ValuePickr Public Portfolio


(Donald Francis) #101

Most folks are interested in the Reccos - not so much the broad rationale. They reckon anyways the individual merits/de-merits are analysed at great detail in the individual threads. So why complicate things with additional columns?

And there are some young learners/enthusiastic folks who have written-in asking us to exemplify the use of the additional columns - 1 yr fwd PE, Fair PE band, and Future Potential PE band - why are they needde/why do we think these are useful to mull upon while making investment choices/ capital allocations.

So let me have a go from my side - how and why I find it useful to think in this way. These are (in the end) pretty simple things - but getting that consciously embedded in investment decision- making is a different thing, I found.

This may be boring stuff for enlightened investors - so kindly bear with me for the sake of our fellow-learners.

Item Practical use/Application Examples from our ValuePickr Portfolio Experience
1Yr Forward PE

(On Recco Date)
Apart from a forward view on the business, this is the only sure-fire way to get rid of price-anchoring.

(Eternally thankful to Ayush for planting this firmly in my head - in early 2009/10)
When I first looked at Mayur it was available ~6x at pre-split 240, think in Feb '11. We visited Mayur and came back highly impressed. Good results came and stock had climbed to 360-400 by July/Aug I think. Towards year end it was back to 300-320 levels...our calculations showed 5-6x 1 year forward and we loaded up again. Few months down the line at 400-440 levels again we found 6-7x 1 yr fwd and again loaded up - by the 3rd time we bought I think the fab dividends had started. For the first-time I was rid of price-anchoring for good. (Of course it helped that I was in love with the business).

I found when we have done detailed homework to our satisfaction, and were generally comfortable with Management-speak and walk-the-talk, and could project with a degree of certainty (+/-10% tolerance), I could apply it successfully to other businesses. My entry price ceased to matter!
Fair PE Band Apart from a broad perspective on available Margin of Safety, this helps us SLOT business in different Quality Bands.

I finally started falling "out-of love" with my stock picks

(Aim is to become as unemotional as Hit-bhai; he is the Man!!:))
When we started we had a Mayur and say an Ajanta at the same level 6-7x. Where was my allocation highest? - Obviously Mayur - I was a textbook/theory cat:) ROCE of 50+% vs ROCE vs Ajanta's touching 20%, both at similar growth levels. Huh! NO-Brainer decision for me.

By the time ValuePickr Scorecard 2 came out in April 2012, I could clearly see a Pharma business being valued differently by Mr Market (Mayur 93% returns, Ajanta 216% returns)! I had already written down the Capital Allocation thread by then (got lot of theoretical appreciation for it - but clearly couldn't apply it to the more valuable stock in my PF :(.

Finally by the time ValuePickr Scorecard 3 came out in Dec 2012, I think we started GETTING IT. The first discussion on Category A and A+ Businesses happened. And we exited a few because we found they are Category B or B+ businesses (with cyclicality, more variables, etc.)

A simple enough "Fair PE band" application - but to GET IT somewhat, I took complete 2 active years in the Market.
Future Potential PE band This is what I think should help us distinguish in our minds - which are the A+ Category businesses.

Identify businesses with building blocks laid for dis-proportionate future returns
This is still in the works:). Lot of thinking-through and refinements needed. We have seen some Pharma businesses get re-rated as they gained scale (easy to comprehend in hindsight:)). But are these higher ratings durable? In the short-term (last 2 months) Mr Market has voted Astral as A++ Category:). Who are we to argue? Will that be durable?

In my mind I am clear PI has disproportionate growth characteristics, and so is Kaveri. We intend to get wiser by drawing in more and more experienced folks into this exciting process of refinement as investors. Some we will learn by our experience - like I did for Ajanta on the 2nd take. But some I am hopeful we can learn vicariously through others-more experienced and our own process and quest at becoming better-informed and thinking investors.
Future Potential 25%+ CAGR For the amount of homework/legwork that we do, we do not find it worthwhile to retain/include any business that cannot do 25% CAGR for next 2-3 years. THAT''s ALWAYS a GIVEN!

(So the 18-20x or 20-25x is not a typo error, not CAGR, but Future Potential PE bands)

I hope young learners will be as energised by the above, as I am. We want to enlist more and more folks into this kind of thinking - for our own selfish quest - for our Community - one day most discussions at ValuePickr may begin by attempting to slot the business first into A or B category or the rare A++.

