Venkat's Portfolio - 2022

Q&A: Questions & Answers Portfolio Q&A
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Dear Forum Members,

I have been investing in stock market since 2009 onward’s after the subprime crisis. I started earning/saving only after 2008 time. During the crisis I was working for a Wall Street Bank in US when daily I used to hear that some or the other company in US is bankrupt. Luckily, the department I was in was the one used to block all these bankrupt companies, so my job was saved. Bank also got saved as it was part of the Big Four(Too big to fail).

My earlier Multibaggers were Sterlite Technologies (10X), Arvind Mills(10X), IOCL(5X) & GIC Housing Finance(11X).
Failures - NHPC, Bharati Shipyard, Adani Power, Mphasis & Aban offshore.
I sold all my shares in Jan 2018 fearing recession in India as the economy was slowing.

Here is my learning, Government decision plays a big role in stock market investing, so choose business where the government is favorable towards the sectors. Also, government will open the purse when there is a big turmoil in the economy/GDP growth(Current Situation). Government also favors businesses or incentivize the business where there is huge demand. Need to monitor those sectors closely.

Here is my list of Stocks with equal allocations of 10% each which I started adding from October, 2018. I am sitting on 80% cash waiting to be deployed before the general elections.

Nitin Spinners - It is into Cotton Yarn manufacturing. Very good management, CEO is a Chartered Accountant with all India Rank, first generation enterpreneur with long run way. Company has been a turnaround story after initial mistakes with forex, NPAs etc. It has since then made a turn around & made good capacity additions recently. Next capex is planned for Rs. 600 for production of fabric but yet to start. Good Inventory Management & debt Reduction. Expected Return - 3X in 5 years.

CAN FIN Homes - Retail HFC, Good ROE, Risk of default is less. Branch expansion is good, predominantly south India based HFC. Future growth is more in South India as the majority of the Tech companies(Young Population), lesser defaults. Company is growing at a decent pace. Expected Return - 3X in 5 years.

Yes Bank - Company is really good at marketing, CASA is GOOD, CEO has a good global experience. May be having a bad time handling the Government. ROE is comparable to HDFC bank, lot is being invested in technology which is the back bone for any bank. - 5X in 5 years.

Rain Industries - Company has a good R&D & Capacity to grow, lot is being invested for future materials used in EV. Company is cyclical with crude as the main raw material. We are in the down cycle for crude as there is over capacity world wide & emergence of EVs. - 5X in 5 years.

Mirza International - Consumer discretionary theme very good leather products. Company has good products, RED TAPE brand. - 5X in 5 Years.

ABFRL - Consumer discretionary theme, Company has good set of brands for all category of peoples, Retail Stores with Pantaloon. Quality of the products are really good - Peter England, Van Heusen, Louis Phillip, shoes, belts etc. - 3X in 5 Years, 10X in 10 Years. Long run way.

LT Foods - Consumer Discretionary theme, more people will eat Basmati Rice. Company has good products in packaged foods. - 5x in 5 years.

Deepak Nitrite - Good Management with vast experience in Chemical Industry. Capex completed recently. Long runway with Phenol & Acetone plants. - 3X in 5 Years.

Also, tracking GIC housing finance, HDFC life, ICICI Securities, Birla Cable, Bodal Chemicals, Biocon, Persistent Systems.

Kindly, provide your views on my portfolio. I have learnt lot from the fellow forum members. During my initial days, there was no forum like this to discuss on stock markets. Thanks to ValuePickr team for such a superb platform. Hope this will help n number of investors to create wealth in India as most of the shady companies have been cleaned up in the last 3 years.

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There is a realistic chance of your portfolio performing as per you expectations. View is biased since I hold Rain, Mirza and Deepak Nitrate. The real worry ahead is what is going to happen to equities if the world is on the verge of slipping into a long drawn out recession. In that case, we may have torrid time since Indian stocks are trading at a high PE multiple. Hence it is advisable to keep adding to the portfolio over the next two year period as things unfold. The way the world markets and crude have been falling, it seems they are pricing in the possibility of a global recession. So spread out your investment over the next couple of years to take the best advantage. What we saw in October may be only the tip of the iceberg. Good luck.

