Dinesh Sairam's Portfolio: Requesting Feedback

Hi ValuePickrs,

Dinesh Sairam here. I have been investing in the Indian markets for a very short time now, just about ~1.5 years. I follow my own investment code-of-conduct. I look forward to your feedbacks regarding my portfolio of stocks.

HDFC Bank: The One Man Story

My investment rationale in HDFC Bank is largely dedicated solely to Aditya Puri’s stellar management of the company and the way he has shaped the company’s culture. I have heard several stories from several people about how the company’s culture is hellbent on returning shareholder value. I also identified HDFC Bank’s leading position in the Private Sector Banking industry in India. All my family members have a SD account with HDFC and their customer service has been satisfactory so far.

Cupid: The Turnaround Story

I had been following Cupid’s business for some time before I invested in it. The company has a monopoly in Female Condoms in India, but I have my doubts on whether that is a real moat or not. However, what attracted me to the company was that it has managed to turnaround its sales and operations in a quick span of time. Cupid has been churning out cash for the past few years (Well, relative to their size, anyway) and even paid off a majority of their debt, which was bogging down their returns. I tried looking into the reason behind this, but the best I could come up with was their CapEx cycle turning. Recently, they grabbed an order from WHO to supply condoms to Africa, which could possibly be an expansion opportunity for them. Regardless, I believe that the company has a great future.

DHFL: The ‘Affordable Housing’ Story

No points for guessing why I bought DHFL. The government’s push for affordable housing has created a temporary economic advantage for all housing-related companies. Out of the lot, I believe DHFL to be the most equipped to take advantage of the opportunity to scale up. They were able to successfully scale up and still maintain their returns on equity largely. However, I have my doubts on how much they can really continue scaling up and of course, there’s always the ever-present threat that DHFL doesn’t actually have a moat all by itself.

Goodyear India: The Value Story

Once again, my conviction in Goodyear India began with the fact that there is still a lot of demand to be fulfilled in the mechanization of agriculture in India. Goodyear India commands market leadership in both the rear and front tractor tyres market. Their list of suppliers is impressive, including all the major players in India and even some foreign players. My determination was steeled when I valued Goodyear and found out that it was way undervalued than what I expected it to be. This explains the portfolio concentration on this company.

Ion Exchange: The Future Story

I’ll be honest, I started tracking Ion Exchange only because Rakesh Jhunjhunwala is invested in it. Although their B2C business faces extraordinary competition from all directions, I believe that they are one of the few players in the water treatment industrial machinery business. India’s demand for clean drinking water is projected to seriously explode in the coming years and companies like Ion Exchange and VA Tech Wabag are perfectly positioned to pick up the slack. I would really like it if Ion Exchange concentrated more on their B2B business more than their B2C, but I’ll take what comes.

P.S. I understand that my portfolio is concentrated. I definitely believe in diversifying up to 10-12 stocks. Earlier I had such a portfolio which I diluted completely to create this portfolio (Because I wasn’t strictly following any code of investment back then - so, a fresh beginning). Since the markets have been riding up all the stocks in general, it’s become very difficult for me to solicit good businesses which are also intrinsically undervalued. I am more than willing to buy into 2-3 more companies if and when they fall within my comfort for valuation.

The following have been the returns on my very short investment journey so far (This is inclusive of the returns from my previous portfolio as well, FYI):

I would specifically like feedback on either my investment code, the stories attached to my portfolio or the lessons I learned on my prior holdings. Thank you.

Summary of Feedback:

  1. @arunsg: Include more objective factors to identify the ethics of companies in the investment code.
  2. @hitesh2710: In a concentrated portfolio, invest in industry leaders with growth potential. Too much weight in a single stock should be checked.
  3. @bharat.jain: Compare investment opportunities with their competitors for financial metrics.
  4. @jamit05: Stick to high-growth companies for capital protection.
  5. @Savishesh: As far as possible, stick to facts and numbers. Avoid trusting ‘gut feelings’ or ‘convictions’.
  6. @red2red: Growth potential is important in identifying investment opportunities.
  7. @SlownSteady: Diversify.
  8. @paraacbe: Concentrated portfolios perform well in bull markets, but not so much in bear markets. Prepare for it.


Its refreshing to see the high concentrations in a high conviction portfolio!

