Atirek portfolio

[royatirek]

Took the tracking position in Ksolves.
Smallcap in it industry.
Getting projects is easy from my personal experience of it industry.
Gives a lot of dividend.
Management has given 100 cr of revenue in 3-4 years.
No corporate goverance issues
No need to do capex and wait(assest light industry)
Glassdoor rating comparable to peers

Negatives
Client concentration risk
Generative AI like chatgpt risk

PE rerating chances are low.
Longetivity of growth may be debatable due to generative ai in the coming years but again it can pivot.

Industry
Service sector growth in high single digit

Debt
Negligible

V stop
Positive

First time, I have more than 8 stocks in my portfolio which makes me little uneasy

[royatirek]

Last month took a break from the job and hence got some time to complete SOIC course on Valuation and technical indicators(Part 3 and 4).

Few learnings

Whenever there is a lot of capex is going on we should value the company over the EV/EBITA.

Though we should have clear visibility how the capex would turn into profits.
Therefore hospital sectors should be valued on EV/EBITA.

Averaging the stock in the free fall is not the good idea based on probability

Therefore knew, why 52 weeks high makes more sense than 52 weeks low.
This is a reason why relative strength is a good parameter to screen stocks as stocks showing relative strength are more probable to hit the 52 weeks high.

Things that I have been practicing earlier
I have been practicing this in some form that I don’t average over maximum percentage that I can allocate to a stock at the Buy Price.
Example → I have averaged Alibaba but never made it more than 4% of my total investment at the Buy price.

Look into tailwinds while investing, finally understood the logic behind it.

Valuation comfort comes with tailwinds as current price is the discounted future price. Also tailwinds gives us margin of safety.

Invest in the company while looking at the growth prospects and position size it based how how likely it is to fail and make your money zero

Learnt that we should consider risks while position sizing not growth in the stocks.

Things that worked
Mutual fund based screener works as when I learnt that Syngene has been added by Edelweiss Small Cap Fund in February this year, I increased my stakes in the Syngene making it near to 20 percent of my total stocks portfolio and then the news of exports came and then the results.
Also added Equitas Bank in my father and sister portfolio based on fundamentals and as it was added by three top mutual funds in February.

Five stocks which was added in more than one top mutual fund house portfolio in February that I am tracking to see how it performs coming months. It looks like a solid portfolio screener at first look.

1. Sona BLW Precision Forgings

2. Mahindra CIE Automotive

3. Kirloskar Oil Engines

4.Kajaria Ceramics

5. Equitas Small Finance Bank

Planning to create a separate thread for explaining the approach if it seems to work.

Perfomance
Last month has been good for me as my indian investment in stocks hit 52 weeks high multiple times due to Syngene, Maharastra Scooters and Ksolves.

My returns in the US stocks has been in downfall mostly due to Amplitude. I have bought the Amplitude even though investing in loss making company breaks my initial framework of investment but I liked its business and learnings from the Peter Lynch book that we should invest in what we know.
Looking at the decision in the hindsight, I feel that I should look for the tailwinds and headwinds when investing in anything.
One more mistake is that I position sized it based on the growth than the risk.

The thing I did good is that I am not averaging it down.
After new tax laws on investment in the US equity market through mutual funds and TCS in direct stock investment, I am not planning to put money in the US equity market now.

Holdings Update

I did not increase the stakes in the Ksolves over the tracking position as it looked so risky for me after it gave a run in the stock price which makes the current price of the Ksolves unfavourable for me considering 30 percent future EBITA margins and the risk involved.
It is currently currently 4 percent of my total stocks portfolio due to 50% increase at my buy price at 460.

[Mudit.Kushalvardhan]

Hi…its interesting to see the mutual.funds screener is helping you identify the right kind of stocks. Can you please help in understanding how you do it? Is there any tool you are using and what is its probability of being correct as per your experience?

[royatirek]

Every mutual fund does the monthly portfolio disclosure. Every mutual fund disclose their last month holdings by the next month of 10th.

Have built a tool over it to screen stocks based on various parameters. Will release it in few months.

