ValuePickr Forum

GP Portfolio review

Hi All

Can i please request members to review my portfolio and give in their thoughts.

  • I have recently sold Reliance and made entry into Power Finance corp and Alufluoride
  • I have always tried to kept my portfolio value/growth based investing into high dividend stock ( that has been my investment style) with a small portion of the portfolio ( roughly 10-20% ) which are very risky opportunistic bet.

Below is the reason for my investment along with risk factors i am considering. Would be great to have your views.

I will usually re-balance my portfolio when i feel exit price has come or Risk factor has played out .

Currently Two stocks where story hasn’t played out the way i wanted

  • Sangam renewable : Might exit if things doesn’t change in next 1-2yrs… given swelling in B/S and strong Waree group support, i am still hopeful on this slightly.
  • Shemaroo : Its new initiatives are at very early stages. Still yet to see how it plays out . Will take decision over next 2-3 quarters

Two stocks which are near my exit price. Waiting for maybe 10-20% more upside.

  • GHCL
  • Phillip carbon

Would love to get your views and learn :slight_smile:

Thanks

5 Likes

One of the most impressive portfolios I have seen on this forum. Rather than going with investment tide, you have actually picked good stocks with bottoms up approach. One of the portfolios that falls into “Value Investing”. If you don’t mind, can you explain how do you go about picking companies? Like what parameters you check about companies? Also, why are you selling winners in your portfolio? Do you have exit prices in mind whenever you make purchase? or do you stay invested till companies keep performing?

finding it difficult if to paste as normal text as text are getting disoriented :frowning:

thanks a lot Chaitanya for your kind words

i usually am a very conservative person so i think value investing is part of my nature. Infact my 80% of portfolio at even such good time is in debt fund and that has been the case for last 10yrs now. I invest around 20% of my investment only in Equity and those are highly value based

Now my investment style if i think about my above portfolio while i was making investment is as below

  1. Very high risky play
    Sangam, Cadys, Alufluoride, TAAL and Shemaroo are very high risky play where people can loose 100% money. I usually do make such bets which has been both hits and misses. Just as example, i purchased Archit organosys 2 year and i lost 75% on that. That company was profitable but since it was expanding 4x , opportunity was huge on those companies while it didnt turned out the way i wanted and had to exit. Learning i had from that was never invest in a growing company where D/E is high while CWIP . This is the learning i am trying to implement now in Alufluoride ( reason given in a separate post) which is a very niche player and making significant expansion however even with that D/E is very low . So on Risky bet it has been hit and miss but i think it has helped me to learn and evolve in market and keeps me excited.

so given out of 20% equity, this represent 10-15% of my portfolio i.e. 2-3% of my wealth so i dont mind to be honest :slight_smile:

  1. Second category, my first criteria is always a company which pays a decent dividend as i do like those cash flow however dividend should be like 10-30% of EPS and too high div means company is not using money to grow which is also not good. I like steady cash inflows

  2. i do like companies which has demonstrated good profit in past and within their sector most reasonably priced. for Banking i have developed my own methodology which i have used in past too and refined with my experience over time. People can say its a weird methodology but its something i have developed over time

  1. Some of the winners i plan to sell are those where i dont see a upside beyond a certain level like GHCL as soda ash demand itself in market is not huge so i dont see great future of company. I bought this as company at that time did a decent buyback of ~3% of capital at 175 levels while it was trading at 100 thus showing management confidence while due to market crash its price corrected. I took the opportunity to buy but i usually try to sellout once those company which are not very unique reaches a certain level

  2. I usually stick to niche company even when price is 1-2x like his HAL i am very bullish and might not sell so yes no price in mind at the time of investing :slight_smile:

lastly in short time i have learned so much from this forum. I hope to keep learning here and contributing to this lovely forum :slight_smile:

5 Likes

Hi All

I have reduced my investment on GHCL @156 vs cost of ~102 . GHCL was roughly 5% of my portfolio . It has been reduced by 50% to book 55% profit on it . Still keeping my “profit” invested in this while i have taken out my original cost ( mostly) . I have invested my “profit” in S P Apparels at ~75.

