Esha Portfolio Feedback Invited

Q&A: Questions & Answers Portfolio Q&A
21

Few Name I can suggest for IT company, As you are from IT background, you can explore more

  1. Tata Elxsi
  2. MPS
  3. Accelya Kale
  4. L&T Technology Service

Some of them are expansive in valuation basic but some of them have good Moat and they are industry leader.

22

Thanks Jagat. Could you please provide some details why you are interested in these 4?

Tata Elxsi may get absorbed in TCS (as part of restructuring). Business focus similar to Sasken (Auto).
L&T technology services - Looks good in initial look will explore more on it
MPS - Looks like Content creation and Cloud based services like Zoho and Salesforce. Does not look promising to me.
Accelya Kale - Need to look more. Why Company is stagnant in past 5 years or so.

23

Why not have a look at Product based companies ??

24

Thanks for Suggestion.

Any Company or companies would you like to mention. I assume you are referring to IT product based companies. Please correct me if I am wrong.

InfoEdge can be termed as product based if you take Naukri as product

25

No Infoedge can be termed as Berkshire Hathaway of India which invests in start ups. Pure play IT Product companies are OFSS and Nucleus Software. Product Oriented Service is company like Persistent.
There are other good companies catering to specific sectors like Majesco (Insurance)

26

Markets going high and stocks not performing are two different things. I am also invested in rating companies with higher weightage to CARE on account of better margins, higher ROCE and low PE. Last but not the least prime take over target on account of CRISIL stake.

27

I joined Tata Elxsi in 2005 with rumours that it’s merger with TCS is just round the corner but nothing happened. TEL is designing arm of TATAs. It is in Engg design, vehicle design, aviation, movies, patented designs, VLSI etc. It will continue to grow as it’s not in competition with biggies of IT sector

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28

Thanks for quoting some companies. I will check them out for sure. On top of my head below are some of the points

For Insurance play (Majesco)… I have seen Guidewire becoming more popular with Insurance companies. Many are shifting from Legacy to Guidewire and Service companies like Cognizant etc are heavily recruiting them.

OFSS Oracle is getting left behind in Cloud race (Google, Microsoft, Amazon and IBM) are leading now. So far it is unable to compete with them

Nucleus Soft and Persistent - Will check them out.

What pisses me off about IT is usage of same 5 things as growth trigger for all Companies for example Cloud, Blockchain, IoT, Security and AI.

For all product based Companies if they are not on Internet then they will not be future proof. Companies like Salesforce, Zoho and Google (with Google Apps) are taking Software from Machines to Internet.

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29

Cloud, Blockchain, IoT, Security and AI these are eye-catching words. As per my view many companies are working on these areas. If not they will acquire some company having expertise

30

Completely agree, but still what is the reason for rating stocks not performing? Let us know if any insights…thanks

31

There are some generic reasons for a sector not performing

  1. Bad news related to Sector for Ratings it is issues like IL&FS where these agencies failed
  2. Accumulation phase during this phase stocks are in sideways movement. If you see most rating stocks have been sideways in last three years

Recently I was exploring Fortune 2000 list to see which sectors dominate. It is good to see two rating companies near 1000 mark. So Rating companies have limited growth potential (Note World is dominated by only 3).

India is far from that saturation point as of now so we can see decent growth in these stocks. But after that point growth will be limited IMO

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32

Thanks, I was refering to business reason…above points are symptoms not cause. Has profits, margins and sales of rating companies been growing…if not then why and what are future triggers…pls ignore if my queries are not important to you…thanks

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33

I do not refer numbers much. As they say Price is reflection of Company’s health (Founding principle of technical analysis) . I do check reasons if there is abnormal price movement.

CARE (and others as well) does not have incremental performance improvement for last couple of years. This is reason of stagnant price. There is no major trigger as of now and whatever I mentioned in last post added to it.

34

Lots of feedback that you will get will be too many positions, which might be true, but if you have a real reason why you are holding, hold them thru the story / macro picture to come true and then unload. Reducing the positions down to 10 for a 1cr or less amount, makes a lot of sense.

I am believer that if you have 20 stocks for a portfolio over 1cr is OK esp. if you are not doing investing full time. So, it is all subjective and there is NO correct answer, regardless of what anyone says.

Concentrated portfolios are for people who do immense research, keep up with it, and have done lots of reading, attend AGMs etc. Diversified portfolio is for LT investors who are also doing wealth creation with the grey matter while letting their cash flow be invested into a diversified set of assets.

Nothing stops anyone from just getting into 3 to 5 MFs but if you have a passion for investment, then do the stocks.

I do Stocks, Bonds, ETFs, Commodities etc while working more than full time and managing real estate. Therefore, I hold a diversified set of portfolio with all of the above.

KKP

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