@sajijohn - Did you make any changes in your portfolio during the current correction?
@vinoths. My core pf of Asian Paints, Hdfc bk, Gruh, Oriental carbon, PEL, CCL, Avanti, dmart remains. I have reduced PEL, Avanti and dmart. Increased CCL. Holding hikal and hoec. Got out of infrastructure related plays tata metaliks( should have held on), Shankara and Nesco. The new to the pf are Wabco, L&T technology, Sunflag, Mayur Uniquoters, Multibase, Westlife developers(Mc Donalds) and HEG. Overall pf is down 28% from Jan 18
I really liked your disclosure about the fall in PF. It certainly helps others to know that the PF pain is for everyone .
Coming to your recent purchases, Mayur Uniquoters haven’t done anything in last almost 5 years. The management was saying that their new PU plant will come online this December, while going through the balance sheet, there is a little CWIP. Any idea how we can corroborate that management is saying the right thing?
Saji, What’s the thesis for investment in Multibase if you are ok to share ?
My thesis on reentering Mayur is based on their two new plants. PVC plant in Mysore and PU leather plant in Gwalior. Both are slated to be operational with in couple of quarters. I think there have been many reports authenticating the progress in it’s implementation. In the past the management is known to be honest. I will hold on until I am proved otherwise.
What made you to exit Shankara ? This stock is hitting 52 week lows regularly. I remember this being talked about in the same breath as D’mart. Is it corporate governance or tepid growth prospects?
A comment by @hitesh2710 A Brief summary of the Micro/Small/Midcap Carnage drew my attention to Multibase. What is interesting is it doesn’t require much capex for churning out significant cash flow. It is an MNC working in a niche area of thermoelastomeres. It was beaten down recently due to the rise in crude price and rupee devaluation. Now that the rupee is appreciating and crude price is falling will help Multibase margins. Outlook for it’s products are good especially safety concerns for passenger cars(air bags) need for alternative products for plastics and rubber in industrial applications is very robust.
I was hoping to keep Shankara for long term. As I have a habit of booking regular profits, it’s percentage had come down and it didn’t make any sense to keep small quantity. More over I noticed that they were aggressively increasing the number of stores and every time a store is opened the stock price will bump up. Even though the debt was within manageable levels, since the cash level was low and they will have to go for more debt. I thought the margins are also very low.
Thank you for sharing @sajijohn. These indeed look like interesting choices.
Would you be willing to share your philosophy behind portfolio construction? At the outset, it looks like you follow a core-satellite portfolio construction strategy without a bias towards market cap (large/mid et al) . Would be grateful if you can elaborate this-
How would you define and decide on a shareholder-friendly management?
How do you decide on your picks and define opportunity?
What role does margin of safety play in all of your picks?
Would also love to know your prespective on Hikal as well. Ashish Kacholia recently bought into this.
To be frank I didn’t plan or follow any pattern/philosophy. My main source of info is from valuepickr and couple of advisories. I keep it very simple. Invest spare money, book profits regularly & reinvest, book bigger amounts when I need for personal expenses. Try to maintain about 4 to 10% of each stock in core pf. I have gone through corrections of 2008, 2012 and 2016. Every time I get rid of duds and invest in ones that I always wanted to own. I am not too much concerned about PE and market cap. I try to keep about 10% margin of safety even after booking gain. I am ok with 25 to 30% down if overall pf is doing alright. There is a thread on Hikal here Hikal - Pharma & Agrochem. Looking at their pharma products, I got interested as most of their products I prescribe to patients. Some of them they are able to increase their price when govt is actively executing administered price by DPCO eg Gabapentin. They have a dominant position in Gabapentin. Almost all their products have good market prospects. You may go through the thread for more details.
Hello, if possible can you pls share investment rationale in Westlife?
I had studied the company some time back but found too many negatives such as
- Loss making and not paying income tax since many years
- IT raids on the company
- Lots of indirect tax litigation
- Consistently heavy investments in capes of Leasehold improvement and Restaurant equipment
- Mcdonlalds India is also loss making since many years
- McDonalds India had a major falling out with its other franchisee in India
@sajijohn Wrt Mayur Uniquoters, are you able to detect any positive trend based on their annual or their latest quarterly numbers i.e are you able to detect any turnaround pattern based on your experience in addition to the additional OVC/PU leather capacity? What is it?
If not, what would be a number that would get you excited in the next quarter or something that would make you add more?
Would love to know your views. Thank You.
@bharat19 These MNC’s think differently when they do business in India. The fact that they don’t give dividend and avoid CSR is negative and it shows their colonial aptitude. But the business is good and they have the capacity to add many new products from their parent co which are very unique. Once they achieve the purpose for this company they might even unlist?
@Chetanpinto I am not a number guy. I just believe the management and their plans have worked so far. Even when this company was on the verge of bankruptcy in 1999, S K Poddar persevered and made it big in India. I had invested in Mayur earlier and when I realized that their further growth prospects are some years away(there was a delay in getting all approvals for expansion) I exited. Now I think the new plant will be up by April next which will be followed by the PU plant in Gwalior. You may want to view this video to know more about the management. Caveat…As S K Poddar in 70 plus and there is confusion about the next level leadership…https://www.youtube.com/watch?time_continue=1&v=0ZuZBwS2h18
Also read this…https://www.linkedin.com/pulse/mayur-uniquoters-ltd-mul-largest-manufacturers-8-j-kattadiyil/?published=t
@JOSE_ABRAHAM In hindsight, we know the reason why Shankara is falling. I wish I had reduced Shankara based on these facts than the reason I mentioned!! Some more insight into Shankara you may want to listen…https://twitter.com/CNBCTV18News/status/1068070499685519360
Do you still hold Tata Global? This stock has lost almost 2 decades of Indian consumption story. Its a pity for the management. I strongly believe its real story has not yet started. But God only know with this sluggish management, when will that story start. Let me know your thoughts on Tata Global for the next decade?
I also came to the same conclusion that the management is very sluggish and it will move only when the overall Tata companies are doing well. I exited Tata global in 2013/14. Somebody mentioned that when you buy a Tata enterprise, you will have to entertain the uninvited tata cousins in your bedroom!
Hello @sajijohn : would love to know your portfolio updates since the last time you posted them. Thanks.
@distilled_feni This market correction has taught me many lessons. In early 2017 as there was a lot of froth in mid/small caps, I had shifted allocation more to large caps. So even though the going was very painful, the capital preservation was achieved due to the shift to large caps. So all the gains of 2017 are lost and at the moment around 6 to 8 % down when compared to 2017 Jan level(pf was down 10% in 2018 and 30% in 2019 so far). I believe the next phase will be for small/midcaps. So, now I have a highly skewed allocation to small/midcaps!. Regarding stocks, I exited CCL(execution of retail business is not going to be easy/predictable), PEL(though I knew that infra lending is risky, as new revelations come out like Lodha; I thought there may be more cockroaches inside the cupboard), dmart(valuation), Asian paints(valuation and need for money), wabco(buyback price being low and opportunity cost), multibase(mgt not retail investor-friendly) and Mayur(delayed implementation of PUC plant and succession clarity). I have started experimenting with cyclicals with the advice of a subscription service. So started nibbling on metals, infra , power and auto. I have increased stake in Avanti, OCCL, gruh and hikal. I have pared some gains from hdfc bank and started investment in sonata in view of the appreciating US dollar.
Discl: This is not investment advice. Please do due diligence before you make any investment decision based on my experience.
I always analyze tata companies and never invest as each of them dont focus on one core business…
I have invested in their recent bonds