  1. Ion Exchange - In addition to the other well known name in water treatment viz, Va Tech, the other two big daddies in the business are L&T and Thermax. How do you see Ion Exchange being able to fend off competition? What is the moat for Ion here, and how sustainable is it?
  2. Good year. I did look at this business a while back and agree with your points made. However I always am unsure when the foreign promoter has a stake close to 74% in the business, nothing stops him at some point to short-change & buy out the small investor. The question here is again, why Goodyear and why not a purebred Indian company - TVS, MRF, etc. Your thoughts about the moat GY enjoys, if any.

Investment code- looks fine, and is mostly around financials of the company. Any thoughts about including any social, ethical, or any other non-financial check points?


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Thank you for writing @arunsg sir

  1. This is going to be a lopsided answer. I actually did value VA Tech Wabag and Thermax along with Ion Exchange (Which is how I usually go: Identify economic need, identify industry, identify companies. identify investment opportunity). I found that VA Tech Wabag and Thermax were overvalued, even when I used a 5% terminal growth coupled with a 20% required rate - generous by my standard. Ion Exchange’s valuation fell within my comfort zone (Which is a 25% Margin for Error from the final valuation). You make very good points about Ion Exchange fending off competition - I don’t think Ion has any edge over the competition. But I feel that the upcoming surge in demand for clean water will require many players to contribute the gap, not just a few big ones. As I mentioned, I think Ion Exchange needs to reduce their concentration on the B2C business and start equipping for the demand surge by developing their B2B business, where they already excel. That’s why I have a relatively small (10% when I invested in it) concentration in Ion Exchange - the inability to determine if they’d actually go about doing this.

  2. I could care less if they take the company private. In fact, if they announced a de-listing by buying out, I think I will buy whatever outstanding stock I can get my hands on and refuse to sell my shares. But yes, in a such a case, I may have to spend some money out of my pocket to get a hold of their annual reports each year, which would be a fair trade-off. Goodyear’s brand and identification with farmers (In reference to tractor tyres) is its biggest moat. Farmers don’t calculate marginal utility or some kind of quantitative advantage to arrive at purchase decisions - they go with the brand. The company also has a thinner moat in High Switching Costs - tractor tyres are usually replaced one-by-one, as and when they wear out. As such, if a farmer already has two Goodyear tyres and one goes bust, he will have to replace it with another Goodyear tyre owing to the specifications and the cost of replacing both the tyres in order to move to another brand. Goodyear India is not the kind of stock I’m going to sell in a short time, unless some kind of a major disruption occurs in the mechanization of Indian agriculture which does not involve tyres (I really doubt that can happen). I have a very high concentration in it because I intend to see it out for the next decade or possibly more. All the while, I will be looking for opportunities to invest more in it.

About the investment code, I could probably squeeze in ethics while I research the company’s culture. But the truth is, I lack the expertise to determine how ethical is a management. I can identify very apparent cases. For example, I was tracking Lycos Internet for a while. I still believe their stock is extremely undervalued, but their order book and their blatant refusal to buy back their stock (In con call transcripts) would tell you that they are manipulating market prices- which I don’t appreciate at all. If it’s not a case like this, say Goodyear India, how can I determine if the management is ethical/well-meaning or not?


Thanks, Dinesh for sharing your thoughts on the two picks. My small investment in Ion Exchange is also more on the lines of valuation comfort than any other factor, even though it appears that Ion has not done anything outstanding so far and it remains to be seen how it seizes the opportunity ahead.

I don’t think most investors can determine the ethics of a management with any degree of certainty. It’s small signs that the management sends out inadvertently and only an investor with a completely neutral and unbiased viewpoint can see those. Remember that even the big-5 accounting firm could not detect the massive fraud at Satyam, but somehow the “market” knew something about Satyam that it never assigned the same valuation to it as it did to Infosys to Wipro. Frequent change of Auditors, frequent raising of capital, frequent acquisitions, how promoters treat the listed entity wrt their private holdings are some of the red flags one can watch out for. The stratospheric valuations of HFCL only ended with the massive scandal involving top government officials and no one was wiser about the wrong-doings till then. But an astute investor would have noticed that HFCL was seeking publicity, visibility and raising funds, maybe early signs to watch out for.



I like your crisp logic for investing in the companies you are invested in.

But if I were to be invested in only 4-5 companies I would like to go with dominant players in a sector which has enough growth potential. And according to that, Cupid would not qualify as the company depends upon orders from third parties for their growth and there is always the element of orders drying up or some other competitor scoring over them.

Goodyear is a good pick but I am not too sure if it should occupy a top slot in a 5 stock portfolio with a weightage as high as 35%. If it has happened because of the run up in the company then one might give it a bit more rope.

