Gurjot Portfolio

Thanks for sharing and that’s a great CAGR performance. Just glanced through your PF and I think you have a superb portfolio with almost all proven quality businesses. The only thing I’d be a little wary of is the returns going forward for some of them like Asian Paints, Pidilite, Relaxo (desperately want to get in as well) having frothy valuations. These businesses will not correct much but could face time corrections.

Overall, I’m pretty confident you should achieve your target of 15-16%+ CAGR having good growth stories in digital, banking, insurance, etc. All the best!

1 Like

Extremely fair and valid point. Something which I believe most retail participants don’t think often about. Everyone likes to believe they can beat the market as well as the leading MFs. I have addressed this point earlier.

I believe the lessons over the last few years in the market and having a better appreciation for the kind of businesses which do well over the long term should hold me in good stead in the next 2-3 years. This has meant changing my PF style to a Core (Coffee Can) and Satellite method and the results over the last year and a bit have been pretty good. However, if after 4-5 years - my performance still lags the average performance of top 3-4 MFs, will gladly shift everything there :slight_smile:

Few things to note - I don’t track Nestle closely as of now, so cannot comment much on the potential threats you’ve highlighted. My comments were in the context of current environment and how these businesses are operating. Would like to agree with you that no moats are permanent. But even if any moat exists for 40-50 years, that’s pretty much the entire investing journey of most individuals.

2 Likes

Its a pity that similac is not a part of listed Abbott in India.

Absolutely true even I follow similar strategy plus applying quality ipo . High. P/ E stocks are part of my PF .
But at the same time i got into quality Smallcaps like Apollo tricot, Shivalik rasayan, ION exchange , HLE glasscoat , KEI which delivered big . And some pre listing ipo bets like Rossaria , Happiest mind, Affle, route, polycab as well . IRCTC ipo allotment All these took 2 years PF returns 71% to date.

2 Likes

The last portfolio update was at the end of Feb and I was thinking about the regularity at which I should share the portfolio performance and updates. Without any scientific reasoning, I feel a monthly update is a decent rhythm in this high-octane market especially when I have a reasonably high portfolio churn as of now.

Before, I delve into the last month performance and portfolio changes - I had these thoughts go through my head, what is my portfolio objective or how would I describe my PF goal?

Portfolio Objective - Generate a minimum 15% compounded portfolio return starting 1st Jan 2021 for a decade with low volatility minimizing the depth of PF drawdowns.

With the above in mind, let me share the ytd Q1CY21 PF performance (along with key benchmark indices):

image

If I come back to my PF objective now, let me address the second part of the objective first “low volatility minimizing the depth of PF drawdowns” and will come to the 15% compounding part later.

Now there is no better measure of volatility than beta defined as “systematic risk—of a security or portfolio compared to the market as a whole” (Wikipedia).

I’ve been tracking my daily portfolio % change over the past 10 months and based on that data when compared with the Nifty, my PF Beta is 0.78 as of now. Given that I’ve had a rapidly changing portfolio in the past year throwing out lots of leveraged financials and other high beta names, I expect a more reliable measurement of my PF Beta early next year. However, Beta of 0.78 does mean I expect the volatility of my PF to be at ~80% of the market volatility. My target PF Beta would be around 0.50 whilst also not compromising on returns objective.

However, I do want to highlight that the objective here is to minimize PF drawdowns in market downswings along with reasonable participation in market upside.

The above chart shows the YTD daily PF performance (orange worm) overlayed on top of all the key benchmark indices. Here we can see the objective I’ve described above being met in terms of the portfolio performance, lower drawdowns and reasonable participation in the upside. The caveat here is the very small time period of observation. Will look to share the PF Beta and the daily performance chart on a quarterly basis to observe how the portfolio is shaping up and whether it is on track to meet defined objectives.

Now coming to the first and most critical part of the objective i.e. getting 15% compounded returns. This requires having a very strong PF focus on growth oriented businesses with good managements may be mixed with a few significantly undervalued businesses with potential future growth. This has led me to making quite a few PF changes off-late and also forcing me to re-think my philosophy of Coffee Can approach.

