Ravi Kothuri Portfolio

[rkothuri]

hi,

I have been investing since couple of years and introduced to ValuePickr by one of my friend. Impressed with the amount of work that individuals are carrying in this forum. I am working currently in full time job and been semi active in the valuepickr discussions. I have been trying to build a strong portfolio for long term. Please go through below and share your suggestions.

I have setup SIPs for my financial goals and have been buying shares directly with whatever money left and the plan is to move to direct equity once I get to comfortable levels. Though I am not reducing the amount of money that I am putting in equity and keep it increasing every time there is an increment (so its like another SIP). I buy the shares every month with this amount and not been in with cash any of the time. During the demonetization I deployed some more capital to buy shares which I got as a bonus.

When I started I used to buy companies on some news and then sell it for a small amount of profit or book loss. Some of the companies where I made profit are Cadila (bought when it got FDI warning and sold after one year as results are not improving - should have been a long term hold), Vedanta, Hindalco (both being cyclical in nature bought at the bottom of the price but sold early as I am not in a stage to understand cyclical business) , Chamanlal(sold early due to not much information available publicly, may be a mistake), Bandhan Bank (sold on listing due to high valuations & Ujjivan is already been in PF), Caplin(should have kept this and sold Granules instead as valuations are too high for caplin), CMI(not happy with promoter actions), Finotex chemicals (no bad news but just price was not moving, again a mistake), Kaveri seeds(booked profit after came know about the land issues) .

Companies where I made losses are Welspun India(sold at 50% loss due to Egypt cotton issues forming a no trust on management), Suzlon Energy(one of the early shares I bought as it used to be highest volume trade at that time), National fittings (again not much info available public and bought at a price which doesn’t have margin of safety). Companies where I made neither loss nor profit are HMVL (not happy with the management in deploying the cash they have), Byke Hospitality (showing good growth but felt it might be able to sustain the competition from other online players), Waterbase( management not walking the talk but share price increased so much after I sold but no regrets), Take solutions (again good business but not happy that promoters are not able to divest scm business which they are saying they will since long time - may be I should have kept it more?)

Below is the current portfolio. Preference is given to management quality which are growing consistently and have long way to go in the business.

Goal is to increase the holdings in companies like Thyrocare/Wonderla/Nesco/CCL etc. while reducing/completely sell Granules. I have to decide for PI/Alembic whether to hold for long term as they already proven business. Increase the holdings in Ujjivan/Skipper/Bhansali/Minda depending on their results and future plans. For Emmbi/Sharda I have to figure out if they are long term sustainability business and so take action depending on the outcome.

Please share your views on the portfolio, my approach to stock investing, what additional parameters I should be looking before taking a call etc.

I will update the thread with more details on what books I am currently reading and portfolio allocation strategy , what companies are in watch list etc. soon.

[bheeshma]

Hi @rkothuri

I like the fact that you have outlined the thesis for all your investments. It shows clarity which is important. I dont follow any of the cos except Wonderla. However whatever little i know about Emmbi, Sharda & Skipper - your top 3 - suggest that they are good cos with good growth prospects. Generally, the idea is to select the top cos in your portfolio such that they are able to reinvest at reasonable returns on capital on a consistent basis. These re-investment opportunities come when there is an industry tailwind , new or unique products, new markets, new mgt and so forth so one will have to measure the cos against these things.

There is also the q/s of valuation which one can ignore if cos are scaling up rapidly and you have gotten in at a sober valuation - in which case you have to just ride it. For the rest - like BEPL/Minda etc - where valuation is out of hand - one needs to take a call. In general, the less the churn the better but easier said than done esp when the cos are good as most in your portfolio seem to be. Overall - I think you have a very good looking porfolio with a good mix of sectors and cos.

All the best
Bheeshma

[rkothuri]

Thanks @bheeshma for the review. They are helpful in further analysis and add insights to improve my current thinking.

I also request fellow boarders to review and provide their inputs.

[suru27]

@rkothuri

I have setup SIPs for my financial goals and have been buying shares directly with whatever money left and the plan is to move to direct equity once I get to comfortable levels.

Hi Ravi,
Like it that equity is driven by a clearly defined purpose and not just for making money but not knowing how much. This would surely help you to identify how much risk you want to take for the rewards sufficient for financial freedom.