Probable reason behind it seems to work is that
If a stocks get added my multiple mutual funds houses in a month as I think it takes the stock into Stage 2 of the Stage Analysis as a lot of accumulations happens.
They also seems to have the knowledge arbitrage.
Screened stocks have high probability of due diligence of the management done.
I have seen them predicting the cycle correctly as I have seen them buying industrials, auto ancillary and banks at the nearly correct time.
There are many more insights that we can know just looking at the mutual fund portfolios.

Final conclusion can give after some time as I still backtesting some of the results.
It does not happen much that a stock gets added by many mutual funds in the same month. Hence the data that I have is less. Barely double digit in a year.

One correction → Mahindra CIE Automotive, Kirloskar Oil Engine and Kajaria Ceramics that I mentioned above were added in the month of march.

[Mudit.Kushalvardhan]

Also if possible , can you do similar analysis for superstar investors?

[royatirek]

Thanks @Mudit.Kushalvardhan for interacting with newbies like me. It helps me think deeper about the reasons about the things that I am doing and write it down here.

I can give the reasons why mutual funds tracking is better than the superstar investors. These are below

• I can not define the superstar investors. Though we can define the top mutual funds.

• I guess, can only know about portfolio of individual investors, once stakes in the stocks goes over 1 percent. Hence can never know when they add or remove some stocks.

• It is easy to know the mutual fund approach than the individual investors approach. Mutual fund also publish the research reports so that we can know their reason better.

• They are not regulated by the SEBI therefore there is some trust factor.

• There portfolio update is shown quarterly which is too late.

I am still not sure about the feasibility of the mutual fund based screener.
If it works and get adopted, might work on individual investors.
Disc : I can be horribly wrong.

[Mudit.Kushalvardhan]

Also there is one more factor related with trust. Some Superstar investors can be hand-in-glove with some promoters to jack up the prices of unknown companies and lend their superstar status to make these companies look credible to invest. If we blindly beleive them, we can be their scapegoat.

[Mudit.Kushalvardhan]

Few dumb questions :

1. if we are planning to copy moves of mutual fund managers, before doing that we need to ensure that we are copying bright students in the class and not the last benchers , otherwise we may also fail like them. So what many recent surveys say that Big Boys are failing big time in their game. They are not even able to beat theiir indices too. And those who are beating indices, keep on changing every year. So whom to copy and in which year?
2. Another aspect is , lets say their picks are good and they are faultering , not because they are doing inadequate research, but due to their behavior biases and also due to systemic issues. They may not want to sell the stocks, but due to redemption pressure, they have too. Even on buying side, they may not have a solid conviction about a particular stock but since invetors are giving them so much cash and their mandate doesn’t allow them to sit on cash…so they have to buy less conviction bets too. In short, their buying and selling decisions can be entirely based on environmental factors rather than on that specific company basis.

[royatirek]

@Mudit.Kushalvardhan

if we are planning to copy moves of mutual fund managers, before doing that we need to ensure that we are copying bright students in the class and not the last benchers , otherwise we may also fail like them. So what many recent surveys say that Big Boys are failing big time in their game. They are not even able to beat theiir indices too. And those who are beating indices, keep on changing every year. So whom to copy and in which year?

I am not telling to blindly copy the moves but it is good to know what the mutual funds are buying.

@Mudit.Kushalvardhan

Another aspect is , lets say their picks are good and they are faultering , not because they are doing inadequate research, but due to their behavior biases and also due to systemic issues. They may not want to sell the stocks, but due to redemption pressure, they have too. Even on buying side, they may not have a solid conviction about a particular stock but since invetors are giving them so much cash and their mandate doesn’t allow them to sit on cash…so they have to buy less conviction bets too. In short, their buying and selling decisions can be entirely based on environmental factors rather than on that specific company basis.

Probably, position sizing can let us know about the mutual fund conviction. Also, each mutual fund has some liquid cash present and they get a lot of money incrementally.