I dont know the size of your portfolio or the percentage of your networth in equities so cant comment on the appropriateness of such a concentrated portfolio. In the not too distant past, I too had a similar skewed portfolio of my own with 65% weightage allocated to Kaveri which at that time looked invincible.:grinning:


Thank you for the comments, @hitesh2710. As I mentioned before, it’s not that I really want such a concentrated portfolio. But I also do not want to diversify just for the sake of it. If I find a good, undervalued stock with a story I can follow, I am more than willing to spread my money. However, the current market situation leaves a lot to be desired. I am tracking a few of them. Let us see. If I do invest in something new, I will update my post.

Regarding the weights, I usually decided it based on two things: 1. How undervalued it is compared to the other investment opportunities I currently have. 2. How strong is my conviction that the story I narrate for the investment will play out. Goodyear and Cupid both scored higher than my other picks in both these areas, so I went with it.

Finally, regarding growth, I believe all growth has a price and it’s just a question of how much. As Warren Buffet liked to put it “Value and growth are joined at the hip.” If you take the case of Goodyear, their average Sales growth for the past 5 years is lesser than 1%. But in my humble opinion, that doesn’t make Goodyear a bad company, because they are still able to produce RoE, CRR and and most importantly expand their OPM as they learn newer methods to control production costs. I might be wrong, of course, but that’s how I have it in the back of my mind.

How do derive your conviction? Is it subjective based on 10 factors with arbitrary weights or gut feel or some mathematical model to arrive at your `conviction’. I am asking this because my conviction has mostly being wrong because it was subjective and did not have a mathematical verifiable objective method.


I read pages of articles about the company, listen to interviews by the management, talk to my friends working in the Industry and then try to see if the story I’m trying to fit to my Valuation makes sense or not. I don’t really think there’s any ‘logical’ way to do this. If there is, I’d like to know. Yes, I do keep checklists. I’m also a big fan of Monish Pabrai. I keep a list of ‘what did I do wrong in my previous investments’ that I try to avoid in my new investments.

I’m not sure what you mean by ‘mathematical models’ though.


I have similar question like Savishesh sir has. I understand that you are mostly creating a strong positive bias after receiving input from various sources but can this be quantified. This kind of bias can be tested by looking at peer companies and then running them through your basic model (like PE, PB, ROE, ROCE, D/E ratio). One of the most perplexing things tthat is my roadblock is that how people get that growth potential right.?

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Hi @bharat.jain If that was the query, then yes, I only ever approach Valuation after doing Financial Statement Analysis. I have my own Screens on Screener, but even when I hear about a good company from someone else, I make it a point to check out its financials first. I also try to arrive at the long term economics of the company (Again, as I mentioned, based on my interactions with SMEs in the industry).

Yes, you’re right in saying that you can’t exactly predict the growth potential of a company. That’s why I don’t. I simply value the company on nominal terms (Using historical, industry and other such averages, or often growth numbers from industry research reports, sometimes revenue guidance from the MD&A) and in the end, include a large enough Margin of Safety.

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2009 low 900 to CMP 73000 … 81 times

2009 30 to 2018 2000 … 67 times

2009 60 to 2018 1200 …20 times

I wonder why? What is the weakness in the company that doesnt rally even half as much. Why does it not attract other investors? What are we not seeing, that others know.

I’m not sure what you’re trying to ask, but I find MRF and Ceat to be way overvalued (Just by looking at their P/L, Balance Sheet and the multiples the market is willing to pay for it). You can’t win by looking for a treasure in a place where everyone else is also looking for gold. Besides, 2009 was an exceptionally bad year. If 2009 happens again, I’ll be sure to load up on all the market leaders available cheap, no doubt.

Dear Dinesh

Thanks for your quick reply and really apologize if at any point you feel I am rude or arrogant.

Actually, recently I did analysis of my portfolio performance since inception i.e. 2006. It is easy to bask in the glory of recent good returns but success is a bad teacher and hence I am more close to my losses which help me teach valuable lessons and stay on the ground. Few of my observations about my mistakes:

  1. Keep investment size low specially during the learning period - I wish someone had told me so when i started except for beginner’s luck in Reliance Petroleum (RPL) I did everything wrong I could.
  2. Conviction is very subjective - and it is good to trust your convictions when your objective results prove `consistently’ that your conviction had developed to a point that it can be trusted.
  3. I so much wish somebody had slapped me everytime my losses in a stock crossed 10%. Since few of my gainers gave exponential profits they took away the pain and covered losses from my bad `convictions’. If I put a stop loss of 10% my portfolio would fly to just another orbit !!
  4. Position size is a very tricky thing to let it be left to your untrained convictions. Sometimes you will be lucky but do not mistake it as alpha. This has been my mistake.
  5. I had my good share of multibaggers which distorted my psyche in believing myself as someone genius in discovering multi-baggers (something I am very ashamed of to think of it now)

All the while my position size and my approach was NEVER correct and practically had NO risk management to leave me at the mercy of Market.