Portfolio Mindset Change - The time period between Dec-Feb has made me understand the importance of being able to sit on cash irrespective of the market movement leading to FOMO and feeling of last chance saloon. The key difficulty I faced during December - February timeframe was worthy opportunities where I could deploy cash and also meet my portfolio objectives of 15% compounding for 10 years. So while business like Britannia, Abbott, etc. were correcting and offering good min. potential returns of 10-12% over the long term, I realized these businesses still didn’t offer enough MoS to be confident of achieving the 15% return objective. And hence the realization to get out of any such businesses where the conviction of meeting my objective does not stand anymore.

Also, whilst the Coffee Can approach is the best way to identify and select great businesses, I may not be able to sit idle and not take any action for a 10 year timeframe especially if some of the businesses deliver 5/10 year expected returns within a year itself. Hence, have a Core portfolio approach (invest using Coffee Can filters and sell using multiple criteria of recent business performance, valuation re/derating, expected future changes in business / environment, management changes, etc.)

Portfolio Updates over the past quarter

Core Portfolio Exits -

Alkyl Amines (4.5 bagger in 11 months and life high crazy OPMs, valuations)

Chola Finance (90% returns in 1 year, 5x book value and 7x leverage) - In just a year, I’ve seen my investment go down by 65% and then come back up 4.5x from lows to give overall 90% returns). Way too much volatility for me to handle, also reflected in the stock beta of more than 1.75

Berger Paints, Marico - Outcome of the portfolio mindset change. Given me 50-70% returns in the last 1 year somewhat underperforming the Nifty (a clear indicator of the rich valuations these businesses already trade at). Will be exiting all in next few days to lock in LTCG

Abbott India, Britannia - Were recent investments and covered above mostly. Happy to be a buyer of Britannia at 2500 and Abbott at 10-11k levels which gives me MoS for 15% type of compounding. Not that these businesses still won’t do that, but just that I don’t foresee it and don’t want to bet on it

Core Portfolio Entry - I’m still building positions in most of them as they don’t fall a lot even on the worst days

Syngene - Strong industry tailwinds, one of the fastest growing listed businesses in the market with solid execution track record and consistent growth capex over the past 5-7 years expected to continue at least for 1-2 decades.

Valiant Organics - Excellent management track record Aarti group company, industry tailwinds, very good profitability metrics, very strong growth capex expected to come onstream in the next couple of years

Fine Organics - India#1 amongst top 6 global players in a good growing industry with strong tailwinds, strong business growth and management execution track record with excellent return ratios, 75% promoter holding and all leading MF small cap funds invested. Also covered in a recent interview by Saurabh Mukherjea

CAMS - Market leader superb profitability metrics. Best way to play financialization of savings in MF industry. Delivered mid-teens topline growth over the past decade and management guidance of 10-12% growth over next few years as well along with new revenue levers opening up

SBI Life - I think a 100 times before entering any PSU business given the wealth destruction track record. However, SBI Life appears to be amongst the fastest growing LI businesses, have inherent advantage of network distribution via SBI branches, has the lowest opex ratio in the industry and effective Price to EV of 2.6-2.7x on FY21 embedded value growing at 18%+ past few years.

REITs - I have entered in all the 3 REITs now given the tax free nature of significant portion of distributions and huge potential yield in latest listing Brookfield. Given the extremely favorable demographics we have (65% population below 35) and many million youngsters to be added to the workforce every year, I see India as one of the few bright spots for commercial RE in the next decade at least. Would have been happier if I waited a bit more and got the additional 8-10% discount on Embassy REIT currently offered by the market. This is now a very significant allocation ~12% for me, will be trimming to 10% as a little overexposed to Embassy.

Increased allocation - Indian Energy Exchange and ICICI Pru Life

Satellite Portfolio - Exits

Spandana, Indiabulls - 2 leveraged businesses (booked 40% gains and booked 50% loss). One with potential severe crisis in microfinance portfolio and other with honest / clean management and tarnished market reputation.

Airtel - Exited at no profit no loss. Seeing the competitive intensity in the telecom space and never ending capex such as 5G auctions, time to kick this one out as the positive and negatives seemed to be cancelling each other out. Would much rather hold a business with simple books of account and industry tailwinds.

Satellite Portfolio - Entry

Chemcrux - Replaced with Indiabulls holding. Excellent limited business performance, appears honest managemant with well articulated annual reports and management growth vision. Plant closure overhang has stayed longer than expected, good to see the disclosure today on the same and also approval for capex.