[royatirek]

Mutual Fund Stock Data Analysis
Few things that I got by going through data of the mutual fund

1. In most of the mutual funds the recently added stocks is not performing better than the already added stocks.
2. In most of the mutual funds, it is not guaranteed the high allocation bet will perform than the lower allocation bet. The medium allocation stocks performed better than the lower and higher allocation bet.

Conclusion: It is the good medium of the idea generation for now.

Stock Update
A) Exited Amplitude with 30 percent loss. Amplitude was my high allocation bet and it was really painful when I exited it.
The reasons behind exit

1. The growth is gone. The management is guiding for no growth in top line from quarter over quarter for the coming three quarters.
2. 30 percent loss is the maximum I could handle over my high allocation bet.

Due to this my return in USA is barely double digit in one year in rupees terms in which time nasdaq 100 has given better returns. In dollar terms as of current date it is 3 - 4 percent.

Learnings: Never position size any stock based on its returns but based on the risk that it carries.

B) Exited Ksolves with 70 percent profit. Allocation was the lowest. Did not added much return over my stock portfolio as allocation was low. I feel that I did justice with its low allocation as it was a risky bet.
The reasons behind exit

1. I don’t wanted to lose my returns. My profit reduced from more than 100 percent to 70 percent.
2. As my profit reduced, I checked the VSTOP on weekly candles, the lower vstop line(green line) was at near to 790. When it crossed 790, I sold it. Vstop at monthly candle was at 700 which would have erased my lot of profits therefore did not use it.
3. Considering 400 cr revenue in 2026 and 20 percent profit margin with PE ratio of 20. The growth rate of the price in next three years is 17 percent lumpsum. It is better to put money in small cap mutual fund if a stock is projecting less than 20 percent returns.

India stocks portfolio did very good in last two months.

Now I have 4 stocks in indian market portfolio and 3 stocks in the usa market portfolio.

Still looking for my 8th stock.

[Mudit.Kushalvardhan]

Mutual funds :

1. Already added stocks might be purchased long back and hence performing good.
2. mid size allocaton doing better , how this can be ascertained?
3. This means instead of focussing new additions by Fund managers, we should look into their portfolio and look for already added stocks.

Stocks -

1. When i applied V-stop monthly chart, it gave me sell trigger for most of my core holdings like Infosys, HCL, Asaian Paints etc. These stocks I want to hold for more than a decade. Getting confused by V-stop…

[royatirek]

After reviewing mutual fund data, I got nothing special. My thesis that the recently added stocks(for the first time) might perform better than the already added stocks was broken.
I analysed the small caps fund mostly and the mid size allocation performed better, though there were peaks in returns across all sizes of allocation.
Therefore, it is just a good medium for knowing the stocks ideas till it gives me more data.
I also tried mixing it with SOIC technical indicators but nothing substantial was concluded.

@Mudit.Kushalvardhan

When i applied V-stop monthly chart, it gave me sell trigger for most of my core holdings like Infosys, HCL, Asaian Paints etc. These stocks I want to hold for more than a decade. Getting confused by V-stop…

V-stop brings the objectivity in exiting the positions that we don’t want to hold for the long term. Therefore, I after going through the course, only buy the stocks whose vstop is positive.

Few implementation detail of vstop
On monthly candles, it takes the certain date of the month and checks whether that price is below the lower band(green band) to trigger the sell signal.
Few problems that I found with vstop →
1.Even if in month for some days if it would crossed the lower line(calculated on monthly candles) and would have triggered sell signal, it would not show, as tradingview checks the vstop signal at the start of the month.
2. In a month the loss can be more than 20 percent before the sell signal is triggered at the start of the month on tradingview, even if the lower line was crossed(sell signal was triggered) a lot earlier if the date on which the monthy vstop is calculated is different.

Therefore what I propose is that we should calculate the vstop band lines at the monthy level but check the sell signal by comparing daily closing price.

Though SOIC indicator seems to work for most of the stocks in the indian market in its vanilla form.

As per SOIC course, we should not use vstop based exit for long term holdings(10 years or more).

[royatirek]

Added more of Alibaba.