I see lot of commonality in our portfolio. My personal objective is to make 8-15% money above inflation and hence, please consider my feedback with same expectation (as I am not aware of your quantitative expectation from the above portfolio)

Coming to portfolio, let me categorize it in 3 sections:

1. Companies known and either invested in past or rejected due to some reason or want to buy at better valuation:
   Sharda : If you are sure about intangible assets on the BS then good, somehow I could not convince myself and could not gather enough ground information for mental satisfaction on intangible assets, hence avoided else it looks a very attractive business model going by numbers

Skipper: One of better companies in its field but realized its a working capital heavy high receivable business and hence switched to something else during demonetization opportunity
Wonderla ; One of mistakes where seems i have misinterpreted possible risks in the business and did not take enough margin of safety while valuating the company. A very good learning and i still love the business but again decisions are relative. One of borderline companies for me where would love to cross the line at some price
Canfin: Historically very good company, how they respond to intense competition from pure private sector companies is something to be seen. The fight for the pie due to sheer market size opportunity seems to be big every passing day. I am not sure if Canfin was at the right place at right time by chance or by design (differentiating factor) though their numbers have been very impressive.

Orient, PI : Great quality companies in my opinion though I do not hold currently
Granuels : If you are ok with debt and promoter pledge. I do not understand pharma much hence not much to add. All i know they in transition from API to formulation

2. Companies which I am also holding:
   CCL,NESCO, Ujjivan,Thyro
   Obviously, have positive bias as I hold. However, I think Ujjivan would need a closer watch on how they tranform into SFB and thyro I have smaller allocation as I am not yet comfortable with valuation being a low entry barrier business. I am yet to convince myself completely that volume could a moat and still in wait mode for a bigger accumulation

3 Rest companies totally unknown to me and hence no comment

Overall, liked portfolio a lot as:

1. Do not see any dubious one which can sink the ship (at least the one i have tracked)
2. Really like some of companies in portfolio from a longer term perspective
3. Purchase price seem to be ok ( i m not great at it but rough estimate of range) and with a plan of SIP should be ok few years down the line
4. Judicious risk balance from sector, currency etc type of risks

Just one concern I have which is - Anything more than 10% exposure is truly a highly concentrated investment in my opinion and you should be double sure about understanding of risk reward opportunities in those investment along with complete business understanding.

Cheers and All the best buddy

[rkothuri]

Thanks @suru27 for the detailed reply.

I have not churned the portfolio much. Here is what I did since last update:
Sold Granules - Growth by debt, heavy promoter pledging. Alembic is already in PF(though didn’t add Alembic as well since last update).
Sold Canfin - Messed up the stake sale. Not so good number in last couple of quarters.
Sold both of above in loss.
Sold Bhansali - Made handsome profit of 150% and sold at 200. Stock has corrected much since then due to fire accident and now company stopped the expansion. Will keep in watch list and look at the next quarter results.
Added more Nesco/CCL/Sharda/Ujjivan in small quantities.
Entered Mahanagar gas/Ruchira papers as tracking positions.

• Ruchira was available at historical PE and taken a small tracking position at 117.
• Mahanagar gas was corrected due to shell stake sale and has good opportunity to grow in Mumbai. Worry is that it has not gone of bidding in most of the GAs.

Entered RBL bank/GIC as trading bets but felt GIC is a wrong decision. Reading more about RBL and planning to keep it for long term/buy as and when feel more comfortable.

[rkothuri]

2018 has been a good learning year. Here are some of the guiding principles I am following currently:

• Continue to do SIP on the ones that I like instead of chasing every other company.
• Look for companies which can have long career and do SIP buying in those companies.
• Have very limited set of stocks in watch list. Try to reduce the number of stocks in pf to 12-13. Currently at 17.
• Continue to focus on full time job while focusing on the companies that I hold. At the moment I can say that I am beating stock market returns with the CAGR growth in the company I am working on.
• Continue SIPs in mutual funds for Kids long term goals, short term goals etc.
• Not currently looking into macro/micro environments, competitive analysis etc. (In future I want to do though)
• Listen to the quarterly concalls of companies I hold + Scanning annual reports (not detailed though) + Google alerts/BSE alerts.
• Continue to read valuepickr posts. Follow the updates from top contributors/other good writers.
• Form patterns which can be helpful in the long run. For e.g. Granules - growth coming by debt, Skipper - Heavy working capital etc and make notes of these (currently not maintaining any notes).
• Don’t chase small caps. Try to have to 3-4 quality small caps though. Get the ideas from Valuepickr posts.
• Don’t worry too much about fall in share prices. Re-review the assessment and buy them if the story remains intact.
• Work on identifying a good capital allocation framework in 2019. Currently have 3 baskets 1L, 60K & 30k. Goal is to have all the stocks in one of the baskets.
• Try to finish at least 3 books in 2019.
  **One up on wall street
  **Five rules of successful investing
  **Dhando investor
• Attend at least one annual general meeting in 2019. May be Garware which happens in Pune.