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Thanks for taking your valuable time to scrutinize my portfolio. Am still looking at companies which are undervalued to add more. Stocks are risky as you may get stuck, so investment horizon should be at least for 5-10 years. Need to average down if the business you are owning is going down due to external factors in short term(1-2 yrs).

India is already in recession now, I strongly believe that the government will start acting after the elections, more FDI, good increase in per capita income,low interest rates, more discretionary spending, more defence spending and also, crude price will stay low which is good for our economy. In case the government doesn’t act, the growth will take more time as it has to adjust by itself.

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You can try for balkrishna Industries .Now trading at reasonable valuation.

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Hi,
Venkat

Diluting equity from 40 Cr share Capital to 55 Cr Share Capital and even after this the Debt to equity Ratio is above 1. Looks very capital Intensive business. Have to see how far they can stretch.

In my view , there are better options available among Pvt banks. Good luck with Yes Bank.

Debt levels are very high but much of it is priced in at current levels. The repayments date are very far and i guess they can easily generate enough Cash Accruals by that time.

Company is really trying to be aggressive and trying to gain Market share. Though there are issues of sales going through related party and difficult to find whether they are done at arms length basis or not. Very High payout by the management as commissions is also a worry. But looks very good at CMP. Disc: Invested recently

Huge Debt + Very Capital Intensive Business. Requires high level of inventory. KRBL might be a better bet as it is a Market leader with much sound fundamentals. Disc: I don’t like the sector.

You have very low exposure to Financials , FMCG , Auto , IT and Pharma. Any specific Reason or are there no names which you feel can be 3X-5X in 5 Years ?
These are the sectors which have created good wealth over long term.
Anyway Good Luck on your investments. Hope you achieve your targets.

Disc: I own Mirza from the above list of companies,

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Thanks for taking time to look at my portfolio. India is going through recession right now, GDP growth has slowed down hitting finance & auto sector. Also, due to Trump effect, IT, Pharma is facing slowness. Need some kind of boosters before we can enter into these sectors else we will get trapped.

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Hi Anna
You have selected Roti Kapta and Makan them which is fantastic I am sure that you will achieve your target but in my opinion instead of LT food you should opt for Chamn Lal Setia , Canfin is alright but there are chances of selling the stack of camera bank if I am you I would like to opt for DHFL as this is giving my huge margin of safety and the company is mature and expected to grow better than Canfin Along with Rain if you could add NoCil that will be excellent I would like to skip banking sector so No to Yes Bank if you wish all the best in that instead of this I would suggest to go for pharma sector using basket approaching the nitrate section you can Compare Deepak Sadhana nitrate
Best wishes
Regards
yourraj

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Thanks for taking your time to analyze my portfolio. Sadhana Nitro was a big miss stock zoomed from 50 to 1200 in no time. I do regret it. DHFL is good with nice very low pb ratio, 3x possible. Will track it. NOCIL is in radar, no debt good one. Chaman Lal already had a great run. YES Bank, I like it as CASA & technology is good. That will save them any day. Maybe will go down in short term due to all TV analysts but future is good. Also, tracking westlife developer (McD). Only 2 - 4 more stocks has place in my portfolio.

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Increased my holding in Yes Bank & CAN FIN Homes. I thank all TV analysts & credit rating agencies for bringing the price of Yes Bank down. Would like to add more till December 12.

Tracking on Sintex Plastics as it has good products. Only Huge debt is a big concern.

Let me know if there is any good under valued Auto sector stocks.

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You may look at Ashok Leyland… Its a value pick IMHO. Share your feedback. Thanks

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Here is my analysis on Ashok Leyland.
Ashok Leyland is very good stock with good Dividend Yield, Earnings Yield & PEG. Numbers are just great. 3X possible in 5 years looking at the past performance. IF we can have the TV analysts talk bad about the stock and bring it down to 75. It will be a screaming buy. I will keep it in Radar. Let the price come down.
Force motors also looks good in terms of low Market cap, EV/EBITDA, new products, tie up with Rolls Royce & BMW but only concern is top line is flat for the last few years. In case, if it turns around, it will be a 5X in 5 years. Entry price less than Rs. 1300.
Both the companies are planning for EV & BS-VI compliance by 2020. India needs lot of trucks, school vans, buses, ambulance etc. No doubt the sector is good. Mass transportation is need of the hour.
Will track both the companies. Thanks for the recommendation.

