Deep Value Portfolio

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.

Risky (Illiquid)
Maha scooter: 10% (exposure to Bajaj Twins!!)
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

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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.

Criminal Undervaluation
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.

Underlying Assets:

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.

Downstream Companies:

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.

Upstream Companies:

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.

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Vls finance is 180+ consistently :fire:
Indiabulls down can be invested in. (And auropharma and GLS)

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