ValuePickr Forum

Dinesh Sairam's Portfolio: Requesting Feedback

I think that’s a dangerous practice. It takes at least 1-2 weeks of regular 3-4 hours of reading every day just to familiarize myself with a new company. If it’s an industry I already know, maybe it will be a little easier.

The simplest and most effective practice is just to start with two things:

  1. Time Series Analysis (Compare your own company numbers with its historical numbers)
  2. Competitive Analysis (Compare your company’s numbers with the closest competitors)

While doing these, you should make note of areas you do not understand fully (Ex: “Why is my company earning less Margins than the industry’s average Margins?”). Once you’ve got all your questions, you can try to find answers from the Annual Report, Concall Transcripts, Management interviews and so on. If you can get an insider from the industry to answer some of your more generic questions about the inner workings of the industry, that would round it up nicely.

I don’t see any way in which this will take just a couple of days. This will take weeks, if not months.

Hatsun is an excellent company with a vast array of familiar brands. But they have levered themselves up to the neck and ruined their Balance Sheet. Even now, after a recent massive round of equity dilution, their D/E is still above 1.25. On top of this, their Interest Payments are almost equal to their PAT.

If they have poor business for even 1-2 years (Not saying they will), their B/S will further worsen. This means that Hatsun’s managers are very interested in short term profits to keep the treadmill running. They cannot afford to take even small risks in terms of innovating new products or capturing new markets (Again not saying they won’t - but the leverage is an inherent discouragement).

Hatsun would have been my first choice had it not been for the leverage.

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Dinesh, it’s good to see your portfolio. Will you be able to add a price range which would reflect fair value after considering the MoS? Would help members to make a buy or sell decision based on your valuation.

P.S - Only if you’re ok with it and if it makes sense.

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I don’t think it makes sense as of today. I am very young in the markets. I might potentially reveal my returns 5 or so years down the line (So that I complete at least 7 years in the markets). Let’s see.

Besides, I don’t mind telling people at which price I would buy a certain business I am interested in (Given I am sure about the business prospects myself). I do all the time when they DM me here or on Twitter. I simply don’t want to post my average purchase price on a public forum just yet.

Even if I say so myself, I am fairly confident in my ability to value companies. I am here on this forum to discuss about the underlying businesses themselves, which you can never learn enough about.

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We have talked before about your cash allocation in liquid funds and want to explore this further.

In times of uncertainty & crisis, would you recommend moving a portion of cash to gold mutual funds or ETFs? Is there anything you have against this avenue of allocation? Please share your thoughts!

I would say, make it more micro. If you are uncertain about the businesses you already own, yes, move money into assets you consider are fairly safe. I consider government bonds to at least keep my capital, if not appreciate it. I have very little idea about gold.

We are currently in the midst of a crisis and I have 70% in liquid funds - I might as well sell the rest of my portfolio right? But the companies I am still invested in, I believe, are fairly guarded from any impact from COVID19. In case they are not, I don’t think that will damage the B/S by much (I don’t mind 1-2 years of bad results).

I sold Cera recently and IndusInd before that because I am very sure they will be heavily hit by this pandemic. Same goes for companies in my watchlist - some of them I’m sure the impact will be limited and others, I am not so sure. Of course, price is the common question for all of them.

So again, I would suggest a micro approach.

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hello sir , what is your opinion about put in liquid funds ( are they surely safe?), or we put money in cash only and wait for opportunity.

Liquid funds that invest 80%+ in Government Securities / Short term Debt instruments are safe in my opinion. Everything else carries risk.

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Your investing picks remind of me a few years ago. Your knowledge of investing is amazing.

I would suggest to invest in Coffee Can stocks available at good valuations now like Pidilite, Relaxo etc. and hold on to them. Cera is also a good coffee can stock. In your portfolio, I would say use the balance cash to buy Coffee Can stocks that are not ‘hot’ right now and available at reasonable prices.Invest in good market leaders and you will multiply your money.