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Hello Venkat.Anna,

I am just a 1.5 yrs old in investing so not much idea and trying to read this forum a lot and getting idea on how things work in the world of investing.

From your list, I have LT Foods and Yes Bank.

In LT foods I have a round trip. Started buying around 60 in last year and continued at 100 levels as well and now doing same in downward journey. Most of the people’s concern in LT is their debt. I stay in Singapore and can see Daawat brand everywhere along with India gate and most of my friends from US also refer Royal is every where. So at current level of RS 40 is still highly priced for the brand which is almost as familiar as India gate which is quoting at 300+.

Yes Bank…I have few shares at 300+ then due to so much negativity I decided to take risk and added decent quantity in the range of 150-180.

Rain is in my list to buy and will keep adding in small quantities.

Any views on LT will be highly appreciated. Thanks

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Never compromise on promoter quality . Sintex plastics scores poorly in this regard

Remember 90% bet is on promoter n 10% on sector. Try to find cos where opp size is good giving good cagr n also shud have good Roce which implies some sort of moat. This combo under ethical promoters with good execution track record n buying with a good MOS gives a big opp to mint money

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About LT foods, MR. Market is worried about IRAN sanctions, so the prices of LT foods will come down even though it doesn’t affect as Rice comes under staple food as I was checking on the same. We need to wait for the price to beaten down further till it is less than Rs.30 - 35 before making a big entry.

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Added SELAN Exploration today which comprises 10% of my portfolio. Business looks good.

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any thoughts on gic hf, since you used to hold it. long term roe of 18% available at 1.05x BV.
https://www.screener.in/company/GICHSGFIN/

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Long post alert :sweat_smile::sweat_smile:
You should look at CGD companies to expand your portfolio further. Some facts I like about the companies in this space:

  1. CGD companies are monopolies. Govt gives them a renewable license for a fixed number of years (15-20 years) for particular districts called GAs. Only authorised companies can lay down the pipelines or set up CNG stations & sell gas through them.
  2. Their product, CNG & LPG is cheaper & less polluting than petrol, diesel & kerosene.
  3. CGDs have pricing power. They can pass on higher costs of natural gas to their customers and maintain margins.
  4. They have an entrenched moat. Customers who opt for a PNG connection from a CGD company are unlikely to switch to another. Also, another company, even if it gets a gas distribution licence from an existing one will find it extremely hard to set up new pipelines. It’ll have to pay rent to existing CGD Co to use its pipelines. That’ll make it’s gas less competitive compared to the existing player. Also, people are unlikely to switch because of sheer inconvenience (who’ll damage all those beautiful kitchen interiors unnecessarily!)
    Same goes with CNG Stations. Hard to set up once player has already set up a few in a particular area.

Some of the key points why I am bullish on the theme are:

  1. Govt has targeted to increase share of natural gas in the Indian energy basket from 6% to 15% in the next few years.(https://www.reuters.com/article/indonesia-lng-summit-india/india-plans-massive-natural-gas-expansion-lng-imports-to-soar-idUSL4N1PW5M0)

  2. Oil Minister Dharmesh Pradhan has targeted pipeline construction of 15000 kms, necessary infra for gas transmission. (Govt plans to add 15,000 km new pipelines under national gas grid programme – The Pioneerwww.dailypioneer.com › business › govt…)

  3. Robust natural gas supply scenario with US production rising but preference shifting to renewable energy production. US has become an exporter of natural gas. This should keep NG prices low in the long term. (https://www.forbes.com/sites/chuckdevore/2018/05/14/u-s-liquefied-natural-gas-exports-just-quadrupled-its-good-for-the-economy-national-security/#4a8fd69a27b5)