Icemake - See huge scope for this business and industry, cold supply chain storage and solutions. Management track record is pretty decent in terms of growth and also given strong growth guidance for next couple of years as well. This can grow multi-multi fold if executed well by the management. Next quarter should be interesting as it’s the best one seasonally and management has guided for normalcy in margins, will contemplate exiting if management doesn’t deliver somewhere near guidance without any major business hindrances.

Jubilant Ingrevia - Given the industry tailwinds of specialty chemicals and pharma, seems an interesting business with good growth guidance and very modest valuations. Management execution should lead to re-rating

Nazara Tech - Hyper growth business in an industry getting strong tailwinds with Covid, No listed peers and digital platform business should get premium multiples once business execution track record is established and recurring revenues. Key risk of very brief product lifecycle for most games.

Allocation Change - Significantly upped allocation in RACL Geartech and Goldiam with super strong business performance and momentum. Don’t like averaging up 3x-4x of buy price but see similar potential even from the current market cap.

Watchlist - Bajaj Healthcare, Indigrid (hoping it corrects 20-25%)

Concluding Thoughts - I want to crush market risk without compromising on returns in order to sleep peacefully every night. Having an all-weather portfolio with a bullet proof core helps achieve that.

PS: Hopefully, next month’s update will be a lot shorter :slight_smile:

22 Likes

Monthly Portfolio Note - April 2021

Portfolio Commentary
Reasonably good month and well on target to achieve 15% CAGR for the year despite the fact that 10% of my PF was invested in Office REITs this year whose DPUs are not included in the above numbers. I thought we were in for a decent correction with Covid 2nd wave, however Mr. Market is quite smart and didn’t repeat it’s folly from last year’s vertical decline. Basically, Covid is not an unknown unknown for the market anymore. Anyway, I’ve have been adding on all dips through April and trying to increase my exposure to some high beta top notch financials as they’re available at reasonable valuations. However, also meant having to exit some positions I may rather have not, details below.

Poly Medicure (minor profit booking at 4.5x levels), CAMS, Fine / Valiant Organics and ICICI Pru Life seem to have driven majority of PF gains this month.


Exits

  • Beta Drugs - Sold with 100%+ profits. NSE SME listed pharma company operating in unregulated markets. Nothing wrong with the business as such except a SME company is relatively hard to track and get good insights on with 6 monthly results and bare minimum visibility via annual report / AGM. And I was looking to raise cash to avail of opportunities during the 2nd wave Covid decline in mid-April. Big mistake!!!
    In terms of stock performance, it had been in the same range for almost 4-5 months now and almost as if the stock was waiting for me to “GET OUT”, I KID YOU NOT - the stock hit 10 consecutive upper circuits from the next day onwards to become almost 3.5x from my 2x - 75% opportunity loss!

Don’t believe me, see this!

Selling is definitely not my forte yet :slight_smile:

  • Pidilite - Booked out at 50% gains, very very small position from Mar 2020 and same line of thinking as Marico, Britannia, earlier - do not foresee 15% CAGR on long term 10 yr basis at current valuations. Happy to re-enter any of these businesses at lower valuations if ever…

  • Sun TV / Huhtamaki - Booked minor 15-30% gains, opportunistic bets in satellite portfolio. Wanted to reallocate cash to higher conviction bets


Entry / Increased Allocation

  • Muthoot Finance - New position, 2point2capital’s letter really caught my eye and I started thinking about the gold loan business. Read through latest concalls, annual reports, watched management interviews and came to the conclusion that this is a fail-safe business as long as the world lusts for gold. There can be intermittent periods of volatility in value of gold prices but there are very very strong barriers to protect the business model. Just this 1 number blew me away from the management - ever since the company got listed, not a single rupee of regulatory reported NPA has resulted in actual losses as the physical gold has been auctioned which more than covers the loan amount at 70-75% LTV incl. making charges. Although management has admitted banks / other NBFCs have also started hunting in this ocean, there are ample opportunities for growth for the foreseeable future. Also gold prices have a double tailwind - precious metal which is limited supply and long term USD INR depreciation

  • Bata India - New position, has to be looked at from a long term perspective. Footwear is an essential product just like clothes. And I was thinking about all the last few global / economic crisis of any kind. 2008 financial crisis, 2001 IT bust, 1992 Harshad Mehta scam - none of these crisis would have any major impact on Bata’s business. So whatever the next crisis will be, I’m pretty confident it will have limited or no impact on Bata unlike Covid. Now, Bata’s brand has a very strong recall and the company has been aggressively investing in growing their reach by doubling/tripling store count over the past 1-2 years. This can be a 1 lakh crore market cap company in my view over 10+ years.