GHCL: Reason for partial profit booking

  • As given in Initial rational, company product soda ash , i don’t think had a huge market in India.
  • Initial investment rational was to take advantage of the market downside when it was made at 102. Company has always taken a shareholder friendly approach of continuous buy back ( last was nearly at 185 i think for 3% equity) and decent dividend. It has used its internal accrual to reduce debt, buyback and pay to shareholders dividend which is an ideal strategy hence i found this attractive

Reason for still not fully exiting it

  • Although company product is something generic and domestic market is not huge, it has captive mines which makes it lowest cost producer of the product
  • Company has filled with Indian government to impost tax on China on imports done by Indian companies . Indian government has taken such steps recently against lot of product and will not be surprised if it does in case of this product too
  • Company is doing massive investment to expand its production capacity which if above point 2 if implemented by govt can make this company the largest producer in India.

So given story still has potential , decided by keep my profit invested

Now on S P Apparels, its a pure value play like i did with GHCL,i think it will do well…

Reason for investment

  • good micro cap company with consistent performance which hasn’t really participated in bull run post March-20

  • Company has disclosed that dispite its bad result in Q4-20 ( which was mostly due to 25cr of order … this is expected to come back once international operation resume so not a permanent impact…Company still has decent order book
    - i like companies which focus on niche segment and this focus on children wear thus something unique

  • With COVID and migrant workers situation, company did disclose that its 60% of the workforce is staying in company hostel facility this not expected to face shortage of labor

  • Company has noticed significant order inflow from May 2020 and demand to be coming back. It doesn’t expect the demand in near term to be impacted

  • Liquidity is fine and company is using nearly 70% of its working capital.

Concerns:

  1. MEIS withdrawal is a permanent impact on company profit even for future.
  2. Company management if we look in past has over promised and under delivered so lets see if it can stick to that
  3. Goldman sachs international holds 5% of this company. I take it as concern as it has been holding it since long time when price was around 450 type…i wasn’t able to find its exact cost price but it can be assumed that they might look to sell out once investment recovers
  4. Textile business is badly hurt but still have concerns on how badly demand for the children knitting segment hit by COVID. Company management has presented a very positive picture which needs further drilling and review of Q3-20 performance to check if that they telling is reality or not…story is still unfolding so lets see. Will review the development against Q3 result.

Thanks

1 Like

I checked Sangam Renewables.
The spelling of executive is executtive on the website: http://sangamrenew.com/our-team/. Not a good sign
image

Company had 7Cr of sales in 2019 and market cap is only 16 crore rupees. Debt of the company at 37 Crores is 5 times the sales and 2.5 times the market cap. Confusing why the company has cash & eq of 7 crore (which is equal to its sales) when the debt is so high! Company is not able to service its interest also as seen by negative interest coverage ratio. Given this is 4% of your portfolio, recommend booking a loss and finding better avenues.

Renewable energy is a very capital intensive business. Not sure this firm can be a going concern in a few years time.

thanks @rkirana for your comments

Coming to Sangam, yes i am aware its a very risky play and the largest loss i have is on this company in my portfolio

I don’t think we can look at this company from the normal prism of fundamental analysis as these are opportunistic play where things slowly unfold.

I don’t disagree that its better to cut losses on losers which I have done in past once story on that is over however story on Sangam is still evolving and hasn’t proved to be completely wrong so would like to wait a bit more before I exit my largest loss driver :slight_smile:

Let’s discuss why I am still a bit optimistic on this ( although I must admit that chances doesn’t look great at the moment )

  1. I made this investment way back in 2017 end. The company announced an agreement with Maharashtra Seamless to supply 1 MW power for a period of 25 years. they won just a few months after that another 4MW order from Maharashtra state power generation while they bided for 50MW thus opportunity looked fairly good

  2. Waree group never talked about the merger with Sangam. I tried almost a year to connect with management but management is not too friendly when it comes to connecting with shareholders. Sangam office was moved to same building where Waree is situated if you search google thus I had no doubt in my mind that Waree is making a backdoor entry in the Indian market via Sangam and this is the reason for swelling up in its B/S in last few yrs via JP and cheap inter-corporate loan. Sangam was an advisory firm ( i believe a shell company) before the Waree group took over and then it started winning all this contract.

