Anshul's investing journey

[avthakkar]

This is the start of my investing journey. I actually have been actively investing for 8-9 months while actively learning for a year now. I am basically an amateur, let alone a cycle: I haven’t even lived past a whole financial year. However, I am only 19 years old and I am keen to make a career out of it and that’s why I want to continue going forward.

The reason I am starting this topic is so that I can journal my investing journey, note down what I learn everyday and observe a change in myself in the coming years.
So lets begin!

My investment approach

My goal is to find businesses which can grow earnings by 20-25% over the next few years and are available at reasonable valuations. As a beginner, I might overestimate the potential of my investments. and pay at a premium they don’t deserve. However, that’s part of the game and I intend to improve.
I prefer betting on sectors first, and then shortlisting stocks in that sector which suit my investing approach of earnings growth+ valuations.

Caps and types of stocks
I do not have a problem in investing in any types of caps. I prefer small caps as they can grow faster but if a large cap can deliver the same, I am fine with it.
I also do not have a problem with investing in cyclicals, turnarounds etc. The only problem is I do not know if I am good enough to tackle them that well, but I am agnostic to that.

Portfolio allocation
I am a very strong believer of concentrated bets. However, no stock exceeds 10% mark in my portfolio. The only reason is because I want to further refine my skills before taking riskier bets.
technicals
I started off as a trader and I still actively trade, so technicals is my strong suit and I use them in evaluating my investments, but not deciding whether to buy or not on the basis of charts. I haven’t exited businesses based off of technicals, but I think they can be a good signal in terms of taking sell calls so I am open to that.

Here is my portfolio, with the exact weightage

I am bullish on the following sectors: Hotels, real estate, Financials, selective capital goods and auto ancillaries, retail jewelry, mining, hospitals and wires & cables.

Business I am the most bullish on: Senco, Pennar, Prestige+Kolte patil, Samhi, good luck, GPIL and GMM.

PS. These are not my starting buying prices, I have averaged up in most of them except GMM.

Disc: nothing is a buy or sell recommendation. I will give updates on a monthly basis and share my learnings as I go ahead.

[omsingla]

Hey Anshul, Kudos to starting your investment journey. Quite interesting portfolio. Wanted to know more about SAMHI hotels and your rationale for investing.

[avthakkar]

I will summarize here, but I will share my thesis and financial model as well.

My bet was on the hotel sector, as the demand is increasing while supply will take a few years to catch up. This will lead to operating leverage and excess cash. My bet is that SAMHI will not only become profitable, but also deleverage its balance sheet as sectoral tailwinds are the ideal time to strengthen themselves.

My detailed reasoning
Thesis

Sales growth
FY25 will see addition of around 10-12% more keys which are being added or will get ready from renovation. Moreover, we can expect a RevPAR in double digits, although we are seeing RevPARs in high teen or in the twenties, I don’t know if that can sustain and hence a growth rate of around 13% has been assumed until FY27E
The decline in growth rate from FY26 and FY27 is because not a lot of keys are being added, and we can only expect the newly renovated ones to start(around 900 are under renovation)

EBITDA
The business aims to increase the margins to around 38-40%. Moreover, they shared a chart in one of their presentations that talks of types of costs. 20% was variable and after looking at it, I thought of an additional 20% being semi variable in nature. Despite the fact that semi variable won’t rise as much as revenue, I assumed 60% of the additional revenue each year trickling down to EBITDA.
That is how the model has been made!

Other income
It shouldn’t be negative the next few years because the current year had a one off event and the company took the worst possible scenario and wrote off 70 crores.

Depreciation
It shouldn’t really increase because no keys are being added, only existing portfolio is getting renovated

Interest costs
for FY25, the debt is assumed as 3.7x their EBITDA which is their target. The cost of capital for the business is around 10% and hence the interest cost. Although the management hasn’t guided towards interest cost reduction or anything for FY26 and FY27, the free cash generation does make me believe that a bit of reduction might happen. I have taken a moderate reduction in interest costs post FY25

[avthakkar]

Fantastic results by Senco( highest allocation) A YoY growth of 38% is impressive. What I really like is that SSSG is the backbone of growth instead of store additions like Kalyan. This allows operating leverage to come into play. I had assumed a FY24 growth of 25% but I think its around 28%(not very sure)
However, it helps to keep a conservative model as there is an inherent margin of safety to it.