  • HDFC Bank / Kotak Mahindra Bank / MAS Financial - Increased allocation, I’m very bullish on select financials to keep on accumulating market share and consolidate the very very large Indian FS market over the next few years. But need to be very selective in leveraged names. Bandhan Bank is a great lesson for me in terms of the difference in business models across banks (MFI unsecured book vs semi-secure mortgaged books of HL/AL, etc.)


Since the number of PF stocks are more than 70, sharing a pie-chart of the holdings across sectors which helps me better understand my weightages and exposures:

See you next month!

4 Likes

Interesting! Can you link it?

Here you go

1 Like

Recently I switched from Bata to Relaxo. The later is richly valued but I believed for genuine reasons. Bata has good brand recall and a collection of good brands, like Hush Puppies, and recently they’ve changed their strategy and is now aiming to premiumize their portfolio. I used to think that this strategy is good but later realized that in the premium segment there is a steep competition from global brands like Adidas, Puma, Reebok etc., which resonate more with the younger populace, while Bata has more brand recall among the older populace.

Relaxo on the other hand is more in the budget segment, where they have successfully created a brand out of commoditized chappal / slipper category. Bata used to have presence in that segment in the past, but they have exited from that segment altogether. Relaxo also manage the inventory better to make good returns on capital from this budget segment. They have presence in mass premium segment too via Sparx.

You must know the merits of Relaxo well through the writings of Saurabh Mukherjea. It took me a while to realize this merit as the ‘Brand moat’ illusion of Bata was clouding my opinion. Recently I realized that brand may not actually a no moat in a highly competitive segment where there are more similar/better good brands.

Bata also has a good moat in terms of a large number of brand shops. People love to try out their shoes before buying and I always thought Bata will get benefitted in the long run due to this. However, with more ease of returns in online shopping and Covid induced habit change may in the long run eliminate this benefit of Bata too.

5 Likes

Let me address Bata first - they’re not competing with the sporty brands in majority of the categories such as school children, leather/office wear, casual wear (Puma, Adidas, Nike, etc have no presence in first 2 and generally have limited casual wear). Also these foreign companies target segments is relatively niche upper middle class and above, maybe 10-15% of India at max where as if you look at recent Bata store openings, they’re predominantly targeting Tier 2 and Tier 3 cities i.e. lower middle class and above.

The brand recall with older populace is correct to an extent which is why Bata has been roping in young stars like Kriti Sanon and Kartik Aryan to change that image. And if you see the performance over FY16-20, the average age of their customers has come down a couple of years which means more younger people are recognizing and adopting Bata.

These are extraordinary times which have been prevailing for 14 months+ and who knows how long this may continue. But I still think that is clouding your judgment on how 90%+ (my guess) people would generally buy shoes.

Think of it this way - human beings are not born in assembly lines. We are biological evolutionary creatures.

  1. Your size 10 feet and my size 10 feet can be extraordinarily different - narrow width, average width and broad width. So 2 people with the same size feet can find a shoe loose/tight depending upon the width of the feet. Plus, some people are flat footed vs some have normal shaped feet. So many biological differences in humans means - most people will end up buying a shoe at the store whenever this ends

  2. Every brand seems to have a different size even if they both say size 11. Some are UK, some are US, etc. and unless they are Nike, Puma, etc. there can be big differences in size for local manufacturers and actual size of the product. Again, leads to people wanting to try it out in the store

Now coming to Relaxo - it’s undoubtedly a fantastic business and unbelievable performance even in this pandemic. However the valuations really don’t offer much margin of safety and I’ve been trying to get in but it just refuses to correct beyond 6-8% and keeps moving higher and higher.

I can buy at these valuations as well if you can tell me the addressable size of market and potentially Relaxo’s share in it.

