Biplab's Portfolio -Feedback needed

[Paulbiplab]

Dear All,

Very new to ValuePickr and have been observing the topics under discussion for few months.
I had first invested in the market way back in 2007, but was quite novice and went by recommendations of friends and TV channels - wont say have lost much, but felt that it was not the right way.
ValuePickr has given me some indications on how to pick stocks based on fundamentals and valuations.
This new portfolio was created about six months back.
I would sincerely need feedback on the same - mostly in cases where I have gone wrong.
My aim is to make 10-12% on a yearly basis (compounded) and the time scale is around 5 - 7 years.
I have the option of adding another 2-3 lakhs on the portfolio and hence I need help from the giants in the forum.
Looking forward to your earnest feedback.
My Portfolio.pdf (180.4 KB)

Sr#	Stock	PP	% Allocation
1	ASTEC LIFE	541.88	5.1%
2	BANK OF BARODA	153.34	4.9%
3	CANFIN HOME	486.84	7.3%
4	CUMMINS INDIA	838.17	6.7%
5	EXIDE IND	210.39	5.2%
6	FORCE MOTORS	3447.28	7.5%
7	GRANULES INDIA	128.63	6.7%
8	GRASIM	1137.43	5.1%
9	GREAVES COTTON	124.79	5.6%
10	GUJARAT ALKALI	395.86	2.4%
11	ICICI BANK	291	2.2%
12	ITC	265	4.0%
13	ION EXCHANGE	459	3.4%
14	KAVERI SEEDS	518	6.4%
15	KWALITY LTD	85	1.7%
16	LUPIN	882	3.5%
17	S H KELKAR	263	3.4%
18	SML ISUZU	905.58	7.9%
19	STRIDES SASUN	783.7	6.6%
20	TATA ELXSI	844.2	2.5%
21	UPL	747.58	7.1%

I have tried to put forward the investment rational as much as I can.

1. Bank of Baroda
    Improvement in Margins
    Loan Book Growth
    Value Unlocking – BoB willing to exit from non-core business
    Asset Quality to accelerate
    NPA resolution program

2. Cummins India
    Operating leverage to kick in with better capacity utilization
    Steller Export business, albeit marginal dip in recent quarters
    Superior distribution and spares franchise, strong balance sheet and best-in-class return ratios.

3. Force Motors
    Luxury car market in India is on the rise
    Sub-contracting revenues are up by almost three times
    Strong R&D with Benz for EV
    LCV segment growth is a key driver

4. Granules India
    Augmented capacity o fuel growth
    Focus on formulations to boost growth
    JV with Onmichem to boost revenues

5. Gujarat Alkali
    Increase in prices of Caustic soda since Aug 2016 could last for some more quarters benefitting GACL’s margins
    In-house R&D, plant and technology up- gradation could help to improve capacity utilization going forward
    GACL’s capex plans could help to expand its business going forward
    With sound financials, company is on track to significantly improve return ratios

6. Greaves Cotton
    Sustainable growth
    Diversifying into new sectors – like aftermarket & Farm Equipment business
    Collaboration with Altigreen propulsion for Hybrid technology to rope in green vehicles
    Strong Balance Sheet & excellent management

7. ICICI Bank
    Focus on retail book augers well
    Healthy operating performance and sustained margin
    Capital Ratios higher than regulatory requirements
    Robust CASA ratios

8. ITC
    ITC’s market leadership in cigarettes (~70% market share) provides it with strong pricing power
    Non-cigarette businesses, led by FMCG are now set to be significantly value accretive
    Excellent ROCE & EBITA margins
    Paper & Stationary business on the rise

9. ION Exchange
    Largest one stop water solution provider in Asia, ventured into consumer product business:
    Strong R&D, diversified marquee client base
    Global footprint, robust industrial outlooks

10. Kaveri Seeeds
     Cultivation of Cotton has increased in kharif 2017 supported by better monsoon and farmers’ shifting from pulses and soya bean to cotton,
     Diverse Product portfolio addressing crop rotation & reducing dependence on traditional crops,
     Aggressive focus on R& D helps product development and sustainability in farm practices,
     Investment in Biotechnology is accelerating the breeding program of cotton and rice,
     Focus on new products could help to garner revenue going forward.