Will this be useful? Time will tell - Maybe ValuePickr Scorecard 7 will enlighten us either way :)

Till then!


(Mallikarjun) #102

Thanku Donald for the Management Q&A, the reccos and additional columns which will help newcomers… It will helps us if we go through the Art of Valuation thread and the additional columns simultaneously …

Regards

mallikarjun


(Vinod MS) #103

Hi Donald, to say the returns are excellent is a big understatement!

But I would suggest we add a column to show past one year return too. All of us remember the nifty return in a year and the nifty year beginning levels are taken for that and it will be nice to know how each stock would have rewarded someone who entered for example on Jan-1st 2013 in these stocks. Since the entry price is low the annualised return will look good even if some stocks have under-performed in last 12 months which can potentially hide opportunity costs if any.

Between fair P/E band and potential P/E band it is a bit difficult to understand the subtle difference. It would appear that if the company has potential we should give a higher “fair P/E” band accordingly. When we say fair P/E is 18x, but potential P/E 25x it looks contradictory at first sight. It means its OK for the market to value the company at 18x now, it is fair but market should most likely value it higher IF the com delivers in a certain way and comes up the business quality curve.We can call it “conviction gap” on potential of the company :slight_smile: Fair P/E band is for the market and potential P/E band is for the well informed investor who is currently a small minority in the market.

Cheers

Vinod


(Administrator) #104

Excellent suggestion Vinod! about adding 1 year Return column.

Although it must have been evident to all that most of ValuePickr Portfolio picks have done exceedingly well over the last one year - we acknowledge the caution that one must not be lulled by the high annualised returns figure - that could well be due to higher order performance in the initial years. Its better to draw attention to immediate 1 year returns too.

Since ValuePickr Scorecard is updated every 6 months or so, we have decided to track results from ValuePickr Scorecard 3; Dec 2012. And here's what the picture looks like. In many cases we can see portfolio stocks have appreciated the most in the immediate past 1 year.

ValuePickr Scorecard 5: Feb 2014

Category

Annualised Returns

Returns since VP Scorecard 3

VP Scorecard 3 Price Levels

CMP

Current View (at CMP)

12-Feb-14

(Dec 2012)

(Dec 2012)

12-Feb-14

Mayur Uniquoters*

A

97%

84%

252

464

HOLD; Add on big declines

Ajanta Pharma*

A+

147%

253%

273

965

BUY; Add on declines

Astral Poly Technik

A

103%

156%

151

386

HOLD; Book Partial Profits

PI Industries*

A+

62%

99%

123

245

HOLD; Add on big declines

Kaveri Seed Company*

A+

121%

85%

283

524

HOLD; Add on declines

Poly Medicure

A+

77%

85%

219

405

HOLD; Add on declines

Shilpa Medicare#

A+

-

321

BUY

Alembic Pharma

A+

-

232

BUY

Atul Auto*

B+

89%

60%

181

289

Hold; Add on declines

Avanti Feeds

B

-

97%

185

365

BUY; Add on declines

Indag Rubber

B

23%

-18%

288

237

Exit/Book Profits

The 1 yr Return focus helps to draw attention to Indag Rubber, as it should!


(Donald Francis) #105

This is how Mr D puts it - Re: Potential PE Band. This should help?

The best is yet to come…estimating the value of a business to a 100% owner/takeover valuation. This exercise will be useful to hold on to extraordinary, seemingly richly valued businesses …KNOWING THESE CAN BE UP FOR SALE.

Even if they are NOT FOR SALE, their intangible assets need to be valued properly. We might not be accurate but we can certainly estimate how desperate a new owner would be to acquire.

Concepts of Intellectual Property, Brand/Pricing Power/Distributor Loyalty, as barriers to entry and thus building blocks for disproportionate future growth - HAVE to be incorporated in Valuation.

:))


(Rahul Chauhan) #106

Donald,

The annualised returns calculated are wrong and misleading. It implies that the stocks are compounding at these rates year on year which is not the case.

Atul Auto compounded at 90% p.a. for the last 2 years.

Ajanta Pharma compounded at 140% for the last 3 years.

Similarly with all the above stocks. Please correct this.