Reading the book The Five Rules for Successful Stock Investing by Pat Dorsey. As this forum, SOIC and unseen value recommended it. Have read 15 chapters of it and it is a complete book which tells about financial statements, parameters to look into and different industry.

Current stock portfolio by percentage.

[royatirek]

Added some amount of Narayana Health and Alibaba majorly.
No new additions in personal portfolio.

Completed the book by Pat Dorsey.

Also read some part of alchemist but did not liked it much and hence left.

Started reading How to Make Money in Stocks by William O’Neil. Again not too good as the book by Pat Dorsey. More trading mindset oriented. Still learning few things. It was recommended in SOIC video.

Again as a reminder to myself, the mutual funds based stock discovery approach might throw a lot of stocks every month but in a year I should not expect more than a couple of good ideas.

[Mudit.Kushalvardhan]

You are right. William O neil is trading oriented book where you are supposed to sell when u get 21% returns upside and 7% downside.
Pat Dorsey is a Fundamental analysis book and best for any investor. I would recommend the latest What I learned from Darwin by pulak prasad. Its in line with Pat dorsey and will build your fundamental approach to the core.
One small query- if u get 2 ideas every year, then what would be your number of stocks within 10 years?
I am asking this question from the point of view of Pulak Prasad book as in Permanent Owners of companies rather than stock investors

[royatirek]

Thanks for recommending this book. Will try to go through it.

One small query- if u get 2 ideas every year, then what would be your number of stocks within 10 years

Before understanding it, you need to understand why I have written the reminder for myself.

1. It is to remind me not to go down in the quality curve.
2. I get a lot of force to act, specially considering new capital that I am get is substantial comparison to the invested amount. Writing down this principles helps.
3. There is a lot of greed to earn good cagr and writing down these things, help me to control the behaviour.
4. Based on past records, I don’t get good stocks to invest every month and hence need to divert my energy and time to something productive like coding and reading.

Failing to do so will lead to many stocks in the portfolio.

I also pay a lot of heed to the terminal value of the stocks while deciding to invest in it.
To increase the terminal value of the stocks according to me

1. The initial growth rate should be very good which is the case with hospitals, crams(in india), cloud, ads and ecommerce.
2. Chances of being obsolete is less in next 10 years like ecommerce, cloud, ads, hospitals and pharmaceuticals(playing through crams)
3. Industry size should be huge and growing.
4. The company should be market leader as in most of the industry there is some benefit of scale.

This is over above the general list of seeing the debt, management, etc.

As you can see that I have invested in

1. NH, HCG which are hospitals(market is huge, brand and economies of scale). Might sell HCG though as I don’t feel it is cost effective and has brand. Also its allocation is lowest.
2. Syngene which have average 6-7 year contracts
3. In cloud computing(large capital needed, economies of scale and switching costs) have three major players
4. ecommerce like Amazon and Alibaba(economies of scale needed). It is same as retail as written by Pat Dorsey.
5. digital ads company like google (switching costs and economies of scale)
6. maharastra scooters(considering the dividends that I will get when growth will falter due to 80 percent discount).

Though, just to keep the number of stocks limited, I tend to sell as I can not track many stocks.

As suggested by SOIC and many others will not hence like to keep more than 15 stocks.

[royatirek]

My thought process has been changed a lot since I started writing this thread. Some thoughts that I have mentioned earlier might have changed.

Future incremental Investment in only Indian market
As I have noted down earlier few months back, after the new rules around taxation and discontinuation of sbm bank from indmoney, I have stopped direct investing in us markets with any incremental money. Alibaba that I have been adding lately was from the money that I got after booking loss in Amplitude.

One more reason behind this is that my performance in us market is sub optimal. I was not able to beat the benchmark and I don’t get too much ideas in us market.

Update in mutual fund
I have discontinued the midcap quality index and have transferred my money into parag parikh tax saver. Reason is performance and I have got little comfortable in SMID investing.

My current thought process is to invest in large caps through flexi cap mutual funds and in SMID directly. As the AUM grows, small cap and midcap mutual fund might face problem beating their index.
As parag parikh tax saver(majority in large caps) can invest in all caps and its AUM does not grow much due to 3 years lock in, I am comfortable with it.

