Building of a Fresh Portfolio

Q&A: Questions & Answers Portfolio Q&A
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Hi everyone,
Hope you all are doing great.

I am planning to enter markets with my partnership firm. In this regard, I have identified few investment opportunities. I would like if you all could provide your views on the same.
Below is the list of identified businesses which according to me are good for 5-6 years time frame.

  1. Piramal Enterprises
  2. Vaibhav Global
  3. Mayur Uniquoters
  4. Atul Auto
  5. Accelya Kale Solutions
  6. Ambika Cotton
  7. Ashiana Housing
  8. Oriental Carbon
  9. PTC India Financials
  10. Shriram Transport Finance
  11. Thomas Cook
  12. Symphony
  13. Relaxo Footwears
  14. Cupid Ltd.

However, according to me, most of them currently trade at fair / expensive valuations. I am briefing my current views on each of them.
I plan to invest a total of 80% of my investible money. Of this 80%, I am looking at investing in 8-10 companies. 20% to stay in cash for any opportunities, which may arise.

  1. Piramal Enterprises - Betting on Mr. Ajay Piramal. Looks like a steady 18-22% investment for 5-6 years. Plan to invest now with 8-10% allocation.

  2. Vaibhav Global - Good economics - Cash generative business - Nice ROCE - Growth visibility - Looks cheap (if growth picks in the H2 of FY 2015-16). Plan to invest now with 8-10% allocation.

  3. Mayur Uniquoters - Proven business - Steady earnings outlook with revenue visibility (auto, footwear, furnishing) - However, looks appropriately valued. Plan to invest 50% of planned allocation of 8-10%

  4. Atul Auto - Proven record - Steady earnings outlook with revenue visibility (export of petrol vehicle) - However, looks appropriately valued/ overvalued.

  5. Accelya Kale Solutions - Good business - ROCE - Cash generative - Dividend Yield - Dividend payment history - Operating leverage play. However, I am not able to foresee any major growth in revenues. Until then, no planned allocation. Wait n watch.

  6. Ambika Cotton - Decent business history - Cash generative. However, looks appropriately valued. No plans to put in money until it is available at deep discount as I am a bit skeptical regarding the ‘textile’ industry’s economics.

  7. Ashiana Housing - Great business model - Cash generative - Great past record. Real estate slow down may hurt the company and the stock bad. I find no MOS at the current price. Hence, no allocation as of now.

  8. Oriental Carbon & Chemicals - Good business economics - good past record - Revenue visibility. However, currently operating at 95-98% capacity. Next capacity expansion to kick in from 2017. Hence, I think this will be available cheap in the near future (1-1.5 years) as revenues / profits gets flat / negligible growth. No allocation as of now, but keeping a close watch.

  9. PTC India Financials - Good past track record (though on low base) - good ratios - Seems to be a little less than appropriately valued - Plan to invest 50-70% of planned investment of 10% allocation.

  10. Shriram Transport Finance - Great business economics - Management - currently hit with slowdown due to auto slowdown, coal mining stoppage - NPA issue. Keeping a close watch on NPAs in coming quarters. Will invest if available at 1.5 P/BV or less. 10% allocation.

  11. Thomas Cook - Decent cash generative travel business - Management - Quess Corp to bring in growth in revenues and profits. However, finding it difficult to make projections and hence valuation. No planned allocation.

  12. Symphony - Great business model - Great Ratios - Revenue visibility for 5-6 years at least. However, very very pricey!! Keeping a watch on quarter earnings. Might be available cheap due to bad quarter. No planned allocation.

  13. Relaxo Footwears - Great business - Great Ratios - Products will never go obsolete - Revenue visibility for xx years. However, very very pricey!! No planned allocation.

  14. Cupid - Revenue visibility - good numbers - However, looks appropriately valued. No planned allocation.

Hence, as of now, I plan to invest in Piramal Enterprises, Vaibhav Global & PTC India Financials as mentioned above.

Would be great if you all share your views on the companies and investment plan as mentioned above. I am also open to look into other companies.

What I generally look for in a business -
a. Past track record
b. Growing revenues and profits
c. Growing / steady margins and improving ratios
d. Cash generative
e. Some uniqueness towards its products/services or business model (finding moats).
f. Management (Have shunned Amar Raja, Kitex, Pokarna, etc due to this)
g. Less / Nil Regulated businesses.

Apologies for the long post. Thanks in advance for the contribution.

1 Like
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Generally agree with ur investment logic… however choice of companies could be debated… Include Pharma… lot of good discussions available, identify a basket and atleast 20% of ur portfolio there… same is true for finance… identify a couple of financial sector companies and invest atleast 15% there… since u r getting in now, dont be discouraged by high valuations, these companies are expensive for a valid reason and they may continue to do so for sometime to come… therefore risk mitigation in these companies would be better by doing graduated entry… waiting for valuations to come down before u invest may not be such a good idea.
Regards

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Hi Prakash,
Thanks for the info. Let us see how it pans out to be. May be someday I may get it available cheap.

Hi Narinder,
Thanks for your views. Regarding Pharma, I have very limited / almost nil knowledge of the industry / products, etc. Though I look forward to it and shall try understanding them. Regarding finance sector, I am looking into a few banks. Shall update.
For investing in great companies, I shall never invest at such high valuations. Great Company + Great Price = Mediocre returns. This is what I follow. Look at HUL, since last 3-4 years. It has not appreciated that much, though it does have a solid business. There are other examples as well. Stock prices and markets are slaves of earnings in the longer term. You may argue about Page. However it is a different story, it has been in a very high growth trajectory in the past plus an efficient business model. However, it is valued at around 70 PE!! means the market is expecting 70% growth, which according to me is very difficult to achieve over a long period of time.
Anyways, you may have different views. This is why it is called Markets. Thanks again. :smile: