PFC 20% (REC covered), IRFC 10% (30)
IOC 7% HPCL 3% (40)
ONGC 3% OIL INDIA 5% (48)
NTPC+SJVN -7% (55)
Can increase above percentage if more liquidity required.
Maha scooter: 10% (exposure to Bajaj Twins!!)
VINDHYA TELE : 5%
Summit Securities: 5% (20)
Kama Holdings: 5
RPSG Ventures: 5
Notables: Distressed Banks (RBL), Indiabulls Housing etc… - 5%
Cash: 10 %
Any more stocks which can be added in deep value category? The one I am most bullish on is PFC
Partial profits can be booked since most of the stocks have given a good run up. Cash positions should be increased to around 25-30%. IRFC, NTPC, SJVN and Vindhya can be reduced, some PFC can be converted to REC as valuation difference has reduced, although I am carrying on with PFC).
If there is a crash in smallcap around 18-25 Jan (the 2nd last week of month seems weaker for small caps), take extra positions in case there is 8-10% crash in a stock.
Short term bet can be taken on VLS finance considering the buyback happening which can increase its price from 154 to 180+. Risky bet.
Some positions can be taken Auropharma+GLS+Glenmark (Say 3, 2 and 2 percent). Caution: Promoter Group of Auropharma is not seen in positive light, but it is one of the cheapest big pharma stocks, so the risk can be worth it.
National Peroxide and Mahanagar Gas Ltd in my opinion. I share the same optimism about HPCL
I would like to understand your investment thesis on National Peroxide and Mahanagar Gas Ltd.
I would explain my ideas behind stocks in a step by step manner.
First I would start with the stock which I believe was criminally undervalued (still very undervalued)
PFC/REC/IRFC have historically grown at 15%+ cagr. For PFC, the revenues and profits became 5x while the stock had just doubled (extremely cyclical in nature, but the underlying growth was not cyclical!! Just stock market things). P/BV was 0.4 and P/E only 2.2!! Dividend yield 10 perc. It was an obvious buy for me. But since there were some NPA issues with it, I bought some IRFC also which historically had 0 NPAs, since it doesnt lend to private sector. Its valuation was also very comfortable.
I recommended 30 % investments in them.
Now PFC,REC and IRFC are all financial organisation. I am not sure how they will behave in case a hyper inflation type situation unfolds. I wanted to own some companies which have underlying assets. What better than oil companies. IOC, HPCL, ONGC and Oil India have loads of undelying assets with them. IOC and HPCL easily own land which is atleast worth 1.5x Market Cap.
But since oil prices were very high, and these were supposed to be temporary losses. I chose IOC to give higher weightage as it would have easier time navigating through losses compared to HPCL.
Since crude prices was so high, OIL india was making better profits compared to ONGC (adjusted to market cap).
Bigger companies have better margins and command much better Market Cap by Revenue multiples, but in good conditions both make huge profits and smaller companies tend to outperform. Atleast that was my investment thesis, but both seemed to have performed similarly.
Also, a very good dividend income pool is created. The average dividend for the portfolio built till now is 8%+!!
Power Reforms and Renewables:
NTPC and SJVN lagged a lot in past decade, with power reforms and dues getting cleared and renewables coming to mix, this is a sector I want to be part of. SJVN is a risky bet, too many new ongoing projects. Their valuations also looked comfortable. Not heavy on confidence though
Trust The Luck
Once I have my base portfolio ready I wanted to evaluate potential 3x opportunities due to luck factor.
Holding Companies. The idea is to look at good names which regularly pay dividends (Maha Scooter + heavy discount)/ have there own good standalone business (Vindhya Tele + heavy discount) or extremely large discount Summit Sec(86%) or high opportunity (RPSG, they are in just so many sectors!! If they pull off even 1 payoff is good).
If any of the above does a buyback or demerge or sells a part of business and reward shareholders with special dividend the payoffs are huge.
Notables: Distressed Banks (RBL), Indiabulls Housing etc… - 5%
Here I missed the bus. While I did identified Distressed banks like RBL, Distressed PSU Banks, Indiabulls housing, Karnataka Bank etc… These were all opportunities in Financial sector where I was already 40% invested (PFC/REC, IRFC, Maha Scooter).
But these are the stocks that actually gave 50% -120% returns over the past 6 months.
Vls finance is 180+ consistently
Indiabulls down can be invested in. (And auropharma and GLS)
I am of same approach as yours but cashed out of PSU dividend stocks and now building GLS.
You can also look into IRB Invit and IndiGrid Invit.
Update: Jan to 18/04/23
Good upmove in Auropharma, Glenmark and GLS(including dividend) since Jan. Partial profits can be booked.
PFC oscillating in range 140-170 (at PE=2.5-3). Still a good long term bet even after 30-50% returns since recommedation (Aug 2022). I have sold 35% of my stocks till now. Next selling only above 170. Will keep 50% even at 200 (and keep even more if results are good). Fundamentals still hold good.
REC: I only recommended PFC because its valuation was much better than REC. But now the valuation gap is very low, and on dividend side REC shines over PFC. Anyone creating new positions can buy some REC instead.
Holding companies have done good since March end (holding discount has narrowed), but holding discount was increasing till March end. Nothing substantial has happened here, except an unconfirmed report of GoFirst sale for Bombay Burmah.
VLS Finance (Buyback opportunity @ 154): our target was 180 Rupees. (It was ~185 in the whole time period when buyback was happening), 20% plus return on low risk, so good enough.
ONGC and OIL India has done good due to duties being lowered, and crude not falling much.
IOC,HPCL, NTPC,SJVN flat. Nothing much happened there yet.
IOC, HPCL did increase once when crude fell, but then OPEC+ again cut production and still the same thing. Govt unlikely to increase prices till 2024 elections now. Only positive move can be Crude moves down.
and Indiabulls Housing: In loss of 20 percent here, hard to say whether it should be averaged, any other stock from above list can be averaged but this one can really go down to 0.
Update: 27th April.
Good upmoves continue in all the above companies
Holding companies doing particularly good. BBTC up 30 perc from March lows. Maha scooter up 5 perc today. Pilani is lagging in comparison.
Pharma companies (particularly our 3 companies) doing really well. Auro and Glenmark up 50 percent from lows. Glenmark up 6 percent today.
Ioc, hpcl both doing good right now.
Maybe it’s time again to book some profits, and keep some cash or we should wait till May week 1 as the uptrend can continue till then.
Pharma cos rocked😂. Auro, Glenmark up 50 perc, GLS soon to follow with its fantastic results
Good upmove continues.
Time to build some cash positions, 27 percent cash for now. 1.5 percent sell on every 1 perc upmove if the momentum continues. Will stop at around 40 perc cash positions.
Update on bbtc: gofirst files for bankruptcy. Good upmove expected.
Update 13th May:
Good upmoves in Glenmark and Summit Securities (on exceptional moves in ceat and good moves in zensar/kec).
Seems like time to book profits in glenmark
Bbtc down by 10 percent since gofirst bankruptcy filing. Bbtc doesn’t wants to exit airline business, lots of uncertainty
Update 29th May:
Good results for PFC. Writeback of provisions causes profit spike. Dividend of 4.5 Rs pushes full year dividend to 13.25. Good growth in dividend and profits.
Glenmark and Auro are slighlty down now. Not a good set of results for them (flattish results), not sure of the reason of 50 perc upmove in them, perhaps Apr-June quarter would be better. Good for us that we have already booked some profit in them.
Market is in upswing. Not much point in increasing positions for long term. Partial profits can be booked and be diverted to debt instruments.
I like your contrarian approach.
Glenmark life sciences stake sale is being discussed.
Yeah that is true too. Will help reduce Glenmark’s debt. And there are some triggers waiting on Ichnos side too. Management claiming that a couple of molecules will be outlicensed in FY-24 (or raise funding for Ichnos). But take it with a pinch of salt, the management is saying this for a long time now.
Auro also wants to list Eugia, but will only happen once the pharma cycle turns. The past 2 months definitely encouraging for that.
Just found out that generic drug shortages in USA are at multi year high so perhaps better times to come for pharma cos especially export oriented. Need to dive deeper in it, but I dont wanna have much position in this sector as of now. Only a few pharma cos were at good valuations and almost all of them gave a good runup in past 2 months.
Update 21st June: The bull run continues. I am becoming more pessimistic about mid term horizon of 3-5 years about the returns we would get in stock market. But lets enjoy the current bull run.
PFC and REC are running like there is no tommorow. PFC just achieved its all time high a week back, then turned ex-dividend a few days back and already achieved all time high again!! Similar story for REC. REC overperforming PFC in past couple of weeks.
All stocks are doing reasonably well (purely because market is in upswing, but not as good as PFC/REC )
Keep cash positions