So I have stopped trusting my conviction, stopped trusting management or what they say, stopped trusting poor or limited scuttlebutt we do just to satisfy our `ego of value investor’ and started trusting simple class 5 maths. I am still learning and discovering so can’t guide anyone here but just pray that others don’t do the same mistakes I did and paid for it lavishly (though the costs were hidden by deceitful profits)

Your mathematics is pretty good going by the excel template, use it as your strength. Numbers are never wrong until you torture them to speak a different picture.




True. Checklists are very important, but I guess I diverge from your views in stating that the comments of the management and the view of the employees working in the industry are equally important. Of course, a dozen other checklist items also follow (Based on your own investment experiences or the experiences of other similar investors). Here’s Pabrai explaining the importance of checklists:


Although the discussion is on the conviction and the reasons for choosing the stocks in your portfolio,
I apologise for posting this link from moneycontrol about the Goodyear tyres. I feel In addition to the value, future growth of the business is also very important. How to derive or extrapolate the previous years to future growth is a difficult question; tailwinds for the sector, improvement in the company’s balance sheet and reduction of interest burden on the debt, improvement in the operating metrics are some of the few which obviously come in your financial statements assessment…

Goodyear India – Strong financials and reasonable valuations merit a look
Robust financials, reasonable valuations and a strong presence in a niche area make Goodyear India a good long-term investment.

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Dear Savisesh,
I liked your 5 points and should help us investors in our early years of investment process/journey.
After your evaluation of portfolio over the long years, do you mean to say to exit and cut down the losses when the price goes below 10% of the buy price in spite of our conviction? Can you say a few more about the losses ; like to what extent you held on inspite of losses, what would have been the gain if you had taken out the money from the losing stocks and would have invested in your other conviction ideas and some more info about the lessons learnt from the losses like where you might have went wrong.
As I am in the early years of the investment journey, where I feel I am carried away by the so called multibagger gains ; we tend to get carried away and forget to learn how not to cut the losses.

Thank you from writing, Pramod. I am comfortable predicting future cash flow growth numbers to a good level of accuracy in the industry I work in (Financial Services). But when it comes to other industries, I restrict myself to the numbers seen in industry research reports, MD&A or at the most, historical averages. On top of all this, I include a 25% Margin of Safety in my Valuation model. This makes sure that the cost of me being wrong is controlled to some extent and I have a cushion to change my course of action if I am a indeed wrong.

I’m sorry, I missed this. I wanted to ask about this too, @Savishesh. What is the reason behind suggesting a 10% stop loss for long term investments? Shouldn’t sell decisions on long term investments be based on valuations and not mechanical limits? Sorry if I sound rude, just being inquisitive.

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Awesome post, @Savishesh and this line is a gem !

You have made valuable points about conviction, luck etc. Reading through the points, is there a finer distinction you want to make between conviction and self-belief, because the points made seem to be more appropriate about self-belief though I could be wrong in interpretation.

I’d love to hear about your thoughts on risk management and position sizing. To take the discussion on conviction further, have you stopped exercising it explicitly? I’d think that conviction reflects first when building a position in a stock and most importantly, when holding a stock in face of seeming or temporary adversity. Knowing when the headwinds faced by the business or industry is temporary and having the courage to hold, or add and acting not merely to to be proven right ( psychologically satisfying) , but that this is the best ROI at that point is the best exemplification of conviction.


Well put. I couldn’t explain my pain in the market over the last 10 years in better words even if I tried. Not trying to mean that the portfolio is amateurish. Just by being in valuepickr and asking people for advise you Have advanced your learning by at least 5 years. But I would still say small position sizes and to read at least 5 books as identified here in the first five years of your journey will do a lot of good!


Hey @SlownSteady! Thanks for writing. Few questions.

  1. Why do you think my portfolio is amateurish? Do you have specific feedback? I’d love to hear it.

  2. How to decide what will be the position size in a stock?

  3. Sorry, but where are the books highlighted? I’d like to know.