Rudra portfolio


(Siddharth Oberoi) #101

For me if there is no or low margin of safety then the company is not worthy of investment. In 1999 Infosys return ratios were 100% +, it had a highly publicised honest and ethical management but for anyone who bought then, it took 11 years to just recoup his money back.


(Subash Nayak) #102

Whatever be the honesty of management, high return ratio, or high dividend payout, if there is no growth in Sales, OP, NP than there will be no monetary gain in investing in that stock.

High pe stock have an inherent risk of pe contraction, and as an investor, one should always try his best to avoid investing in stock undergoing pe contraction. There is no force as powerful as pe contraction in eroding investor wealth.


(Rudra Chowdhury) #103

This is how I am targeting my portfolio. Would like to have comments from seniors please.

"For the ones with very large portfolios like 15x -20x times annual salaries it is essential to have solid anchor stocks. Stocks like HDFC twins/Titan/Page/ even Hawkins come to my mind.

Apart from the earnings/profits and the usual multiples it is the kind of scarcity premium they command for a potential acquirer that will never allow these to trade cheaply. Hence downside is fairly protected at all times.

For the ones with much smaller PF size 2x-5x times annual salaries, one can strategize broader themes and play around. Here one can move away from the safer names to be more aggressive, provided the they do not lose sleep over volatility.

The idea is to allow these themes to play out and don’t look at quarterly figures.

The urban housing theme. Financiers for growth beyond large cities (Gruh/Repco) and pseudo infra names (Astral/Cera/Kajaria). This theme should be played for next 8-10 years at least.

Another theme would be pseudo play on consumption like Automobiles on ancillary stocks (Amara Raja/Mayur Uni). Volatility is bound to be more here. The idea is to not sell out during down cycles but raise stakes, so once the downturn subsides gains could be potentially higher. So these would be real long term bets.

Along with this we need to participate in short term opportunities (Symphony/Kaveri etc) depending on short - medium outlook. Supported by strong business and superior balance sheets, the chances of downside debacles are lower.

Allocate Portfolio %age between these buckets “Stable Compounders - Stalwarts”, “Thematic Long Term Plays”, “Short Term plays”. Idea is to have bucket level allocations intact despite of stock shifts.


(Rudra Chowdhury) #104

Sold half of Ajanta Holdings.

Added Symphony, Kaveri as short-medium term bets.


(Abhishek Basumallick) #105

I like to structure my portfolio in a “core and satellite” concept. Some stocks which are relatively strong businesses and have stood the test of time, preferably consumer facing and have a good brand are part of those. Here the objective is to latch on to the 15-20% compounding over a long period of time.

The satellite stocks are those where the bets are more specific to a product / business cycle / turnaround opportunity. Here I like to look at those stocks which have the capability of being multibaggers.

In my opinion, portfolio size (and its relation to your annual income) has nothing to do with the way your portfolio should be structured. You should always have some stable stocks and some opportunistic ones.


(Vinod MS) #106

Hi Abhishek,

The CFA program also has this core-satellite concept. The core there consists mostly of ETF or index futures and active return is chased by the satellite portfolios.

How do you decide the size of each? Does the mix change according to market conditions?

Cheers

Vinod


(Abhishek Basumallick) #107

Size has to be determined based on your individual situation, in my opinion. There cannot be a thumb rule. Also, keep a track of your satellite portfolio performance. I have known a lot of people who have made very moderate (<10% or even losses) in that part of the portfolio, while trying to maximize returns. If that is the case, then better to be with the compounders. I keep reminding myself that at 20%, an investment doubles itself in 3.8 yrs, which in itself is a great thing.

Personally, I have about 50-50 split between core-satellite.


(Rohit Ojha) #108

The allocation would depend on

Expected returns and mental makeup

Portfolio size

How much is one willing to research.


(Rudra Chowdhury) #109

Trying to add a quantitative approach to the decision making process for Add/Reduce hold.

If a higher allocation is not able to contribute proportionately to a profit contribution %age, better to reallocate.
Note: The EPS targets are rough ballparks, trying to emphasize more on the model part rather than projections at this point.

FY13 EPS

FY14E Growth(%)

FY14E EPS

Trailing P/E 03/14

Target Price

Share

CMP

Exp Price

% change

Curr %age

Exp %age

Profit Contrib

Pr - Hol Delta

Action

64.46

30%

83.80

35

2,933

Hawkins Cooker

2265.20

2,932.93

29%

18%

17%

14.0%

-4%

Reduce

30.68

40%

42.95

18

773

Astral Poly Tec

526.45

773.14

47%

12%

13%

17.8%

6%

Add

47.83

30%

62.18

20

1,244

Ajanta Pharma

965.65

1,243.58

29%

11%

10%

9.8%

-1%

Hold

12.52

20%

15.02

18

270

Unichem Labs

168.60

270.43

60%

9%

11%

17.4%

8%

Add

92.20

30%

119.86

16

1,918

Kaveri Seed Co

1405.90

1,917.76

36%

9%

9%

8.8%

0%

Hold

40.29

20%

48.35

11

532

Mayur Uni

429.10

531.83

24%

8%

8%

6.2%

-2%

Hold

13.88

30%

18.04

16

289

Kajaria Ceramic

235.70

288.70

22%

7%

7%

5.3%

-2%

Hold

17.15

25%

21.44

16

343

Amara Raja

282.40

343.00

21%

7%

7%

3.9%

-3%

Hold

8.15

30%

10.60

28

297

GRUH Finance

230.90

296.66

28%

7%

7%

6.6%

-1%

Hold

16.13

25%

20.16

20

403

Symphony

344.65

403.25

17%

5%

5%

2.9%

-2%

Hold

12.43

20%

14.92

6

89

Dishman Pharma

75.25

89.50

19%

5%

4%

2.9%

-2%

Hold

3.37

60%

5.39

6

32

Commercial Eng

17.65

32.35

83%

2%

2%

4.4%

3%

Add

PF Return

33%


(Vinod MS) #110

Hi, a split of the Target price into TARGET EPS X TARGET P/E will give more insight as to weather you are depending more on the market to rerate your pick or depending on the company to perform. Of-course they are linked :slight_smile:


