh and 3 times for hdfc.


(Gautham U) #75

I liked Prasad’s post. All of a sudden every one is jumping onto it. Now book value of almost 3 and even on a P/E basis its 21. If you look at the spread, its predominately present in 1 state. Other thing one needs to consider is the customer profile. Chances of defaulting is more.

I know Gruh is also a similar business. But here the management quality is the differentiating factor.


(Rudra Chowdhury) #76

Having invested in LIC Housing Finance, Can fin home and the likes of state owned NBFCs I tend to agree with Prasad.

Being flushed with funds from IPO, Repco may report high growth, but maintaining the asset quality will be a different ball game altogether.

Comparing Repco with Gruh at this point time is meaningless. Gruh is not the typical quick return stock hence it may disappoint ‘investors’ chasing quick returns, who get more frustrated by the day seeing Repco run amdist flurry of brokerage reports and higher and higher targets.

Gruh is a sure shot compounding machine. For those with time on their side, superb management+pristine asset quality+ proven lending & recovery strategies from Low Income groups, will see Gruh maintaining consistent results.

What I most like about HDFC management is their conservative risk taking and prudent provisioning. This is what saved HDFC Bank against the ever-so-expanding ICICI Bank during 2007-2008.

One thing’s for sure, Gruh will never chase growth for the sake of growth at the cost of compromising asset quality. That is something very very important in this business.


(Raj) #77

While in principal I agree with both Prasad and Rudra. I just want to add few more points to the discussion.

1). Gruh has proven it’s worth over a long period of time. By any means it’s expensive and probably it justifies it’s premium because of it’s quality of books and operational efficiency.

2). REPCO is a new kid on the block(post listing) which has a small operating history. Any comparison with Gruh is just because they cater to the same segment. However, any direct comparison with Gruh is meaningless at this point of time as it needs to prove itself.

Any new idea need to be watched for some time before we can declare it as a great stock. However, if one waits too long for the idea to be proven and then buy it…you end up buying after probably the entire re-rating is done.

**My approach:**If a new idea comes across with a good possibility, I personally would buy some and watch cautiously. As and when my conviction gets better, will keep adding to my position. If the idea falters on the way, I will get out of my position.I will not wait till the idea is proven to perfection, else I will get only a compounder which I am not very keen on. This has worked well for me, and I would continue with it.

Disc: I own both from much lower levels.


(ashaggarwal) #78

I think we are missing a fundamental point - markets move first, masses come later.

We have seen many a times that a stock forms a bubble and getting in at first stage is the only low risk investment. there was a bubble in gruh and gsk consumer in the last 2 years and now they will undergo long time correction. it happened with nestle earlier. many arguments then come up - mkt cap theory, 10 year investment etc.

gruh will get a premium over repco - question is how much premium. the short term bet is that the premium will reduce - how much is for the market to decide.

Similarly there was a bubble in hawkins from 1000 to 2000 - intelligent investors got in early while speculators who invested 50% or even 100% of their portfolio at 2000 are sitting at almost zero returns now for 2 years !

ofcourse, if they don’t perform, they can go down like zydus wellness and hawkins did. so we need to track the story. but for now, the story seems strong.


(PRASAD V. K.) #79

ashaggarwalji

we need to understand the very concept of microfinance first.Companies in this field lend to people without any co lateral security,people without any credit history,people without any fixed source of income or regular jobs,self employed people with irregular income patern etc.

In short banks lend tp all the creamy,creditworthy people with cheap money they generate from CASA. Microfinance companies lend to noncreditworthy people with expensive money borrowed from banks.Hence security of investment,analysis of risk vs rewards is of prime importance here. Microfinanace is a dangerous place to invest in first place. I have already said that even gruh went in deep RED in 1998 and took almost a decade to come back on track.A few relatively big ticket loans (to developers/builders)

can bring the entire company down if go bad.Hence I just wanted to caution our forum

investors to understand the very concept that here is a company where they can loose entire capital but there is some chance of appreciation as it is placed with some discount with a proven market leader.Also govt rep. in board have their own compulsions while sanctioning loans, PE investor is basically looking at exit hence they are more worried about near term growth rather than long term asset creation hence this cocktail may end up with a bitter taste. Having said this once stock enters in speculative hands what happens with price can be anybody’s guess.But it is up to individual to decide how to play this phase.

Regarding hawkins- it is a quality company with pristine balance sheet,run by ethical management with excellent brand recall.I do not think those who bought hawkins at 2000 levels are stuck at all. In time they will be richly rewarded.

Desire to participate in each and every rally either lands one in the league of RJ/RD–etc

or just strips one entire investable capital.

Conservative approch can be to wait and watch while your money is compounded in gruh/hdfc etc.

Aggressive approch can be take small ( 5 to 7%) exposure presently and take a future call depending on business of the company (strictly not depending on stock price).


(Amit Jain) #80

I do not like the idea of holding one or two stocks in ones portfolio. The following is my reasoning:

Last 10 years have been a boon for all types of investors: Equity, Realty, Gold and even Copper investors. In general, businesses, irrespective of their models, have blossomed.

In the period between 2000-2010 any decent company gave a positive return on investment. There was little room for mistakes. But, now one will have to be doubly sure. Tides have turned.

Now, the mode of the Money-Game has changed from easy to hard. Businesses have become tougher. Realty, Gold (and copper) are falling. Investors have not made a penny in Bluest of Blue Chips, like Infy, in the last 4 years. Forget profit, they feel threatened.

To add to their woes, US is trending towards increasing Interest Rates. This could wreak havoc of sorts.

Value Investing, as done by WB clan, is primarily about finding value: A match of price and business. With that said:

  1. Currently Bhel could be as good as bet as Gruh, given its price.

  2. TCS could be a sound investment at par with Gold. If Gold rises due to fall in currency then TCS is surely set to benefit as well. (WB does not support investment in Gold).

In short, if one agrees with the Value argument then diversification should naturally follow. There is no sound reason to put all eggs in one basket, where one major incidence in your company could be a calamity to your financials and has the potential to end your career as an Investor. Confidence will take a major beating after such a fiasco.

Secondly, if one argues that he is investing only the money which he can afford to lose, then he is not investing enough simply because he does not wholly trust his process of investing. Hence, he chooses to be very defensive.

Finally, I would like you to ponder on this.

HUL, recently touted as a super-hero, gave NIL returns for a decade to investors who bought the stock at Rs.300 a pop, in the year 2000. The stock only took off in 2011. That is a 10 year long wait !!

I reason it as value catching up to price. Price multiplied three times after 1996, then came the wait: a period in which price fell back to 100. No matter how good the company, the price was too much.

Lastly, when fundamentals are menacing it is logical (and crucial) to not buy any stock when its price is at all time high. You may be right about the company, but wrong about the price. Or you may be right about both but the market won’t have the sentimental strength to drive the price much up (let alone 10 fold).