(Vinod MS) #107

Hi,

Here is the Annualised Return for stocks that were recommended more than a year ago. Shilpa, Alembic and Avanti are not in the list as annualising returns does not make sense in their case.

Reco Date Reco Price CMP 12th Feb Annualised Return
Mayur 10-02-11 60 464 97%
Ajanta 17-01-11 60.2 965 147%
Astral 29-03-11 50 386 103%
PI 07-03-11 59 245 62%
Kaveri 14-08-12 160 524 121%
Poly 20-11-12 200 405 77%
Atul Auto 10-10-11 65 289 89%
Indag 01-12-11 150 237 23%

(Administrator) #108

Thanks Rahul and Vinod MS for prompt corrections. Incorporated back.


(Rudra Chowdhury) #109

All annualized returns as well as Trailing 12 months returns had been incorporated in the dynamic spreadsheet. There’s no need to compute any numbers anymore. This had been shared earlier too in the discussion thread.

https://docs.google.com/spreadsheet/ccc?key=0AmN-lUahXrkwdE1MRUhzX0NORnBIVnBvUWFOeExmUUE&usp=sharing


(Bhupesh) #110

It may be worth including an academic exercise, looking at float, trading volume and the prospects of the stock how much money one can put (not %) in one particular stock.


(Dhwanil Desai) #111

Heartiest congrats to Valuepickr Admin team for a sizzling performance.

There is no wonder Valuepickr portfolio has done so well! Sheer amount of effort and passion put into the process clearly reflects in the performance…

However, in the longer run, we as a community can add tremendous value if we can UNRAVEL the process that we use for “decision making” and transform it into “easy to grasp” methodology/framework. It may be the ingrained mental models playing out at subconscious level in the minds of senior investors which new investors may not get hang of! In that context, the latest discussion on capital allocation framework was exactly trying to do that! I think we need to continue to work on that. It may be less exciting than working on a new stock idea or digging out information on a promising stock idea, but I feel that time/effort spent on such discussions/threads will be equally rewarding, if not more!


(ravikumar bhoopal ) #112

Congratulations to the Valupickr team for such a wonderful performance. I have a question regarding risk/correlation in the entire portfolio. I get the feeling that the portfolio now is weighted more towards businesses engaged in exports and having a great run due to stronger dollar? What could be the impact to the portfolio if let us say Indian currency appreciates say 10 or 15% ? While I am sure many will say this is hypothetical question and with such currency deficits and inflation, Indian currency will not appreciate against dollar, we all know things happen.

Please note that this question is purely to understand the thought process from senior investors. While we add individual businesses based on their potential and valuations, should there be any consideration from portfolio perspective? If yes, what are the driving factors in portfolio construction?

Regards

Ravi


(Administrator) #113

Guys,

We need to keep this thread UNCLUTTERED for easy access/look-up by Members. Please post on this thread using your discretion. Broad comments highlighting specific concerns/shortcomings/critique are welcome from time to time.

Comments pertaining to specific aspects of the Portfolio or the Reccos MUST NOT be posted here. All such comments are more than welcome in the ValuePickr Public Portfolio Analysis-Discussion-Critique thread. Recent comments of this nature have been moved to this thread.

Your co-operation is solicited. Let’s reduce the daily house-keeping job on this thread.


(Administrator) #114

1year Fwd PE - on the recommendation date.

Yes this will be included from here on with all Reccos - to indicate a certain measure of safety at the time of Recco. It was added retrospectively for the earlier Reccos (wrt recco date) - again to indicate how Mr Market gave us excellent opportunities in last few years.

A 6x Fwd PE against Mayur Uniquoters indicates it was available at 6 PE on the reccomendation date viz. 10th Feb 2011.It does not mean it is today available at 6x PE. In our experience we have seen a consistently growing business (undiscovered, or where where Mr Market is still undecided/poorly-informed) being available at entry valuations multiple times in its journey. A good example will be Kaveri Seeds being available at 10x for extended periods so many times in last 3 years, including very recently.

For better-informed decision-making, we have found it useful to keep this metric in our head along with the Fair PE band metric.

We might not be as lucky in coming years. For outsized performance to happen - Mr Market must be handing out great opportunities! We may or may not get them now or in near future.


(Pranay Pallav) #115

How do you get to know about the valuepickr’s latest stock pick?


