Rudra portfolio


(Rudra Chowdhury) #41

Hi Subash,

Poly Medicure is surely a great opportunity, but I would like to have clarity on their US venture in terms of sales, working capitals and net effect on free cash flows before investing. I did this mistake earlier with Opto Circuits and won’t make the same mistake again.

Kajaria as I mentioned is in a sweet spot and the stock price seems to be in a long term bull run with minimal price corrections. However, most of the expectations are already priced in. Agree that FII money can take it to any levels, even doubling within a month, but risk is timing an exit in such cases. I would prefer a gradual rise in other stocks, looks like **Mayur **has mad e a mark again today :slight_smile:

Agree with you on Granules but as mentioned I am riding Dishman and I feel it will make up for the opportunity lost in Granules. You can’t be at all places at once. Unlike the opportunity is super-normal (like in CPVC pipes) I generally won’t prefer multiple companies in the same business (unlike Astral, Supreme there). Good that you are riding both :slight_smile:

Main problem with La Opala is the limited size of opportunity, Opalware and Bone China are two different markets. La Opala is the only branded player in Opal ware. The size of opportunity is limited. It can never be a Hawkins. Pressure Cooker is a must have utility while I don’t see a rural household buying La Opala dinner sets. Moreover I am always skeptical about Kolkata based companies (after Shree Ganesh Jewellery House). Just look at the delivery %ages and I see a froth building already.

Regarding Atul Auto, my doubts have been satisfactorily answered by esteemed ValuePickrs and Ayush in particular. (A big thanks to you Ayush :)) and I do foresee enough growth for next 4-5 years to ride this even at this point. Looking at the EV and the size of the opportunity is more relevant than the price.

Hope I have answered your queries.


(Rudra Chowdhury) #42

One of my favorite threads of TED,

http://www.theequitydesk.com/forum/forum_posts.asp?TID=3238&FID=51&PR=3

A must read, whenever one is tempted to buy into the next BIG idea :slight_smile:

_"…
_

One of the typical attributes of a young, impatient and a restless investor is to desperately look at new investing ideas when the existing ones look as promising as the rest. So the moment you meet someone the first question that comes to you is âAur Naya Kya liyaâ (What did you buy new?). Isnât that strange? Why do people want new things in life â always? So many families could have lived happily had people not looked for the new? Likewise so many investors could have stayed and become wealthy had they not tried identifying the new. Spare a thought for the guy who having bought Wipro in 1980 looked to exchange his stock for something new in 1981. A Rs 10,000 investment in the company would have grown to over Rs 350 crores had he just stayed with the old.

So does it mean that investors should do nothing and just sit back after an idea has been identified? Certainly not, all ideas need introspection and a constant monitoring vis-avis the new ones that come in every day. The only cost of investing is opportunity cost. So if Company A is doing well and someone whispers to you about the prospects of Company B then try comparing Company B with Company A before committing your money. If A is still better then B then buy A until you hi the 15% open offer limit!

Peter lynch says that the best stock to buy could be the one you already own.

Suppose you were running a restaurant, or a casino or a hotel, would you have looked at putting more money buying a new business each time your existing business threw back cash or would you have tried to consolidate your position in the business that provided maximum return for capital? Money has no emotion, given a free run it would flow to the spot that provides it maximum return but the emotions of the person in whose pocket the money resides allows it to do foolish things in the garb of looking at something new.

Many people look to buying something new to avoid the pitfalls of putting all eggs in one basket but one should remember that as long as the basket is strong and capable of holding the weight there is no harm in putting several eggs in one basket and if the basket is weak then even one egg can break the same. The idea is look for strong baskets not necessarily new ones.

There could be months where a smart astute and serious investor would not get new investing ideas in that case it would be prudent to analyse the existing stocks in the portfolio rather then hold cashand wait for new ideas. If a stock that he holds does not qualify as a buy then he has no business holding it in the first place…" - Basant Maheshwari.


(Rudra Chowdhury) #43

_ If a stock that he holds does not qualify as a buy then he has no business holding it in the first place…_


(HG) #44

Hi Rudra,

Did you get out of Supreme completely? What do you think of its prospects?


(Atul Garg) #45

Nice Article Rudra.

Though well known, from time to time refreshing these write-ups do help in keeping things in right perspective.