My question to management has always been around why not acknowledge this backdoor entry and why did it not go public itself. However, if you closely follow this company, you will see what I mean

  1. In June -17, for the first time, it reported a “proper” financials with decent revenue thus giving more transparency

  2. In Nov-17, it badded a major 50MW contract from Maharashtra state power corporation which was a massive contract for a firm of this size. Another point that without Waree support and influence it could have never got such a contract. The contract is of 25yr with maintenance

  3. During Dec-17, it acquired Waacox although I tried a lot of websites whereby you can check financials of a private company but could not see this company financials

  4. In March-18 they again acquired two more companies

  5. In June -18, management did disclose that they have bid for another 200MW project

  6. In H2-18, the company borrowed nearly ~30cr and made an investment in Waacox energy which increased its financing cost and also swelled up the balance sheet. Now since Waacos is privately limited, I was very keen to understand from management the rationale for this investment and future potential but again as I said not much transparency

  7. finally in Dec2018 and March 19, it reported its highest ever quarterly sales and all the orders I told in the above points started showing results. Also if you check March 2019, the balance sheet increased by 6x pointing asset transferred from Waree to Sangam to carry out projects it has won.

  8. June-19, the company raised 20cr at 18.5 through preferential issue. The company also did a major buyback around May-19 at 18.5 in which I didn’t participate as I was still very bullish

  9. In Sep-19, it signed another 35MW of the contract along with its existing contract thus building on its order book and assets

Thus, in short, company has raised multiple money ( waree, etc) and also made substantial investments. I have no doubt it has strong Waree group support as have been following this company for more than 3yrs now and my conviction on this company hasn’t changed

Red flag in this company is management transparency however I still think the story is yet to come out on this stock. It’s a risky play as I mentioned where I might lose 100% capital ( i usually have 10-15% of my equity in such risky bets while the remaining 80% are value-based safe stocks)

Nice portfolio

GHCL promoters got bad history
Cant regard very highly of Goenka group

Goldiam (rarely people make money in jewelry stock except Titan, lot of jewellers in willful defaulters list)

@bhaskarbora67

I think no company I have found in India where there is no corporate governance issue. I am aware of the promoter making wrong disclosure of their shareholding and I think the market is still punishing them after all these years however they got cleared by SEBI. Other than that, I see their actions to be fairly reasonable and also they are quite engaged in emails.

(FYI: After investing in Reliance Industries, I have stopped caring about corporate governance issues in any company till the time its really a red flag. We all know how reliance has grown and still, most of the investors have made an investment in that company including myself.)

Goldiam, yes true. this sector is a tough one to track and esp after Nirav Modi’s case, it just proves how lack of transparency has hurt this sector prospects. I still think a well-diversified portfolio should have gold.diamond stocks.

1 Like

Hi - I have made 2 changes to my portfolio after doing a review of all the company’s quarterly results and COVID impacts on the company results.

(1) Sold Century textile and bough IST. Century was purchased at 285 and today I exited it at 312.
Reason for exit: Quarterly result was way worst then my expectations and the outlook of textile doesn’t seem good in next 1-2 yrs unless its a niche player in segment ( one of the reasons for entering S P Apparels)

I will post the quarterly results on each company in my portfolio by weekend however the result was too poor than my expectations in Century hence cutting it away.

(2) Goldiam International: Although company management actions are shareholder-friendly and primarily it looked like one of the best-priced company in the Jewelry segment but after going into details and studying this industry further for last 1 month now, I realized the concerns @sahil_vi highlighted regarding investments, in particular, were genuine. We reached out to management and they were satisfactory in most of their other concerns however for me the lack of transparency in their product was still something making me uncomfortable. I entered this at 114 and exited at 114.2 so not a good feeling but I have realized one thing in the last 10yr that as soon as we are not optimistic like we were at the time of investing, it’s better to switch it. My decision might prove wrong in future.

Two new stocks entered in place of above stock is as below

(1) Renaissance global: I found this company very similar to Goldiam however the product transparency was something that attracted me. The company has a famous Disney brand which has got good response so far
https://renaissanceglobal.com/enchanted-disney/
and also it has multiple stores in Mumbai along with a recent tie-up with china big houses which is expected to boost its revenue.

will post more on this in the Renaissance forum soon. Entered @218 for 4% of my portfolio.

(2) Instead of Century, i have entered IST LTD. This is a very interesting cash-rich company with a high float. One thing which attracted me about this company is high growth with high promoter holding which is a lethal combination. Entered @236 today for 4% of my portfolio. Will post more on this in IST LTD thread.

Thanks