Overall the goal is learn slow but learn very long & stay in the market for long.

Here is the current PF:

Company	PF %	Absolute Gain/Loss
Ujjivan Financial Services Ltd.	14.00%	-18.13%
Emmbi Industries Ltd.	12.60%	-20.73%
Minda Industries Ltd.	10.83%	7.24%
Sharda Cropchem Ltd.	9.88%	-31.45%
Alembic Pharmaceuticals Ltd.	7.45%	4.07%
Orient Refractories Ltd.	6.46%	37.54%
RBL Bank Ltd.	6.44%	9.98%
Nesco Ltd.	4.77%	-16.18%
Mahanagar Gas Ltd.	4.59%	3.26%
CCL Products India Ltd.	4.42%	-3.42%
GIC Housing Finance Ltd.	4.25%	-39.37%
Edelweiss Financial Services Ltd.	4.15%	10.23%
Thyrocare Technologies Ltd.	3.12%	-16.22%
Ruchira Papers Ltd.	2.87%	4.06%
Natco Pharma Ltd.	2.30%	0.52%
Wonderla Holidays Ltd.	1.87%	-28.13%

PF performance:
2018 -> -24%
Since starting -> -6%

Companies in watch list:

• HDFC Life Insurance
• Garware Technical Fibres
• CARE
• Interglobe Aviation
• Hexaware technologies

Appreciate the feedback from fellow valupickrs. Please review the PF and suggest any improvements/modifications in the process.

[hitesh2710]

Good list of companies. But if I were you I would have reversed the allocations to Ujjivan and RBL bank. I think RBL is a much more steady business and one can keep investing in an SIP mode in it. Ujjivan would probably have a rollercoaster ride looking at the variables affecting its market fancy.

Emmbi has been showing decent consistent numbers. You need to have a look at the kind of runway for growth it has. I havent tracked it too closely but had liked it some time back when I had looked at it.

Minda is widely recommeneded by brokerages and savvy investors but I dont have much idea about it.

Sharda Crop was one company where I was very excited some time back but exited due to incosistent numbers.

Among the rest I like and track Alembic, Orient Refractories, CCL products, Thyrocare, Natco. GIC has suffered due to the correction in financials.

Edelweiss price movement too doesnt inspire too much confidence. Top weightage companies seem good growth companies but I think you need to look at the kind of weightage you give to these stocks in the PF. If I allocate more than 10% weightage in my PF to any company it has to tick a lot of boxes in terms of good growth, good management, balance sheet, runway for growth, minimal variables affecting its growth and consistent and predictable growth, besides right valuations.

[rkothuri]

Thank you very much @hitesh2710 for review. I have been doing SIP buying in these companies and I am working on capital allocation framework. RBL, I started buying recently and is still at a lower bucket. I am interested in moving this to top bucket in next 3-4 quarters.

I want to give another couple of quarters to Sharda before taking call. They have reduced the debt having good cash flows in H1/19 and Bubna looks straight forward person and walks the talk.

Edelweiss I entered as a short term bet but will read more about before increasing the allocation.

Once again thanks for the review and comments.

[rkothuri]

Posting the update on latest PF. Latest additions to the PF are Bandhan, ITC, HDFC life, HDFC AMC & ICICI Lombard. Sold the non performers/loss making companies in last few months correction. The core of investing still remains, buy good companies and hold it for long term.

View are welcome

[harsh.beria93]

A few observations:

• Average quality of company in the portfolio has definitely gone up since you first created the post, which is obviously a good sign
• Why did you sell out Wonderla?
• You have a huge allocation to alembic, they have done very well because of the sartan shortage. This is similar to what happened in 2016 when margins went through the roof because of one-time gains from abilify, it required 4 years to reach the same profitabiliity. Will it be the same this time around? Also, their domestic business has lagged for the last 6 years. So I am wondering why you have such a high allocation?
• Can you provide a bit of context of investing Emmbi? You seem to be holding large quantities since a long time. (I don’t know much about their business, that’s why the question).