Stopped my nasdaq 100 and debt fund sip after new rules in taxation. For alternative of debt, I am putting my money into arbitage.

Reason behind increasing sip amount in arbitage

1. I am trying to focus more on direct investing and increasing allocation of direct investing to more than 25%
2. need some money in near term.
3. Portfolio rebalancing by increasing more incremental flow in non equity assests as equity percentage has crossed 85%.

Currently my sip looks like
35% - parag parikh tax saver
7.5% - canara robeco small cap
7.5% - navi nifty 50 index
50% - invesco arbitage

HCG update
HCG seems to be the biggest in oncology. Need to watch for increase in margins. If it does not happens, then should take an exit.

Book reading update
Currently have stopped reading investment books. Reading software domain book.

Free cash flow and dividend
Free cash flow can also be considered as good as dividend and I should try to value the company at the free cash flow.
For calculating free cash flow, I should subtract the fixed assest cost of centres producing revenue from CFO. Like in Syngene, I should not subtract the mangalore api facility cost for free cash flow.

SRF update
I have decided not to invest in SRF or kama holdings as the risk that I see are more and some things are unknown for me.
My anti thesis pointers

1. Floropolymers and flouro chemicals industry growth is single digit and all players are doing huge capex. Source : annual reports
2. Not sure when old agrochemicals molecule patent will expire and hence drop in revenue due to off patent molecule economics. Suspecting some might expire soon considering 10 years patent life cycle.
3. Agrochemicals custom synthesis market size is small and according to my calculation, there is not much opportunity of growth over 20 percent after few years.
4. Not sure whether the process is PFOS free and the regulations that can come.
5. Gujurat florochemicals have capitive mines but SRF does not have it, therfore may face margin pressure from Gujurat flourochemicals in flouropolymers when competition arises.
6. Refrigerant is not a consumable element that needs to be replaced over time and hence demand will be from new products that are made requiring the refrigerant gases. Same can be said about fluorpolymers as the nature of them being stable and hence it might not require replacement.

I though have bought small quantity of Kama holdings from my mother account. Though reasons for buying is more of discount narrowing than the capex. As the promoter of SRF might want to sell some stocks of kama holdings as the growth flatten(and due to personal capital requirements) and they would want a reasonable valuation for their share in kama holdings. There is two ways to do this, either the discount will narrow or the kama holdings will be merged with the SRF according to my opinion.
Promoter holding has gone to more than 75 percent therefore they are looking for selling some shares due to regulation and hence work for reducing the discount according to my opinion. Also we can not rule out the increase in the revenue and profits of SRF considering some capex is going live.

My mother also have Equitas, ITC and Maharastra Scooters. Her direct stock portfolio account is comparatively a lot smaller than mine.

Current stock portfolio

Disclaimer
I might be talking stupid things which I may or may not realise later, therefore please correct me if you think so.

[Mudit.Kushalvardhan]

Hi…you have sold Midcap quality and gone for Parag Parikh Tax saver.
Its like you replaced midcap component of your portfolio with large cap.
I would recommend you Midcap 150 Index fund. No active midcap fund has been able to beat Midcap 150 Index fund in all time periods , be it 3 years, 4 years, 10 years. And there is no requiremnt of any factor to introduce in that. The Midcap 150 index is enough to give very good returns. I am invested in Sbi Midcap 150 index and its going good. I also earlier gone with quality factor with midcap quality DSP fund…but sold it as its not beating the normal 150 index.

[1Pranav]

@Mudit.Kushalvardhan

No active midcap fund has been able to beat Midcap 150 Index fund in all time periods , be it 3 years, 4 years, 10 years.

I think HDFC midcap has outperformed Midcap index fund in 3 years and 10 years time frame (but not in 5 years time frame)

[Mudit.Kushalvardhan]

10 years comparison is not fair. SEBI was not very strict about demarcation between small cap and midcap , hence HDFC midcap opportunities fund has been a small cap oriented fund earlier. So returns are not comparable.