11. S H kelkar
     India’s largest F&F Company with 12% market share
     Strong R&D team and working closely with customers to develop new molecules
     Overseas acquisition to enhance portfolio

12. SML Isuzu
     Economic growth will drive growth in CV segment
     Steady Growth rate
     Capacity Expansion to focus on export market
     Good management team
     New and better product launches.

13. Strides Shasun
     Steady top line growth through organic & inorganic expansion.
     The restructuring of Australian & US business to pay dividends
     Excellent Management team

14. Tata Elxsi
     Opportunity from rising global ER&D spend, high growth in the EPD segment (82% of rev) and strong offshore delivery model
     Strong competencies in the niche automotive vertical (50% of revenue), supported by scalability and non-linearity from the ‘Autonomai’ platform (driverless car software)
     Strategic vendor to group co JLR (top client and 22% of rev), with an increasing share
     Growth prospects in its marquee client base, including JLR, Mercedes, BMW, Ford, Nissan, Isuzu and Subaru in the automotive segment

15. UPL
     Dominant player in a high MOAT business sector
     Superior and innovative product with wider demographic range
     Excellent in-house R&D facility
     Strong Financials

[sgjaclyn]

While I am not invested in any of the companies in your portfolio, I have a comment about the PSU in which you plan to stay invested for 5 - 7 years.

Do note that the way PSU banks are run, it is not to generate returns for shareholders. Because, the board or the management doesn’t have the right kind of incentive both to persevere the capital or to grow it. And the major shareholder, the GoI has not taken the initiative in spite of several suggestions.

Taking this into consideration, it is far safer to stay invested in any other company which you understand better than a PSU bank.

The only exception to the above is if you find significant undervaluation which you know will get corrected in a short to medium period. Once that happens you plan to offload and you don’t find any other risks to upset your assumptions. If you answer no to this, better sell this right now irrespective of whether you gained or lost your investment so far.

This is just a suggestion and leave the decision to you.

Good luck.

[Paulbiplab]

Thanks for the suggestion.

[Paulbiplab]

Dear All,

I have not received any feedback, except for one.
This would mean that my investing ideas are totally flawed or the reverse.
I need some feedback so that I can take corrective actions, if my philosophy is flawed.
Please help me out.

[sgjaclyn]

Need not be. It is just that people have not shown interest or they were busy with other things. Rather than worrying about what others perceive about you, study the companies you hold more and more and start to look at the competitors and see what they have to say. That should give you a picture.

At the same time, stick to companies for 3-5 years minimum. Because this is one common mistake several investors have because of their impatience.

Few more comments to add on some of the two other companies you hold.

ICICI Bank continues to have a higher NPA compared to all the leading private sector banks. For me from the beginning this bank never looked attractive as an investment vehicle. So I have not followed it, but occasionally I look at their results.

So instead of ICICI Bank & Bank of Baroda, you can invest in some of the well run private sector banks like HDFC Bank, Kotak Mahindra Bank, Indus Ind Bank. All three I have in my portfolio hence I am biased.

ITC I had invested earlier, but noticed that Deveshwar is presented as a semi-god, which I could not accept. Simply look at how much the company pays to him compared to the CEO. It went to the extent of filing a defamation suit at company’s expense rather than he pay for the suit. That is ridiculous. Filing suit against a proxy advisory shows its intolerance to the opposite views which will always exist.

As a company which wanted to diversify from its risky income from cigarettes it has created umpteen number of brands and entered wide range of sub-sectors in FMCG and burns the cash. Rather it could have incrementally scaled them with decent profit motive. That would have given it an option to scale down where it is not succeeding. Meanwhile it could have distributed the free flow of cash from cigarettes to the shareholders rather than enlarging the managements ego. I would have preferred it to be a focused company. The management continues to opt for diworsification as it has announced its entry into hospital sector. A well run company but badly focused. So I eliminated it from portfolio after staying invested in it for a decade. But I consider it as a giant which can teach a lesson or two to the multi-nationals. And also it is highly nationalistic company.

Other companies I do not have any opinions worth to share.

[jayakrishnan]

Try to bring it out to 15. 21 could be too huge to track only Mutual fund mangers can do with so many companies. Take out those with least conviction and not performing as expected. Good that you have very realistic return expectations, You will definitely get more than that for the time horizon planned.