(Rudra Chowdhury) #46

Have it in my brother’s portfolio. Here the concentration ( and hence the risk too) is more on Astral.

Supreme is one of the best play for long term portfolios with a 20% CAGR kind of outlook. I am not expecting any short term magic there, but should be a stable compounder for 5-10 year kind of range.


(Subash Nayak) #47

Awesome article Rudra, I somehow had the same idea in my head, but never able to express it.

The way I look is that I always try to maintain a healthy portfolio % of my existing core holding (like Kaveri, Mayur, Astral, Hawkins, Granules and ARBL) by taking new positions on it, and add new ideas in a small steps of 0.5% of portfolio, preferably in 2-3 weeks interval (the only exception is when a stock turn screaming buy)

At any time I have 5-6 new ideas worth putting money (currently : Kajaria, Atul auto, Acelya Kale, RS soft, Poly medicure). In the last one year I somehow had trained my brain to resist the temptation of buying a stock even if it looks attractive, just to avoid over-diversifying my portfolio stock count.


(Rudra Chowdhury) #48

From Warren Buffet’s annual letters, on over diversification,

_"…We have to work extremely hard to find just a very few attractive investment situations. Among the few we do find, the expectations vary substantially. The question always is, âHow much do I put in number one (ranked by expectation of relative performance) and how much do I put in number eight?" This depends to a great degree on the wideness of the spread between the mathematical expectation of number one versus number eight.â It also depends upon the probability that number one could turn in a really poor relative performance.

If good performance of the fund is even a minor objective, any portfolio encompassing one hundred stocks (whether the manager is handling one thousand dollars or one billion dollars) is not being operated logically. The addition of the one hundredth stock simply can’t reduce the potential variance in portfolio performance sufficiently to compensate for the negative effect its inclusion has on the overall portfolio expectation. Anyone owning such numbers of securities after presumably studying their investment merit (and I don’t care how prestigious their labels) is following what I call the Noah School of Investing - two of everything. Such investors should be piloting arks._

…"


(Rudra Chowdhury) #49

Was talking to someone who is cautiously optimistic on Hawkins (and yet have 100% of portfolio invested) and ready to book a 25% cut and quit. This very quote came up in the discussion.

As we discussed, the relative downside needs to be ascertained first before betting heavily on some stock. The clear idea about possible downside is extremely important given that such high allocations can make or break one’s portfolio and have a long lasting impact on their investment career.

But in scenarios with limited downside the overall potential upside (in case of a favorable outcome as anticipated) will far outpace the portfolio returns.

Thus a 12% allocation even with a 70% appreciation will boost your portfolio only by 8.4%. The upside keep going up as the allocation increases. Boosting the whole portfolio with a 70% with a fair chance, may be a game changer to one’s equity investment.

Worth thinking :slight_smile:

_

“…We ** The âHow eight?” ** eight.â_


(Rohit Kotewale) #50

Rudra,

What do you think are the potential downsides for Hawkins ?

:))

From Warren Buffet’s annual letters,

"…We have to work extremely hard to find just a very few attractive investment situations. Among the few we do find, the expectations vary substantially. The question always is, aHow much do I put in number one (ranked by expectation of relative performance) and how much do I put in number eight?" This depends to a great degree on the wideness of the spread between the mathematical expectation of number one versus number eight.aIt also depends upon the probability that number one could turn in a really poor relative performance.__


(prabhakar) #51

I have been following Hawkins for a while and would like to make some comments to ensure that the new investors don’t get into something at a price where they regret it later. The smart ones know enough not to get excited.

Please be advised that it is not very prudent to build positions at cmp and get stuck at these prices. The ones who built their positions did so at 1500 levels and at most would have added very little at 1800. This is not the time to get excited.

Let’s not get carried away. The price reflects a lot of what we are discussing, the markets are not that inefficient :slight_smile:

We don’t want to come back and blame rudra later :slight_smile:

The time to have these discussions was when the price was at 1500.

Hope this helps.


(Subash Nayak) #52

Hi Prabhakar,

I beg to disagree with you and be a little critical of you. The way you are talking with just mentioning price, you seems to be having “price anchoring syndrome”.

At CMP, PE is coming to be at 40. In last 5 year Hawkins has a minimum ROE, ROCE figure of 56, at a reasonable PE of .24. Number side they seems to be fairly priced.