(Sunil) #116

HI Pranay,

This is a forum where you are not supposed to get tips or stock picks. You are expected to read stock stories, discussion, analysis. Learn from those and ask questions and contribute to knowledge.

Looking forward for participation from you.

Regards,

Sunil


(PATURI BAPAIAH CHOUDARY) #117

DEAR SIR

excel Lent PERFORMANCE . CONGRATS FOR THE GREAT SUCCESS OF VALUEPICKR TEAM. QUITE USEFUL FOR LONG TIME INVESTORS. market IS AT PEAK AND SOME B GROUP SCRIPS NOT PARTICIPATED IN RALLY. CAN OUR TEAM FIND OUT SOME ??

REGARDS

PATURI


(Syntharz) #118

Hi Guys,

Next scorecard will be published in June(as last year) or it will be published in month of August(6 months from last publication date)

Thanks

Syntharz


(Administrator) #119
Time to simplify.VP Scorecard first.
Time to ponder on our Luck+ Effort+ Skill mix! And Wonder!
Time to Celebrate and Inspire many more to join our fledgling efforts!

VP Scorecard 6: 27 Jun 2014

Business

Recco Date

Recco Price

PAT Growth FY14

CMP 27th June

Absolute Returns

Annualised Return

Ajanta

17/01/2011

60.2

118.41%

1514.9

2416%

155%

Mayur

10/02/2011

30

30.19%

372.45

1142%

111%

PI

07/03/2011

59

90.71%

329

458%

68%

Astral

29/03/2011

50

29.70%

675.6

1251%

123%

Atul Auto

10/10/2011

65

15.01%

535.5

724%

117%

Kaveri

14/08/2012

160

62.14%

722.25

351%

124%

Poly

20/11/2012

200

79.07%

503.35

152%

78%

Avanti Feeds

01/09/2013

205

131.04%

696.55

240%

-

Alembic Pharma

11/02/2014

226

51.35%

269.85

19%

-

Shilpa Medicare

11/02/2014

331

75.94%

418.55

26%

-


(Administrator) #120

VP Public Portfolio Recommendation 6: 27 Jun 2014

VP

Long-Term Portfolio

Initial Reccomendation

Category

CMP

Trailing P/E

Fair P/E Band

2-5 yr Potential

Current View (at CMP)

Qualifying Comments

Min 2-5 years

Hold Timeframe

Date

Price

1 yr Fwd P/E

27-Jun-14

Mayur Uniquoters*

10-Feb-11

30.0

6x

A

372.45

28.26

16-18x

18-20x

HOLD

Ajanta Pharma*

17-Jan-11

60.2

7x

A+

1514.9

24.21

20-22x

22-25x

HOLD; Add on declines

Astral Poly Technik

29-Mar-11

50

12x

A

675.6

49.18

18-20x

20-22x

HOLD; Book Partial Profits

Captures 2+ years earnings

PI Industries*

7-Mar-11

59.4

12x

A+

329

24.37

16-20x

20-25x

HOLD

Kaveri Seed Company*

14-Aug-12

160

10x

A+

722.25

23.60

16-20x

20-25x

HOLD

Poly Medicure

20-Nov-12

200

12x

A+

503.35

25.73

18-20x

20-25x

HOLD

Shilpa Medicare#^

11-Feb-14

331

13x

A+

418.55

19.05

18-20x

20-25x

BUY

Attractive on 1yr fwd basis

Alembic Pharma^

11-Feb-14

226

15x

A+

269.85

21.35

18-20x

20-25x

HOLD; Add on declines

Shriram City Union

29-Jun-14

1415.2

2.41x BV

A+

1415.2

2.86x BV

2-3x BV

3-4x BV

BUY

Attractive on 1yr fwd basis

VP

Opportunistic Portfolio

Reccomendation

Category

CMP

Trailing P/E

Fair P/E Band

2-5 yr Potential

Current View

Qualifying Comments

Min 6-9 months

Hold Timeframe

Date

Price

1 yr Fwd P/E

27-Jun-14

Atul Auto*

10-Oct-11

65

5x

B+

535.5

20.12

8-12x

12-14x

HOLD; Book Partial Profits

Captures 2+ years earnings

Avanti Feeds

01-Sep-13

205

3.5x

B

696.55

9.09

4-8x

8-10x

HOLD