Sumit Portfolio - a review by fellow members and seniors


(sumit680) #1

Warm greetings to all the fellow members and seniors…i am a newbie in investing with a few month’s of exposure to stock market and related literature…
First of all a few details about my financial position…im 28 years old and in a govt job with a salary of appx 90k pm…im trying to save approx 50k pm and distribute it as follows…

  1. 25K pm into equities…
  2. 10k pm into PF…
  3. 5K pm into life insurance…
    4.10k pm into debt funds…

The rationale for this distribution is inability to find excellent buisness at low valuation currently… so i want to keep my reserves ready to use any kind of opportunity emerging out due to short term and long term bear markets…

Im fascinated by the concept of valuation and buying stocks only when undervalued or atleast fairly valued…Valuation being an art itself, i rely on DCF model for an approx valuation of the stock…Im afraid that with a limited understanding of valuation i have been hovering upon the second rung stocks most of the time…I also completely agree that its better to buy excellent buisness at fair price rather than fair buisness at low price…but everything good seems to be so much overvalued to me…

Having said so, my fundamental criterias for the stock selection are a good free cash flow, clean balance sheet…i try to go through previous three years AR and latest qtr results along with the concall transcripts…then i try to write a story to be followed for next 3-4 years for that company on the basis of management’s words…identifying the management’s reputation seems most important aspect to me…i also prefer a strong parentage because it indicates towards an availability of rich experiences and buisness relations…i try to write a detailed risk analysis too…i have posted same at suven lifescience thread…

I have been able to enter into 8-9 stocks till now…but when i see that most of these stocks aren’t much popular among the members, i get a bit under confident…so i will request the seniors to read my rationale for entering these positions and give their opinions…


(sumit680) #2

My stock position is as follows-

  1. vardhman textile -
    An excellent cash holding and free cash flows. It seemed to be hugely undervalued using DCF valuation…ethical and conservative management…planned expansion in next two years…rich experience in textile industry…efficient due to scale of economics…

Risks due to cyclicality and intense competition…im not very sure about the moat but may exist due to size of operations and cost reduction meaures…also good management…

  1. Ambika cottons
    I came through this company after reading its analysis by Dr Vijay malik…Good management…niche segment of operation…

  2. Indigo
    It seemed to be fairly valued with good free cash flows…the airline sector seems to be poised for the substantial growth and it is the major player…good management…i hope exit of Mr Aditya Ghosh will not effect it…

  3. JK paper
    The paper industry seems to have good opportunities in future…this company has completed their expansion and they are the largest player in the sector…debts are being reduced gradually…strong parentage of singhania group…excellent cashflows since last two years…

Major risk is cyclicality of raw mtrl…

  1. KEC international
    Infrastructure theme…a strong order book…immense free cash flow previous year…change of management a few years back…strong domestic and international operations…focus on reducing the costs…capability to undertake projects in difficult trn…strong parentage of RPG group…

Free cash flows have been irregular in past…risks of pol uncertainity in Africa and Latin America…credit risks are inherent…

  1. Kalyani Steels
    Upcycle of steel industry and good demand in the market…30% drop in prices due to reduced profitability on account of sttep rise in ore price…company has good management and strong parentage of Bharat forge…clean balance sheet…may enter defence sector…excellent free cash flows…a focus on niche segment of automobile components…

Risk is cyclicality of the raw material…

  1. Suven lifesciences
    The huge potential for upside…high risk high gain stock…but the managemnt is excellent and it will be worth sharing their journey together…

  2. MPS Ltd
    Excellent governance…niche market segment…high margins…stock has dropped a lot due to limited growth rate but the recent acquisition has fired the stock…excellent cash treasury…ethical management…

  3. Yes bank
    The banks occupy a leading position in a developing economy…yes bank with low NPAs strong growth rate…cheap valuations among top players…

All these stocks have 8-10 pcnt share in my equity portfolio…

Regards…


(Dr Manoj) #3

Thanks for sharing your ideas.
Among the stocks selected by you,I like a few of them namely Vardhman textile,Indigo,Suven lifesciences,Yes bank.For these stocks, I have done the study and analyses and I appreciate your decision,for the rest I need to do further analyses.
Secondly,I think you can reduce debt investment and increase equity investment (even if it is in modest but consistent return blue-chip stocks),because you already have PF,Insurance,age benefit combined with stable job.


(sumit680) #4

Kalyani steels has a good balance sheet…the stock has dropped 30% in the recent times…also please consider kolte patil in real state sector too…

Thanx for your comments…