Relaxo sold 18 crore pairs last year i.e. to put it simply it is like 1 out of every 8 Indians bought one pair of Relaxo!

If I take a very very optimistic scenario and Relaxo can start selling 100 crore pairs in the next 10 years, that is 5.5x growth from current levels.

Do I think Relaxo will quote at 80-90 P/E after 10 years. Probably not! Even if I take 50x earnings multiple the returns come down to 3x using very aggressive assumptions.

I think it has a low probability of meeting my 15% CAGR returns target from current levels over 10 years. Yea, there could be other growth levers such as margin expansion and exports but I rather err on the conservative side than hope for an even brighter future when the past has been so scorchingly great already.

PS: Let me also add, if I was an existing investor in Relaxo from much lower levels there is no way I’d be selling out given the growth potential going ahead. As they say “keep your eyes wide open before marriage and half-shut thereafter” :grinning_face_with_smiling_eyes:

8 Likes

Excellently put points by both you and @sujay85 on bata vs relaxo…I am just thinking on above thought you make… interesting one but why would you not buy relaxo today if you can keep holding it if bought at lower level? I understand that most probably this thought is coming from the very often used terminology “margin of safety” but holding today if bought at any levels is same as buying today at today’s level…and MoS is same for both persons… although optically greater for someone bought at lower levels but it’s today’s money which counts and what we can do of it today and MoS as on today. Hope I was able to convey my thought properly in words…would be good to know yours as well…for me…there is nothing called as MoS…it’s an illusion :grinning::pray:

2 Likes

Fair point. However, if I talk in terms of broker reports - there are 3 types of actions - Buy, Sell and Hold. I’m referring to “Hold” action above. There is no exact science in what I’m saying, but just sharing my thoughts and how I approach my investment ideas.

If I’ve been invested in Relaxo for 5-7 years and already sitting on 25%+ compounded returns from earnings growth and re-rating in a business with still relatively large growth opportunities, I shouldn’t sell out just assuming that the multiples have gone up way too much as I’m fairly confident that the earnings growth will keep on compounding for a long time to come albeit at a gradually lower pace. However, I don’t know whether multiples will contract or remain the same as markets can continue to give premium valuations to select businesses. Just look at D-Mart - even after the doubler on listing, it is up another 5x from those levels and been consistently trading at 100x+ multiples due to the extremely large growth opportunity. So if markets give the same multiples, I continue to compound my money in Relaxo!

However, if markets derate the multiples then I may not make much money for 2-3 years till the earnings catch up and then the compounding cycle begins again at a somewhat slower pace. My 25% compounded could turn into 18-20% CAGR through all this time by when growth starts diminishing. However, I’d still be very happy with a 18-20% CAGR over a 10-15 year period. This is with a caveat that I don’t find any other 25%+ compounding opportunities else it would be a no-brainer to reallocate to a better idea.

But when it comes to fresh investments - I don’t want to take that risk of multiple derating unless the growth rates are very high and sustainable for long periods. This is where the MoS comes in from valuation perspective, if the company continues to deliver good performance - I expect markets to reward it rather than think it’s already in the price.

Ex: Some of my 4-5x investments like Poly Medicure, Indiamart, APL Apollo are all Hold positions now and neither Buy/Sell. Depending upon future business performance, this will obviously change.

3 Likes

@gurjota hello gurjot, yours is an interesting portfolio…I wanted to know your views on bandhan bank against the backdrop of their recent results.

@ap1990 Thanks for the question.

I myself am invested in Bandhan Bank and given my learnings & changes in investment philosophy over the past couple of years, I would have never made this my highest allocation and consider that a mistake. Now, let me explain what I mean by this in more detail.

As a fundamental investor inspired by Buffett and Munger, I should think of every stock I purchase as taking part ownership of a business. So what is the business of Bandhan Bank?

It’s basically in the business of lending money and collecting that money with a wide interest spread/margin to pay off creditors, then deduct operational expenses, provision for NPAs and pocket the left over as profit for shareholders. And as you can realize, this is a business which will not make you much profit initially due to the opex, provisions, etc. as you need to really grow to a decent size and realize economies of scale before meaningful profits start rolling in.