(Rudra Chowdhury) #111

Hi Vinod,

The previous two columns are just that - FY14E target EPS ( based on target growth %age over FY13E EPS) and Target P/E (March 2014 Trailing)

:))


(Subash Nayak) #112

Hi Rudra,

FYI, Amar raja has serious corp governance issue. Their auditor is their ex-employee and they do auditing for ARBL only. Add to it the minimum 2 qtr of solid stagnation. And if the stagnation get spilled to 3rd quarter, than the stock can get hammered like anything. (Disclosure: have sold all my holding of ARBL).

Dishman to me is a high-risk, average-return kind of play. Share pledging can play nasty game with the stock price, and when stock market falls, high pledged stocks like Dishman will be the first one to get hammered. And as we know with pledged share, the probability of going to dump increases as the share price fall (as opposed to non-pledged share where the expected gain increases with decrease in share price). To me pledged-share stocks are the one with good probability of turning anti-investment, because of the inverse behavior.

What is the story with commercial engineering with 83% expected return !!!


(Rudra Chowdhury) #113

Hi Subash,

Kindly ignore Dishman and CEEBCO, if they were anything to go by they would have commanded higher weights :)

The entire focus is on the top 5-6.

Hawkins Cooker
Astral Poly Tec
Ajanta Pharma
Unichem Labs
Kaveri Seed Co
Mayur Uniquoter

I am working on this model so as reduce Hawkins and distribute that between the other 5 based on the growth and expected P/E levels.


(Raj Panda) #114

Hi Rudra,

Nice effort to put this whole thing quantitatively , 1 Q. shouldn’t we be adding the dividend amount to the total returns expected ?


(Rudra Chowdhury) #115

Hello Raj,

Since most of my portfolio stocks have between 1-2% dividend yields w.r.t. current prices, I am ignoring the dividend yield in lieu of transaction+ holding charges (brokerage+taxes+AMC etc.). For the current portfolio: volume weighted dividend yield is 1.5%

For the ones, with significant dividend yield, I have included the same in the model and I am uploading the excel for anyone willing to use it.

Note: Only fill the yellow marked cells, rest all are auto calculated.

PF_tracker.xlsx (13.9 KB)


(Raj Panda) #116

Thanks Rudra,

I was thinking from a FY14 div. yield angle and how it might impact the return %tages. Differing dividend payout ratio from each of them will alter the expected gain %tages a bit. Let me explain by way of an example with your data for Hawkins, Ajanta & Gruh, since the 3 have similar growth & change in price %tages expected.

I am assuming all will maintain the same payout ratio in FY14 as they have in FY13.


FY14 EPS Exp. Div Exp. Total Gains (FY-Market Price+FY14-Div) %tage change from CMP
Hawkins 83.80 65 2932.93+65 = 2997.93 32.3%
Ajanta 62.18 9.3 1243.58+9.3=1252.90 29.7%
Gruh 10.60 3.24 296.66+3.24=300 29.8

So, the return expectation goes up by 2.6% for hawkins vs 0.7% for Ajanta vs 1.6% for Gruh. If we add the div for FY13 which is yet to cross the record date, then the diff. will be even more prominent with Hawkins at 34.5% vs 30.3 for Ajanta vs 31% for Gruh.

Should we be taking into account these numbers ? or can they be ignored ?


(Gigs) #117

Hi Rudra,

I have a question about Astral Poly Tec. Current EPS for 2013 is only 26.48 , and holding a PE close to 20. You have calculated based on a 2013 EPS of 30.68

So do you expect a PE contraction to 18 for 2014 ?In that case this will be only 25% growth from current price.


(Hitesh Patel) #118

After a rethink on hakwins, I think hawkins again represents a low risk moderate/high return kind of bet where one can bet a good amount of portfolio.

Since the company will have a full year free of troubles of all kind during fy 14, results should be good and even may throw up a positive surprise.

I still dont like the management lethargy but like the sector the company is in due to its duopoly structure plus the product pull hawkins brand has.

if stock corrects post going ex-div it might present interesting opportunity.


(Rudra Chowdhury) #119

**

Agree, given the typical seasonality in Hawkins sales (Q1 results typically lower than Q4 last year) and looking at continued weakness post Q4 results, it seems that the stock may present good opportunities post Q1Fy14 results when it goes ex-dividend.

if opportunity.

**


(Rudra Chowdhury) #120

PE contraction won’t be the right word to use here. Given the growth prospects of CPVC sector with broad based growth Astral is expected to do very well for next 3-4 years at least.

Since this is fairly discovered now, this is expected to trade with a 14-15x forward P/E basis. providing roughly 35-40% upside from current levels.