They don’t have any demand side issue. They have a strong brand play. They are an aspirational consumer play, with a huge market opportunity. The only reason why it was languishing at lower level is due to uncertainty of environmental clearance and labour issue at Hoshiyarpur. Now as these issues are a thing of past, real good time are coming ahead of them.

I feel one can add Hawkins even at CMP in a staggered manner. It had been a huge wealth creator in past, and will continue to be in next 2-3 years at least.

:))

:))


(Rudra Chowdhury) #53

Great post, Prabhakar :slight_smile:

Guys,PLEASE DO NOT GET CARRIED AWAY WITH HAWKINS. The downside risk is immense here too.

Here’s a relevant post from Prabhakar on his blog Link: http://investment-in-sight.blogspot.in/#!/2012/01/first-ask-whats-downside.html

"…The key to successful investment is NOT to try and reduce the risk to zero. This is what people who invest only in “zero risk-low fixed returns” try to do or so they think.

The key is to try and reduce a larger risk into a smaller one.This is where lies the fortune

…"

:))

:))


(Rudra Chowdhury) #54

Consolidating portfolio,

Reduced all marginal holdings (less than 4% allocations)

BKT, Orient Carbons, CEEBCO, Cox & Kings, Atul Auto.

Added Dishman Pharma, Unichem Labs, Hawkins Cookers. Portfolio down to 10 stocks.


(Jagbir Singh) #55

Rudra,

Have you exited from Astral? and any specific reason for that?


(Rudra Chowdhury) #56

Hi Jagbir,

I exited the minor holdings only :slight_smile:

Astral is among the top 5.


(Rudra Chowdhury) #57
Latest Portfolio:
Hawkins Cooker
20%
Astral Poly Tec
12%
Mayur Uniquoter
10%
Amara Raja Batt
10%
Kaveri Seed
10%
Unichem Labs
9%
Ajanta Pharma
8%
Dishman Pharma
6%
Cash
5%
GRP
5%
Opto Circuits
4%

(Subash Nayak) #58
[quote="Prudent_Invest_, post:57, topic:607992338"] 20% Astral Poly Tec | 12% Mayur Uniquoter | 10% Amara Raja Batt | 10% Kaveri Seed | 10% Unichem Labs | 9% Ajanta Pharma | 8% Dishman Pharma | 5% Opto Circuits [/quote]

Hi Rudra,

Strange that in 4-5 post up in this thread, you ask of caution for buying Hawkins and CMP, and still you are loaded upto 20% in Hawkins. How can one interpret your strategy !!!

Latest Portfolio:
Hawkins Cooker
6%
Cash
5%
GRP
4%

(Rudra Chowdhury) #59
[quote="subashnayak_19_, post:58, topic:607992338"] > Hi Rudra, > > Strange that in 4-5 post up in this thread, you ask of caution for buying Hawkins and CMP, and still you are loaded upto 20% in Hawkins. How can one interpret your strategy !!! [/quote]

Hi Subash,

Please read through the posts in this thread and Hawkins thread. I am fairly comfortable with the downside and ready to take a cut/hold on if things do go wrong. As Prabhakar highlights understanding the downside is critical here.

It is left upon to an individual regarding his risk averseness to take positions and allocate portfolio accordingly.

Latest Portfolio:
Hawkins Cooker
20%
Astral Poly Tec
12%
Mayur Uniquoter
10%
Amara Raja Batt
10%
Kaveri Seed
10%
Unichem Labs
9%
Ajanta Pharma
8%
Dishman Pharma
6%
Cash
5%
GRP
5%
Opto Circuits
4%


(Rudra Chowdhury) #60

Working on the following theme to base portfolio allocation:

“…Peter Lynch advises minimum 3 to max 8-9 stocks is an optimum portfolio with 30% weightage to growth,20% to stalwarts and rest 50% divided in cyclicals and turnarounds…”

50% in turnarounds (Hawkins, Unichem, Dishman)

30% to growth ( Major[Astral, Mayur, Ajanta] Minor[CEEBCO, GRP] )

20% to stalwart ( Amara Raja, ??? )

Need to add one more Stalwart at reasonable valuation. Visibility of moderate growth for at least a decade or more. From the current watchlist (Whirlpool but is expensive).

Else Hawkins will make a transition with a reduced weightage after a few quarters, when growth tapers down.