Now if you understand this, you’d realize that banking is really not a very good business. Any kind of shocks to the economy (demonetization, GST, Covid, etc.) - banks and lending institutions get hit first! With so much economic and business uncertainty, this makes banking a (semi) cyclical business. Lending money is easy, but collecting that money in a timely fashion at an appropriate rate of interest is darn difficult.

But when we add leverage to the equation i.e. borrowing money and then lending it further which is what banks do as their balance sheets get levered 5-10x of equity, it becomes one of the most dangerous businesses to invest in.

Despite the above, you may say there are many successful banks like HDFC and Kotak in the market. However, the base rate is very low - you can pretty much count the list of successful long term banking wealth creators on your fingers. And that is why, well run institutions like HDFC and Kotak get rich premium multiples in the market. However, every bank (including HDFC / Kotak) faces the same risks and can go the way of a Yes Bank / PNB tomorrow!

Why? Just invert this quote - “I learned this very early, it is very hard to go bankrupt if you don’t have any debt" - Peter Lynch

Btw, there are different types of business models even within the lending universe which can help mitigate the general business risks and those with asset backed (gold, property, etc.) lending generally are amongst the safer business models within the lending space.

So even within the lending institutions, Bandhan Bank’s business model is amongst the most dangerous one with unsecured microfinance lending.

So that should be the first mental model in your head - is Bandhan Bank’s business a business that I want to take part ownership of?

If yes, the second mental model is how much are you willing to pay for that business? I’d leave that question up to you to answer as I don’t have the ability to predict the future profits of such an unpredictable business model and what might future NPAs look like (currently surging at 7% reported and 13% of total loan book incl. SMA1 and 2). However, if you can predict the future profits - my book value multiple for buying the business would not exceed 3-3.5 P/B no matter how bullish the outlook.

My 2-3 year view - There have been a slew of negative overhangs in the past few years (high priced acquisition and integration with Gruh Finance, CAA and NRC protests in Assam, Covid wave 1, wave 2 lockdowns, Bengal/Assam elections, etc.). I expect the company to enjoy some blue sky territory maybe 6-12 months from now just like the Indian economy and gain back market participant trust in the business model for a few years (at which point I plan to exit) before the next big economic shock repeats the cycle.

6 Likes

@gurjota thank you so much for the detailed answer. I have also made the same mistake. Bandhan having the highest allocation in my portfolio. I am also waiting for an oppprtunity to exit.

I don’t know what price you got in. But I cut down my position by 50% in December rally at a negligible loss.

You can also see in my January post, it’s no longer in my top 10 holdings.

My average is 419. I am expecting to cut my losses once the covid situation is better and the price rebounds a little.

Well, I think the market gave an opportunity for exit in Dec-Jan around your buy price. Curious why you didn’t exit then?

Now given the latest Q4 results, I do not foresee a dramatic rebound and the business seems to be getting derated in my view. Could be sometime before it goes back to 52 wk highs and many many years before it goes back to all time highs.

PS: I could be totally wrong as well :grinning_face_with_smiling_eyes:

Monthly Portfolio Note - May 2021

There’s an old adage in equity markers “Sell in May and go away”. Thankfully, I wasn’t listening to whosoever recommended that as it would have deprived me of the largest monthly absolute gains in my investing journey till date (saying that at the risk of markets cutting me to pieces on Monday - the last day of May).

I had predicted in August last year that I expect the mid/small caps to come roaring back after a painful 2.5 years but I couldn’t have ever imagined the velocity at which this will happen.

The rally over the past few months has been extremely broad based and something also highlighted in Samit Vartak’s latest memo. Referring to the same - 99% of the smallest BSE 500 companies (i.e. 401 to 500) have delivered positive returns in the 13 months till April 2021 and pretty confident the trend only increased in May 2021.

Market have been very kind and rewarding personally as well, it’s been an absolutely phenomenal month of gains equivalent to a full year’s salary of mine just 5 years back of 2016. Also already equaled the full year 2020 returns in just 5 months.

So what do we do now? Where do we go from here?

I’d like to use a cricketing analogy of attack and defence. Think of this as a Test match where we are still on the 1st day of the match with about 80 overs bowled in the day. However, if we rewind to start of play (Feb 2020) it’s an astounding come back where the first hour of play was disastrous on a green seaming wicket (read Covid and March 20 market crash) and 4-5 wickets were lost for very few runs.