[nikhilbajaj]

Hey bro, nice to see your investment journey, it’s very impressive that you started so young,
can you please guide me about what study books I should refer and on what point of basis do you selected the companies?
I am newbie so please guide me about which books are good for investment?
Currently I have invested mostly in one stock IIFL finance at average price of 386

[avthakkar]

A war between Iran and Israel broke out, all would be well if Israel does not retaliate but I don’t think that’s possible.
I am quite confused on the impact of the war. I expect Russia-Ukraine to have had a bigger impact due to the role of Russia in global trade compared to Iran Israel and hence, should not be that bad.
Israel’s top exports are Diamonds, integrated circuits and refined petroleum(4 billion).
Iran’s top exports are Polymers and crude petroleum.
Can these impact the stock market severely?
Inflation could definitely increase or remain elevated, particularly in commodity and rare metals and energy.

My first thoughts are GMM’s international business could suffer the brunt of it with margins getting supressed. Domestic business isn’t that well for them and International has been the one carrying their business. Let’s see how it plays out

Capital good businesses like Pennar and Goodluck could be affected temporarily as well but hopefully not much.

My thoughts could probably sound dumb and I could be very wrong, however I am writing this down so I can later see how my thoughts vs reality turn out.

[avthakkar]

hello! thank you so much
There are a lot of books that can be really helpful
Here are the ones I have read and helped me a lot

For personal habits and character( I think its key to have good habits to become a good investor)

1. Atomic habits
2. Deep work
3. Same as ever
4. Gita

For investing:

1. Little book that still beats the markets
2. Little book of valuation
3. Little book that builds wealth
4. One up on wall street
5. Beating the streets
6. Mastering cycles
7. What I learned about investing from Darwin
8. Trade like a stock market wizard
9. Dhandho investor
10. Understanding Michael Porter

These are my picks, there are a lot of good ones that I haven’t read yet but I am sure if you read these, you would learn a lot!
I burnt my hands in IIFL finance Exited with 15% or something loss, I would suggest you study the business again because gold loans are capital intensive due to branch set up and RBI banning it will lead to a big operating deleverage. I don’t know if they will reverse the decision, but this is just observing the present.

[nikhilbajaj]

Thanks for reply bro, K will surely do study the business model but the company will also have different streams of income?

[avthakkar]

yes it does! my thesis was built on gold loans due to the excess margins and that’s why I sold after RBI’s decision. It all depends on what factors built your thesis on the stock

[avthakkar]

I have added two positions in the past few weeks: Time techno-plast and Medi assist. Both seem to be at a reasonable valuations with strong growth ahead.

As I was talking to my father about my portfolio, I recognize a few problems. 19 stocks for me, is a few too many stocks. I am thinking of exiting a few positions and investing in my high conviction bets.
It will take some time for me to recognize which idea should get a higher weightage, but I am strongly considering reducing my holdings to 15!

Moreover, I have increased stake in Goodluck and Sandhar.
Goodluck seems to be at a reasonable valuation. FY26 revenue should be 4500 cr barring defense segment with an expected PAT of 250 crores. a 20PE exit gives 5000 crore market cap
Sandhar too looks good for margin expansion, I expect double digit margins.

Moreover, I am evaluating whether I should shift capital from SIB to Arman financials as Arman AUM can cross 5000 crores and PAT 250cr is very much on the cards.Still haven’t made a decision but thinking!

I don’t want to rush my decision making, will take some time and think

[avthakkar]

I will share the changes in my portfolio over the weekend.
Until then, I want to write down my learnings and hope to follow them in the future

As I learn more and understand my position, I believe I have made 2 mistakes in my portfolio which I would like to reflect upon.

1. Sky gold
   I invested in the business because of the growth potential and the gap of organized retailers against organized manufacturers. Manufacturing has to catch up and hence this business should grow very fast. However, the mistake I made is the starting valuation I paid. If I remember correctly, I paid at a PE of around 45-50. That is a very high premium. For a company, that is upstream of retail jewelry, I do not think it can sustain this valuation. Moreover, it will be difficult for the company to keep up with expectations for continued years. The odds seem stacked. The only thing that comforts me is that allocation I have given. The consequences of the losses seem to be minimal.