  4. Multiple regasification terminals – used to convert imported liquid NG into gas – are coming up. (4 terminals in operation & 11 more planned). (https://www.lngworldnews.com/report-india-plans-to-build-11-lng-import-terminals/)

  5. PM Narendra Modi developed Gujarat’s NG infra as state’s Chief Minister as a result of which Gujarat has a very high natural gas consumption rate (26% vs 6% nationally). There’s a good chance he can replicate the Gujarat model nationally.
    (https://economictimes.indiatimes.com/news/politics-and-nation/pm-modi-unveils-vision-for-gas-based-economy-10000-cng-pumps-2-cr-piped-gas-connections/videoshow/66756399.cms)

  6. Rising pollution concerns across the country has made the govt/courts take steps like banning highly polluting industrial fuels (pet coke for e.g.), making all public transport run on CNG (Delhi). This bodes well for usage of NG as a power fuel across industries. Natural gas burns cleaner than petrol, diesel and other crude derived products as it has only 1 carbon atom compared with ~18 for diesel/kerosene & 8 for petrol.
    (Government plans to propose nationwide ban on pet coke as a fuel: Sources – Times of Indiahttps://timesofindia.indiatimes.com › artic…)

  7. Priority gas allocation to power, fertiliser & city gas distribution sectors. (http://www.ogfj.com/articles/print/volume-14/issue-4/features/india-wants-a-gas-based-economy.html)

Key risks to this theme:

  1. Lack of sufficient pipeline infrastructure (due to traditional land acquisition issues and bureaucratic/funding delays)to off take imported gas. See Kochi LNG terminal for eg. which is waiting for pipelines to be completed for higher capacity utilisation. Grid development key to India’s natural gas market growth
  2. Electric vehicles disruption to blunt NG volume growth. (IMO EV disruption is still far away again because of lack of charging infra). Plus, EV+CNG poses a greater risk to crude as a source of energy.
  3. Dependence on LNG imports (low domestic production) exposes India to FX volatility of international gas prices.
  4. Rise in natural gas price (very low risk due to ongoing supply glut) in the short term due to geopolitical tensions, extreme cold weather conditions in US etc.
  5. LPG subsidy which increases switching costs to PNG for houses. (Though industry people have noted PNG is still cheaper than LPG after subsidy and some new LNG subsidy models are coming up. In a first, Gujarat to offer PNG subsidy – Liveminthttps://www.livemint.com › … › Energy )
  6. Political uncertainty in case of change in govt at the centre & reduced investment in developing necessary infra. Though investment is set to pick up pace going by how aggressive the bidding process is becoming (https://www.livemint.com/Industry/Amwfjm4m0s4EhycLgWt9CO/City-gas-distribution-to-see-big-investments.html?facet=amp&utm_source=googleamp&utm_medium=referral&utm_campaign=googleamp&__twitter_impression=true)
  7. Lack of switching incentives to piped gas. Customers in many areas where pipelines are already laid don’t opt for png connections. Similarly, due to lack of enough CNG Stations, people don’t generally buy CNG only cars. Things might change as infra develops.
  8. CGD companies are state owned. Progress on infra development-pipeline set up, CNG stations set up, customer enrolment is slow. Like all things govt out there.
  9. Being state owned, they might be regulated like OMCs. They might be compelled to cut prices to suit the populist needs of the govt in power. But this risk is far into the future. Right now focus is on expanding gas usage aggressively.
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GIC HFL is a very good small market cap with good ROE, targets only retail customers in LIG & MIG, govt servants. So, defaults will be less but it is not very aggressive like other HFCs(which is good in a way). With govts initiative with PMAY, it had a great run. Now, you need to wait till elections as the stock will go down to less than 160 before you can add more.

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Instead LIC Housing Finance stands better due to a much larger market cap and other financial ratios are just about the same.

In the sector LIC is better position than GIC

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Looking at numbers of LT foods it appears that this business has only 4% NPM, in that how it may be able to clear debt, which is getting in the way of the desirable ROE, which ought to be 30% for s company this size.