Then with all 11 fielders in catching positions and lots of open gaps, the batsmen (central banks, governments, corporates) decided to go on a Rishabh Pant style all-out counter attack (interest rates, stimulus, corporate cost rationalization). And that attack has paid off handsomely with a very strong comeback in the last 4-4.5 hours of play.

Now with 80 overs gone and batting going strong, it’s time to think about the next day and not the next 10 overs. The new ball (commodity inflation, valuation, slow Covid 2.0 unlock) can do a lot of damage and clean-bowl the whole team if not played cautiously.

To sum up, I think it’s time to be slightly cautious about the future (next 3-6 months), closely evaluate Q1/Q2 earnings before deploying fresh money or even take some off. Majority of the cats and dogs are also selling at the price of horses in this market.

Exits

Chemcrux and Jubilant Ingrevia - Both were fancied sector based undervaluation plays for me and never core portfolio bets. The pace of returns of both has been astounding and almost feels like successfully doing a shoot and scoot operation. Chemcrux has given me 70% in 3 months and Ingrevia doubled in less than 2 months. Both have combined to literally wipe of my entire losses in IBHFL in just 3 months combined. Thanks a lot to @Chins for highlighting the environmental risks with regards to Ingrevia’s plants.

With regards to Chemcrux, I tried to highlight in the Feb post when VPers were selling their holdings cheap, that nothing really has changed for the business. And I stand by that today as well and this could very well be 2-4-8x from here. However, I realized that the environmental concerns and ESG as an investing filter will always be like an albatross around my neck. These 2 cyclones are all an impact of global warming, carbon emissions and not taking care of our environment. If ever India decides to go the way of China, these will be the hardest hit companies. Why take that risk when there are so many other fish in the pond especially when you’ve already been handsomely rewarded. So, I quit.

Reliance - Only sold for raising cash assuming it won’t go anywhere like the last 8-9 months and will look to enter again soon. But then days like today make you regret. Let’s see if we ever see those levels again.

3MIndia - I realized that doing blind Coffee Can Investing may reward you, however I can never develop the conviction to hold it during tough times. And this business is something I find very hard to track and monitor without any investor presentations, conference call, etc. Exited with 50%+ gains again.

Kajaria - Fabulous coffee can investment again, I didn’t want to get out of this, however needed the cash to get into other opportunities mentioned below and this seemed the most fairly/slightly overvalued business from a 1-2 year perspective. 2.8x returns in a year - keep searching Saurabh Mukherjea style and keep getting rewarded.

New Addition

Tips Industries - This caught my eye from @ankush12495 's blog post and seems like a terrific digital play to me piggybacking on India’s growth potential of smartphones, internet, social media and last but not the least music streaming.

I know the management here is not top notch and also seemed to have an eye on valuations of similar companies in USA (billion dollar valuations) in last con call but at 20-25x trailing earnings and 25-30% growth over the past few years, I find it a great bet for the next 3-4 years. As music streaming apps consolidate, there could be pressure on the licensing fees paid out to these music labels but feel we’re a few years away from that yet.

Britannia - Now this is strange! I barely exited in Feb and have re-entered here. If I refer back to my attack and defence methodology, this is a form of defence for me with the current run to the moon. I’m using this as a hiding spot in the market from some of the other sold positions (Chemcrux, Ingrevia, etc.) proceeds. And very confident of getting a peaceful 12% CAGR (10-10.5% growth and 1.5% yield) at current valuations over the next 10 yearsa after the heady run-up of last few months.

Ugro Capital - Very well covered thread on VP already. Taking a small punt on this given the highly unlevered balance sheet from a NBFC perspective and expected strong bounce back of financials over the next 2-3 years.

Increased allocations to IEX, Goldiam, Neuland after 3 down circuits, MAS Financial, Mindspace REIT

13 Likes

Congratulations! Finally you are getting your mojo back. Being myself the king of diversified holding:) Liked your diversification pf angle. Great sharing and also liked the cricket analogy part and quick course corrections in Britannia. What’s your thought process behind allocating 2nd highest weight towards office reit? IMO tailwind sectors should get capital rotation atleast 20% for couple of years. What is your thought in this direction?

3 Likes