2. GMM Pfaudler

The goal of an investor is to generate high XIRR. Warren Buffett, when he started managing funds had an average holding period of 6 months or so and made a killing. Only due to this size of his funds he had to modify his approach. As someone who too wishes to maximize gains and is an active investor( to some extent) I expect my churn to be on the higher side.
GMM Pfaudler was a mistake for 2 reasons that are necessary to avoid if we want a high XIRR.
I truly believe in the business and its a very strong business: the revenue growth should be stable and the health of the business should only strengthen.
the place where its lacking is technicals. It’s stuck in a sideways trend and is not going anywhere until the Indian business recovers. The other problem and the key problem is lack of catalyst. Catalyst will reflect on the charts and hence the first problem is an extension of this one.
The catalyst I see are financial deleveraging and reversal of chemical sector. Deleveraging is a continuous process and it should keep going on but cash flow will increase only when chemical industry rebounds. and I don’t know how long will it take for the industry to reverse.
So until it does, its just gonna fluctuate.

I do not plan on selling them as the thesis pointers are still intact, but these mistakes I wish to avoid in the future.

[avthakkar]

Here is the updated portfolio.

I have added three positions: TIIL, Jash engineering and MediAssist while exited Kolte Patil.
I shifted the funds from Kolte to Jash directly, while MediAssist and TIIL were added.
I am currently studying Welspun enterprises as an extension to the water theme which I am playing with Jash engineering.

I increased stake in Goodluck India, Why?
I see strong earning visibility and the pillars of growth look quite strong. I can be quite wrong but that was one major reason!
Secondly, I had earlier discussed and thought of selling South India bank and shift to Armaan but I did not. It was more of a technical reason. I decided against selling because it was on support and there was growth visible. I think it was the right decision as the stock rebounded and grew by 20% something percent( its a different story that it came back to the same level.

here is where I believe I need to improve. I am not so sure on a few decisions I have made.
Do I keep owning SIB? If it’s a fundamental pick: what weightage does technicals have in making the decision?

Does it even make sense to own stocks such as MediAssist,TIIL and NH because they are barely worth much in my portfolio.

I hope to learn and answer these questions myself: its an evolutionary process as an investor.

Another thing I would like to address
One thing I struggle is idea generation. Most of the businesses I own were talked about by someone, some video, some recommendation in which I worked on independently and bought. I make my own thesis and analyse them myself but Ideas are borrowed. I want to focus on this as well.

[Gautam_Chopra]

Welspun trades higher on buying out 50.10% stake in Michigan Engineers

WPIL is a good proxy to water capex too. They recently discontinued nuclear division and are cash rich. Like Welspun’s MEPL acquisition - WPIL should be doing inorganic growth in coming times. Looks promising. Welspun Enterprises is a available at great valuations i must say. EPC player. MEPL gives them trenchless technology which is high growth.

[avthakkar]

Thank you. Will definitely look into them. Before I could build a position, Welspun run up 20%

[avthakkar]

Two ideas I missed because of my biases

1.PSU banks: Never invested properly because they never created wealth before. Despite being in the markets for like a year or so, I had this perception that PSUs are gonna be traps and have the worst asset qualities. Missed out on them big time. I dont wanna give myself hard time on it because I was quite new to investing at the time they were at great valuations( Still am new but basically very dumb back then

Learning Lesson: When cycles turn, the worst businesses actually end up performing better than the best ones. Imagine a 10 year time period with one 5 year good cycle and one 5 year bad cycle. If the best business rises by 50% CAGR in that 5 years, it will probably give no return to moderate returns in the bad cycle.
However, a bad business will give 70% CAGR in 5 years and take it back in the bad cycle.
Hence, in an upcycle bad businesses will perform better because they are in such a state that the base is low and the improvements can be huge.