DHP India is okay. I am invested in it too as it is part of Vijay Malik’s portfolio, like you highlighted from the annual report.

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Thank you for the suggestion. I don’t want to do a ‘Coffee Can’ as long as I am into actively managing my portfolio. Maybe that is a good idea for when I want my portfolio to be on autopilot. That day is not today, however.

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Dear DInesh pl share more on orient Refractories. It has fallen to RS 140 due rejection of their merger plan of 2 Group companies RHI India and RHI Calsil. To me they are mergin low margin RHI India and RHICalsil with High margin ORL. I feel this erode ORL Valuation. Currently it is hovering RS 160 to RS 175. How much more it will go as per your Valuation and expectation. I am watching to add. But unable to decide.

The merger was rejected mostly on account of the valuation done for the group companies (RHI India and RHI Calsil). The court felt that the valuations favored the parent company more and the Indian shareholders would lose out. Actually, I will have to agree with the Court that it’s true.

Here is the full judgement:

https://nclt.gov.in/sites/default/files/Feb-final-orders-pdf/C.P.(CAA)-2199(MB)_230-232_2019%20RHI%20India%20Pvt.%20Ltd.FINAL__0.pdf

I’d suggest skipping ahead to the last 7-8 points if you want to get the gist of it.

In any case, I think this is just a hiccup. The court did not reject the merger based on anti-competitive acts or anything big of that sort. That is a relief in itself. I’m sure once this crisis is over, they will appeal this decision or may be come up with a better valuation for the Indian shareholders.

I think ORL’s core business is pretty straight-forward. I would personally buy it close to Rs. 100-120. But this merger with group companies comes at a considerable dilution to ORL shareholders (Almost 35% dilution - according to the valuation report submitted to the court). I wouldn’t be happy with this at all if it went through. So, I’m contemplating on the valuations.

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Will you please put a link of your presentation?

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Thanks, but this link didn’t work but your Twitter’s did.

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Hi Dinesh, have you done analysis on CUB as it’s in your watchlist? Disclosures on moratorium book very well explained, attaching concall n presentation. Do share your views

MD_June 20_final.pdf (55.6 KB) bbb359fa-e551-4064-8fa5-30dbaed116b6.pdf (254.0 KB)

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Not just CUB, but other banks too are hoping that things will get better soon. If they don’t though, things can go to hell in a hand basket very soon, considering the leveraged nature of Banks. Even the regulatory pressure as they mention, like restriction on transaction charges / ATM charges and so on, adds to the misery.

That being said, the one thing I like about CUB the most is their conservative nature (Especially after my terrible experiences investing in “risky” lenders like DHFL and IndusInd). Their CAR is 16%+ and the management expects only a ~5% of their Loan Book to be restructured. Even if you consider the possible NPAs (SMA 0/SMA 1/SMA 2), they don’t even form ~2% of the Loan Book.

I’m mostly waiting to see when Moratorium will be lifted and whether things will get back to normal from the get go. If it gets extended further, things can get tricky. But again here, I like the fact that they are making provisions without any hesitation for each possible slippage.

@dineshssairam have you ever looked at Aditya Birla Capital?

Sorry, I have not tracked Aditya Birla Capital.

They mentioned about the recovery in this latest press release

It is quite strange to note that you are sitting on 70% cash - real money is made in markets like these. One might say that it is a bubble but if someone is so intelligent to identify a bubble ,he/she should be able to ride the bubble and exit before the dance stops.
Stop loss function can be used as safety mechanism.
Many a times I wonder that certain intellectual type of investors miss out on bubble - they may be philosophically right but we are in the market to make money and not to take a high stage on certain ideology.
Am nowhere saying that one should invest in every kind of company - an experienced person can clearly identify whether the bubble is in good stocks or some pump/dump is going on in certain bad stocks.Riding bubble in good stocks can be rewarding.

Would like to listen to your views - again it is a personal choice but I find it strange -experienced people sitting on cash when prices are rising and one can make good money by insuring himself by using stop-loss option.

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