2.Indigo:
Again, the bias of airlines being wealth destroyers made me turn away from the stock. All the books I read about said against it and I trusted their opinion against mine
books being: What I learned about investing from Darwin, Michael Porter and Peter Lynch books

Learning lesson: Failed to recognize the importance of timeline when it comes to such ideas. I am not invested for eternity. I am only here for a few years while the investors who wrote the book are not.
the industry structure and its importance is very necessary when investing for a considerably long time. But I do GARP investing so growth holds supreme and I should have taken that into account before dismissing anything. Long way to go

Updates on Q4, I will update my portfolio in June first-second week because of traveling back to india and exams at the moment. I will share my rationale behind the changes as well. Lot to learn and observe

[avthakkar]

I am quite happy today. It’s not because my pf is doing good. Its not at all pf is down 7% ish
The reason I am happy is because this is the second biggest fall post covid I think and the biggest I have witnessed and honestly, I feel a bit unfazed. I am ofc upset about my gains evaporating but that’s part and parcel of the game.
I am excited to see how the markets progress post this.
Don’t have a lot of cash unfortunately
but added Samhi, EIH and Nuvama today

[avthakkar]

A bit late but here it is

My quarterly update

There have been a few changes which I will explain and maybe and a few possible mistakes that I want to delve deeper into.

I have exited South India bank, GMM,NH, Sanghvi movers and added Nuvama and Max estate.
Why did I sell each of them?

Slow to no growth: GMM and NH. Sold GMM ±5% of cost and NH at +5% I think. not much to gain or lose.
South India bank: I found it better to allocate capital in other businesses and add Nuvama.
Sanghvi movers: Thesis of exponential increase in profitability wouldn’t have been possible because of focus in EPC. Hence, thesis was proven wrong( I still see good growth potential though). luckily ended up in profit anyways.

Why added these? Nuvama I have started a thread and you can check my thesis there. I think the upside is high and downside limited. elements of cyclicality are present but it should work out for the better in the next 3 years hopefully.
Max estate has really strong growth ahead and I believe that Real estate will be one of the biggest winners. Hence, went for it.

Here is my take on the relevant businesses

Added significantly in Hotels and Goodluck,Prestige during the election fall and Pennar after its results. Mainly because the thesis is getting priced right in hotels and the guidance Is very strong for the other with good margin of safety. Prestige is in solid momentum and the growth is intact, correction gave good valuations at around Mcap/presales of 2-2.5x
EIH deserved a higher allocation and got it right after the election correction

You might notice a small drop in the other positions its because I added fresh capital and did not take a basket approach to it.

Anyways, here are my potential worries ahead.

Samhi: it’s a turnaround bet and hence can go wrong. Which is why it concerns me that it’s a high allocation idea. Its going well so far and the prices I got while adding were very good and hence feel good about it but its a potential worry.

Auto anc dilemma: I consider Sandhar a better business than RACL yet RACL has a higher weitghage. It’s my bias because I studied RACL first. I will probably correct it and adjust accordingly

TIIL: great business but I am already playing the theme with 2 good business. Do I even need it with such low allocation? even if it does great I cant do much and I am 100% invested right now so would prefer it.

Also, Missed airman and Welspun. Had mentioned above wanted to study them and see what to do.Arman looks good but out of cash rn. Welspun is a bit expensive for me.

[Luv_Nainwal]

Hi Anshul, Can you help me with your rationale for investing for
Max Estate - based on Mcap to presales, what is your POV for the next 2-3 years of growth?

[avthakkar]

I think that real estate has a strong cycle ahead! After watching a few analysis and reading reports, we are only in the middle of the cycle.
Max estate operates in Delhi-NCR which is the strongest market in India right now. the player is guiding for 100% pesales growth, which is about 4000 crores. so at my buying point, I was getting it at a 1x of market cap/Presales

the only player that compares its growth is TARC. which said 200%. If I had capital, I would play a basket approach with the two names.
Hope that helps

[Investor_No_1]

@avthakkar

Despite being in the markets for like a year or so, I had this perception that PSUs are gonna be traps

You are right by not overburdening yourself. I am sure many in markets since long must have had this bias, including me.

There will always be such reversals and stories and we cannot be part of it everywhere.

I think its important to know what we want to be a part of and while such misses are good learnings, if its not what we stand for, we will surely miss it next time as well. So, in an effort to want to play such games next time, we must not forget what we stand for and not miss out in our real game.

There are few who see such huge misses and change their way of investing. Sometimes it can be for the good as well if thats what is their inherent strength which had remained hidden for so long and precipitated by such big misses.

So, in short, lets keep learning from misses but again as you rightly mentioned never to over burden ourself as we must know that our biases were also for a reason and ultimately what is it that we stand for as that is most important and deciding factor in success, CAGR being just one of the major pieces.